24108 Marketing Foundations

1. Introduction to Marketing and the Marketing EnvironmentWhat is marketing? The activity, set of institutions, and processes for creating, communicating, delivering and exchanging offers that have value for customers, clients, partners and society at large Marketers need to learn what customers, clients, partners and society want Marketers use information, develop new ideas and offer something unique/special Ongoing process

Why study marketing? Market orientation firms have better performance Better profits, sales volume, market share, return on investment Marketing drives economic growth/stimulates consumer demand Every employee is a stakeholder in the success of their organisation

The Marketing Evolution Changed from: Trade Production orientation Sales orientation (e.g. black vs. blue) Market orientation (i.e. what colour do you want, and matching the product) Societal market orientation (e.g. to stop consumerism) Used by small and large, those selling goods and services, private, public, profit and non-for-profit

Marketing Exchange Mutually beneficial transfer of offerings of value between buyer and seller Two or more parties, each with something of value All must benefit Exchange must meet expectations of both parties

What is value? A customers overall assessment of the utility of an offering based on perception of what is received and given Refers to the total offering

What is the market? Group of customers with heterogeneous (different) needs and wants (e.g. geographic, demographic, product markets) Customers Consumers Clients (customers of non-for-profit) Partners (all who are involved in activities of exchange process) Society

Stakeholders Individuals, organisations and groups with a rightful interest in the activities of a business Owners Employees Customers (and clients) Partners Government

Ethics and Corporate Social Responsibility Ethics are a set of moral principles that guide attitudes/behaviour Law and regulatory bodies govern the conduct of individuals/organisations Corporate social responsibility are businesses with the obligation to act in the interests of the societies that sustain them Trade Practices Act, ACCC

The Marketing Mix Set of variables a marketer can exercise control over in creating an offering for exchange 4Ps: Product, Price, Promotion, Place Services Marketing Mix: People, Process, Physical Evidence

The Marketing Mix: Product Product: good/service/idea offered to the market for exchange Demand: want the customer has the ability to satisfy Brand: collection of symbols creating a differentiated image Good: physical offering capable of being delivered Service: intangible offering that does not involve ownership

The Marketing Mix: Price Price: amount of money a business demands in exchange for its offering Willingness to pay: prepared to give in return for what they get Must consider: Production, communication and distribution costs Required profitability Partners requirements Competitors prices

The Marketing Mix: Place Distribution: making the offering available to the customer at the right time/place Logistics: concerned with supply/transport Supply chain: parties involved in providing all raw materials/services to get a product into the market

The Marketing Mix: Promotion Promotion: activities that make potential customers/partners/society aware of and attracted to the businesses offering Examples: Advertising Loyalty scheme Sales promotion Product trials Product may be already established, modified, new, or a form of information/education

The Marketing Environment All of the internal and external forces that affect a marketers ability to create, communicate, deliver and exchange offerings of value Environmental analysis is breaking the marketing environment into smaller parts to gain a better understanding

Internal The parts of the organisation, the people and the processes used to create, communicate, deliver and exchange offerings that have value Can be directly controlled Measured by strengths and weaknesses

External The people and processes that are outside the organisation and cannot be directly controlled, only influenced Such as when outsourcing (transferring internal function to external provider) Measured as opportunities and threats The external environment includes: Micro-Environment Forces within an organisations industry that affects its ability to serve customers/clients Customers and clients, marketers need to understand current and future needs Partners e.g. logistics firms, financers, advertising agencies, suppliers Competitors Not directly controllable Macro-Environment PESTL: political, economic, sociocultural, technological, legal Political e.g. effect of political issues on marketing Economic e.g. prices, level of savings/debt, availability of credit Social and cultural affect attitudes, beliefs, behaviours, preferences, customs and lifestyle and can be influenced by demographics Technology changes expectations/behaviours and affects how suppliers work Legal such as enacted legislation and regulations governing what marketing can/cant do e.g. fair trading, consumer safety, prices, intellectual property

Situational Analysis and Marketing Planning Situational analysis identifies key factors that will be used as a basis for the development of marketing strategy Return on investment, customer satisfaction, market share, brand equity (%s and information) SWOT analysis Marketing planning is an ongoing process that combines organisation objectives and situational analyses to formulate and maintain a marketing plan that moves the organisation to where it wants to be Executive summary, introduction, situational analysis, objectives, target market, marketing mix strategy, budget, implantation, evaluation, future recommendations

2. Market ResearchWhat is market research? Business activity that discovers information of use in making marketing decisions Understand (market research i.e. willingness to pay), create (product), communicate (promotion), deliver (place) Informs about different types of decisions e.g. market segmentation, sales performance, attitudes and behaviours, 4ps Begins with an issue, discovers information, allows informed decisions about how to report and ultimately results in outcomes that match the marketing goals Involves: Defining research problem Question that research intends to answer Clearly specified problem Designing research method Need to create a market research brief Brief is a set of instructions/requirements that states the problem, information required and specifies budget/time frame etc. Generally includes executive summary, introduction, background, problem definition, time and budget, reporting schedule, appendices Collecting data Research design is methodology created to guide project Hypothesis is tentative explanation that can be tested Types of research include: Exploratory research: loosely defined e.g. focus groups Descriptive research: solves particular e.g. 90% of customers are 60 and older Causal research: assumes variables affect outcome e.g. relation Types of data include: Secondary: originally gathered for another purpose Primary: specifically for current project Data mining: processing large data sets to find patterns Qualitative: numerical e.g. surveys Qualitative: rich, deep and detailed information about attitudes and emotions e.g. interview/focus group This process may include sampling Probability sampling: every member of the population has a known chance of being selected Non-probability sampling: no way of knowing the chance of a particular member Sampling error: measure of extent to which results from sample differ from population Analysing and drawing conclusions Must be collecting according to methods in research design Can be conducted in-house or outsourced Data analysis involves filtering and organising data Quantitative analysis: converts numerical data into knowledge to be used for decision making Qualitative analysis: reductions and coding used to interpret non-numerical data Presenting results and making recommendations Written research report should include cover page/executive summary, contents, background, methodology/findings, statement of limitations, conclusions, recommendations and appendices Results in decisions that take the form of marketing plans/strategies Essential to understand market However, before undertaking you need to consider: Relevance Timing Availability of resources Need for new information Cost-benefit analysis Ethics Only valuable if it contributes to improved performance

3. Consumer behaviourWhat is consumer behaviour? Analysis of behaviour of individuals/households who buy g/s for personal consumption Consumers make decisions along a continuum Habitual decision making extended decision-making One we know our target market we want to work out: Why they behaviour in a certain way? Whey that have preference for particular brands?

Influences on consumer behaviour SituationalGroupIndividual(independent of social circumstances)

Physical locationSocial interactionTime availablePurchase motivationMoodCulturalSocialPersonalPsychological

CultureSubculturalSocial classReference groupsFamilyRoles and statusDemographics e.g. age, occupation, incomeLifestyleMotivation PerceptionBeliefs and attitudes

Group influences - Cultural factors Influences on behaviours that operate at the level of the whole society, or major groups within society

Culture and sub culture Culture is a system of knowledge, beliefs, values and rituals by which a society/other large group defines itself Includes tangible and intangible e.g. clothing, food, laws, customs Examples of influences: Power distance i.e. degree of acceptable inequality within culture Uncertainty avoidance Individualism Masculinity (now known as nurturing) Long-term orientation Sub culture is groups of individuals who share common attitudes, value and behaviours that distinguish them for the broader culture in which they are immersed

Social class Individuals of similar rank within social hierarchy Defined by values and lifestyles Indicators include income, occupation and education

Group influences - Social influences Influences on the individual to behave in a way that reflects group norms

Reference groups Any group to which an individual looks for guidance Membership reference groups: groups the individual belongs to Aspiration reference groups: would like to belong Dissociative reference groups: does not wish to belong Opinion leader is reference group member who provides relevant and influential advice about a specific topic of interest to group members

Family Family life cycle is series of characteristic stages most families pass through Family decision-making roles is differing responsibilities for specific types of decisions Pester power is influence of children on parents purchasing decisions

Role and status Individuals play a number of roles with complex set of expectations Parents, child, neighbour, employee, employer, customer, friend Influence of status lies in perceived status of individual Criteria such as formal role, age, social popularity, technical competence

Individual influences - Personal Demographic, lifestyle and personality factors that influence consumer behaviour

Demographics Vital and social characteristics of populations e.g. age, education

Lifestyle Involves how an individual spends their time/interacts with others

Personality Unique set of psychological characteristics and behavioural tendencies that characterise an individual Combination of genetics and experiences

Individual influences Psychological Internal factors, independent of situational or social circumstances, that shape thinking, aspirations, expectations and behaviours

Motivation Drive to satisfy unfulfilled needs or achieve goals

Maslows hierarchy of needs Suggests people seek to satisfy needs according to hierarchy that places low order biogenic before higher order psychogenic needs Physiological (hunger/thirst), safety, love/belongingness, esteem, self-actualisation

Perception Psychological process that filters, organises and attributes meaning Selective exposure, attention, distortion, retention

Beliefs Descriptive of evaluative thoughts that an individual holds regarding their knowledge of a person, idea or product May be based on objective knowledge, opinions or faith

Attitudes Individuals relatively stable and consistent thoughts, feelings and behaviours towards an object/idea

Learning theories Behavioural learning theory: stresses role of experience and repetition Relevant in low involvement purchases Cognitive learning theory: learning takes place through rational problem solving, emphasising acquisition and processing of new information Relevant in high involvement purchasing decisions

Types of consumer decision making Habitual: low engagement, small, routine, low-risk products Limited: infrequently bought but familiar products Extended decision making: high engagement, high price, high-risk and/or infrequent and unfamiliar products

Consumer decision making steps Need/want recognition Become aware of unsatisfied wants/needs Marketer stimulates/creates awareness of new need/want Information search Seeks information from sources about how to solve the problem Evaluation of opinions Develop evaluation criteria, rank alternatives, consider not purchasing/other uses of money Purchase Choose product and brands, decide to purchase or not to purchase, purchase Post-purchase evaluation Continue to evaluate product, deal with post-purchase cognitive dissonance, assess attitude towards product/bank/seller in relation to future purchases Cognitive dissonance: when purchaser has second thoughts or doubts

4. Business Buying Behaviour: Business-to-businessProduct Parts and materials Equipment (capital and accessory used in production) Supplies and services

Business markets Individuals or organisations that purchase products for resale, use in production of other products, or for use in their daily business operations Compromise four major categories:Reseller marketsProducer marketsGovernment marketsInstitutional markets

Intermediaries that buy products in order to sell/lease them to another party for profitOrganisations and professionals who purchase products for use in the production of other products or in daily business operationsGovernments that buy/sell products to provide services for their citizensNot-for-profit organisations and these organisations compete for market share

Wholesalers (sell to other intermediaries)Industrial distributors (sell to organisational buyers)Primary industries (agriculture or mining)Secondary industries (manufacturing)Federal (Commonwealth)State (provincial)CharitiesReligious organisations

RetailersRetailersLocal (municipal)Clubs

N.B Retailers sell to consumers

Marketing to business customers High-value purchases High-volume purchases (common in reseller market and somewhat in producer as you can negotiate volume discounts) Price competition and negotiation Number of (fewer) buyers and sellers Formal assessment of purchase of alternatives Ongoing relationships

Characteristics of business demandDerived demand Businesses tend not to adjust consumption in relation to price changes They pass costs on to customer or look for substitute products Demand is more likely to be affected by a change in demand due to the end consumer Derived demand has a snowball effect at all levels of the value chain Business customers make purchase decisions infrequently and based on expectations of long-run demand, resulting in demand that fluctuates more so than in consumer markets

Joint demand Interdependent demand for multiple products that are used together in the product of another product E.g. when purchasing an MRI, will try to secure maintenance and supplies contracts

Price and demand In many parts of the business market, demand is inelastic Generally speaking, industry demand tends to be price inelastic in business markets, while company demand can be highly elastic

Business market segmentation Markets characterised by small number of buyers with close relationship to seller Customised or one-to-one marketing is a good approach to use Business marketers isolate business customers by using commercial industrial directories that contain detailed information on companies

Business buying behaviour Straight rebuy: low engagement of same products, established terms, efficient and convenient, reliable source of income for suppliers Modified rebuy: similar but not identical after evaluating a small range of alternatives New task purchase: first purchase in product category in response to a new problem/process/product, extended information search

Purchasing decisions Purchasing decisions usually involve: Negotiation (not just price but supply agreements and volumes) Description (technical specifications) Inspection Sampling Buying centre is group/structure with the organisations that make buying decisions including: Initiators Users (evaluate product performance) Influencers (technical experts) Deciders Buyers Gatekeepers (control relevant information)

Steps in the decision making process Problem/need recognition Initiator becomes aware of a problem/unsatisfied need External party creates a new problem or need Information search and specification development Seek information about the problem and possible solutions Develop product specification to describe the features required of the solution Evaluation of options Identify potential vendors and invite proposals Analyse and evaluate each characteristics of the proposed solution/each potential vendor Purchase Choose one or more suppliers based on evolution of solutions/vendors Decide to purchase (or not to), purchase Post-purchase evaluation Evaluate product/suppliers and assess attitude in relation to future purchases Factors External environmental factors: macro-environment (PESTL) and micro-environmental (industry, customers, competitive situation) which are not directly controllable Internal environmental factors: explain why each organisations makes purchasing decisions Nature of the organisations (size, location, objectives, resources) Organisational structure (how responsibility/authority is arranged) Individuals within the organisation (personal characteristics)

5. Markets: Segmentation, Targeting and Positioning The market Groups of customers with heterogeneous needs and wants Markets can have a variety of characteristics: Common wants, needs and demands Unique wants, needs and demands Contains subgroups Market segments are subgroups within the total market that are relatively similar in regards to certain characteristics

What is targeting marketing? An approach to marketing based on identifying, understand and developing an offering for those segments of the total market that the organisation can best serve

Mass marketing A single product will meet the needs of most people in the market (undifferentiated approach) Producing large volumes at a lower cost per unit makes it possible to sell at a lower price and capture very large markets

One-to-one marketing Unique, customised offering to meet individual needs Results in higher unit costs and a more restricted market

Differentiated targeting strategy (in between mass and one-to-one) Developing a different marketing mix for each target market segment Product specialisation: concentrated on offering a single product range to a number of marketing segments e.g. barcode scanner Market specialisation: focused on meeting a wide range of needs within a particular market segment e.g. travel agent Product-market specialisation: offering a single product to a single market segment Entails high costs and therefore to achieve high profits it requires higher retail prices, higher market share and strong customer loyalty The target marketing process

Market segmentation Stage 1 of the diagram Segmentation variables: characteristics that buyers have in common and that might be closely related to their purchasing behaviours These variables fall into four broad categories:Demographic (most commonly used)GeographicPsychographicBehavioural

Age, education, incomeClimate, local population, market density, region, topography, urban vs. suburbanLifestyle, motivates, personality attributes, based on how you live your life reflected in hobbies and choice of entertainmentBased on actual purchase and/or consumption behaviours e.g. brand loyalty, occasion, price sensitivity, volume usage

Effective segmentation involves: Measurability Accessibility Substantiality (at least 100) Practicability Stability (stays long enough to produce results) Market segment profile: description of the typical potential customer in the market segment

Marketing targeting Stage 2 of the diagram This involves the selection of target markets resulting from an evaluation of identified market segments Potential is influenced by the market potential, level of marketing activity in the industry and the effectiveness of an organisations promotional spending Market potential: total sales of a product category that all organisations in an industry are expected to sell in a specified period of time, assuming a specific level of marketing activity Sales revenue: total volume of sales average selling price Market share: proportion of the total market share held by organisation Company sales potential: estimate of the maximum sales revenue and market share that an organisation can expect to achieve for a specific product

Market positioning Stage 3 of the diagram The way in which the target market segments perceives an organisations offering in relation to competing offerings Company positioning: designed to create a single market perception of the entire organisation in relation to its competitors Brand positioning: designed to create a market perception of a particular brand, usually based on product attributes

6. Product

Definitions Product: good/service offered to the market for exchange Service: intangible offering that does not involve ownership Good: physical (tangible) offering capable of being delivery to a customer Idea: concept, issue or philosophy offered to the market Product item: particular version of a product Product line: set of product items related by characteristics e.g. end use, target market, technology or raw materials Product mix: set of all products that an organisation makes available to customers

Product: Consumer vs. B-to-B Consumer products: purchased by households/individuals for private consumption Business to business products: purchased by individuals/organisations for use in production or for daily business operations

Consumer product classifications Shopping products: moderate to high engagement with purchase based on consideration of features, quality and price e.g. washing machine Convenience products (fast-moving consumer goods): little engagement, inexpensive, frequently purchased Speciality products: highly desired with unique characteristics that consumers will go to considerable effort to obtain e.g. Ferrari Unsought products: purchased to solve a sudden, unexpected need

B-to-B product Classifications Parts and materials: products that form part of the purchasing businesss products Equipment: capital equipment and accessory equipment used in the production of businesss products Services and suppliers: products that are essential to the business operations but do not directly form part of the production process

Total product concept To understand how the products value is perceived by customers, it is useful to describe it in four levels: Core product (fundamental benefit) Expected product (attributes that deliver that benefit) Augmented product (bundle of benefits that buyer may not require) Potential product (possibilities that could become a part of total product)

The Product Life Cycle (PLC) Typical stages: New product development Idea generation Screening Concept evaluation Marketing strategy Business analysis Product development Test marketing Commercialisation (not all products make it to the market) Introduction (see production adoption process) Growth Maturity Decline

Product AdoptionProduct Adoption Process Awareness Consumer becomes aware of the product but knows little about the product Interest Experiences interest in the product and seeks information to learn more Evaluation Consumer evaluates information and decides whether or not to try Trial Examines and tries out the product and decides if it will satisfy a need/want Adoption Decides to purchase the product and evaluates whether it will re-purchase

The diffusion of innovation Theory that social groups influence the decisions made by individuals in such a way that innovations are adopted by the market in a predictable pattern overtime

Product differentiation Creation of products and product attributes that distinguish it from one another Characteristics perceived by customers such as design, brand, image, style, quality Branding Brand: a collection of symbols to create an image in a customers mind Brand image: the set of beliefs that a consumer has regarding a particular brand Brand name: part of a brand that can be spoken (including numbers, words, letters) Brand mark: part of a brand not made up of words (often symbols of designs) Trade mark: brand name or brank mark that has been legally registered so as to secure exclusive use of the brand Brand equity: added value that a brand gives a product Brand loyalty: customers favourable attitude/purchasing behaviour towards a brand Brand metrics: measure of the value of a brand e.g. brand assets, stock price analysis Brand strategies include: Individual branding: approach where each product is branded separately Family branding: uses the same brand for many of the organisations products Brand extension: giving an existing brand name to a new product in a different category Brand ownership includes: Manufacturer brands: brands owned by producers and clearly identified with the product at the point of sale Private label brands: brands owned by resellers and not identified with manufacturer Generic brands: products that only indicate product category Licensing: brand owner permits another party to use the brand on its products Franchising: agreement to establish a business model Co-branding: use of two or more brand names on the same product

Packaging Primary packaging: holds the actual product Secondary packaging: material used to hold or protect the product (removed or discarded after purchase) Shipping package: used to carry out of the factory and through distribution channel Labelling: usually forms part of the packaging and provides promotion, legal and other information Compulsory label information can include: Brand name/logo Product name Ingredients list Use-by-date or date of packaging Barcode

Existing product expansion Line extensions: new products that are closely related to existing products in a product line Product modifications: changes to the characteristics of a product e.g. functionality, quality, aesthetics

Product positioning The way in which the market perceives a product in relation to competing offerings Product deletion: process of removing a product from the product mix

The role of law Marketing law is regulations that draw the line between acceptable competitive business conduct and unacceptable business practices Designed to protect consumers, traders and the competitive system that underpins the free market Example of marketing laws: Competition and Consumer Act 2000: provides protection for consumers and prevents some restrictive trade practices of companies Australian Consumer Law: uniform legislation for consumer protection

Product Laws Intellectual property laws: Covers patents, trademarks, registering designs and copyright Packaging/labelling laws Designed to standardise information and protect against misleading information e.g. weight, contents of food, ingredients Common law protection and statutory protection Statutory protection: Australian Consumer Law Misleading and deceptive conduct Unfair trade practices Product safety and information standards Trade Measurement Legislation National Measurements Act 1960 (Commonwealth) Product liability laws Minimum acceptable product safety and quality standards e.g. food hygiene regulations, manufacture liability for defective/negligent products 7. Pricing

What is price? Measure of value to both buyers and sellers Buyers see are measure of benefit Sellers need prices to cover cost/generate profit Price is a determinant of sales volumes Sales volume influences cost Price is directly related to profitability Profit = ($ sales volume) total costs Profits are when total revenues > total costs, i.e. prices must exceed costs Return on investment is profit required to justify investment in a project

Pricing objectives Objectives should be SMART Specific, measureable, actionable, reasonable, timetabled Objectives focus on: Profitability Long-term prosperity Market share Positioning

Not-for-profit pricing Do not seek to make profits Objectives include: Generating funds to sustain activities Making products/activities appealing to a target market Encouraging change in attitude/behaviour amongst market

The legal environment and pricing The legal environmental includes areas subject to restrictions Essential services Misleading/deceptive conduct Price collusion Price discrimination Comparability and clarity of pricing Governments can intervene to control prices e.g. medical care Trade Practices Act Australia and Fair Trading Act (NZ) prohibit deceptive advertising

Price laws Protect against: Price fixing Price discrimination (different prices to different customers) Predatory pricing (selling below cost for extended period) Resale price maintenance (recommended retail price)

Price surveillance The ACCC: Holds inquiries into the supply of specified g/s Monitors price, cost and profits of any industry/business

Selecting the best pricing method Should be based on understanding of the customer Should reflect the value of the product Important to consider internal and external environment Need to: Appeal to target customers Yield acceptable profit margins Provide a competitive market offer Pricing can be based upon: Demand Costs (including profits and margins) Competition

Demand considerations Demand-based pricing sets prices based on demand Success depends on organisations ability to predict fluctuations in demand Price elasticity is sensitivity of quantity demanded to price changes Q/ P Elastic means % change in Q > % change in $ e.g. luxury goods Inelastic means % change in Q < % change in $ e.g. necessities Innovation can also increase demand

Cost considerations Cost mix includes: Fixed Variable Marginal costs (expressed in cost per extra unit of production) Shared (cost shared across products)

Pricing methods and strategies Price floor Minimum price to cover costs Cannot maintain this approach Low prices generate high sales volume However, may conflict with high-quality/differentiated positioning Price leader High-volume product priced near cost to attract customers into the store Expected they will buy other, normally priced products

Loss leader High-volume product priced below cost to attract customers into the store Expected they will buy other, normally priced products

Cost and revenue analysis Break even analysis Designed to estimate the volume of unit sales required to cover total costs Importance to test price and volume sensitivity Contribution margin is the difference between the price and the variable cost per unit

Marginal analysis Analysis to determine the effect on costs/revenue when an organisation produces/sells one more unit of product Must be examined in terms of: Average cost (total cost divided by volume of production) Marginal cost (cost to product and sell one more) Average revenue Marginal revenue

Cost-based pricing Approach to pricing in which a % or dollar amount is added to the cost of the product in order to determine its selling price Cost-price plus mark-up price

Competition based pricing Approach to pricing based on the prices charged by competitors or likely response of competitors Undesirable unless seller has cost advantage from: Economies of scale (amount produced increases, cost to produce decreases) Low-cost production This can result in price volatility e.g. petrol, or price wars In developed countries, long-term price competition creates oligopolies Oligopoly: market dominated by small number of suppliers Monopoly: one supplier who can determine price Perfect competition: number of buyers/sellers with undifferentiated products Monopolistic competition: numerous competitors whose offers are different

Non-price competition Approach to competition based on factors other than price e.g. promotion/distribution Organisations must differentiate by product attributes Can build loyalty which insulate organisation from competitor price offers

Business-to-business pricing Overview of B2B relationships Business market involves purchasing products for use in production of others products, for resale or for daily use in business Involves relationship between suppliers and organisational buyers Need to be close, long-term and formal More complex

Pricing methods Discounts: Reduction in price in return for another benefit e.g. cash, seasonal, quantity Geographic pricing: Include price differentials based on those costs that vary with distance E.g. freight on board destination price (seller has built in transport costs), or freight on board origin price (price excludes delivery cost)

Price management Purchasing behaviour is usually rational evaluation of value Relative importance of price varies between individuals, market segments and product categories Perceptions of vary with time (especially over economic cycles) Buyer sensitivity price falls into: Value-conscious Price-conscious Prestige-sensitive

Examples of managing perceptions of value and priceApproachDescriptionExampleAdvantagesDisadvantages

Multiple-unit pricingMultiple units of a product are sold for a single price, usually significantly lower per unit than the individual priceIce creams in six packsWine and beer are per case or per cartonSave by buying a low unit price, higher aggregate sales, consumption may increaseMargin per product may be lower

Bundle pricingSelling a combination of complementary products for a single priceFast food meal dealsExtra value is offered, increase of overall saleUndermine price of unbundled products

Odd-even pricingPricing based on theory that odd prices are perceived as cheaper$6.95 moviesManages customers perceptionsInconclusive research on success

Reference pricingPricing a product at a moderate level and positioning it next to a more expensive modelUpsize dealsMay choose to trade upCriticism from health groups

Product-line pricingApproach that sets prices for groups of products in a product line, rather than individual products

Penetration pricingPricing tactic based on setting a lower price in order to gain rapid market share and turnover for a new product

Price skimmingCharging the highest price that customers who most desire the product are willing to pay, and then lowering the price to bring a larger number of buyers

Pricing management and pricing established products definitions Internal reference price: price expected by consumers, largely based upon actual experience External reference price: price comparison provided by manufacturer/retailer Differential pricing: the practice of charging different buyers different prices for the same product Promotional pricing: combination of pricing approach with promotional campaign, includes price leader (and loss leader), comparison discounting and special-event pricing

8. Promotion

What is promotion? Marketing activities that make potential customers, partners and society aware of and attracted to the businesss offerings Marketing communication (a term for promotion) refers to communicating a message to the market place

Objectives of promotion To support the organisations overall marketing objectives To demonstrates features/benefits To encourage product trial and create demand To reinforce the product or brand and encourage repeat purchase To increase support offered by retailers To increase awareness about and goodwill for the organisation (cause-related marketing)

Integrated marketing communications (IMC) The coordination of promotional efforts to maximise the communication effort Large promotion budgets usually use multiple strategies The best promotion mix will change over time

The promotion mix Advertising Transmission of paid messages about organisation, brand or product to mass audience Competitive advertising promotes features/benefits relative to competing products Comparative advertising uses advertising to directly compare a product against competing Benefit: reaches many at a low cost Limitation: difficult to measure effectiveness Creating an advertising campaign involves:1. Understanding the market environment2. Knowing target market3. Setting specific objectives4. Creating message strategy5. Allocating resources6. Selecting media7. Producing advertisement8. Placing advertisement9. Evaluating campaign

Public relations Promotional efforts are designed to build and sustain good relations between organisation and stakeholders Publicity is unpaid exposure in the media Sponsorship is a paid association with an event or person Written communication with stakeholders e.g. annual reports Involvement in charitable donations/acts PR needs to generate good public relations but also be reactive to negative publicity Benefit: increased credibility, resulting word of mouth, low or no cost and an effective way to combat negative perceptions Limitation: to be effective, they need to be timely, engaging, accurate and in public interest

Sales promotion Offers of extra value to resellers, sales people and consumers in a bid to increase sales Free samples Premium offers as a bonus for purchases Loyalty programs Contests to promote benefits and build a database Coupons that offer a discounted price Discounts Rebates are return of some of purchase price upon presentation of proof of purchase Point of purchase promotions including in-store signage/display, free product trials or demonstrations in store Event sponsorship e.g. exclusive merchandise deal Trade sales promotion presents products to business customers and stimulated the products movement through the market channel Conventions and trade shows Sales contest for marketing intermediaries Gifts and premium money Trade allowances Cooperative advertising Dealer listings Benefit: can be used irregularly to smooth demand Limitation: can lose effectiveness if overused, easily copied and the public become increasingly cynical about product value

Personal selling Efforts that seek to persuade consumer to buy products Mainly used for expensive, high-involvement or industrial products System involves: information, needs, product, leverage, commitment/close, follow up Good sales people are: committed, enthusiastic, persuasive, self-confident, have good listening skills, self-motivated Benefit: can be tailored to specific individuals Limitations: expensive, limited reach, labour intensive and time consuming

Additional forms of marketing Ambush marketing: presentation of messages at an event that is sponsored by an unrelated business or competitor (however, need to assess risk) Product placement: in movies, videos, songs, books A plug: media overtly promoted a product within the program rather than separately Guerrilla marketing: aggressive/unconventional Viral marketing: social networks to spread Permission marketing: aims to build an ongoing relationship with customer Sponsorship: paid association However, need to consider media fragmentation, consumer cynicism, social consciousness and environmental awareness

Push and pull policies Push: product is promoted to the next institution in the marketing channel Pull: product is promoted to consumers to create demand through the marketing channel

Statutory regulation of advertising Australian Consumer Law ACL Section 18: prohibition on misleading and deceptive conduct or conduct likely to mislead and deceive by persons engaged in trading or commerce E.g. comparative advertising, use of celebrities, similar or identical brands

The common law and advertising Law of contract Law of torts e.g. tort of deceit, negligence, injurious falsehood, passing off, defamation Right of privacy Right of publicity

9. Placement/Distributions

Marketing channels Marketing intermediaries: individuals/organisations that act in the distribution chain between the producers and end user Distribution channel: the group of individuals/organisation directing products from producers to end users Effective intermediaries in marketing channels achieve the following: Time utility: available at the time when wanted Place utility: available in the locations wanted Form utility: customising products to needs Exchange efficiencies: making transactions simple/cheap through efficiency Decisions take into account nature of product and target market Generally a choice between: Intensive distribution: distributed via every suitable intermediary Exclusive distribution: distributed through single intermediary for any given geographic region Selective distribution: distributes products through intermediaries chosen for some specific reason

Place laws Prevent suppliers from imposing unreasonable restraints on distributors Exclusive dealing: restricting products a distributor may sell Territorial restraints: restricting area in which a distributor may operate Customer restraints: restricting customers with which a distributor may deal

Consumer product marketing channels

Business to business product marketing channels

Supply-chain management Managing marketing channels based on ongoing partnerships among marketing channel members that reduce cost, eliminate redundant processes and develop new ways to deliver value to customers Channel captain: when one member of the marketing channel can exert power over the ability of others members to achieve goals (known as channel power) The more parties involved in the marketing channel, the greater potential for conflict

Types of supply-chain management Horizontal channel integration Bringing organisations at the same level of operation under single management structure e.g. retailer buys out competitor Vertical channel integration Bringing different stages of the marketing channel under single management structure e.g. wholesalers buy s a retailer of transport business Vertical marketing system Marketing channel in which all stages occur under a single management structure e.g. Australia Post Franchising Approach to business in which one party licenses the business model

Distribution of goods

Order processing All activities involved in managing information requires to receive/handle/fill order Important to minimise cost and ensure customer satisfaction

Inventory management Managing stocks of products to ensure availability to customers Important to minimise holding cost e.g. JIT method Most businesses manage inventory by developing a trigger to reorder Could be based on usage rate, safety stock etc.

Warehousing Enable businesses to hold surplus/safety stock Becoming obsolete due to increasing link between producers/consumers (from the internet), demand for customisation and speed of innovation Variation of a warehouse is a distribution centre Focuses on moving rather than storing Cross-docking is this process of receiving, assembling into orders and shipping them with minimum handling Materials handling is the physical handling of these goods

Transportation Freight forwarders are specialist transport companies Combine cargo from different business to achieve efficient load sizes Modes of transport include road, rail, sea, air, pipelines

The role of technology in physical distribution E-distribution (full implementation of advanced telecommunications technologies) is replacing the physical distribution process Radio frequency identification (RFID) is attaching small tags to items/contains to track movements

Distribution of services Key differences and similarities between service and physical distribution Physical distribution is required for physical inputs used in producing/delivering the service product Some services are delivered using infrastructure Service business must ensure labour is available at the right time/in the right quantities

Retailing Any exchange in which the buyer is the ultimate consumer of the product (not reselling/using it in the making of something else)

The retailing strategy The marketing organisation to decide a suitable approach Retailer must then decide on location/positioning Location (often CBD, free standing, shopping centres etc.) determines: Determines geographic area customers come from Proximity to competitors/complementary retailers Access to parking/transport Positioning is important as it: Identifies gap in the market and targets it by creating a distinguished feature in the minds of customers Store image is an important factor to attract customers

Benefits of retailers Retailers add value for customers and products by creating/providing: Time utility (24 hours) Place utility (corner store) Form utility Advice/personal service Exchange efficiencies Or a mixture of these

Types of retailers General merchandise retail stores (wide variety) Speciality retailers (small number, but variety within their line) Online retailing (via the internet)

Other forms of retailing Direct marketing (i.e. non store that promotes/sells via mail, telephone or web e.g. mobile e-commerce) Door to door selling Automatic vending

The wheel of retailing theory Theory about how retailers evolve in the market: Retailers enter using innovation with achieves low costs (used for low prices) Other new/existing retailers copy and compete directly To distinguish, the retailers adds extra services, improves location/store image which results in higher costs and higher prices New retailers enter using new innovation and have to compete with the original, now high-price retailer

Agents Marketing intermediaries engaged by buyers/sellers on an ongoing basis to represent them in negotiations with other parties in the marketing channel E.g. manufacturers agents, selling agents, buying agents, commission merchants

Brokers Marketing intermediaries engaged by buyers/sellers on a short-term/one-off basis E.g. insurance and mortgage brokers, stock brokers

Wholesaling Exchange in which products are bought for resale, for use as inputs in other products, or for some other use in business

Major wholesaling functions Act as a sales force, promoting and selling its products to retailers Hold/manage inventory, reliving the producers warehousing and transport burden Assume the risk when retailers are given products on credit Provide cash flow by paying for/taking possession of inventory shortly after it is produced Communicate producer and market issues to retailers

Types of wholesalers Merchant wholesalers Independently owned wholesaling business that take title to products Full-service: perform all activities Limited-servicing: specialise in narrow range e.g. cash and carry, truck Manufacturers wholesalers Wholesalers owned by the producer

10. Services marketing

Service vs. Services Services are activities, performance or benefits that are offered for sale but which involve neither an exchange of tangible goods nor a transfer of title Service is the act of delivery a product involving human, intellectual or mechanical activity that adds value to the product

Consumer services Purchased by individual consumers or households for their own private consumption E.g. air travel, banking, finance, hairdressing, restaurants Technological change provides opportunities for service providers e.g. eBay

Business to business services Purchased by individuals and organisations for use in the production of other products or for use in daily business operations

The four unique characteristics of services Intangibility increases customer feelings of uncertainty and risk about purchase Use tangible cues e.g. logos or guarantees, testimonials and word-of-mouth Inseparability of production and consumption mean buyers and sellers of services are frequently co-producers of the service e.g. Botox Need to be concerned with technical skill and customer service delivery e.g. face-to-face promotes trust Heterogeneity variations in quality are inevitable Can try to develop service delivery systems, manage expectations and invest heavily in staff training Perishability means it cannot be used at a later date S and D balanced by stimulating/restricting demand and increasing/decreasing capacity If demand fluctuates over time, flexible pricing can be used

The Extended Services Marketing Mix Traditional 4Ps: product, place, price, promotion Services Mix 7Ps: process, physical evidence, people

People Create and deliver the service Affect value for customer as they are directly involved Staff are the most controllable factor Technical competence Ability to deliver high standards of service Ability to promote products through personal selling

Process All of the systems/procedures used to create, communication, deliver and exchange an offering Functional expectations: expectations of the technical delivery Customer service expectations: relate to the service experience

Physical evidence Tangible cues that can be used as a means to evaluate service quality prior to purchase Includes architectural design, floor layout, furniture, background music

Service marketing challenges1. Achieving a sustainable differential advantage Services cannot be protected by legal patents Innovations are immediately replicated2. Managing profitable customer relationships Professional service provides manage customers as individuals Consumer service providers typically provide a standardised offering Churn (rate of customer turn over) and the fact that many customers will never be profitable3. Deliver consistently high levels of service quality and customer service Quality can be examined in different ways: Search qualities: determined prior to purchase e.g. flight duration Experience equalities: determined after or during e.g. quality of meal, speed of cleaning Credence qualities: characteristics impossible to evaluate e.g. hygiene in restaurant To maintain quality they need to: Understand customer expectations Establish service quality standards Manage customers service expectations Measure employee performance

Check-list of Service QualityDimension of service qualityExplanationEvaluation criteria

ReliabilityConsistency and dependabilityBegan on timeFinished on timeBilled correctly

TangiblesPhysical evidenceCondition of premisesPresentation of service providerCondition of equipment

ResponsivenessWilling and able to provide serviceEnquiries responded to Service provided promptlyAccommodated urgent needs

AssuranceTrust and confidence in the service providerDemonstrated knowledge and skillsReputationPersonal manner of service provider

EmpathyCare and attentivenessListened to needsCared about customers interestsProvided personalised service

Not-to-profit marketing Marketing activities of individuals and organised designed to achieve objects rather than generate profits Activities of non-for-profits e.g. Red Cross Social marketing e.g. anti-smoking campaigns

4. Electronic marketing

Electronic marketing The activities involved in planning and implementing marketing in the electronic environment Sales of product via e-commerce website Texting potential customers Emails to participate in surveys Discount vouchers on take away websites

Advantages/disadvantages AdvantagesDisadvantages

For consumersConvenience Inability to physically examine productRisk of credit card fraudLack of personal service

For marketingAccess to the entire global marketReduced costIncreased competitionSome target markets have lower rates of internet accessConsumer concerns about security

Characteristics of e-marketing Profiling Getting to know customers/potential customers before they make purchases Organisations can gather information on customers through: Requiring registration to access a website Cookies on websites Competitions requiring personal information Storing information in database

Interaction Ongoing exchange of information Virtual customer service Real customer service via online chat Email newsletters RSS feeds Survey participation Online communities

Control The ability of the customer to determine how they interact with the marketing message and to influence the presentation and content of the marketing message Push advertising: sent from the marketer to the customer Pull advertising: the customer actively seeks out

Accessibility and comparability Customers can easily research different options/opinions/reviews Choice of completing transaction online or in-store

Digitalisation Ability to deliver a product as information or to present information about a product digitally Some can be completely digitalised e.g. music, others the service cant e.g. groceries

Electronic marketing methods Banner advertisements e.g. on newspapers Pop-up advertisements Brochure sites Web 2.0 (or Social Web) i.e. members contribute to build community/content e.g. Wikipedia, Facebook Viral marketing i.e. use of social networks to spread message, relying on forwarding/linking/word-of-mouth Portal i.e. website acting as a gateway Search engine optimisation (SEO) i.e. tailoring features to website to achieve best possible search results Search engine marketing i.e. paid advertising the appears similar to search result Email/SMS/MMS marketing Apps

Ethical and legal issues Privacy Misleading of deceptive conduct Intellectual property issues: Copyrights Trademarks Patents Domain names Registration does not give propriety rights Party holds a license to use the domain name for specified time Cyber stuffing Embedding of meta tags in a website Deep hyperlinking The practice of linking directly to the contents of another website SPAM Unsolicited commercial electronic messages Australian Communications and Media Authority (ACMA) is responsible for enforcing SPAM Act 2003 (Commonwealth) Technology burn-out Professionals seeking to switch off or unplug

Electronic marketing and marketing strategy Target markets are extremely diverse Can be divided into segments or niches as they would be offline Customer relationships management (CRM) Use information about customers to produce e-marketing experiences that create, build and sustain relationships The marketing mix Product: only products that can be completely digitalised are suited to online purchase Place: the internet provides a place for customers to compare price and can act as a distribution platform Price: need to find another way to create value as prices are easily compared Promotion: internet provides opportunities for promotion, but these are also available for competitors

Evaluating e-marketing effectiveness Metric measurements Cost per thousand views: number who see it, but not necessarily pay attention Click-through rate: amount of people who actually clicked on it Cost per click: dividing the total cost by total number of people who click Conversion rate: how many people who clicked through actually completed a transaction Customer acquisition cost: cost associated with acquiring new customer Unique visitors: number who have visited the site at least once over a given period of time

Electronic business Electronic data interchange Comprehensive, secure and real-time data exchange Intranet Internal website for use of staff Extranet Private web site for sharing information securely

5. International marketing

Globalisation Process through which individuals, organisations and governments become increasingly interconnected and similar Barriers have diminished Greater closeness in terms of trade, finance, living standards and security

Standardisation vs. Customisation Standardisation: applying a uniform marketing mix across international modifications to meet local conditions Customisation: tailoring marketing mix to specific characteristics of each market

Global trade Large proportion of total production/consumption is sent overseas/sourced from overseas Many governments run export promotion programs to help domestic organisations succeed in international markets Australian Trade Commission (Austrade) NZ Trade and Enterprise Agency

The international environmentPolitical forces Alliances/agreements between countries Alliances favour one country which can enhance success but work against international marketing goals Alliances aim to: Stream line paperwork Reduce/eliminate trade barriers Create preferred zones of trade Agreements can be bilateral (2) or multilateral Political factors within target market countries Democratic systems see regular changes in government and therefore policy Dictatorships see infrequent chances but drastic change when it occurs Multiparty systems often suffer an inability to implement policy

Economic forces The global economy Exchange rates The economies of each specific country Market specific economic indicators: Levels of income/wealth Exchange rates Availability of credit Quality of national infrastructure

Socio-cultural forces E.g. different meanings of colour for each country Anglo-Saxon interpret green as envy, whereas it symbolises love in Japan

Technological forces Cheap communication enable easy transfer of information Technology has created, revolutionised and destroyed entire industries Marketers cannot assume potential markets will have the same technological infrastructure as the home market

Legal forces Tarrifs: charge to effectively increase the price relative to domestically made goods Quotas: annual limits on imports Embargos: bans/restrictions on imports

The benefits of going international The world holds more potential May find a market that does not have access to its products Economies of scale It has become a more feasible option: Communication/transport technology Increasingly free trade environment It is a way to respond to increased domestic competition

Methods of Market EntryExporting Sale of products into foreign markets from home market base Direct: marketing organisation deals directly with international market Indirect: approach that relies on the use of specialist marketing intermediaries

Contractual agreements Licensing: business (licensee) in a foreign country manufactures and sells the product of a home country and pays commission on the sales it makes Franchising: business (franchisee) pays a fee in return for the right to use the marketing/business plan of another business Contract manufacturing: business pays a foreign business to manufacture its product and market it in the foreign country under the domestic businesss name

Strategic alliances and joint ventures Strategic alliance: cooperative arraignment between business in a foreign market Joint venture: marketing organisation forms a new business with an existing business in the target foreign market

Direct investment FDI: outright ownership of a foreign operation Greenfields operation: new business established in foreign market from ground up Multinational corporations: businesses that develop extensive directly owned assets in numerous foreign countries

The born global business view A born global business view views the whole world as its market from the outset Not suitable for all industries/products They must offer: Intellectual property or data services Very high-end products A unique/desirable product

The international marketing mix Product Must respond to customer preferences Different levels of disposable income may require changes in quality/size/packaging Sociocultural differences way require changes to the way service is delivered Branding is important

Promotion May confront issues e.g. language barriers, advertising regulations, different media or market maturity

Place Need to transport products Exchange rate effects costs Appropriate use of marketing intermediaries facilities distribution into foreign markets

Price Must be sensitive to local market conditions Must reflect cost of marketing effort Influenced by exchange rates, trade barriers, gov regulations, level of competition and specific marketing goals for each market International markets with little/no experience must rely on market research