Marketing Business Notes

8/17/2019 Marketing Business Notes

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Marketing

Lesson 1 - Role of marketing?

Marketing is the process of developing a product and implementing a series ofstrategies, aimed at correctly promoting, pricing and distributing the product, for

increased sales.

Marketing involves:

- research changing nature of consumers

- setting prices consistent with consumers’ expectation

- increase market awareness through: promotion, public relations and advertising.

Marketing is a method of revenue streams and market awareness, making it

essential to long term success.

Choice

In order to gain a competitive advantage, a business will differentiate its

products from similar products in the marketplace, through price, quality,

features and service.

Standard of living:

To provide consumers with better products and allow business to develop

their income streams, businesses constantly improve the features of their

products.

Millions spent each year developing products that will allow consumers to

maintain a healthy life style, e.g. basic necessities such as milk and bread.

Brand awareness:

Strong brand awareness allows a product to remain in the mind ofconsumers, this influences purchasing decisions.

Brand awareness refers to the extent to which consumers are aware ofa particular product, its features, price and possible places of purchase.


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Market share:

Market share refers to the percentage of total sales a business has compared

with its competitors in a particular market.

Increased market share = Increased profit.

Interdependence with other key business functions

Interdependence refers to each key business function working independently

and with the other to ensure the success of the business.

Operations: Refers to the physical production of a good or the provision of a

service. Work with marketing to incorporate product features that consumers

will react positively too.

Human resources: Deals with the relationship between the owners and

employers of a business. Aims to find, attract, develop and motivate people

that can provide the services the business requires.

Accounting and finance: Provides financial information such as:

- The total cost of producing a product.

- Assess an appropriate price for the product.

- Research the business’ ability to acquire additional finance when needed.


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Production, selling, marketing approaches

Business will use a combination of strategies to increase product awareness

and generate sales.

Production approach:Many business assume that a high quality product will ensure success in a

marketplace. This resulted in businesses placing considerable emphasis on

ensuring production methods where consistent with the high standards of

quality expected.

Selling approach:

Business began to believe consumers needed to be convinced of the need to

buy a particular product. The salesperson was the means of matching the

product to the consumer, who which used different strategies in convincing a

consumer they need the product.

The marketing approach:

Business now use an integrated approach to selling. A successfully marketed

product must incorporate a strategy that makes a consumer desire the

product and thing it is catered to their needs, it should be promoted

appropriately, and priced strategically, to ensure consumers are willing to buy

the good without concerns of quality.

Examples:

Making goods with the expectation they will sell Promotion

Creating a new factory to mass-produce identical items for aglobal market

Promotion

Designing a new advertising campaign that emphasizes theneed for a product for an aging population.

Selling

Door to door selling - Telemarketing Selling

Offering a customized service Marketing

Researching customer preferences prior to creating a newproduct design

Marketing


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Types of markets

Resource markets:

Where the sale of raw materials occur, provide inputs for the manufacturing

process, such as aluminum for cans.

Industrial Markets:

Involved with the manufacture of products, business in the industrial market

transform raw materials provided by the resource market, which are then sold

as intermediate goods to other manufacturers or as finished products to

retailers.

Intermediate markets:

Commonly referred to as wholesalers, they sell products to retail businesses,

wholesalers generally do not sell products to consumers.

Consumer markets:

Where business sell their products directly to consumers. It is made up of all

the individuals and households who buy goods and services for personal use.

The mass market:

Products here are aimed at all consumers, irrespective of their age, gender,

residential location or income, these products have appeal to all consumers,examples include electricity and water.

Niche market:

A market segment is one area of a particular market. A niche market is a

smaller section of a larger market segment, business targeting a niche

market would focus on a select group of customers, they have a very narrow

customer base. Goods are usually higher-priced in this market.


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Influences on marketing

Psychological:

Personal characteristics of individuals that influence their behavior. The

psychological factors that influence the goods we buy are:

- Motivation

People have different needs at different stages of their life,though they will always ensure their basic needs are met before seeking

other desires.

- Perception The opinion that a customer has about a product. It is

important that businesses develop a marketing campaign that provides

positive images of the product. Some believe the quality of a product is

reflected in its price.

- Learning Past experiences with products, they will decide whether to

purchase the product again or to continue to purchase the same products.

- Beliefs and attitudes A consumer’s attitude towards a particular

product is clearly influenced by his or her broader beliefs and attitudes, such

as religious beliefs or attitudes towards social issues.

- Lifestyle Leisure preferences, interests, attitudes and gender

influence a person’s lifestyle.

- Personality and self-concept The way we view ourselves and how

we respond other people’s perception of us will influence the types of goods

and services we purchase.

Sociocultural:

These influences are those that come from ones society and culture, this can

be defined as ones values, beliefs and customs. Business often cater to

sociocultural needs.

Economic:

A person’s socioeconomic status is determined by their level of income,

occupation and level of educational attainment. The higher ones income, thegreater their ability to purchase goods of superior quality.

Government:

Influences consumer purchasing through regulation of economy, achieved

through fiscal and monetary policies. Microeconomic reform also encourages

greater competition in specific markets, providing consumers with greater

product choice and lower prices.


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Consumer laws

Deceptive and misleading advertising:

- Giving misleading information about features, content or place of

manufacture.

- Overstating the benefits of a product.- Offering discounts and offers that do not exist.

- Using bait and switch advertising (promote a product which a low stock of

exists in the store, and suggestive sell more profitable alternatives)

Price discrimination:

- The act of charging different customers a different price for an identical

product.

- Manufacturer cannot refuse to sell goods to a retailer who decides not to

sell the good at the price that it is suggested by the manufacturer.

Implied conditions and warranties:

- Consumers expect that a business will fulfill its legal obligation to provide a

good or service that is consistent with the description given in full working

order.

- Regardless of warranty, a business must by law, either refund a client’s

money, or offer an exchange of the good, if the good is faulty at the time of

leaving the store.- All products have implied warranty


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Ethical aspects of marketing

Ethics in marketing refers to a set of broad principles that establish standards

of behavior and guidelines for people working across the marketing industry.

Truth, accuracy and good taste in advertising:- Marketers are expected to engage in fair and honest behavior when

developing a marketing campaign.

- Promotional material distributed needs to be truthful, accurate and in good

taste, failure to do so may result in a breach of the Competition and

Consumer act.

- The competition and consumer act prohibits a corporation from supplying

consumer goods that do not comply with prescribed product safety

standards.

- The concept of taste in advertising may differ between individuals.

Products that may damage health:

- The federal and state governments restrict the provision of various goods

and services that may damage ones health (by putting age restrictions).

- These include cigarettes and alcohol and entry to casinos.

Engaging in fair competition:

Common practices of unfair competitive behavior include:

- Price fixing between two or more major competitors in the market with the

aim of reducing competition.

- Long-term loss leader - pricing strategy by undercutting smaller competitors

in the short time, forcing the smaller business to engage in a price war.

- Misleading advertising regarding the products of a competitor.

The Australian competition and consumer commission (ACCC) can penalize

businesses that engage in unfair competition.

Sugging:

- A disguised marketing process that uses general questions in a survey to

determine the interests and needs of a consumer, then offers them a

product that caters to their needs.

- It is regarded unethical as the consumers are not aware that they’re being

encouraged to buy the product.


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Sugging

Extra notes on sugging:

- Selling under the guise of research.

- Unethical as consumers do not know they are being encouraged to buy a

product.- Consumer information may be sold to there market research companies.


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Marketing plan

All businesses, no matter what size, activity or legal structure need todevelop a marketing plan, which is a formal document that identifies allthe business’s marketing objectives and the strategies it intends to use

to achieve these objectives.

The elements of a marketing plan are:

Executive summarySituational analysis

Market researchEstablishing marketing objectivesIdentifying the target market

Developing marketing strategiesImplementation, monitoring and controlling

Executive summary:The executive summary provides a brief description of current issues

facing the business.

Situation analysis:

Provides a firm with an opportunity to examine its current position withinthe marketing, including:- Market share of a product.

- Future trends within the market.- Strategies used by competitors.- Changing consumers tastes and preferences.

- The two components of situational analysis are SWOT and productlifestyle.


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Product life cycle

Product analysis examines the current position of goods and services that a

business produces in a marketplace.

Establishment stage:This stage of the product life cycle is when the new product is first launched,

establishment takes time. Sales growth may be slow as there is not much

awareness and the product needs time to develop a loyal customer base,

profits are limited because of lack of revenue, while costs are high.

Growth stage:

If a new product begins to attract a core group of customers who display

loyalty and satisfaction to the product, it will enter the growth stage of the

product life cycle.

Maturity stage:

The period of the life cycle where sales begin to slow, business is faced with

steady income stream with limited prospects for growth. It is important at this

stage that a business differs itself from competitors.

Post-maturity stage:

During this stage, the business goes on one of these four paths:- Decline - It faces a marketplace where there is increased competition and

changes in the business environment, no longer meets needs of consumers

and is considered irrelevant and outdated. The business would aim at

revitalizing the product.

- Renewal - To restrict the impact of increased competition and to re-establish

itself with a competitive edge, the business may revitalize the product. This

may alter the product’s features, packaging and relaunch the product to alter

the marketplace.

- Steady state- A steady state focuses on what customers are currentlydemanding, it requires market research for accurate results. A steady state

stops expenditure on development and renewal though cannot be

maintained forever.

- Cessation - When a company stops business operations.


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Swot analysis

A SWOT analysis is used to examine the strengths and weaknesses with a

businesses and the opportunities and threats presented by the external

environment.

Strengths and weaknesses:

The strengths and weaknesses of any business are things that are controlled

from inside the business. includes:

- Business reputation

- Staffing

- Financial stability

Opportunities and threats:

Opportunities and threats arise from the external business environment, a

business has limited control over these. These include:

- Competition

- Business’ vulnerability to external changes such as interest rates, the

economy, wage growth and industry assistance.

- Changing tastes and preferences.


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Market research

Market research is a system of collecting data and analyzing information to

help make marketing decisions.

Marketing information could include:- Characteristics of the market

- Effects of price changes on sales

- Potential success of new products

- Market share and competition

- Economic and business trends

- Success of promotional activities

There are two types of data, primary and secondary.

Primary data is collected for the specific purpose which it will be used.

Methods of collecting primary data include:

- Observational research - gathering data by observing a relevant group of

people, their actions and their responses to situations.

- Surveys - gathered by asking a number of people the same questions.

- Experimental research - Changing a factor to see how it alters people, how

people react to products and features.

- Focus groups - Small groups of people with characteristics matching targetshare opinions and show behavior to products, advertising and packaging.

Secondary data refers to information that already exists, having been

collected for another purpose.

Methods of collecting primary data include:

- Internal sources - Information which comes from the business itself.

- External sources - Research firms, the government, trade associations and

mass media often provide / sell information to businesses.

Primary data is expensive and often takes a long time to analyze and collect

so businesses often use secondary sources.


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Identifying target markets

A target market is a group of present and potential customers to which a

business intends to sell its product.

Understanding the nature of consumer markets allows businesses to direct itsmarketing to that group of customers, which results in:

- More efficient use of marketing resources.

- More relevant promotions.

- Better understanding of the consumer buying behavior.

- More effective data collection and analysis.

- Refinement of marketing strategies.

Mass market:

The mass market consists of all consumers (people of both genders and all

ages, location and income levels).

Market segments:

A market segment is a area of a particular market. Market segmentation

occurs where the total market is subdivided into groups of people who share

one or more common characteristics.

Niche markets:Each market consists of a number of smaller markets, called niche markets.

Each niche market has a specific, narrow customer base. For example, Fern-

wood gyms are established for women who seek female-only gymnasiums.


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Developing marketing strategies

Marketing strategies are actions undertaken to achieve the business’s

marketing objectives through the marketing mix.

The marketing mix:Developing marketing strategies involves using the marketing mix, consisting

of product, price, promotion and place.

Product:

Refers to the good or service the business intends to provide in the

marketplace. Business must consider the product’s quality, image, logo,

branding, packaging and guarantee.

Price:

Price is the cost to the consumer of buying a good or service, business must

consider the cost of production and distribution with the desired profit margin

and pricing strategies used by competitors.

Promotion:

The process of creating and maintaining consumer awareness towards a

product. Main forms of promotion include advertising, personal selling, sales

promotion, publicity and public relations.

Place:

Refers to the methods of distribution and availability of the good. Includes

issues such as place of purchase, storage, transportation and costs of

distribution.


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Implementation, monitoring and controlling

The final part of the marketing plan focuses on putting the plan into action

and reviewing it’s performance.

ImplementationThe process of putting the strategies outlined in the marketing plan into

operation.

Monitoring and controlling

Monitoring means checking and observing the actual progress of the

marketing plan.

Controlling the comparison of planned performance against actual

performance and taking corrective action to ensure that objectives are

achieved.

Financial forecast

Developing one allows a business to undertake a cost-benefit analysis to

inform the decision process.

There are three forms of analysis used by business:

Sales analysis:

- Examines the sales of a particular product among different customergroups, by comparing actual sales against those forecasted, a business is

able to determine the efficiency of its marketing strategies.

Market share analysis:

- Market share analysis examines the sales performance of a business and

compares it against that of its direct competitors.

Marketing profitability:

- The process of evaluating the financial and non-financial benefits that have

been achieved by a specific marketing plan against the costs of

implementing the plan. Effectiveness can be assessed by comparing thecosts of specific marketing activities with the results achieved.

The marketing plan will need to be constantly analyzed and revised by;

- Changes in the marketing mix

- New product development

- Product deletion


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Marketing strategies

Market segmentation

Market segmentation involves dividing the total market into segments, with

one segment becoming the target market, often with a specific marketing mix

to meet the needs of the group.Market segmentation aims to increase sales, market share and profits.

Common variables for segmenting customer markets:

Geographic segmentation:

The process of dividing a market or customer group into smaller markets

based on different geographic locations. This includes differentiating

customers based on region, climate, city size/type and nearby landforms.

Demographic segmentation:

Involves the dividing of a market into smaller markets based on particular

features of the population, including: age, gender, income, family size and

level of education.

Psychographic segmentation:

Groups people according to how they spend their time, activities, interests,

opinions and attitudes.

Behavioral segmentation:

Behavioral segmentation is the process of dividing the total market according

to the customer’s relationship to the product. Includes thing such as purchase

occasion, benefits sought, loyalty, usage rate and price sensitivity.


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Products - Goods and services

Products are goods and services that can be offered in exchange for the

purpose of satisfying a need or want.

Total product concept refers to the tangible and intangible benefits of aproduct.

Tangible benefits refer to the physical benefits a consumer associated with

purchasing a product.

Intangible benefits refer to the benefits a consumer associates with

purchasing a product.

BrandingRefers to the reputation that a business or product has developed over atime.

It includes a name, term, symbol, design or any combination of thesethat identifies a specific product and distinguishes it from competition.

Branding provides:

- Easy identification of products.

- Indication of quality- Reassurance, prestige/status.

Branding helps a business to:

- Gain repeat sales

- Introduce new products

- Encourage customer loyalty

- Promote products

Brand names/symbol can be protected by a registered trademark, thisprovides a business with an exclusive right of use.

PackagingPackaging refers to the physical appearance of the good.

Packaging:

- Preserves the product

- Attracts consumer’s attention

- Divides the product into convenient quantities- Helps to display the product

- Aids transportation and storage


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Price

Pricing methods

Cost plus pricing:

Considers the total cost to the business of manufacturing or providing a good

or service to the consumer then adds an additional amount (mark-up) to allowfor a profit margin, to determine price.

Competition based pricing:

Covers the sots of production and is comparable to the competitors price.

Market based pricing

Is a method of setting prices according to the interaction between the levels

of supply and demand.

Pricing strategies

Pricing strategies are used once prices have been set, to ‘fine-tune’ the set

prices.

Factors to consider between choosing a pricing strategy is:

- The level of competition

- Government regulations

- Product life cycle stage

- Economic state

Price skimming:

Where a new product is priced relatively high in order to achieve maximum

returns before entry of competitors.

Penetration pricing:

Where prices are set at the lowest possible price to gain market share.

Loss leader:This pricing strategy involves providing a limited number of goods at a price

at or below cost to encourage consumers to purchase goods from the

business.

Price points:

Normally used when a businesses has a number of products in a particular

product line, where a number of key prices are offered within the range.


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Promotion

Promotion describes the methods used by a business to inform, persuade

and remind a target market about its products.

Promotion aims to:- Attract new customers

- Increase brand loyalty

- Encourage existing customer to increase their product purchase

- Provide information

- Encourage the purchase of new products

A business uses various promotional methods, the promotional mix to

formulate their promotional campaign.

The promotional mix is made up of:

- Advertising

- Personal selling and relationship marketing

- Sales promotions

- Publicity and public relations

Advertising

Advertising is a paid, non-personal message communicated through a massmedium. It aims to inform, persuade and remind a target market of a product.

Advantages:

- Reach a wide audience.

- Different media for different target markets.

Disadvantages:

- Risks

- So many ads (Hard to stand out)

Personal sellingPersonal selling involves the activities of a sales representative directed to a

customer in an attempt to make a sale.

Advantages:

- Individual advice and assistance is provided, which can lead to repeat

sales.

- The sales consultant can provide after sales service.

Disadvantage:

- Takes skill


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Promotion

Relationship marketing

Relationship marketing involves the process of building and maintaining long

term relationships with customers. The aim is to create customer loyalty by

meeting the needs of a customer on an individual basis.The establishment of a regular client base, allows businesses to offer special

packages, discounts and promotional events.

Advantages:

- Increase positive word of mouth.

- Increase feedback (for future implement)

Sales promotion

Sales promotion is the use of activities or materials as direct inducements to

customers. Aims to entice new customers, encourage trial purchase of a new

product, Increase sales to existing customers and repeat purchasers.

Short term reductions, e.g. discounts, cash back offers, 2 for 1 deals.

Publicity and public relations

Publicity is any free news story about a business’s products.

The aim of publicity is to enhance the image of a product, raise awareness of

a product, highlight favorable features, or counteract any negative imagerelated to the business.

Public relations are those activities aimed at creating and maintaining

favorable relations between a business and its customers, for example: a

donation, or an attention seeking gesture.

This can increase sales by promoting a positive image, communicating a

message, crisis management, identifying market trends,.

The communication process:Any method used to convey a message.

Opinion leaders:

Celebrities used to promote product through endorsement.

ADV: Opinion come from the company, Early adopters are trusted/ believed.

Word of mouth:

Word of mouth communication occurs when people influence each other

during conversations.

DIS: Hard to control, negative opinions difficult to control.


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Place / Distribution

Place or distribution are the activities that make products available to

customers when and where they want them.

Distribution channels are the routes taken to get the product from the factoryto the customer.

Commonly used channels of distribution include:

The producer to consumer distribution channel, where the good or service is

produced by an individual/organization then passed directly onto the

consumer.

ADV: Allows the producer to maintain control over all areas of the product.

ADV: Provides the producer with a direct point of contact with consumers.

Producer to retailer to customer, is where a retailer is used as an intermediary

to access the good from the producer and then sell it to the consumer.

ADV: Allows the producer to concentrate on the manufacturing component of

the business’s operations.

ADV: The use of a retailer encourages greater distribution and access to the

good.

Producer to wholesaler to retailer to consumer distribution channel, is wherethe wholesaler takes responsibility for distributing the producer to the retailer.

ADV: The use of a wholesaler allows the producer to hold lesser amounts of

idle stock.

ADV: Marketing and sales tend to be the responsibility of the retailer, not

producer.


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Distribution - Channel Choice

The choice of distribution channel will influence the type of customers the

product attracts, the perception of the product in the market and the ease of

which the consumer can access the production.

Intensive distribution occurs when the product is readily available to a wide

selection of stores or locations.

E.g. Convenience items (milk / soft drink / confectionary)

ADV: Wide exposure

DIS: producer loses control over sales process.

Selective distribution involves the use of a limited number of stores /

locations to sell or distribute a product.

E.g. Clothing, furniture, electrical appliances etc.

ADV: More prestigious / more control over sales process.

DIS: Limited exposure

Exclusive distribution is a form of distribution where there is a restriction on

the number of products and availability of the product.

E.g., Jewelry (tiffany & co)

ADV: Complete control over sales process.

DIS: Very limited exposure.


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Physical distribution issues

Physical distribution is all those activities concerned with the efficient

movement of the products from the producer to the customer, including:

transport, warehousing and inventory.

Transport refers to the process of moving goods from one location to another.

Warehousing is a set of activities involved in receiving, storing and

dispatching goods.

Inventory control is a system that maintains quantities and varities of products

appropriate for the target market.

Acronyms:

JIT - Just in time - demand and supply -> perfect balance

FIFO - First in first out, less holding stock, more room for new items

LIFO - Last in first out - Ordered last, brought first causes higher demand


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People, processes, and physical evidence

People

The people element refers to the quality of interaction between the customer

and those within the business who will deliver the service.

It is important to have people with the right skills / knowledge to support/ deliver the level of service being sought.

All business should develop a culture of customer focus and put it into

practice.

Process

Refers to the flow of activities that a business follows in its delivery of a

service.

An efficient delivery system includes a set of well-planned and well organized

processes, focused on delivering to the expectations of the consumer and

achieve customer satisfaction

Physical evidence / packaging

This refers to the environment in which service is delivered, the physical

appearance of the product across every aspect of its presentation to the

consumer.

The packaging should create an image of value and excellence.


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E-marketing

This is the practice of using the internet to perform marketing activities.

It allows a business with online operations to reach a global audience with

relatively low costs.

E-marketing is the fastest growing sales medium in Australia with about 21%of consumers regularly using the internet to shop.

Social media advertising (SMA) is a form of online advertising using social

media, it is inexpensive in comparison to traditional advertising methods.


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Global marketingMany transnational corporations (TNCs) adopt a marketing approach where

standardized marketing mix is applied globally.

Global branding is the worldwide use of a name, term, symbol or logo to

identify the seller’s products. A brand has the same meaning in any language,providing global recognition, e.g. successful brands such as Coca-cola &

McDonalds.

Standardization

A standardized approach is a global marketing strategy that assu,es the way

that the product is used and the needs that it satisfies are the same over the

world. E.g., fast food and mobile phones.

Customization

A customized or local approach is a global marketing strategy that assumes

the way the product is used and the needs it satisfies are different between

countries. For example, McDonalds uses a standardized name, logo, but has

variety in production methods in some geographic locations, such as

Philippines where noodles are included.

Global pricing is how the businesses coordinate their pricing policy across

different countries.- Customized pricing (different prices in different countries.)

- Market customized pricing (prices are set according to local market

conditions)

- Standard worldwide price (charged same price for a product across the

world.

Competitive positioning

relates to how a business will differentiate its

products.

To remain competitive, a business must develop:- Product leadership - refers to the enhancement of brands through

innovation and quality.

- Operational excellence - refers to the ability of a business to be run

efficiently as a means of producing a low-cost operation.

- Building positive customer relationships - allows a business to develop a

long term association with the customer, through understanding their buying

behavior.

Marketing Business Notes

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