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Marketing Defined
Marketing is a continuous and dynamic strategic decision-making process Strategic process that matches the firms strengths and resources to potential opportunities that exist within the marketing environment
Product Orientation
Focus on making products widely available, affordable, and require little selling effort
2.
Sales Orientation
Market Orientation
1.
2. 3.
4.
Storing
Marketers create and provide utility (value) to its customer base. Four most important forms of utility:
1. 2. 3. 4.
Societal marketing conceptsatisfying customer needs and wants in a manner that is in the best interest of customers and society-at-large
Marketers must be mindful of unintended social consequences Marketing promotes societal causes
Marketing fuels the global economy
Marketing strategy is the birthplace of a products value proposition Value propositionthe bundle of benefits the product provides to fulfill customer needs and wants
Market
Market segmentation Target market
Positioning
Positioning
Image that customers have about a product in relation to the products competitors
Marketing Strategy
Tailoring marketing mixes that meet the needs and wants of each specific target market
Developing marketing mixes that reinforce the products desired positioning strategy in the marketplace
Marketing Mix
Product
Place (Distribution) Promotion
Price
Marketing Mix
Product
Refers to goods, services, people, places and ideas
Marketing Mix
Place (Distribution)
Marketing channel is the network of organizations that create time, place and ownership utilities for household consumers and business customers
Advertising, publicity, sales promotion, personal selling, sponsorship marketing, and point-of-purchase communications
Marketing Mix
Price
Pricing decisions are complex and are driven by a variety of considerations including:
Customer demand, costs, information availability, competition, profit motives, product considerations, and legal considerations
Environmental forces
Exist outside the walls of the firm, are less controllable, and include socio-cultural, economic, natural, technological, political and legal, and competitive forces
PEST analysis
Political factors
Economic factors Socio-cultural factors Technological factors
Political/legal
Monopolies legislation
Environmental protection laws Taxation policy
Employment laws
Government policy Legislation Others?
Economic Factors
Inflation
Employment Disposable income Business cycles Energy availability and cost Others
Socio-cultural factors
Demographics
Distribution of income Social mobility
Lifestyle changes
Consumerism Levels of education Others
Technological
New discoveries and innovations Speed of technology transfer Rates of obsolescence Internet Information technology Others
Benefits of Segmentation
Effective use of resources
Gain a focus Create Value for a target market
Positioning
3. Develop measure of segment attractiveness 4. Select target segments 5. Develop positioning for target segments 6. Develop a marketing mix for each segment
Market Positioning
Mass Marketing
Segment Marketing
Market Segmentation
Geographic Segmentation
International
National
Regional/City
Market Segmentation
Demographic Segmentation
Dividing the market into groups based on
variables such as: Age Gender Family size or life cycle Income Occupation Education Religion Race Generation Nationality
Market Segmentation
Psychographic Segmentation
Divides Buyers Into Different Groups Based on:
Market Segmentation
Behavioral Segmentation
Dividing the market into groups
based on variables such as: Occasions Benefits User status Usage rate Loyalty status Readiness stage Attitude toward product
Market Segmentation
Segments must respond differently to different marketing mix elements & programs
Requirements
Measurable
Accessible
Substantial
Actionable
the place the product occupies in consumers minds relative to competing products. Marketers must:
Plan positions to give their products the greatest
Positioning Strategies
Positioning by specific product attributes
Positioning by benefits Positioning for user category
Competitive Differentiation. Selecting the Right Competitive Advantage: Unique Selling Proposition (USP). Communicating and Delivering the Chosen Position.
Product Differentiation
Physical attributes
Service differentiation Personnel differentiation Location Image differentiation
Market Research
Marketing Research Building The Knowledge Base Marketing Research is the function which links the consumers and customers to the organization through information; information used to identify and define marketing problems; generate, refine and evaluate marketing actions; monitor marketing performance; and improve our understanding of marketing as a process
What is a Product?
Product: bundle of physical, service, and
business user needs Goods-services continuum: device that helps marketers to visualize the differences and similarities between goods and services
Characteristics that distinguish services from goods: Intangibility Inseparability Perishability Difficulty of standardization Frequent requirement of interaction between buyer and Seller Variability
Product Levels
Potential Product Augmented Product Expected Product Basic Product Core Core Benefits Benefit
Classifying Products
Consumer products: products destined for use by ultimate consumers Business (or B2B) products: those that contribute directly or indirectly to the output of other products for resale Also called industrial or organizational products
Convenience product: good or service that consumers want to purchase frequently, immediately, and with minimal effort
Impulse goods and services are
purchased on the spur of the moment. Staples are convenience goods and services that consumers constantly replenish to maintain a ready inventory. Emergency goods and services are bought in response to unexpected and urgent needs.
Shopping product: good or service purchased only after the customer compares competing offerings from competing vendors on such characteristics as price, quality, style, and color
Typically cost more than convenience purchases. Include tangible items. Shopper lacks complete information and gathers
Specialty product: good or service with unique characteristics that cause the buyer to value it and make a special effort to obtain it Unsought product: good or service marketed to consumers who may not yet recognized in the need for it
Installation: major capital investment by a business buyer that typically involves expensive and relatively long-lived products, such as a new factory or piece of heavy machinery
Accessory equipment: capital product, usually less expensive and shorter-lived that insulation,
Component parts and materials: finished business products that become parts of buying firms final products, such as spark plugs for new cars
Raw materials: business product, such as a farm product (wheat, cotton, soybeans) or natural product (coal, lumber, iron ore) that become part of a final product
Supplies: products that represent regular expenses necessary to carry out a firms daily operations but are not part of the final product.
MRO item: part of business supplies categorized as maintenance items, repair items,
or operating supplies such as light bulbs, nuts and bolts used in repairing equipment, or pencils
purchased to facilitate a firms production and operating processes such as financial services, leasing of vehicles, legal advice and consulting
Desire to Grow Enhancing the Companys Position in the Market Optimal Use of Company Resources Exploit the Product Life Cycle
firm sells.
attract new users A product may be pruned or altered, and new product may extend the product life cycle Line extension: introduction of a new product that is closely related to other products in the firms existing line
Introduction Stage
Firm works to stimulate demand for the new
market entry Promotional campaigns stress features Additional promotions to intermediaries attempt to induce them to carry the product Although prices are typically high, financial losses are common due to heavy promotional and research-and-development costs
Growth Stage
Sales volume rises rapidly Firm usually begins to realize substantial profits Success attracts competitors
be necessary
Maturity Stage
Industry sales continue to grow, but eventually
reach a plateau Many competitors have entered the market, and profits began to decline Differences between competing products diminish Available supplies exceed industry demand for the first time Competition intensifies and heavy promotional outlays are common
Decline Stage
Innovations or shifts in consumer preferences
cause an absolute decline in industry sales Industry profits fall -- sometimes become losses Firms cut prices in a bid for the dwindling market Manufacturers gradually drop the declining items from their product lines
Product life cycles can stretch indefinitely as a result of decisions designed to:
Increase the frequency of use by current customers
Price
The sum or amount of money at which a thing is valued, or the value which a seller sets on his goods in market; that for which something is bought or sold, or offered for sale; equivalent in money or other means of exchange; current value or rate paid or demanded in market or in barter; cost.
Penetration Pricing
Price set to penetrate the market
Low price to secure high volumes Typical in mass market products chocolate
bars, food stuffs, household goods, etc. Suitable for products with long anticipated life cycles May be useful if launching into a new market
Market Skimming
High price, Low volumes Skim the profit from the
market Suitable for products that have short life cycles or which will face competition at some point in the future (e.g. after a patent runs out) Examples include: Playstation, jewellery, digital technology, new DVDs, etc.
Value Pricing
Price set in accordance with customer perceptions about the value of the product/service Examples include status products/exclusive products
Loss Leader
Goods/services deliberately sold below cost to encourage sales elsewhere Typical in supermarkets, e.g. at Christmas, selling bottles of gin at 3 in the hope that people will be attracted to the store and buy other things Purchases of other items more than covers loss on item sold e.g. Free mobile phone when taking on contract package
Psychological Pricing
Used to play on consumer perceptions
Classic example - 9.99 instead of 10 Links with value pricing high value goods priced
on price too high and they lose market share, too low and the price leader would match price and force smaller rival out of market May follow pricing leads of rivals especially where those rivals have a clear dominance of market share Where competition is limited, going rate pricing may be applicable banks, petrol, supermarkets, electrical goods find very similar prices in all outlets
Tender Pricing
Many contracts awarded on a tender basis Firm (or firms) submit their price for carrying out the
work Purchaser then chooses which represents best value Mostly done in secret
Price Discrimination
Charging a different
Prices for air travel differ for the same journey at different times of the day
price for the same good/service in different markets Requires each market to be impenetrable Requires different price elasticity of demand in each market
Destroyer/Predatory Pricing
Deliberate price cutting or offer of free gifts/products to force rivals (normally smaller and weaker) out of business or prevent new entrants
Anti-competitive and illegal if it can be proved
both fixed and variable costs Absorption Cost Pricing Price set to absorb some of the fixed costs of production
fewer item of production MC pricing allows flexibility Particularly relevant in transport where fixed costs may be relatively high Allows variable pricing structure e.g. on a flight from London to New York providing the cost of the extra passenger is covered, the price could be varied a good deal to attract customers and fill the aircraft
Aircraft flying from Bristol to Edinburgh Total Cost (including normal profit) = 15,000 of which 13,000 is fixed cost* Number of seats = 160, average price = 93.75 MC of each passenger = 2000/160 = 12.50 If flight not full, better to offer passengers chance of flying at 12.50 and fill the seat than not fill it at all!
*All figures are estimates only
Target Pricing
Setting price to target a specified profit level
Estimates of the cost and potential revenue at
different prices, and thus the break-even have to be made, to determine the mark-up Mark-up = Profit/Cost x 100
Cost-Plus Pricing
Calculation of the average cost (AC) plus a mark up
AC = Total Cost/Output
Promotion Mix
Promotion Mix Advertising Personal Selling Sales Promotion Publicity
Advertising Advertising is a non-personal form of promotion that is delivered through selected media outlets that, under most circumstances, require the marketer to pay for message placement.
Advertising
Advertising is a message paid for by an identified sponsor and delivered through some medium of mass communication. Advertising is persuasive communication. Russel and Lane
Advertising has long been viewed as a method of mass promotion in that a single message can reach a large number of people. But, this mass promotion approach presents problems since many exposed to an advertising message may not be within the marketers target market, and thus, may be an inefficient use of promotional funds.
Functions
In its role as a form of mass communication, it delivers relevant messages to target audiences and by changing mental states, it can perform a number of functions. Stimulate demand:- by informing consumers about the availability of a product in the market. Strengthens other promotion mix elements:- It does the pre-selling of the product and makes the job easier of sales people Develops Brand Preference:- Consistent and persuasive advertising often include trial or purchase.
Functions
Cuts Costs:- It may be instrumental in cutting down
when unit costs go down, competitive pressures force companies to lower the prices for the benefit of the consumers. coupled with other promotion mix elements, may prove to be an extremely potent weapon to counter competitive moves.
Functions of Advertising
Conative Affective
Conviction Preference Liking Purchase
Cognitive
Knowledge Awareness
Affordable/Residual
Comparative Parity Payout Planning Quantitative Experimental Approach
Low
Attack with Large SOV premium: Spend approximately twice that of competitor and sustain for a year or more
Low
High
Personal Selling
Personal selling is the two-way flow of communication between a buyer and seller, designed to influence a persons or groups purchase decision.
Public Relations
Public relations is a form of communication management that seeks to influence the feelings, opinions, or beliefs held by customers, prospective customers, stockholders, suppliers, employees, and others about a company and its products or services.
Publicity
Publicity is communication about an organization that is nonpersonal and not paid for directly by the organization.
Sales Promotion
Sales promotion is a short-term offer of value designed to arouse interest in buying a good or service.
Direct Marketing
Direct marketing uses direct communication with consumers to generate a response in the form of an order, a request for further information, or a visit to a retail outlet.
Distribution Channels
A distribution channel is a set of independent organizations involved in the process of making a product or service available to the consumer or business user
Used to move the customer towards the product
buyers
Matching: shaping and fitting the offer to the buyers
goods
of channel work
Risk taking: assuming financial risks such as the
Channel Organization
contracts with them, or wields so much power that they all cooperate
Business Location
1.
Understand the marketing strategy and target market of the company Conduct a regional analysis, which involves the selection of geographic market areas Select an area within that region Choose individual sites
2.
3. 4.