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Marketing Defined

The practice of marketing is applicable to businesses big and small

The planning and implementation of everything an organization does to facilitate an exchange

between itself and its customers

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

Marketing as a Business Philosophy


Four orientations or business philosophies
1.

Product Orientation

Focus on making products widely available, affordable, and require little selling effort

2.

Sales Orientation

Promotes the business philosophy of selling what we make

Marketing as a Business Philosophy


3.

Market Orientation
1.
2. 3.

Customer focus Coordinated marketing effort Long-term success


Create and sustain mutually satisfying longterm relationships with not only its customers but with other key players such as employees, suppliers, distributors, retailers, community, and society as a whole.

4.

Relationship Marketing Orientation

Marketing as an Exchange Process


Buying
Selling Transporting

Storing

Marketing as an Exchange Process


Financing
Risk taking Standardization and grading

Information acquisition and provision

Facilitating Exchange by Narrowing Separations

Marketers create and provide utility (value) to its customer base. Four most important forms of utility:
1. 2. 3. 4.

Form Utility Place Utility Time Utility Ownership Utility

Marketings Impact on Society

Societal marketing conceptsatisfying customer needs and wants in a manner that is in the best interest of customers and society-at-large

Marketings Impact on Society

Marketing provides jobs


Marketing provides customers with alternatives Marketing helps make products affordable Marketers must be mindful of limited natural resources

Marketings Impact on Society

Marketers must be mindful of unintended social consequences Marketing promotes societal causes
Marketing fuels the global economy

Marketing as a Dynamic Organizational Process

Marketing strategy is the birthplace of a products value proposition Value propositionthe bundle of benefits the product provides to fulfill customer needs and wants

The Fundamentals of Marketing Strategy

Market
Market segmentation Target market

Positioning
Positioning

Image that customers have about a product in relation to the products competitors

Marketing Strategy

Identifying target markets

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

Household consumers Business-to-business customers

Marketing Mix

Place (Distribution)
Marketing channel is the network of organizations that create time, place and ownership utilities for household consumers and business customers

Marketing Mix Promotion

Integrated Marketing Communication (IMC)

System of management and integration of marketing communication elements

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

Marketing Strategy and Environmental Forces

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

Researching Global Markets


Marketing Research Building The Knowledge Base Breadth and scope of international marketing research. Greater uncertainties in global markets.

Marketing research defined :


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

Role of Marketing Research Reduction of uncertainty and facilities management decision


making
Information for :
Planning Problem Solving Control

Nature of Marketing Research


Applied research Cost-benefits assessment Dynamic environment and need for frequent updates

Stages in the Research Process


Formulate Problem

Determine Research Design


Determine Data Collection Method Design Data Collection Forms Design Sample and Collect Data Analyze and Interpret the Data Prepare the Research Report

Type of Data Needed for International Marketing Research


Secondary Data
Internal External

Advantages and Disadvantages of Secondary Data


Availability Reliability Compatibility of data Validation Outdated

Gathering Primary Data


Types of primary data Socioeconomic / demographic data Attitudes / Options Awareness / knowledge Intentions Motivations Behaviors

Benefits of Segmentation
Effective use of resources
Gain a focus Create Value for a target market

Positioning

1. Identify bases for segmenting the market 2. Develop segment profiles

Steps in Market Segmentation, Targeting, and Positioning Market Segmentation


Market Targeting

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

Step 1. Market Segmentation Levels of Market Segmentation


Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs.

(no segmentation, i. e. a commodity)


Different products to one or more segments

Same product to all consumers

Mass Marketing

Segment Marketing

(some segmentation, i.e. Marriott)

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

for effective segmentation


Size, purchasing power, profiles of segments can be measured.

Measurable

Accessible

Segments can be effectively reached and served.


Segments are large or profitable enough to serve. Effective programs can be designed to attract and serve the segments.

Substantial

Actionable

Evaluating Market Segments


Segment size and growth Segment structural attractiveness

Company objectives and resources

Choosing a market-coverage strategy


Company resources Degree of product homogeneity Market homogeneity Competitors strategies

Positioning for Competitive Advantage


Products Position - the way the product is defined by consumers on important attributes -

the place the product occupies in consumers minds relative to competing products. Marketers must:
Plan positions to give their products the greatest

advantage in selected target markets

Positioning Strategies
Positioning by specific product attributes
Positioning by benefits Positioning for user category

Positioning for usage occasion


Positioning against another competitors Positioning against another product class

Steps to Choosing and Implementing a Positioning Strategy


Identifying Possible Competitive Advantages:

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

Which differences to promote?


Important to customers Distinctive Superior Communicable to customers Preemptive Affordable Profitable

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

Role of Marketing Research Reduction of uncertainty and facilities management decision


making
Information for :
Planning (Market entry strategies) Problem Solving Control

Nature of Marketing Research


Applied research Cost-benefits assessment Dynamic environment and need for frequent updates

Stages in the Research Process


Formulate Problem

Determine Research Design


Determine Data Collective Method Design Data Collection Forms Design Sample and Collect Data Analyze and Interpret the Data Prepare the Research Report

Type of Data Needed for International Marketing Research


Secondary Data
Internal External

Advantages and Disadvantages of Secondary Data


Availability Reliability Compatibility of data Validation Outdated

Gathering Primary Data


Types of primary data Socioeconomic / demographic data Attitudes / Options Awareness / knowledge Intentions Motivations Behaviors

What is a Product?
Product: bundle of physical, service, and

symbolic attributes designed to enhance buyers want satisfaction

What are Goods and Services?


Service: intangible task that satisfies consumer or

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

Types of Consumer 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

information during the buying process.

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

Types of Business Products

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,

such as a laptop computer

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.

Supplies are sometimes called MRO items

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

Business services: intangible product

purchased to facilitate a firms production and operating processes such as financial services, leasing of vehicles, legal advice and consulting

Development of Product Lines


Product Line: a series of related products
Motivation

Desire to Grow Enhancing the Companys Position in the Market Optimal Use of Company Resources Exploit the Product Life Cycle

The Product Mix


A companys assortment of product lines and individual offerings
Product Width--the number of product lines offered. Product Length--the number of different products a

firm sells.

Product Depth--variations in each product that a firm

markets in its mix.

Product Mix Decisions


A firm may lengthen or widen its product mix A Company may decide to add variations that will

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

The Product Life Cycle


Product life cycle: progression of products through

introduction, growth, maturity, and decline stages

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

Firm may need to make improvements to the product


Additional spending on promotion and distribution may

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

Extending the Product Life Cycle


Marketers usually try to expand each stage of the life cycle for their products as long as possible

Product life cycles can stretch indefinitely as a result of decisions designed to:
Increase the frequency of use by current customers

Increase the number of users for the product


Find new uses Change package sizes, labels, or product quality

Product Deletion Decisions


Product lines must sometimes be pruned and marginal products eliminated
This decision is typically faced during the late maturity and early declined stages of the product life cycle An unprofitable item may be continued in order to provide a complete line for 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

Many are predicting a firesale in laptops as supply exceeds demand.

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

Companies may be able to set prices according to perceived value.

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

according to what consumers THINK should be the price

Going Rate (Price Leadership)


In case of price leader, rivals have difficulty in competing

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

Absorption/Full Cost Pricing


Full Cost Pricing attempting to set price to cover

both fixed and variable costs Absorption Cost Pricing Price set to absorb some of the fixed costs of production

Marginal Cost Pricing


Marginal cost the cost of producing ONE extra or ONE

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

Marginal Cost Pricing Example:

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.

Six Basic Components


Paid
Non-personal communication Sponsor is identified

Using mass media


Tries to persuade or influence Reaches large audience

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

the production and selling costs.

Lowers Prices:- In many market based economies

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.

Competitive Weapon:- Advertising, by itself and

Functions of Advertising
Conative Affective
Conviction Preference Liking Purchase

Cognitive
Knowledge Awareness

Lavidge and Steiners Hierarchy-of-Effects model

Approaches to setting the advertising budget


Percentage of Sales
Objective and Target Arbitrary Allocation

Affordable/Residual
Comparative Parity Payout Planning Quantitative Experimental Approach

Factors affecting Allocation of Ad Budget


Market Size and Potential
Market Share Goals
High SOV effect and Budgeting strategies for individual markets
Decrease: Follow a niche strategy, retreat and focus, reduce ad spending Increase to defend: Follow defensive strategy, increase ad spending to match that of competitor
Maintain a modest ad spending premium: Set your SOV at least at the level of competitor

Competitors Share of Voice

Low

Attack with Large SOV premium: Spend approximately twice that of competitor and sustain for a year or more

Low

Your brands share of market

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

Why Use Marketing Intermediaries?


Selling through wholesalers and retailers usually is

much more efficient and cost effective than direct sales

Distribution Channel Functions


Information: gathering and distributing marketing

research and intelligence information about the marketing environment


Promotion: developing and spreading persuasive

communications about an offer

Distribution Channel Functions


Contact: finding and communicating with prospective

buyers
Matching: shaping and fitting the offer to the buyers

needs, including such activities as manufacturing, grading, assembling, and packaging

Distribution Channel Functions


Negotiation: agreeing on price and other terms of

the offer so that ownership or possession can be transferred


Physical distribution: transporting and storing

goods

Distribution Channel Functions


Financing: acquiring and using funds to cover the costs

of channel work
Risk taking: assuming financial risks such as the

inability to sell inventory at full margin

Customer Marketing Channels

Channel Organization

A vertical marketing system (VMS) consists of

producers, wholesalers, and retailers acting as a unified system


One channel member either owns the others, has

contracts with them, or wields so much power that they all cooperate

Conventional vs. Vertical Marketing Channels

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.