Chapter One - INTRODUCTION TO MARKETING

ignoredmoodusSoftware and s/w Development

Feb 21, 2014 (3 years and 5 months ago)

317 views

1

|
M A R K E T I N G F O U N D A T I O N S


24108
Marketing Foundations


UTS


Chapter One

-

INTRODUCTION TO MARKETING



Marketing



set of institutions and processes for creating, communicating, delivering and
exchanging
products of value

for customers, clients, partners and society at large
. Firms

with a
market orientation perform better than firms without a market orientation. They have better
profits, sales volumes, return on investment and market share. Marketers must learn about the
needs and wants of customers. This is an ongoing process

as cu
stomer preferences are
continually evolving. The best marketers are able to offer something that is unique or special
to
customers

e.g. I

pad
.



An example of marketing in action is Apple Ltd creating customer delight via market orientation
i.e. a focus on

the customer. Moreover, with a clear focus on New Product Analysis coupled by
market research the company is able to achieve this objective. Apple has better profits, sales
volume return on investment and market share. The marketer has adopted marketing t
hinking via
mutually beneficial exchange with value creation for all parties, both parties expectations being
met and both parties benefit from the transaction.




Ethics is a set of moral principles that guide attitudes and behaviour.
Corporate Social
Res
ponsibility is the material fact that businesses have a duty to act in the best interests of the
society that sustains them. They are obliged to act ethically, within the law and fulfil
requirements such as philanthropy, protecting the natural environment,

providing products that
benefit society and generating employment and wealth. Qantas’s corporate social responsibility
(‘the spirit of Australia’) is used as leverage to earn more cash money via support of community
organisations such as Clean up Australi
a, Land Care and the Prime Minister’s Disability
Awards. The marketing organisation has not fulfilled its obligations to all stakeholders if it
merely acts within the law. The organisation must act in the best interests of most stakeholders
such as shareho
lders, employees, customers, partners and government.


Marketing can be used by not for profit organisations such as the Salvation Army that aims to
advance the welfare of the less fortunate and needy. This can be via Integrated Marketing
Communications or

promotion in online news media to generate donations to help the needy.


A contemporary product that demonstrates how marketers stimulate demand is I phone. The
product’s augmentation such as special features that differentiates I phone from competing
pro
ducts e.g. a digital high definition camera which allows users to take pictures when they
want.


Advertisements that are product focused include BMW ‘the ultimate driving machine’, while
advertisements that are customer focused include NAB ‘more give less
take.’

.


The Marketing Process

2

|
M A R K E T I N G F O U N D A T I O N S


The marketing process involves answering two questions. The first question is what customers
we serve (market segmentation and targeting). The second question is how we best serve
targeted customers (differentiation and posi
tioning).


1.

Understand the marketplace and customer needs and wants

2.

Design a customer
-
driven marketing strategy

3.

Construct an integrated marketing program that delivers superior value

4.

Build profitable relationships and create customer delight

5.

Capture value f
rom customers to create profits and customer equity


Simple

Marketing Concepts

-

Needs, wants and demands


products as bundles of benefits, look for best value for money



Needs


things that are vital for survival e.g. housing, food and water.



Wants


a non
-
necessary desire e.g. designer clothes and
perfume.



Demands


wants backed by buying power

-

Products


offered to market to satisfy need or want (e.g. goods, experiences, place,
information)

-

Value, satisfaction and quality



Value


customer

s overall percep
tion

of the utility

of a product based

on what is
received and what is given.

Utility is the usefulness of a product.



V = Quality/ Price


= Benefits

expected
/ benefits received




Customer satisfaction


extent to which perceived performance meets

expectations



Quality



how well products

satisfies want

-

Exchange, transactions and relationships



Exchange


the mutually beneficial
transfer

of products of value between buyer
and seller. It involves:

1.

value creation for all parties

2.

both parties benefit f
rom the transaction

3.

Both

parties expectations must be met e.g. quality and price.



An example of an exchange is the Cancer Council

Australia runs Television advertisements
encouraging people to protect their skin from sun damage.

People become aware th
at
they
should

wear protective clothing when in the sun.

The Cancer Council meets its objectives
because more people are wearing protective clothing when in the sun. Long term benefits will
arise for society as the rate of skin cancer drops for the Austral
ian population.


Transaction


marketing’s unit of measurement; trade of value


Relationship marketing


creating, maintaining and enhancing strong value
-
laden
relationships with customers and other stakeholders.

A
market

is a group of customers wi
th heterogeneous needs and wants e.g. Geographic markets
(China, Australia and the UK), Demographic markets (Baby boomers, Gen X and Gen Y) and Product
markets (water bottle and pain killer).


Designing Customer
-
Driven Marketing Strategy

3

|
M A R K E T I N G F O U N D A T I O N S


6.

Marketing manage
ment


“analysis, planning, implementation and control of programs
designed to create, communicate and deliver value to customers and facilitate managing
customer relationships in ways that enable the organisation to meet its objects and those of its
stake
holders


Selective Customer to Serve

Demand management


understand and monitor nature of consumer demand; build profitable
relationships, cost of attracting new customer is five times higher than keeping existing one

Creating excitement



The
Marketing
Ev
olution


1. Trade (bartering and exchange of products).

2. Production orientation



what could be made?

Henry Ford said that “you can have any car that
you want as long as it’s black (because black was the cheapest car to produce)”

3.

Sales orientation



cons
umers won’t buy unless organisations undertake large
-
scale
promotional efforts (e.g. life insurance)
. “Hey come and buy the blue car, we know you can get
black but blue is better” says the used car salesman
.

4.

Marketing
orientation



focus on the customer

an
d finding out what they need and want.

5.

Societal market orientation
-

used as a selling point and leverage to target socially aware
customers i.e
. Corporate Social Responsibility and Ethics.

Selling and Marketing Concepts


Concept

Starting Point

Focus

Means

Ends

Selling

Factory

Existing products

Selling and
promoting

Profits through
sales volume

Marketing

Market

Customer Needs

Integrated
Marketing

Profits through
customer
satisfaction



Philosophies

7.

Social marketing concept


balance between ideas of SOCIE
TAL (HUMAN WELFARE) + COMPANY
(PROFITS) + CONSUMERS (SATISFACTION)


Preparing an Integrated Marketing Program

8.

Outlines which customers the company will serve and how it will create value

9.

Developed to deliver value to target customers

10.

Builds relationships;
consists of marketing mix


Managing the Marketing Mix

PRODUCT


good, service or idea offered to the market for exchange.


PRICE


the

amount of money a business demands
in exchange for its products.

11.

PROMOTION


advertising, personal selling, online

marketing

12.

PLACEMENT


channel management

13.

Physical evidence


used to measure satisfaction i.e. as services are intangible

14.

Process


in ‘high
-
contact’ services, customers involved in creating and enjoying experiences

15.

People


many service experiences invol
ve interacting with people; relationships

4

|
M A R K E T I N G F O U N D A T I O N S



Customer Relationship Management (CRM)

16.

Overall process of building and maintaining profitable customer relationships by delivering
superior value and satisfaction

17.

Deals with all aspects of acquiring, keeping and g
rowing customers


Relationship Building Blocks: Customer Value and Satisfaction

18.

Customer perceived value


evaluation of difference between benefits and costs

19.

Customer satisfaction


product’s perceived performance and buyer’s expectations


Capturing Value

from Customers

20.

Creating customer loyalty and retention


delighted customers remain loyal and will tell others
about their positive experience with brand; losing a customer is losing more than a sale

21.

Growing share of customer


through variety and cross
-
s
elling e.g. restaurants want ‘share of
stomach’ whilst banks want ‘share of wallet’

22.

Building customer equity
-

the combined discounted customer lifetime value of all a company’s
current and potential customers




























5

|
M A R K E T I N G F O U N D A T I O N S


Chapter Two



MARK
ETING ENVIRONMENT


The Marketing Environment

is all the internal and external forces that affect a marketer

s ability
to
create

communicate and deliver products of value. Marketers must influence

their
environment. They use environmental analysis

to break
the marketing environment into smaller
bits to make it easier to understand. The
internal environment

is the people and processes
within an organisation

that affect a marketer

s ability to create
, communicat
e and deliver
products of value e.g. marketing in
formation system and sales force.


The Micro

environment

is the forces within an organisation’s industry. It is not directly controllable
by the organisation. It consists of

customers, clients, competitors and partners.


Partners include (LFWARS) Logistic

firms (storage and transport)
, financiers (banking and insurance),
wholesalers (B2B), advertising agencies, retailers (B2C) and suppliers.

Marketers must ensure their
products provide their target market with greater value than their competitors’ products
.



The Macro

environment

is the forces outside

of an organisation’s industry. It includes
Political, Economic, Socio cultural, Technological and Legal forces
.


Political forces include lobbying for favourable treatment at the hands of government and
lobb
ying for favourable regulation.



Economic forces are how much
money individuals

and organisations have to spend and how
they choose to spend it.

They include

prices, income and availability of credit
.



Socio cultural factors
affect people’s attitudes, be
liefs, behaviours, preferences, customs and
lifestyles.

Social Cultural factors include

demographics

such as

s
tatistics about a population
:

age,
gender, ethnicity,
educational attainment and marital status.

Furthermore, the natural
environment is an exampl
e of a social cultural theme that has recently emerged.



Technological forces allow a better way of doing things.

Technology

changes expectations
and
behaviours

of customers and clients and have huge e
ffects

on how suppliers work.



Legal factors include

legislation enacted by elected officials. Laws and regulations fall under the
following categories: privacy, fair trading, consumer safety, prices, c
ontract terms and
intellectual
property
.


Situational Analysis involves assessing an organisation’s curren
t position in the market place. A
marketing plan communicates how marketers plan to get from the current situation to where
senior management thinks the organisation should be.


Marketing metrics

are used to measure the current performance and the outcome
s of past
activities. It includes Return on Investment, Customer satisfaction, Market share and Brand
Equity.




6

|
M A R K E T I N G F O U N D A T I O N S


-
Return on investment


Cost and benefit analysis which takes into account sales
volume
,
marketing investment (cost, share of voice) and botto
m line (profit, share of industry profit).


-
Customer satisfaction
-

churns

(the

percentage of customers lost) and number of complaints
received
/ resolved.


-
Market share is defined as the percentage share of total industry profits

including

the percentage

improvement

in the
market share growth/ decline.


-
Brand equity
-

awareness (
the percentage of the total

target

market
) and loyalty (repeat purchase
behaviour).





A SWOT analysis is used to identify
strengths (those

attributes

of the organisation that hel
p to
achieve its objectives), weaknesses (those attributes of the organisation that hinder it in trying to
achieve its objectives); opportunities (factors that are helpful to achieve the organisation’s
objectives) and threats (factors that are harmful to a
chieving the organisation’s objectives).
Strengths and weaknesses are internal; opportunities and threats are external.

.


SWOT Analysis of Qantas


Strengths


-

highest safety standard

-

employees strong commitment to the Qantas Group

-

Named

one of the
world’s

top airlines in the prestigious Skytrax World Airline Awards.

-


Weaknesses

-

operations deemed as inferior to competitors

-

strikes


Opportunities

-

transitioning the business from cost centres

to profit centres


Threats

-

Security concerns

-

Increased competition

-

The federal government’s Workplace Relations policy

-

Rising fuel prices

-




Respond to the Marketing Environment

Some companies view marketing environment as uncontrollable, others take on environmental
management perspective
.

Marketing management should

aim to be proactive rather than reactive wherever possible

7

|
M A R K E T I N G F O U N D A T I O N S





Chapter Three


MARKET RESEARCH

Market Research (MR) is gathering information and knowledge about the market.

For example
,

a business that makes bird houses involves understanding,
creating (pro
duction

and operations)
,
communicating
(promotion

e.g. on Channel Nine on TV on a show such as The Voice Australia)
and delivering (e.g. a store such as Kmart or Target because older people are not as tech savvy).
The above stated market research process i
s interlinked and ongoing. Moreover, if a business
creates what it perceives to be a profitable product but if there are hardly any customers, then the
firm needs to do market research to find out why the consumers are not buying.

The results of
market re
search are fed into a
Marketing Information System (MIS),
which holds and
organises all of the organisation’s marketing information.

The MIS is in house (internal
environment).


The inputs of a MIS are:

-
Marketing
Intelligence (
Sales representative reports
, customer service reports, customer
feedback surveys, c
ompetitor actions and environmental changes)

-
Internal Reports

(Accounting

reports, Sales reports, Production reports and Distribution
reports).

Market research involves five major components:

-

definin
g the research problem (profit or sales related clause)

-

designing the research methodology (design)

e.g.

dropping prices by 5

per cent increases
sales by twenty per cent i.e. actionable results

-

collecting data

-

analysing data and drawing conclusions

-

present
ing the results and making recommendations.



What the research is intended to answer is known as the
research problem

e.g.
1)
why
is
the sale

of sultanas down at the Pymble Woolworths
? 2) Why is Apple

s brand image taking
a hit?

As the research project pr
oceeds the research problem may need to be redefined. A
market research brief should be prepared to guide the project. A market research brief
specifies the research problem, the info required, the time frame and the budget. A planned
methodology to answer

the research problem is known as the
research design
. Types of MR
include exploratory, descriptive or causal research.
Exploratory research

gathers more
information about a loosely defined problem

e.g. a focus group
.
Descriptive research

is
used to solve
well defined problem by clarifying more about certain phenomena

e.g. healthy
product range for MC Donald’s Quick Service Restaurants (food done fast)
.
Causal
research

tests if a variable affects an outcome

e.g. effect of coupons on pizza sales at Pizza
Hu
t
.


MR draws on two types of data. Secondary data is data already exists.
Primary data

gathers
specifically for the current research project. Research methods can be
quantitative
or
qualitative research
.
Quantitative research collects data that can be rep
resented numerically and
analysed statistically. Experimentation, neuroscience and observation are quantitative research
methods e.g. the survey.
Qualitative research obtains rich and detailed info that underlie
observable behaviour. Interviews and focus g
roups are the most qualitative research methods.


MR tries to find out about the population by studying a small part of it and generalising the
results (sample).

8

|
M A R K E T I N G F O U N D A T I O N S



Probability

sampling ensures every member of a population has a known chance of being
selecte
d in the sample. Non Probability sampling provides no way of knowing the chance of a
member being selected in the sample.


Once a research project

has been designed, it must be implemented in compliance with the
design via project management.

Data must be
carefully collected and organised so that it can be
efficiently analysed. Quantitative data can be statistically manipulated to identify

trends and
patterns in the data. Qualitative data can be reduced to allow statistical analysis but much of the
rich det
ail can be lost.

Qualitative data analysis can lead to further research in the form of
quantitative research. Data analysis allows conclusions to be drawn

and recommendations
formulated. The findings and recommendations of the market research project shoul
d be
presented in a concise and clear manner.



Two types of probability sampling methods are random sampling and stratified sampling. In a
random sample each member of the population has an equal opportunity of being for the sample.
In a stratified sampl
e the population is divided into different groups based on some

characteristic
e.g. age and gender and then from each groups a random sample is chosen.


Two types of non probability sampling methods are quota sampling and convenience sampling.
A quota sam
ple divides the population into groups based on a number of characteristics. In

a
convenience sample, participants are selected based on convenience e.g. interviewing your
friends and family for a project.




Unethical market research examples

Sugg
ing


se
lling under the guise of market research.

Frugging
-

fund raising under the guise of market research.


Codes of practice for Market research in Australia
:

-
research must be objective, based on scientific methods and conducted in compliance with the
law.

-
re
spondents
identities must not, without their consent be revealed to anyone not directly
involved in the market research project or used for any non research purpose.

-
Professional researchers must not act negligently



Chapter Thirteen


International Mark
eting

Globalisation is the process via international individuals, organisations and government
become interconnected and similar. Barriers have diminished facilitating
greater
interconnections between different countries and their people. This has resulted

in close
interdependence in terms of trade, finance, living standards and security.









9

|
M A R K E T I N G F O U N D A T I O N S
















Chapter

4



Consumer Behaviour (CB)


Factors influencing consumer behaviour Summary


Situational factors include physical, social, time, motivationa
l and mood factors.

Group factors
-

cultural (sub cultural and social class
) and social (reference groups,
family, roles
and status).

Individual factors
-

personal (demographics

e.g. age, occupation and income; lifestyle,
personality and self concept
) and

ps
ychological (motivation, perception, belie
fs and attitudes and
learning).





Case Study: New business ventures built on understanding consumer behaviour
(Wotif.com)

Consumer behaviour involves getting inside the heads of consumers and understanding their

psychological values. Wotif.com has
clear target market i.e. International business travellers

and
has built a business by selling last minute cheap hotels. If
you see a target market not being
served, create a product and make cash money.





Consumer be
haviour is the study of the behaviour of individuals and households who buy
products for personal consumption. It provides an understanding of the reasons behind the
decisions consumers make which is central to creating an effective marketing mix. Consumer

behaviour is influenced by situational, group and individual factors. Situational factors are the
circumstances in which consumers make purchasing decisions. They relate to physical, social,
time, motivation and mood factors. Group factors comprise cultur
al and social influences.
Cultural influences affect the behaviours of society: culture, sub culture and social class. Culture
is the system of knowledge, values and beliefs by which society defines
it
. National cultures can
be described according to Hofst
ede’s cultural dimensions: power distance, uncertainty
avoidance, individualism, masculinity and long term orientation.


-
Power distance
-

the degree of inequality among people that is acceptable within a culture.
Western societies tend to score low on powe
r distance manifesting their relatively egalitarian
cultures,

whereas Asian societies score high in power distance, reflecting greater social
inequality.
Less s
ocial inequality

(20 per cent) New Zealand, Australia (38 per cent), United
States of America (4
0 per cent)
;
more social inequality

Japan

(55 per cent),

Singapore (
75 per
cent) and India ( 79 per cent).

10

|
M A R K E T I N G F O U N D A T I O N S



-
Uncertainty avoidance
-

the extent to which people in a culture feel threatened by
insecurity

and
relies on mechanisms to reduce it.

Most secure cou
ntries (Singapore 10 per cent, Australia 50
per cent) and least secure countries (Japan 90 per cent).


-
Individualism

is
the extent to which people focus on their goals over those of th
e group.

Western
societies are

generally individualistic, whereas Asian

societies are more collectivist.


-

Masculinity is the extent to which traditional masculine values (e.g. status, assertiveness and
success) are valued over traditional feminine values

(solidarity, quality of life).


-
Long

term orientation
-

the extent to
which pragmatic long term visionary view is valued over a
short term focus.



A sub culture is a group of individuals who share common attitudes, values and behaviours that
distinguish them from the broader culture in which they are immersed. A social clas
s is a group
of individuals who share common rank within the social hierarchy. Social influences are those
that influence an individual to conform to group norms. A reference group is any group to which
an individual looks for guidance including membership
, aspirational and dissociative reference
group. An opinion leader is any reference group member who provides influential advice to
other group members. Innovators introduce innovations, early adopters including opinion leaders
drive adoption by early majo
rity, late majority and laggards. Family influences are a vital
influence on consumer behaviour with many purchasing decisions made by certain members or
combinations of members of the household. Personal and psychological factors influence
consumer behavi
our independently of social circumstances. Personal characteristics include
demographic, lifestyle and personality. Psychological characteristics include motivation which is
the internal drive to satisfy unfulfilled needs or achieve goals. According to Mas
low’s hierarchy
of needs individuals try to satisfy lower order biogenic needs such as food and sleep ahead of
higher order psychogenic needs such as learning? Another psychological characteristic is
perception, how an individual manages meaning to externa
l stimuli including marketing
communications. Beliefs and attitudes are a vital influence on consumer behaviour as they
determine the context in which product evaluations are made. Effective marketing needs to
appeal to the cognitive, affective and behavio
ural components of consumer attitudes. The
consumer decision making process comprises of need/want recognition, information search,
evaluation of options, purchase and post purchase evaluation. Consumer decisions involve
different levels of involvement:

-

H
abitual decision making involves low involvement such as buying bread and milk.

-

Limited decision making involve limited information to evaluate options e.g. buying
appliances and clothing.

-

Extended decision making involve high involvement and is usually fo
r once in a life time
purchase e.g. a car, wedding ring, house or wedding dress.

Cognitive dissonance is second thoughts about the wisdom of a purchase (post purchase
evaluation/ regret).








11

|
M A R K E T I N G F O U N D A T I O N S















































12

|
M A R K E T I N G F O U N D A T I O N S


Roles in the

Buying Process




Chapter 5
-

Business Buying Behaviour

The business market can be divided into reseller, producer, government and institutional
markets. Reseller markets comprise marketing intermediaries that buy products in order to sell
and lease them
to another party for profit. Producer markets comprise businesses and
professionals that buy products in order to produce other products, or in their daily business
operations. Govt markets comprise federal, state and local govt’s that buy products in orde
r to
provide services to citizens. Institutional markets comprise non public and not for profit
organisations that buy and sell products.


There are vital differences in the reflection of business markets and consumer markets. Business
markets involve high

value purchases (lots of money), high volumes (lots of money) and regular
repeat purchases. Price and other conditions of the sale are open to negotiation. There are far
fewer buyers and sellers in business markets. Products alternatives are subject to ex
tensive
formal evaluation with decisions made by committees. The relationships between buyers and
sellers tend to be long term and involve extensive after sales support. Demand in business
markets tends to fluctuate much more than demand in consumer market
s.


Many business products are used in the production of another product. This creates a situation of
joint demand, where demand for one product is related to demand for another product. Because
business products are one of many used in the production of o
ther products, demand for them
tends to be relatively unresponsive to changes in price. This is known as inelastic demand.

Demand tends to be relatively inelastic within an industry but can be elastic in relation to
individual companies. Business purchases

take the form of a straight rebuy
, modified rebuy or
new task purchase, each of which leads to different levels of engagement in the purchase
13

|
M A R K E T I N G F O U N D A T I O N S


decision making process. The group of people who make business purchasing decisions is the
buying centre.




Cha
pter 6



MARKET SEGMENTATION, TARGETING AND
POSITIONING



Sellers can take three approaches to a market. Mass marketing is the decision to mass produce
and mass distribute product and attract all kinds of buyers.

One to one marketing is providing a
customi
sed product to meet individual customer needs. Target marketing is creating a group of
customers with homogeneous needs and wants. The target marketing process involves market
segmentation, market targeting, market positioning. Market segmentation involves

creating sub
groups within the total market that are homogenous. Segmentation variables used in consumer
markets include geographic, demographic, psychographic and behavioural.


In business markets, organisation size, product use and geography are used as

segmentation
variables.



Market Segments

-

Segmentation involves dividing a market into direct group of buys who might require separate
products or marking mixes; classifying customers into groups with different needs,
characteristics or behaviour

-

Geograph
ic


geographical units such as nations, regions, neighbourhood

-

Demographic


variables such as age, gender, life cycle, income occupation, religion

-

Psychographic


socioeconomic status, lifestyle, personality characteristics

-

Behavioural


occasions, benef
its sought, user status (non
-
user, first=time, regular), usage rate
(light, moderate, heavy), loyalty status, buyer
-
readiness, attitude

-

Business Markets



personal characteristics, demographics, operating variables, purchasing
approaches, situational facto
rs


Evaluate Market S
egments

-

Size and growth


analyse data on current and projected sales growth rates; large companies
may want large current sales and high growth rates, whereas smaller companies may find it too
competitive

-

Structural attractiveness


c
ompetitors, power of buyers, substitute products, power of
suppliers

-

Company objectives and resources


evaluate whether segment fits with company’s goals and
objects; whether the company has resources to go into the segment


Targeting Strategies

-

Undiffere
ntiated marketing


one homogenous market; one marketing mix

-

Differentiated marketing


several markets; several marketing mixes (different product
offerings)

-

Concentrated marketing


one target market though market is heterogeneous; one marketing
mix

14

|
M A R K E T I N G F O U N D A T I O N S



Di
fferentiation and Positioning

-

Product position


way the product is defined by consumers on important attributes

-

Positioning strategies


product attributes, benefits, usage occasions, against/away from
competitors, product classes




Choosing and Implemen
ting Positioning Strategy

-

Identify value differences


perceptual mapping, analyse position of brand in mind of
consumers, rating brands against each other

-

Identify competitive advantage


understand needs and buying processes; deliver more value


Differen
tiation

-

Product
-

performance, style, design, durability, reliability, consistency

-

Services
-

delivery, installation, repair, customer service, consulting service

-

Personnel
-

hiring and training better employees than competitors

-

Image
-

brand, symbols and
logos, sponsorship


Selecting Overall Positioning S
trategy

(Positioning Statement)


Brand’s Value Proposition

兵慬a瑹t
mr潤uc琯ter癩捥

䍯獴

More for more

Most upscale

Higher price

More for the same (attack competitor’s
positioning)

Comparable quality;
more product/service

Lower price

Same for less (powerfully value
proposition)

Same quality

Lower price

Less for much less

Less quality

Lower price

More for less (winning value proposition;
hard to maintain)

More quality; more
product/service

Lower price


Co
mmunicating and Delivering the Chosen P
roposition

-

Marketing mix efforts must support the positioning strategy

-

Position must be monitors and adapted over time to match changes in consumer needs and
competitors’ strategies













15

|
M A R K E T I N G F O U N D A T I O N S








Chapter

7



PRODUCTS



A product is a good, service or idea offered to the market for exchange. It can be tangible,
intangible or both. Marketers analyse products using the
total product concept
: core, expected,
augmented and potential products.


Total Product Concep
t

-
Core Product


basic benefit bought;
eg. for a car it is transportation from A to B. For coffee it is

caffeine hit)
. For mobile phones it is communication.


-
Expected Product


product’s characteristics (quality level, features, styling, brand image and

packaging)
.

-
Augmented Product


bundle of benefits that differentiates the product (e.g. warranties, delivery)

e.g. for a washing machine it could be warranties, a delay function and delivery. For a mobile phone
it could be a camera.


-
Potential Product
-

features that are being developed and prototyped.
e.g. retina recognition
security for a credit card.




A product can be

tangible

and
intangible

give examples of each.


A product that is tangible and can be delivered to the consumer is a good it includes

commodities
like coffee, tea, sugar, salt and minerals.


A product that is intangible and does not involve ownership is a service like a hair cut, insurance and
air plane travel.


Products can be divided into
consumer products

(purchased by individuals an
d households) and
business products
(purchased by an organisation to be used in its operations or in the
production of other products).


The concept of
product life cycle

says that a product passes via five stages: new product
development, introduction, g
rowth, maturity and decline.


New Product development

has eight stages: idea generation, screening (eliminating unviable
ideas), concept evaluation, marketing strategy, business analysis (how the new product will
affect costs, sales and profits), product d
evelopment, test marketing and commercialisation.


16

|
M A R K E T I N G F O U N D A T I O N S


The product adoption process describes the stages via which a potential customer passes, first
becoming aware of the new product, then deciding to adopt/ buy the product. In this process the
consumer who a
ccepts a new product passes via five stages: awareness, interest, evaluation, trial
and adoption.


Product differentiation is the creation of products and attributes that distinguish one product
from one and another. Most of the differentiation occurs in
the augmented product layer of the
total product concept. The design, brand image. Style, quality and features are the key product
attributes that can be used to differentiate products from competitors products.


Brand is the collection of symbols (e.g. n
ame, logo and slogan) intended to create a
differentiated image in the customer’s mind. Brands play a major role in the consumer’s choice
of a product, namely high involvement products, as well a highly popular brand with a good
reputation will more likely

be chosen rather than a cheaper and unknown brand.


Consumer Product Classifications and Market Considerations



Definition

Customer
Buying
Behaviour

Price

Distribution

Promotion

Convenience
Products

(Staple, impulse
and emergency
products)

E.g. toothpas
te,
household items,
breakfast cereals

Bought
frequently,
with
little engagement
in the purchasing
decision making
process.

Frequent
purchase, little
planning or
comparison, low
involvement

Low
price

Widespread
distribution,
convenient
locations

Mass
promo
tion by
producer

Shopping
Products

E.g. major
appliances,
electronics,
clothes

Moderate to high
engagement based
on quality, price
and features.

Less frequent,
much planning
and shopping
effort,
comparison of
brands on price,
quality and style

Highe
r pric
e

Selective
distribution
in fewer
outlets

Advertising
and personal
selling by
both
producer and
resellers

Specialty
Products

E.g. luxury goods

Unique
characteristics,
unique brand
identification,
willing to make
special purchase
effort

Strong brand
prefer
ence and
loyalty, little
comparison of
brands, low price
sensitivity

High
price

Exclusive
distribution
in one or few
outlets per
market area

Carefully
targeted
promotion by
both
producer and
resellers

Unsought
Products

E.g. life
insurance, blood
donation
,

Pest
control and
Crimsafe

Know about
products or
doesn’t normally
瑨t湫n⁢ y楮g


i楴瑬e⁰牯 畣琠
a睡re湥獳Ⱐs楴瑬e
灲潤pc琠
歮潷汥摧dⰠ汩瑴汥l
潲⁥癥渠湥条瑩癥
楮ie牥獴

噡物rs

噡物r猠


easy
acce獳s
桥汰晵氠
⡯湬楮E
摩獴物扵瑩潮o
a摶d湴nge潵o
F

䅧杲e獳s癥
a摶d
牴楳r湧
a湤⁰n牳潮r氠
獥汬楮i


17

|
M A R K E T I N G F O U N D A T I O N S


Product
Relationships

-
Product item
-

a particular version of a product

-
Product line


set of product items related by characteristics such as end use, target market,
technologies and raw materials

-
Product mix


set of all p
roducts that an organisation makes available to customers.


Packaging

23.

Designing and producing the container or wrapper for product

24.

Altering packaging, secondary
-
use packaging, category consistent packaging, innovative
packaging, multiple packaging, handlin
g
-
improved packaging


Labelling

25.

Part of packaging, consist of printed information appearing on or with the package

Branding

26.

Add value to product, powerful brands have consumer franchise


command strong consumer
loyalty

27.

Brand equity


value of brand based
on extent to which it has high brand loyalty, name
awareness, perceived quality, strong brand associations and other assets such as patents,
trademarks and channel relationships

28.

Brand meanings


attributes (brand brings to mind attributes such as prestige)
; benefits
(customers by functional and emotional benefits); values (brand says something about buyers’
value); personality (brand projects personality)

29.

Brand sponsor decision


manufacturers’ brand, private brand, licensing, co
-
branding

30.

Brand strategy


l
ine extension, brand extension, multibrands, new brands

31.

Brand repositioning


need to change product and image, change attitudes and perceptions
towards brands, need huge promotions


18

|
M A R K E T I N G F O U N D A T I O N S





LECTURE
7B



NEW PRODUCTS


What is a New Product

32.

New to the world (
e.g. inventions)

33.

New category entry (i.e. taking company to new category)

34.

Additions to product line

35.

Product improvements

36.

Repositioning (e.g. retargeted for new use or application e.g. Dettol hand wash + cleaning
agent)

37.

Variations of the above (e.g. new to
a country, new to channel, packaging improvement)


New Product Success and Failure

38.

New customer packaged goods rail 80% of time, 33% of industrial products fail at launch

39.

Products may fail due to negative perception, wrong timing, poor market research, poo
r
commnctn


Overview
of branding
decisions

19

|
M A R K E T I N G F O U N D A T I O N S


New Product Development (NPD) Process


1.

Idea Generation

40.

Systematic search for new product ideas

41.

Internal idea sources


formal research and development, company scientists, engineers,
brainstorming

42.

External idea sources


competitors, custom
ers, distributors/suppliers, marketing
intermediaries

43.

Others e.g. trade magazines, shows and seminars, advertising agencies, marketing research
firms


2
.

Idea Screening

44.

Reduce number of ideas generated by spotting good ideas and dropping poor ideas

45.

Criter
ia may include company objectives, production capabilities, feasibility of target market


3
.

Concept Development and Testing

46.

Product idea


idea for possible product company can see itself offering to market

47.

Product concept


detailed version of idea state
d in terms meaningful to customers

48.

Product image


way consumers perceive an actual or potential product

49.

Concept testing


process of testing product concepts with a group of target customers


4
.

Marketing Strategy Developments

50.

Designing of initial marketi
ng strategy for new product

1.

Describe target market, planned product positioning, sales, market share, profit
goals

2.

Outline product’s planned price, distribution and marketing budget

3.

Describe planned long
-
run sales, profit goals and marketing
-
mix strategy

5
.

Business Analysis

51.

Review of sales, costs and profit projections to find out whether they satisfy company objectives

52.

Assessment of financial budgets, potential markets and growth rate


6
.

Product Development

53.

R&D or engineering develops product concept int
o physical product (prototype or test run)

54.

Development activities


prototype, feasibility testing, preliminary market strategies

55.

Large investments

56.

This stage will show whether product idea can be turned into workable product

20

|
M A R K E T I N G F O U N D A T I O N S



7
.

Test Marketing

57.

Introductio
n of product and marketing program into more realistic market settings

58.

Consumer markets


standard test markets (free samples); controlled test markets (leaving
products in certain places); simulated test markets (try selling at particular environment)

59.

Bu
siness markets


product use
-
test


8
.

Commercialisation

60.

Introducing new product into market

61.

Full scale production, full scale marketing

62.

Integration into the firm

63.

Company launching product must decide WHEN, WHERE, TO WHOM and HOW


The Product Life Cycle (P
LC)


Marketing Law

The law imposes a number of duties on the marketer. Each element of the marketing mix is
controlled in some way by the law, be it common law or by statute. They include:

-

SOG legislation

-

Consumer protection legislation

-

Consumer credit leg
islation

21

|
M A R K E T I N G F O U N D A T I O N S


-

Debt collection

-

Restrictive trade practices legislation

-

Principal and agency law

-

IP law

-

Law of contract

-

Law of torts


Chapter fourteen
-

Marketing Planning

Strategic Planning



p
rocess of developing and maintaining a strategic fit between
organisa
tions goals and capabilities in light of changing marketing opportunities


Marketing Plan vs. Business Plan

-
Business plan incorporates plans of all business functions

-
Marketing plan focuses on:

a.

Customer acquisition, retention and required resources

b.

Resou
rces required to implement specific marketing functions

c.

Covers one year (markets keep changing)

d.

Varies in length

e.

Shortcomings may include lack of realism, insufficient market, short
-
run focus


Contents of Marketing Plan

1.

Executive Summary


brief summary,
aimed at senior management, no longer than a page

2.

Current marketing situation


background data on target market, product, competition,
distribution and macro
-
environment

3.

SWOT and Issue Analysis


strengths + weaknesses (internal), opportunities + threats

(external)

4.

Objectives


financial and marketing objectives, Smart Measurable Achievable Realistic
Timeframe

5.

Marketing Strategy


specific strategies for target markets, marketing mix, marketing
expenditure level, often comes after positioning strategy sta
tement

6.

Action Programs


implementation, what will be done, when, who will do it and how much
spent?

7.

Projected Profit
-
and
-
Loss Statement


budget with revenue showing sales, expenses showing
cost of production, distribution and marketing

8.

Controls


monitor
ing plans progress; contingency plan













22

|
M A R K E T I N G F O U N D A T I O N S







PRICI
NG, CONSIDERATIONS & APPROACHES

Price is the amount of money charged for a product or service. Is the only element in the
marketing mix that produces revenue, all other elements represent cost. It
is used as a
competitive weapon.


Importance of Pricing:



Pricing is getting more and more important due to better informed customers (e.g.
through new media) and mistakes in companies’ communication



Pricing has a huge impact on competitors:

Competitors can

expect effects from a price change that are twice as high as those from a
change in another marketing variable


Internal Factors Affecting Pricing:

Marketing Objectives:



survival



current profit maximization (short run)



market
-
share leadership (long run)



product
-
quality leadership (high prices)


Companies often have more than one objective, which may lead to a conflict of interests!


Company Resources:



size of the company



resources.


Pricing will be a function of costs:



fixed cost



variable cost



total cost



experience cost curves
,
costs decline over time

as a result of

accumulated production
experience


Marketing Mix Strategy:

Product:



how important is the product?



is it part of a range or accessory?



quality?


Promotion:



who does the promotion?



is price a maj
or selling point?


Place:



wholesale and retail margins store image


23

|
M A R K E T I N G F O U N D A T I O N S



External Factors Affecting Pricing Decisions:

The Market and Demand:



Pricing in different types of markets



Consumer Perceptions of Price and Value



Price and Demand Relationship



Price Elas
ticity of Demand (sensitivity)



Competitor’s Prices and Offers



Other External Factors



Government regulations



Loyalty programs



Pricing for Different Types of Markets

Pure competition



Market consists of many buyers and sellers with each having little influe
nce on market
price



Trading of uniform commodity


Monopolistic competition



Market consists of many buyers and sellers



Range of prices occurs


Oligopolistic competition



Market consists of a few sellers



Sellers are highly sensitive to each other’s pricing an
d marketing strategies



Difficult for new sellers to enter the market


A pure monopoly



Consists of one seller



Pricing is handled differently in each case


Demand:

Price and Demand Relationship



mapped on a demand curve


Price Elasticity of Demand



how sensiti
ve will demand be in relation to changes in price for your product?


24

|
M A R K E T I N G F O U N D A T I O N S


General Pricing Approaches:

Cost
-
based pricing
:



cost
-
plus pricing



breakeven analysis and target profit pricing



sets the floor for the price that the company can charge for its product


Competitor Based Pricing
:



economic value pricing



going
-
rate pricing



sealed
-
bid pricing


Relationship Pricing



special relationship



enrichment



shared risk and reward


Break Even Analysis and Target, Profit Pricing:



determine the price at which it will break
even


Target pricing



uses concept of a breakeven chart which shows total costs and total revenue expected at
different sales volume levels



setting the price to break even on the costs of making and marketing a product, or to
make the desired profit











Value
-
Based Pricing:



buyers’ perceptions of value
are the key to pricing



use
non
-
price variables
to build up perceived value in the buyers’ minds



price is set to match the
perceived value


Cost vs. Value
-
Based Pricing:

Cost
-
Based Pricing:

Product
, desi
gn a new product

Cost
, total the costs of making the product

Price
, sets a price that covers cost plus target profit

Value
, convince buyers that at the products value at that price justifies its purchase

Customers
, purchase the products


Value
-
Based Pricin
g:

Reverse of Cost
-
Based Pricing

25

|
M A R K E T I N G F O U N D A T I O N S



Customer

Value

Price

Cost

Product


Competition
-
Based Pricing:

Economic Value Pricing

The price set by a company is lower than customers’ perceived value and lower than that of its
competitors.


Going
-
Rate Pricing

Price bas
ed largely on competitors’ prices, with less attention paid to its own costs or demand.


Sealed
-
bid/Tender

Company bases its price on how it thinks competitors will price (e.g., job offers, governmental
tenders).


New Product Pricing:

Market
-
skimming prici
ng

Setting a high price for a new product

Appropriate if:



Sales are less sensitive to price in early stages



Capacity constraints exist. E.g. Apple used for the Ipod a skimming strategy


Market

penetration pricing

Setting a low price for a new product

Appro
priate if:



Sales are very sensitive to price



Product faces strong potential competition. E.g. Microsoft used a penetration strategy for
Office XP in 2001






What is Price?

-

Amount charge for a product or service, or sum of values consumers exchange for th
e benefits
of having or using the product or service

-

Only element of marketing mix that produces revenue

-

Comprised of different components (e.g. price of production, royalties, shipping, labour)

-

Price is adjusted across different products, times and custom
ers (e.g. new products attract
higher costs, discounts for children and pensioners)


26

|
M A R K E T I N G F O U N D A T I O N S


Factors to Consider when Setting Prices


Internal Factors Affecting Pricing

-

Marketing objective


survival, current profit maximisation, market
-
share, product
-
quality

-

Com
pany resources, size of company

-

Function of costs


fixed costs, variable costs, total costs, experience cost curves

-

Marketing mix strategy


product, promotion, place


External Factors Affecting Pricing Decisions

-

Pricing in different types of markets

-

Cons
umer perceptions of price and value

-

Price and demand relationship

-

Price elasticity (how sensitive buyers are to price)

-

Competitors prices and offers


Pricing in Different Markets

-

Pure competition


markets with buyers and sellers with little influence on m
arket price (e.g.
petrol)

-

Monopolistic competition


many buys and sellers, different products and prices

-

Oligopolistic competition


few sellers, sellers highly sensitive to each other’s pricing and
marketing strategies, difficult for new sellers to enter

market

-

Pure monopoly


one seller, pricing handled differently in each case (e.g. Australia Post)


Demand

-

Price and demand relationship can be mapped on demand curve

-

Price elasticity shows how sensitive demand is in relation to changes in price

27

|
M A R K E T I N G F O U N D A T I O N S



General

Pricing Approaches

-

Cost
-
based


cost
-
plus pricing; break even analysis and target pricing

-

Value based


buyers’ perceptions of value; non
-
price variables build up perceived value in
buyers’

-

Competitor based


economic value (cost lower than competitors an
d lower than perceived
value); going
-
rate (prices close to competitors); sealed
-
bid/tender (how it thinks competitors
will price)

-

Relationship pricing


used when there are few customers; shared risk and reward




New Product Pricing

-

Market skimming


hig
h price for new/innovative product, sales less sensitive to price,
appropriate if capacity constraints exist, consumers may wait for prices to fall

-

Market penetration


low price for new product, sell large quantities, sales sensitive to price,
product fac
es strong potential competition, difficult to raise prices as product perceived as low
quality


Price Adjustment Strategies

-

Discount pricing and allowances


generate more sales volume

-

Segmented/discriminatory pricing


concessions for students, cheaper ti
mes of day

-

Psychological pricing
-

$1.99 instead of $2.00, using the ‘lucky’ number 8 in China

28

|
M A R K E T I N G F O U N D A T I O N S


-

Promotional pricing


create awareness of product

-

Value pricing


according to delivered value (e.g. planes


first, business and economy classes

-

Geographic pric
ing


transportation costs increasing cost of goods

-

International pricing


certain products more popular in different countries

LECTURE 6


SERVICES MARKETING


What are Services?

-

“Acts, performances, and experiences”; “deeds, processes and performances”;
“activities,
benefits, and satisfactions, which are offered for sale or are provided in connection with the
sale of goods”

-

Service Industry


core product is service e.g. airlines (
T&G
)

-

Service Products


intangible product offerings e.g. Hewlett
-
Packard c
onsultancy

-

Customer Service


supports the company’s core products, often free

-

Service as a process when there is: people processing, possession processing, mental stimulus
processing or information processing


IHIP Framework


Intangibility

-

Cannot be stor
ed, demand difficult to manage

-

Not protected by patents; can be copied

-

Not easy to display or communicate; quality difficult to assess

-

Difficult to price

-

Solutions


tangible cues; physical evidence; personal sources of information; create strong
reputatio
n/organisational image (T&G create strong reputation for quality;
making customers
feel ‘a million dollars’ and passing on word of mouth to others
)


IHIP Framework


Heterogeneity

-

People are not machines; no two services will be exactly alike (
hair dresse
rs cut differently
depending on person and their mood
)

-

Difficult to measure and control service quality

-

Solutions


customisation to maximise profits; standardisation for faster, cheaper, more
consistent service; staff trained in service recovery (
teaching

standard techniques which can be
put together differently to offer a customised haircut
)


IHIP Framework


Inseparability

-

Customer and service representative at the same place and time (
customers highly involved in
haircuts, need to cooperate e.g. turning

head to one side
)

-

Mass production of services is difficult, if at all possible

-

Other customers may be involved in the production process (e.g. cinemas)

-

Service quality depends on what happens in real time

-

Solutions


careful selection and rigorous traini
ng of service personnel; strategies to manage
consumers (
T&G Creative Academy, apprenticeships)


IHIP Framework


Perishability

-

Services cannot be inventoried (
at T&G each hair dresser can do 10 haircuts a day
)

-

Cannot be returned


service recovery is more

difficult

29

|
M A R K E T I N G F O U N D A T I O N S


-

Managing supply and demand a challenge (
no bookings mean that time is gone, cannot get it
back
)

-

Solutions


keeping customers ‘in stock’ (
reserve bookings if another customer cancels booking
)
; development of service recovery strategies; creativ
e management of supply and demand






The 7Ps
-

Product

-

Service products are the core of service marketing strategy (
the haircut itself
)

-

Supplementary elements are value
-
added enhancements (
e.g. label.M hair
-
care range
)


The 7Ps


Place (and Time)

-

Service

distribution can take place through physical and non
-
physical channels

-

Some firms can use electronic channels to deliver all or some of their service elements (e.g.
information based services can be delivered almost instantaneously electronically)

-

Delive
ry decisions


when, where, how

-

Convenience of place and time of great importance as customers are physically present (
e.g.
salons in convenient places
)


The 7Ps


Price

-

Generates income for the firm; key part of costs to obtain wanted benefits for consume
rs

-

Firms need to minimise non
-
monetary costs to customers (
e.g. time waiting, finding parking
spot, unwanted physical effort of getting to salon
)


The 7Ps


Promotion

-

Provides information and advice (
promotions at hair expo’s
)

-

Persuades the target customer
s of merit of service product or brand (
e.g. advertising in
magazines
)

-

Encourages customer to take action at specific time (
discount coupons in magazines, 10%
discounts to students
)

-

Customers may be involved in co
-
production and taught how to move effectiv
ely through
service process and shape customers’ roles and manage their behaviour


The 7Ps


Process

-

Actual procedure, mechanisms and flow of activities through which service is delivered

-

Length: number of steps

-

Duration: time it takes

-

Logistical effective
ness: smoothness in delivery

-

Service delivery may follow standardised procedure that comprises a number of activities

-

Activities may occur
frontstage

(in view of customer) or
backstage

(not seen)
e.g. frontstage at
T&G is the process of the wash, haircut a
nd blow
-
dry; backstage is washing the

towels


The 7Ps


Physical Evidence

-

Setting where service is delivered; tangible components

30

|
M A R K E T I N G F O U N D A T I O N S


-

Servicescapes


physical environment where the customer and provider interact (
the salon
)

-

Any tangible components that facili
tate performance or communication of the service (
the
shampoos used, the scissors and other tools
)

-

The intangibility of service offerings makes tangible cues an essential part of the service process


The 7Ps


People

-

All humans who play a role in service d
elivery who influence the perceptions of customers

-

Service delivery employees (front
-
line staff)
the hairdressers themselves

-

General staff of the service company (
the receptionist when making a booking
)

-

The customer

-

Other customers present in the servuctio
n (serv
ice
-
prod
uction) and delivery process



















Service as a Process: Implications

-

People processing


customers must physically enter the ‘service factory’ and cooperate with
service operation; managers must think about process and output f
rom customers’ perspective

-

Possession processing


customers less physically involved; production and consumption are
separable

-

Mental stimulus processing


ethical standards required as customers can be manipulated;
physical presence not required; core co
ntent of service is information based; can be inventoried

-

Information processing


most intangible service output; transformed into enduring forms of
service output; link between information processing and mental stimulus processing can be
blurred


Using 7
Ps for Services Strategy

-

Overall strategic assessment


how effective is a firm’s services marketing mix; is the mix well
aligned with overall vision and strategy; what are strengths/weaknesses in terms of 7Ps?

-

Specific service implementation


who is cust
omer; what is the service; how effectively does the
services marketing mix for a service communicate its benefits and quality; what changes
needed?


31

|
M A R K E T I N G F O U N D A T I O N S


Services Marketing: Key Challenges

-

How can service quality be defined and improved

-

Designing and testing ne
w services to take into account intangibility

-

Communication and consistency of image

-

Dealing with demand fluctuation

-

Strategic and tactical decision making when inter
-
functional coordination is required

-

Balance between customisation and standardisation

-

Sus
tainable competitive advantage

-

Communicating the value and quality of something intangible to customers

-

Delivering service quality when employees and customers contribute to it themselves





LECTURE
8
-

PLACEMENT


Marketing Logistics Network

64.

Traditionally

physical distribution; today includes logistics, marketing logistics, integrated
logistics management, supply
-
chain management and materials management and physical
distribution

65.

Includes procuring inputs (e.g. raw materials, equipment, capital) and conver
sion to finished
products and conveying them to end users

66.

Network players


suppliers, purchasing agents, manufacturer, marketers, transport agencies,
end
-
consumer

67.

Other P’s



Product


variation (colour, size, features) may impose burden on distribution
fac
ilities



Promotion


campaigns must reflect logistics delivery



Pricing


source of differential advantage based on superior logistical service, need
to compare the price end
-
user will pay for each channel


Marketing Channels

68.

Distribution channels are the pa
thways that companies use to sell their products to end
-
users

69.

Network of interdependent organisations making product/service available for
use/consumption

70.

Intermediaries are organisations linking producers to other intermediaries or to the customer
through

contractual arrangements to purchase and resale products


Why Marketing Intermediaries are Used

71.

Cost


manufacturer is paid immediately regardless of whether products are eventually sold

72.

Increased coverage

73.

Consumer convenience


consumers go to once plac
e

74.

Customised approaches to customer needs

75.

Greater efficiency and effectiveness

76.

Improved marketing effort

32

|
M A R K E T I N G F O U N D A T I O N S


77.

Reduction of number of channel transactions


Marketing Channels adding Value

78.

Information


gathering and distributing marketing research and intellig
ence

79.

Promotion


developing and spreading communications about an offer

80.

Contact


finding and communicating with prospective buyers

81.

Matching


shaping and fitting the offer to the buyer’s needs

82.

Negotiation


reach an agreement on price and other terms of t
he offer so that ownership or
possession can be transferred

83.

Physical distribution


transporting and storing goods

84.

Financing


acquiring and using funds to cover the cost of the channel work

85.

Risk taking


assuming the risks of carrying out the channel wor
k


Channel Organisation


Vertical Marketing Networks (VNM)

86.

Information


gathering and distributing marketing research and
intelligence

87.

Consists of suppliers, wholesalers, retailers acting as unified network

88.

Network can be nominated by either the supplier
, wholesaler or
retailer

89.

Types of VMN include corporate, contractual or administered


Choosing a Distribution Model

Consumer Marketing Channels

33

|
M A R K E T I N G F O U N D A T I O N S


90.

New products


needs to be introduced by demonstration and explanation,
retailers not
appropriate
;
new tools and equipment need direct mar
keting through
commission agents
(B↔B)

91.

Small customer bases


readily accessible customers have
wholesalers
or

distributors

target
customers for direct sales through
commission agents
; d
irect sales

can help maximise profits
and create good customer relationships

92.

Personalised service


lo
cal dealer network

or
reseller program

to provide service

93.

Buying online


e
-
commerce website

to sell direct; sell to
online retailer or distributor

94.

Own specialised sales team


look for sales prospects and close deals directly with customers


Retailing

95.

Ret
ailing


activities involved in selling goods or services directly to final consumers for their
personal, non
-
business use

96.

Retailers


businesses whose sales come primarily from retailing; classified through:


Retailer Marketing Decisions (Strategy)


Targ
et Market and Positioning

97.

Product (and service assortment)


decide on product variables of product assortment, services
mix and store atmosphere

98.

Price


price policy must fit target market and positioning, product and service assortment and
competition; e
ither high mark
-
ups on lower volume or low mark
-
ups on higher volumes

99.

Promotion


use any or all of promotion tools (advertising, personal selling, sales promotion,
public relations and direct marketing); websites offering information and selling direct

100.

Pl
acement


CBD, shopping centres (regional and strip), clusters of retailers in
commercial buildings or near hotels, ‘do it yourself’ retail parks, entertainment centres, arcades
and conversion of historical buildings

34

|
M A R K E T I N G F O U N D A T I O N S



Wholesaling

101.

All activities involved i
n
selling goods and services to those buying for resale or business use

102.

Wholesalers perform one
or more functions: selling and promoting, buying and assortment building, bulk breaking,
warehousing, transportation, financing, risk bearing, market informatio
n, management services
and advice

Types of Wholesalers

103.

Merchant wholesalers


independently owned business that take title to the merchandise they handle; largest single
group of wholesalers

35

|
M A R K E T I N G F O U N D A T I O N S


104.

Full service wholesalers


provide full set of services (e.g. car
rying stock, using sales
-
force, offering credit, making
deliveries and providing management assistance)

105.

Limited service wholesalers


cash and carry wholesalers, trust wholesalers, drop shippers rack jobbers, producers’
cooperatives, mail order wholesalers

106.

Brokers


brings buyers
and seller together and assists negotiation; paid by parties hiring them; do not carry inventory
or get involved in financing nor assume risk

107.

Agents


represent buyers
or sellers on a more permanent basis; there are (1) manufacture
r’s agent (2) selling agent (3)
purchasing agent (4) commission merchant

No lecture 9


Labour Day holiday




LECTURE 10


INTEGRATED MARKETING COMMUNICATION:
ADVERTISING



What is promotion? How do marketing communication activities assist the other eleme
nts of the
marketing mix in an organisation's marketing strategy?


Promotion is the marketing communication that makes


potential customers, partners and society
aware and attracted to the benefits of a business's products. It comprises of a strategic mix
of
advertising, public relations, sales promotion and personal selling. Promotion sends messages
about other parts of the marketing mix mix: product, pricing and distribution.

Integrated Marketing Communication

-

Coordination of organisation’s promotional ef
forts

-

Use major communication elements such as advertising, sales promotion, public
relations, direct and online marketing, personal selling.

-

Meets objectives such a to inform, persuade and remind customers



How does the model of communication help in exp
laining how an
advertisement works? Analyse a current advertising
campaign

in
your answer.


The communication process: a message is encoded and sent by a sender via a message channel
to a target audience who decodes the message and responds by some form of

feedback. Anything
that gets in the


way of the effective communication process is known as noise. The AAMI
36

|
M A R K E T I N G F O U N D A T I O N S


advertisement where Rhonda


is on the beach with Ketut is very effective in communicating that
with AAMI you save so much that you can go on a holi
day.



Definition

Benefits

Limitations

Advertising

Paid, non
-
personal
presentation and
promotion of ideas, goods
or services by an
identified sponsor

-

Cost efficient

-

Repeats message

-

Can control message

-

Create favourable
images

-

Hard to measure
effectiveness

-

Delayed feedback

-

Credibility problems

-

Clutter in media

Sales
Promotion

Short
-
term incentives,
encourage purchase;
alters price
-
value
relationship

-

Appeal to price
-
sensitive

-

Generate extra interest

-

Can measure effect

-

Short
-
term impact

-

Doesn’t contribute to

brand image

-

Promotional wars

Public
Relations

Non
-
personal
communication in news
story form through
medium for free

-

More credible

-

Low cost

-

Lack of control

-

Can be negative



Elements in the Communication Process




















Lecture 9:

Marketing L
ogistics Networks:

Managing the network of players providing customer fulfillment, ranging from:



suppliers (raw materials, components and capital equipment)



purchasing agents



manufacturer



marketers



transport agencies



end
-
consumer (managing their expectatio
ns)

37

|
M A R K E T I N G F O U N D A T I O N S



Marketing Logistics Network and the Other P’s

Product:



variations (colour, size, features, styles)



may impose a burden on distribution facilities


Promotion:



campaigns must reflect logistics delivery


Pricing:



a source of differential advantage based
on superior logistical service



if you use multiple channels, compare the price that the end
-
user will pay; if a customer
can buy from one channel at a lower price than another, your partners will rightfully have
concerns.


Marketing Channels:

A set of inte
rdependent organisations involved in the process of making a product or service
available to users.



Distribution channels are the pathways that companies use to sell their products to end
-
users.



Network of interdependent organisations
(or intermediaries)



m
aking product or service available
for use or consumption



Intermediaries
are organisations linking producers to other intermediaries or to the
customer through contractual arrangements to purchase and resale products (i.e. transport



companies, Dan Murphy’s
)


How Marketing Channels Add Value:



Information

gathering and distributing marketing research and intelligence.



Promotion

developing and spreading communications about an offer.



Contact

finding and communicating with prospective buyers.



Matching

shaping a