Marketing

What is a market?

Any place where buyers and sellers meet

Consumer Markets

Consumer markets - are made up of individuals who purchase goods/services for personal or domestic use.

Consumable goods - eg, food, cosmetics, magazines

Durable goods - eg, cars, televisions, clothes

Industrial markets - organisations which purchase goods and services to use in the production of other goods and services.

Consumable goods - eg, raw materials

Durable goods - eg, machinery and equipment

Industrial Markets

What is Marketing

“ Marketing is the management process responsible for identifying , anticipating & satisfying consumer requirements profitably”

About Marketing

Marketing finds out consumers needs and what products meet them “Customer is king”

Marketing is a business philosophy and an on-going process

Marketing affects ALL aspects of business

Marketing is NOT just selling

Marketing and advertising are NOT the same

What is the Role of Marketing

To identify, anticipate and satisfy customers needs

Providing customers with desired goods/services = profits

To ensure customer awareness or goods/services

Marketing Objectives

Target a new market or market segment

Achieve or maintain market share

Develop new range of products

Improve image of product

Marketing Activities

Market Research

New Product Development

Selling

Pricing

Promotion and Advertising

Preparing Publicity Information

Factors leading to Importance of Marketing

Economic Growth – booms = more disposable income. Marketing is needed to gain market share

Fashion – Marketing attempts to anticipate trends and/or changes in tastes, lifestyle

Technology – New product innovation is essential for firms to keep up with competitors

Competition – rivals may come from overseas. Firms have to be aware of the market environment both at home and abroad

Product Orientation Production Capabilities Manufacture Product Aggressive Sales Effort Customers Production Orientation is when a business focuses on the production process and seeks to make goods which are viewed as superior

British Motorcycle Industry

Britain ruled the world of bikes in 30s and 40s.

BSA, Norton & Triumph neglected consumer tastes as sleeker models arrived

Suzuki, Kawasaki and Honda catered for this. Look at what happened!

Market Orientation Customer Needs Potential Market Opportunities Marketing Products & Services Customers Market Orientation starts with the consumer and looks at consumer needs. It is customer orientated.

Sony Walkman

Designed due to people’s needs for a small tape recorder

Workers used headphones to listen to music and the Walkman was born

Henry Ford and Model T

The World’s First Assembly Line churned out the Model T Ford.

Henry Ford ‘boasted’ that “it was available in any colour… as long as it’s black!”

Ford was customer orientated because the savings made by the assembly line were passed down to the customer by offering cheap automobiles

Advantages of Market Orientated approach

Respond quicker to changes in market due to market research

Stronger position to meet new competitors

Can anticipate market changes

More chance of new product success

The Marketing Environment THE MARKET Consumer trends and behaviour Technology Political Competition The Economy Social

“ It is useless to tell a river to stop running; the best thing is to learn how to swim in the direction it is flowing.”

Anonymous

Market Share

Market Share is the percentage of customers who buy/use a company’s goods/services

Market Growth

Increasing market share means a business increases sales at the expense of competitors.

However, firms can also increase sales if the whole market grows.

Market growth occurs when the number of people buying/using the good/service increases

Marketing Mix

The 4Ps

Product

Price

Place

Promotion

Product/Service

The good or service which the business is trying to sell. Most important element a it determines what the price will be (Price), how it is promoted(Promotion) and where it is sold (Place).

Core Product provides a basic need

Augmented Product is made more attractive to the customer by having additional features.

Product

Boston Box Market Share Market Growth High High Low Low

Boston Box - Strategies Dogs Harvest or Divest Cash Cows Hold sales/market share Use excess cash to invest in stars, problem children Problem Children Build selectively Harvest or divest rest Stars Build sales/market share Invest to turn into cash cow

Product Life Cycle Products have a natural ‘lifespan’. Some are very short others are around for decades. The file of a product can be prolonged by using extension strategies. However all products go through a number of distinct phases.

Stages in Cycle Development Stage – many products will never progress past this stage. Development of new products is essential but can be very costly. Before launching it may be test-marketed. Modifications can then be made based on feedback. Introduction Stage – heavy advertising at this stage to make consumers aware of the product. Sales are slow and costs are high. Growth Stage – consumers more aware of the product and sales start to grow rapidly. It is during this stage that the product begins to become profitable.

Stages in Cycle Maturity Stage – sales reach their peak. Advertising costs are lower and development costs should have been repaid. The product is at its most profitable. The business will work to keep the product in this stage for as long as possible. This can be done by using extension strategies . Decline Stage – Sales and profits start to fall. Mobile phone sales are beginning to decline if firms wish to stay in business they will have to create new phones or new demand for phones.

Product Life Cycle

Extension Strategies Reducing Price Therefore Promoting More Frequent Use of Product – reduce cost of texting to mobile phones. Developing New Markets for Existing Product – Computer were originally manufactured for the business market, moved into home market. Finding New Uses for Existing Products – fire lighters now used for barbeques.

Extension Strategies Develop a Wider Range of Products – new versions of same product can produce new interest from consumers. Irn Bru – range of can and bottle sizes, fruit chews, ‘alco-pop’ market. Developing Styling Changes – introducing slightly different product – football strips.

Effects of Extension Strategies

What is a New Product?

New to the world

New product lines

Additions to existing product lines

Improvements and Revisions to existing products

Repositioned products

NPD: Facts

1 in 50 new products fail

Stages of New Product Development

Generate Ideas

Analysis and Further Research

Are the Products Marketable?

Prototype

Test Marketing

Full Launch

Product Failures

New Coke

Sony Betamax VCR

McDonald’s Arch Deluxe

Maxwell House Ready-to-drink coffee

Sinclair C5

Sinclair C5

Successful NPD

Unique, superior product

Well defined customer target market

Close links between R&D and Marketing

Well executed stages of NPD

Market attractiveness

Japanese Approach

In Japan they use the trial and error approach.

They do not worry about market research.

Japanese firms release hundreds of products in hope of getting one or two hits.

They aim to get new products to market quickly and at low R&D costs.

Failures can be modified and released again.

This approach is called Expeditionary Marketing .

Branding Branding is used to create USP’s (unique selling propositions) and ESP’s (emotional selling propositions) The business chooses a word or symbol, or both, then registers them so that they can only be used on its products. Baxter’s, Oxo, Cadbury’s and Heinz are all well-known brand names.

Benefits of Branding Instant recognition of the product by the customer. Brand loyalty – repeat purchases Higher prices can be charged Quality is associated with it Easier to launch new products Good after sales service May lead to purchases of other products with same brand name

Drawbacks of Branding Time is taken to establish a brand Promotion costs will be high Bad publicity for one product can affect the whole range of same-brand products Fake products may appear. These imitators are very difficult to stop. (Burberry, Rolex and Calvin Klein who can charge premium prices for their products suffer most at the ands of the forgers.)

Own Brands Most of the supermarket chains, and large retailers such as Boots, offer a wide range of products under their own brand names. These can be produced by the supermarket or by a manufacturer who is contracted to produce goods for the supermarket.

Advantages of Own Brands Own brands will attract more customers and more sales within the store. Producer will have guaranteed sales Products are cheaper Disadvantages of Own Brands Some customers believe ‘own brands’ are of lower value than established brand names (although this is not necessarily true).

Price Consumers will only pay what they can afford and what they think is a reasonable price for the product. Consumers use price as a measure of quality. When setting a price for a product you need to consider: Costs of production Profit mark-up Competitor prices

Long Term Pricing Strategies Low Price - Charge lower than competitors. Only appropriate where there is a little brand loyalty and competition in the market is high. Market Price - Setting price at a similar price to competitors. Homogeneous product means that price competition is not of benefit. They compete in other areas – service etc. High Price - High quality products, premium goods and services where image is important, such as perfumes.

Short Term Pricing Strategies Skimming Using a high price initially for a new product where there is little competition. Penetration Pricing Used to introduce a product to an established market. Allows the business to achieve sales and gain market share very quickly. Usually set a low price to attract customers. Once product is established price can increase.

Short Term Pricing Strategies Destroyer Pricing Setting a very low price to destroy the competition. Product probably being sold at a loss, however once competition is destroyed the price will return to market price. Promotional Pricing Used to boost sales and create interest in a product by lowering the price. Supermarkets use this for some of their sales lines, as loss leaders. Demand-orientated Pricing Price varies with the demand, ie crops, trains, phones etc.

Place Producers Wholesalers Retailers Consumers Direct Selling Producer to Wholesaler Two or more intermediaries Producer to Retailer

Choice of Distribution Channel The Product – perishable, unique The Market – size – Mars Bars Legal Requirements – alcohol, drugs Buying Habits – expectations of customers The Business – own distribution network

Manufacturer Wholesaler Retailer Consumer A Distribution Channel

Direct Channel

This is from manufacturer to the consumer

It is the fastest way (perishable goods?)

And cheapest for consumer (no costs added on by each part of the chain)

Manufacturers A B C D E Company warehouse Wholesalers Company outlets Retailers Retailers E-tailers C o n s u m e r s

Key Terms

Manufacturer – firm that makes goods

Wholesaler – company stores goods in bulk before selling them on in smaller batches

Retailer – firm who sells goods to end-users

Consumer – person who uses final good/service

Types of Promotion Promotion Advertising Sales Promotion Direct Mail Personal Selling Public Relations Exhibitions and Trade Fairs Merchandising

What is Promotion

method used to pass on information to consumers

an essential way of keeping existing customers and getting new ones

Methods of Promotion

Advertising

Sales promotion

Public relations

Merchandising

Packaging

Exhibitions and trade fairs

Direct mail

Personal selling

Types of Advertising Informative : Health Education Board for Scotland – smoking, drugs, alcohol etc Persuasive : used in very competitive markets, use powerful images and language – ‘Probably the world’s favourite lager.’ Corporate : promoting the whole company not a single product – BP adverts focus on their ‘green image’ not on the product (petrol) Generic : the whole industry come together to promote the whole industry – Scottish Beef, Scottish Tourism

Choice of Advertising Media

How and where an organisation carries out its advertising will depend on how it can best reach its existing and potential customers.

Young audience: teen magazines, Hollyoaks

Older people: Sunday newspapers, daytime TV

Whole market: Coronation Street

Types of Advertising Media

Print : newspapers and magazines

Broadcast : TV, radio, Internet

Outdoor : billboards, buses, round football grounds etc

Which one is chosen depends on:

Cost : TV expensive but memorable

Target audience : choice of programme, newspaper

Competitors’ Advertising : usual to match competitors

Impact required : new product  wide variety of methods

The Law : tobacco and alcohol

Sales Promotion – Into the Pipeline

Dealer Loaders: 6 boxes for the price of 5

Point-of-sale displays, posters, videos etc

Dealer competitions

Staff training for the shops

Sale or return

Extended credit

Sales Promotion – Out of the Pipeline

Free samples

Bonus packs: 50% free

Price reduction: 50p off offer

Premium offers: one product is free when you buy another

In-store demonstrations and tasting

Merchandising: in-store displays

Public Relations

The way an organisation communicates at a corporate level with: the public, the press, the government and shareholders

Will involve : press statements, making charitable donations, sponsoring events, arranging product endorsement

Publicity : internal through press releases or external through news reports or consumer programmes. Not usually paid for, can become advertising if it is good publicity.

Merchandising

An attempt to encourage the customer to buy at the point-of-sale by using window displays, posters,etc

Layout of products: popular items at the back of the store to make customers walk passed less popular items.

Related items together ie soap powder

Products at eye level are the best position to achieve sales

Well stocked shelves, the right atmosphere ie bright lighting can create a feeling of cleanliness near fresh food. The smell of coffee or baking can make customers hungrier.

Packaging

Good packaging can increase sales of a product . Factors that

should be considered:

Shape and weigh : can affect distribution costs

Protection : product must not be damaged in transit or be affected by heat, light or dust

Convenience : easy for the customer to handle

Design : eye-catching to distinguish from competitors

Information : legal requirements (food labelling), technical requirements (wattage on bulbs)

Environmental factors : public concern about recyclable materials and excess packaging

Target Markets

Undifferentiated or Mass Marketing

When a product is sold to the entire market

Differentiated Marketing

When a product is offered to a group or groups within the total market

This is done by Market Segmentation

Undifferentiated marketing Firm Market Marketing mix

Differentiated marketing Firm Segment 1 Segment 2 Segment 3 Marketing mix 1 Marketing mix 2 Marketing mix 3

Concentrated marketing Firm Segment 1 Segment 2 Segment 3 Marketing mix

Methods of Market Segmentation

Age

Race

Gender

Lifestyle

Size of family

Income

Work

Location

Socio-Economic Group

A. Higher managerial, administrative or professional

Intermediate, clerical, administrative or

professional

C1. Supervisory, clerical, junior administrative or professional

C2. Skilled manual

D. Semiskilled and unskilled

E. State pensioners, widows, casual and lowest paid

Segments people according to lifestyle.

Lifestyle is a person’s individual pattern of behaviour.

Includes;

attitudes, beliefs, interests, hobbies, habits, religion

Psychographic Segmentation

Stages in Life

1 Bachelor stage: young, single, not living at home

2 Newly Weds: young, no children

3 Full nest 1 Youngest child under 6

4 Full nest 2 Youngest child 6 or over

5 Full nest 3 Older couples with dependent kids

6 Empty nest 1 Older married couples, no kids living with them, head of house in employment

7 Empty nest 2 Older married, no children living at home, head of house retired

8 Solitary survivor in employment

9 Solitary survivor retired

Niche Marketing

Niche Marketing is when a business targets a product at a small segment of a market

Tie Rack is an example of a Niche Market

Niche Marketing

Advantages

Niche market may be overlooked

Gain competitive advantage

Disadvantages

If successful, larger competitors may enter market

Niche markets are smaller and may suffer more frequent swings in consumer spending

Market Research

What is Market Research?

“ The collection, collation, and analysis of data, relating to the marketing and consumption of goods and services”

Market Research Provides Information About

Size and nature of market

Age, sex, income & preferences of market

Effectiveness of selling methods

What customers think and feel about product

Effectiveness of advertising & promotion

What can businesses use market research for?

Descriptive reasons:

What is happening in a market?

Predictive reasons:

What will happen in the future?

Explanatory reasons:

Why is something happening? E.g. Why is our product only popular in one region?

Exploratory reasons:

E.g. Could this new product work?

Primary (Field) Research

Questionnaires

Personal interviews

Telephone interviews

Postal surveys

Observations

Technology e.g. loyalty cards

Focus Groups

Customer panels

Used to collect Primary data

Sampling

Sampling is a way to find the views of the population without asking everyone!

Random Sampling – a randomly generated list of individuals free of bias, but not targeted at any market segment

Quota Sampling – a group selected to reflect a proportion of the whole population. Cheaper than random sampling but can be less representative than the random method

Primary Research +/-