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- 1. 1 Chapter 8: Marketing TheRole and Impact of Marketing Marketing is all activities involved in getting goods and services from the businesses that produce them to the consumer. Marketing has two fundamental roles: to sell what a business makes and to manage the brand. Marketing activities include Branding Businesses can spend millions creating an image for products and services with a brand name, logo or trademark, and a slogan. • distribution • advertising • promotion • research • development • sales
- 2. 2 Chapter 8: Marketing TheRole and Impact of Marketing Brand Name A brand name is a word or group of words a business uses to distinguish its products from that of the competition. Brand names should be distinctive, stand out, and memorable. Logo or Trademark A logo is a symbol that is associated with the company or product. It can take the following forms: monogram, visual symbol, or abstract symbol. A trademark is a word, symbol, design, or a combination of all three that a business uses to distinguish its goods or services from others.
- 3. 3 Chapter 8: Marketing TheRole and Impact of Marketing Slogan A slogan is a short or catchy advertising phrase associated with a company or product. Brand Identification Everything associated with a product, such as the slogan, name, and logo, must be used consistently to ensure that the brand is always identifiable to the consumer. The Product Life Cycle Marketing efforts pay off in the form of consumer reaction to the brand. Successful marketing efforts increase brand equity or the value of the brand in the marketplace. The changes in popularity or sales volume of a product over time can be graphed on the product life cycle or style curve.
- 4. 4 Chapter 8: Marketing TheRole and Impact of Marketing
- 5. 5 Chapter 8: Marketing TheRole and Impact of Marketing Non-traditional Product Life Cycles Fads A fad is a product that is extremely popular with a select market for a short time, usually less than a year. Niches A niche is a section of the market in which a product dominates and into which few competitors enter. Niche marketers are often left alone because of barriers to entry—the factors that prevent competition from being profitable in a given market. Seasonal Some products are popular during a specific time or season. Balancing product quantity with seasonal sales is called inventory management. To be left with little seasonal inventory, businesses calculate the amount of product to keep on hand.
- 6. 6 Chapter 8: Marketing MarketingConcepts Marketing can be divided into two major concepts: the product concept and the market concept. Product concept involves the four Ps of marketing and market concept involves the two Cs of marketing. The Four Ps of Marketing A good combination of all four elements, called the marketing mix, translates into an effective campaign. Products and Services The two reasons businesses develop product are because they can and they see a need. The development of good products and services considers quality, design, features, and benefits. 1. Product 2. Price 3. Place 4. Promotion
- 7. 7 Chapter 8: Marketing MarketingConcepts Quality Improvements made to the quality of a product attracts more customers. Design Every product and service has a design component. Consumers will often buy one product over another because of the way it looks. Features Product developers consider the features used, such as the materials, scent, size, or the taste, when constructing a new product. Service providers outline or detail what they do best.
- 8. 8 Chapter 8: Marketing MarketingConcepts Benefits Consumers buy products and services for a particular purpose. Businesses need to make consumers aware of the advantages of a product to be motivated to buy it. The Product/Service Mix A retail store provides services and a service business sells a product. The resulting product/service mix can increase sales to existing customers and attract new ones. Price Prices for products must be set with care to ensure their success. Today consumers are very price conscious and look for competitive prices at other stores or on the Internet. Businesses need to be price sensitive and look at their competitors’ prices for the same products.
- 9. 9 Chapter 8: Marketing MarketingConcepts Place (Channels of Distribution) Channels of distribution are the paths of ownership that goods follow as they pass from the producer or manufacturer to the consumer. The three types of channels of distribution are direct, indirect, and specialty. Direct Channels Direct channels of distribution connect the consumers to the producers of the goods or services. This is also referred to as the maker-user relationship. Indirect Channels Indirect channels of distribution have one or more intermediaries who import products (importers), wholesale goods (wholesalers), or retail products (retailers).
- 10. 10 Chapter 8: Marketing MarketingConcepts Specialty Channels A specialty channel of distribution is an indirect way to distribute products by using vending machines, telemarketing, catalogue sales, e-commerce, and door-to-door sales. No retail store is involved. Promotion Promotion is an attempt to sell a product. Sales promotion encourages consumers to buy products by using coupons, contests, premiums, samples, or special events.
- 11. 11 Chapter 8: Marketing MarketingConcepts The Two Cs of Marketing The marketing department must consider two major external factors: the competition and the consumer. The Competitive Market The competitive market refers to the sellers of a specific product, and is often expressed in terms of the total dollars spent annually on the product. The percentage of the market that a company or brand has is called its market share. A market segment is a part of the overall market with similar characteristics. Competition among Products Indirect competition means products or services are not directly related to each other. Products that are similar to one another are called direct competition.
- 12. 12 Chapter 8: Marketing MarketingConcepts The Consumer Market In their effort to be competitive, businesses study and target the consumer market, the potential users of a product or service. These consumers can be identified by demographics and lifestyle. Demographics Demographics is the study of obvious characteristics that categorize human beings. Some examples of demographics include the following: Lifestyle Lifestyle is the way people live, including their values, beliefs, and motivations. •age •gender •family lifestyle •income level •ethnicity and culture
- 13. 13 Chapter 8: Marketing Advertising CreatingGood Advertising Good advertisements sell products by making the consumer remember the brand name of their products or services. The four standard rules for creating good advertising are summarized as follows: 1. Attract attention – develop a good headline 2. Gain interest – make people want to read, watch, or listen 3. Build desire – help the customer want your product 4. Get action – always ask for the sale Types of Advertising Advertising is the paid-for promotion of a businesses’ goods and services using a variety of mass media to target a market.
- 14. 14 Chapter 8: Marketing Advertising Commonadvertising classifications include Comparing Types of Advertising Advertisers use the following categories to help them select which media to use for a certain product promotion. These eight categories are • direct-to-home • out-of-home • radio • television • newspapers • magazines • Internet •reach •frequency •selectivity •durability •lead-time •mechanical requirements •clutter •cost
- 15. 15 Chapter 8: Marketing MarketingResearch Market research is the collection and analysis of information that identifies specific groups of consumers who would use a particular product or service. Types of Marketing Research Marketers use different types of research depending on what information is needed, how it will be collected, and what will be done with the final information after it is analyzed. The following is a list of the most common types of research used by marketers: •consumer research •market research •motivation research •pricing research •competitive research •product research •advertising research
- 16. 16 Chapter 8: Marketing MarketingResearch Marketing Research Tools Marketing research relies on secondary and primary data. Secondary Data Secondary data is information collected by others. Secondary data can be collected from Web sites, databases, periodicals, indexes, and professionally prepared marketing research reports. Primary Data Primary data refers to current information that is collected and analyzed for a specific purpose. Methods include • test marketing • internal information sources • surveys •observation •focus groups
Editor's Notes
- #2 Marketing does not include the production of goods and services.
- #3 BRANDING Brand Name A brand name is how a product and company are identified and it is important to organizational success. When people talk with others about brand preference this is free publicity for the company. Logo or Trademark A logo or trademark helps a product compete for consumer awareness. Monogram : a stylized rendering of a company’s initials or a combination of initials and numbers. Examples include IBM (International Business Machines) who wanted to consumers to associate them with computers not adding machines, and KFC (Kentucky Fried Chicken) who did not want consumers seeing the work “Fried”, etc. Visual symbol : These are line drawings of people, animals, or things such as Apple Computer’s apple and Kellogg’s Frosted Flakes’ Tony the Tiger. Abstract symbol : These are shapes that carry a visual message but are not representative of actual things. The Nike “swoosh” is an example and one of the world’s most well recognized logos.
- #4 BRANDING Slogan Slogans are taglines for both print and broadcast advertisements. Examples include; MasterCard’s “Priceless,” Canadian Blood Services’ “It’s in You to Give,” and Sprite’s “Obey Your Thirst”. Brand Identification The writing, the colours used, the design of the package should always be used in association with the product, this way it is always clear to the consumer that they are getting the product they desire. THE PRODUCT LIFE CYCLE Successful marketing efforts created brand awareness; customers can name you brand as part of a specific category. Brand loyalty is when customers prefer your brand and support it. Brand insistence is when customers will not accept a substitute for a particular brand. Brands that have reached brand insistence have enormous equity.
- #5 THE PRODUCT LIFE CYCLE Product Introduction : Is the launch of a product into the marketplace. It may be done locally, all the way to internationally. Businesses need to inform potential customers about the products features, availability, package design, and brand identification. Early adopters are individuals who like to be one of the first to try a new product. Marketers often focus their early efforts on these trendsetters who can be sports icons, celebrities, or even students. Growth : As the new product sales increase competitors enter, this can decrease profitability due to decreased market share. They often compete by adding features, improving quality, or sell at a lower price;. The product line becomes very visible and is promoted on commercials, billboards, print ads, etc. Some competitors start to drop out of the competitive race at this stage. Maturity : Growth is flat; it does not increase or decrease, and brand equity is at its highest. Businesses keep advertising the product to keep it in the consumers’ eye. Products, also know as cash cows , at this stage usually make large profits and this income can be used to develop and fund new products for the company. Examples include Tide and Kellogg’s Corn Flakes. Decline : When sales decrease because customers leave to by other brands, and they are not replaced, a product can enter the decline stage. Sometimes a change in price or advertising can slow down or stop the decline. The Decision Point : The business may make an effort to regain original sales figures and brand equity or they may discontinue the product altogether. If they try to save the product a variety of options are available: Repositioning: making the product popular with a new consumer group Reformulate (new scent), repackage (new container and spout), and re-introduce (new and improved) the product. Repricing to gain popularity. New promotion. Obsolete technology utilized in the product will make such that no amount of marketing efforts will restore product position.
- #6 NON-TRADITIONAL PRODCUT LIFE CYCLES Fads Trends are not fads, trends last longer and influences other areas. Some well-known fads are hula hoops, yo-yos, Pogs, and Tamagotchis. Businesses who plan well, and sell most of its stock and get out of the market just before the fad reaches its peak, can make an excellent profit. Some companies market knock-offs of fads, often a cheaper version. If they do not sell off their inventories before the fad quickly dies off they can stand to lose money. Niches A niche product tends to have a short growth stage and leads to a solid, but not financially spectacular, maturity stage. Niche marketers usually invent their products and hold exclusive patents or formulas. By the time the competition can produce a competitive product the niche marketers have cornered that market. Barriers to entry include the small market size, the cost of R&D, advertising expenses, factory and equipment costs, design costs, lack of distribution channels, and the cost of raw materials. Seasonal Christmas and summer are seasonal time frames within which certain products are marketed. Inventory management is the balancing of product quantity with sales.
- #7 The Four Ps of Marketing are the four elements of a good marketing campaign: product, price, place, and promotion. The Two Cs of Marketing are the two major external factors in marketing: the competition and the consumer. THE FOUR Ps OF MARKETING The four Ps of marketing are product, price, place and promotion. See Figure 8.3, “The Marketing Mix”, on page 240.
- #8 THE FOUR Ps OF MARKETING Products and Services Quality Consumers depend on the quality of many established brand names. Consumers know that higher quality usually means that the product or service is more expensive. Some products are successful because they can meet consumer needs, at a lower quality, and therefore a lower price. Design We often think of design in relation to clothing, such as jeans that come in many different styles. When a package is designed the function has to be considered. Packaging protects the product from light, dirt, germs, air, water, tampering, and damage. Packaging can aid ease of use, such as a spout or a resealable bag. Product identification or recognition benefits from package shape and colour, such as the Coca-Cola bottle. Label design is also an aspect of design and it can help a product stand out. Labels also give information such as size, weight, ingredients, and nutritional facts. Services consider design features in their web pages and the physical design of their store. Features Some examples of product features are the smell of different perfumes, foam or feather pillows, and laundry detergent can be spring sent or sent-free.
- #9 THE FOUR Ps OF MARKETING Products and Services Benefits Examples of benefits are a microwave that cooks food faster or a can opener that does not leave a sharp edge. The Product/Service Mix A retail store could offer a delivery service, an installation service, or a gift-wrapping service. A service business, such as a veterinarian could not only assist ill pets but could sell pet food products as well. Price If consumers think the price of a product is too high, it will not sell. Consumers can easily find out product prices by searching on the Internet. Marketers need to be aware of how price sensitive their product is: how much sales will go up or down when the price goes up or down.
- #10 THE FOUR Ps OF MARKETING Place (Channels of Distribution) A product does not change as it moves through the distribution chain. If the product is changed or altered that is the end of that channel and a new one begins. See Figure 8.4, “Channels of Distribution”, on page 243. Direct Channels Simplest form of distribution. Direct channel distribution does not use intermediaries or businesses that take possession of the goods before the consumers do, they add costs to the product so that they realize a profit. With direct channels consumers can readily inform the producers of their needs and they may feel more confident about the product because they deal directly with the company that produces it. Indirect Channels of Distribution Importers: Importers are businesses that seek out foreign products to bring into their own country. Importers may negotiate distribution deals with foreign manufacturers, buy the goods, store the goods, and may sell the goods. To eliminate risk importers can arrange only delivery of foreign goods to Canadian businesses. Wholesalers: Wholesalers buy goods from producers or importers and resell the goods to retailers. The manufacturer may require that the retailer buy a minimum quantity of goods. Using a wholesalers may mean that the retailer pays a higher price but they get the quantity they need and the wholesaler may store the products close by. Retailers: Linked directly to consumers, retailers buy merchandise customers want, keep it in stock, and display it so that customers can examine it in an easy-to-reach location.
- #11 THE FOUR Ps OF MARKETING Place (Channels of Distribution) Specialty Channels See Figure 8.5, “Specialty Channels of Distribution”, on page 246. Vending Machines : Vending machines, that can sell virtually anything, can be placed where consumers are. Telemarketing : Using the telephone to sell products and services is very popular. A sales pitch or scripted presentation that anticipates all possible consumer responses is delivered to people once the automated call distributors (ACDs) , a computerized dialing system, calls them. Catalogue Sales : Catalogues from retailers provide information about merchandise that consumers can purchase by mail, phone, or at the store. E-commerce : The most important specialty channel, e-commerce is selling products and services online. For consumers it is convenient and competitive and for manufacturers and retailers it reduces distribution costs. PROMOTION Coupons: offer consumers money off the price of a product but redemption rates , a method of determining effectiveness, are only about 5%. Contests: increase brand recognition through an anyone can enter and win concept that is not gambling and cannot require a purchase to enter. Premiums: are when the consumer makes a purchase and they get something for free. Customer loyalty cards are stamped with each purchase and, when full, entitles the customer to a discount or a free product. Samples: samples are small “trail” sizes of a product that are given to consumers, it is expensive but often results in increased sales. Special Events: are used to attract customers and increase sales.
- #12 THE TWO Cs OF MARKETING See Figure 8.6, “The Two Cs of Marketing”, on page 249. The Competitive Market See Table 8.1, “Estimated U.S. Market Share for Major Soft Drink Brands*”, on page 250. The soft drink market has a flavoured market segment (root beer for example) and an energy drink segment (Red Bull for example). The two ways to increase market share are to increase the size of the overall market (the introduction of energy drinks created a new segment) and to take sales away for the competition. Competition among Products All products and services compete for the consumer’s money in some way. Indirect Competition : Is competition between products or services that are not directly related to each other such as a teen with $25 who decides on spending it on movie tickets or on a CD. Discretionary Income: The portion of one’s disposable income that is not already committed to paying for necessities and can be used to buy things for pleasure, satisfaction, and comfort. Disposable Income : Is the amount of income that is left after taxes have been paid. This income can be used to pay for the basic necessities such as food, clothing, and shelter. Direct Competition : Competition between products that are very similar and have only minor differences. These products that compete directly with each other do so through image, quality, price, design, features, and benefits.
- #13 THE TWO Cs OF MARKETING The Consumer Market Demographics are used by businesses to target specific consumers. Age: Age defines our tastes as well as our needs and wants. Some age groups are consumers, but not always customers. Adults or parents are gatekeepers , or the person who makes buying decisions for others, often children who can influence their decisions. Gender: Some products lines are distinctly marketed to men or women, but more and more traditionally gender marketed products are being targeted to both groups (detergent and power tools are examples). Family life cycle: People’s stage in the family life cycle often determines needs and wants. New parents need baby items and seniors may buy a retirement escape. Income level: Is the grouping of consumers by how much money they make or have. Some products are marketed to consumers in every income bracket (Kellogg’s Corn Flakes), some are not (Mercedes). Ethnicity and culture: Businesses target people based on their background and customs. Lifestyle study is called psychographics. When marketing to demographic groups, marketers need to consider their lifestyles because a person’s beliefs (such as being environmentally conscious or concerned about diet) influence what they purchase.
- #14 CREATING GOOD ADVERTISING Can be referred to as the AIDA principal: A ttention, I nterest, D esire, and A ction See Figure 8.7, “Rules for Creating Good Advertising”, on page 255. Attract Attention: Print ads need a good headline, it should not be more than seven words, it should mention the brand, and should encourage receiver to read the rest of the ad. Broadcast ads attract attention with sound, unusual visuals, attractive people, celebrities, or something funny. Gain Interest: Print ads should be easy to read and to the point. Broadcast ads should get to the message quickly. Visual images should be strong. Build Desire: Print ads should build desire with words, adding benefits with each line. Broadcast ads repeat brand names. Get Action: Ask the consumer to buy now, give them reasons, and provide the necessary information so that they can. TYPES OF ADVERTISING Advertising, that always is the advertisers’ point of view, costs a lot of money. Publicity, usually more believable that advertising, is information about a business, either positive or negative, that appears in the media and is not paid for by the business. Some companies hire public relations (PR) firms that can influence the media with well written positive stories about the business.
- #15 TYPES OF ADVERTISING Direct-to-home advertisements are messages (flyer or catalogue) that come directly to a person’s residence. Out-of home advertising are messages (billboard or bus ad) that the consumer is supposed to receive while not at home. Radio advertisements or “go anywhere” medium uses words and sound to draw us in. Television, and effective but expensive medium, combines words, sound, and images to reach very large audiences. Newspaper ads range from inexpensive local ads in the classified section to full page spreads in national publications. Magazines offer the opportunity to target specific groups of consumers with colour. The Internet allows for three different types of advertising: company websites, banner ads on other websites, and e-mail advertising. Non-permission-based e-mail is called spamming. COMPARING TYPES OF ADVERTISING Reach means the number of people exposed to a message. Frequency is the number of times an audience will see or hear the ad over a given period of time. Selectivity means the ability of the medium to focus on a target audience. Durability means how long the advertisement lasts in the house. Lead-time means how fast the ad can be ready to run. Mechanical requirements means how complex it is to prepare the ads for the medium. Clutter means the level of competition for the audience’s attention. Costs means the accumulated costs of running the advertisement. See Table 8.2, “Media Rating Chart”, on page 261.
- #16 TYPES OF MARKETING RESEARCH Consumer research uses methods such as phone or personal interviews to discover what type of products consumers want and predicts the sales potential of that product. Market research identifies specific groups of consumers who would use a particular product or service. Motivation Research tries to find out why we buy, by looking at the emotional and rational motives that influence buying decisions. Pricing research helps a company decide if they can sell a product for a competitive price and make a profit. Competitive research looks for opportunities where competition is weak or absent and determines what competitors are doing. Product research looks at details of a product or service and analyzes the impact these details might have on the market. Advertising research gives information on effective ways to get a message to potential consumers.
- #17 MARKETING RESEARCH TOOLS Secondary Data Researchers re-interpret secondary data for their own or their clients’ purposes. A lot of secondary data is available for free, however sources such as databases or reports can be costly (a beverage industry report costs almost $10 000). Primary Data Test marketing involves producing a limited quantity of a new product and introducing it to one or two areas (in Ontario London, Peterborough, and Kingston are often used). This method is expensive and should be done carefully to ensure good decisions. Internal information sources includes data mining, the analyze of a company’s own records (sales, inventory, advertising, and promotional results), that gathers primary data on product history and/or customer behaviour. Surveys are a planned set of questions used to gather data that can be analyzed to help solve problems. Most surveys us closed-ended questions for which respondents must select an answer from two or more choices they are given. Open-ended questions are questions that allows respondents to develop their own answers, they are difficult to analyze and are used only when very specific data is needed. Observation is used to learn how people react to situations and it is done without interaction and often when the subject does not know they are being watched. Focus groups are company-arranged meetings of potential consumers that the marketer observes during an organized discussion. Participants are usually paid.