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4.1 The Role of Marketing What is marketing?? No single definition!! There are several definitions of marketing as it is a complex process of many integrated and coordinated activities in a business But here is one… Anticipating consumers’ needs and wants and attempting to satisfy them profitably. Relationship between marketing and other functions Marketing and human resources: market research can reveal information about the business industry/market that determines the human resources necessary to carry out the marketing function successfully. MARKETING AND HUMAN RESOURCES Marketing with production Marketing conducts research to determine the most suitable products to produce. Hence, operations management is directly involved with marketing. MARKETING AND PRODUCTION Marketing with accounting finance Marketing needs require resources, while results affect revenue. More or less finance may be needed. MARKETING AND FINANCE & ACCOUNTING The marketing mix Product is a broad term referring to both goods and services. In order to market a product profitably, it must be produced, priced, promoted and distributed suitably. Marketing mix for goods Goods are tangible and their marketing mix includes product, price, promotion, and place. Marketing mix for goods Product-design, color, size, shape, flavor, materials, package, etc.. Price-pricing policy suitable to the image and brand reflecting what the customer is willing to pay. Promotion-methods of informing and persuading customers to buy the product. Place-where the product will be distributed and sold and whether intermediaries will be used (channel of distribution).Remember goods are not frequently sold in the same location they were produced. Marketing mix for services Services are intangible products. Their marketing mix includes 7 P’s: Product, Price, Promotion, Place, People, Process, and physical evidence. Marketing mix for services In addition to the 4 P’s, People, Process, and Physical evidence are added when creating the marketing mix for services. Sometimes known as CRM. Customer Relations Management People People: services rely primarily on people delivering the right quality skillfully, pleasantly, and politely with a professional yet warm manner. People The effectiveness of a service is dependent on a number of factors existent in the people performing it: Appearance, manner, and body language. Proficiency and communication skill. Response to customer including speed with feedback. Adaptability to customer types and needs. Process-the method a service is delivered 1. Service method 2. Waiting time 3. After sales service 4. Payment method Physical evidence-refers to the tangible elements involved in the service. E.g. hotels 1. 2. 3. 4. 5. 6. Décor and color scheme Location and parking facilities Well groomed elegant staff Hygiene Beverages or light snacks offered while performing the service Brands used throughout Challenges in delivering services Employee management-demotivated employees project their sentiment onto the customer often losing them to the competition. Motivated pleasant employees sell the brand!! Measuring employee performance and productivity and keeping them consistent Dealing with angry customers!!! Angry indeed…. Irate customers…. Goods Services Tangible Separable Homogeneous Perishable Product strategy Price strategy is often lower Promotional strategy Place strategy uses channels of distribution Intangible Inseparable Heterogeneous Non-perishable Product strategy requires higher value added Promotional strategy Place strategy uses physical evidence and location Marketing for good versus services Marketing department The main functions of a marketing division in a business are: 1. Market research-obtaining market information such as market size, market growth, amount of competition and respective market share, and consumer profiles along with (PEST) factors. 2. Creating a suitable marketing mix for the business products (goods and/or services) The Marketing mix for products is defined as the combination of product, price, promotion, and place to ensure product success. 3. Creating and enhancing brands and improving business image and reputation. Creating uniqueness for a brand and ensuring it is maintained. 4. Public relations Ensuring the business is on good terms with other businesses and media and enhancing its reputation. This is especially true during crises. It is the marketing department’s responsibility to maintain the business in high market standing (Positive reputation and image). THE MARKET This term includes: Types of markets Market size Customer base Barriers to entry Competition Geographic characteristics Demographic characteristics Seasonal and cyclical characteristics Market growth Market share What is a market?? A market is a situation where buyers and sellers come together to trade. Types of markets Consumer markets-businesses selling to consumers (B2C) Industrial markets/commercial markets-businesses selling to businesses (B2B) Buyer seller Market size The value of total sales in a particular industry or market. It is calculated by multiplying the number of customers and their buying frequency by the average price in the market. Customer base Customer base-a measure of the total potential number of customers in a market. Businesses that continuously enter new markets widen their customer base. This is especially true if they enter populous countries such as China. Rivalry/competition The larger the number of operators/businesses vying for the same customer. The more the businesses, the larger the market is likely to be. Barriers to entry Factors that make it difficult for new firms to enter an industry. The number and size of existing businesses determine how many barriers exist. The larger the existing firms, the more the barriers to entry. Barriers to entry Financial Legal Extensive economies of scale in existing firms Loyalty for existing brands High concentration ratio-high market share for existing businesses Demographic characteristics Some markets focus on gender or age characteristics such as infant formula producers, who will do so for markets with high birth rates such as China or India. Seasonal and cyclical characteristics Highly seasonal markets such as tourism tend to focus their strategy and decision making on such factors as weather and time of the year. Geographic characteristics Markets may focus on geographic locations such as certain countries or regions. For example the vegetarian or vegan market focused in India since nearly 1 billion vegetarians reside in India. Market growth The expected percentage increase in market size. For instance, the higher the population, the larger the food market. Market share The percentage a business’s sales comprise of the total market. Calculated by the formula: Firm’s sales revenue x 100 Industry’s sales revenue Market share Businesses with the highest market share are known as market leaders. They are able to limit new entrants through creating (barriers to entry)factors that make it difficult for new businesses to enter the industry. Market concentration For instance, if three firms exist in a market with high market shares, it is said to be a market with a three-firm concentration ratio (CR). CR can be calculated by adding up the top 3, 4, 5 etc. firms’ shares. Here it is…… Smartphone market shares Market VS Product orientation Firms may approach marketing differently: Product oriented-inward looking approach where the businesses focus on the products they can make well and attempt to sell them. High tech firms are examples. The core focus is the product Product Benefits and drawbacks They tend to be quality oriented producing a technically superior product, which the firm believes will ‘sell itself’. They may supply ‘specialty’ products that customers become loyal to through exclusivity such as Cohiba cigars. However.. A high failure rate often exists as market trends may be overlooked. The research and development cost can run quite high. Market oriented Market oriented/customer oriented-outward looking/market led. These businesses research what the customer wants and then attempt to produce it. The core focus is customer satisfaction The core focus is the customer Customer satisfaction Benefits….. Flexible Less risky High success rate as it is catered to market trends Customer satisfaction However! Market research is costly Customer tastes could change rapidly before the business makes sufficient profits. Product VS market oriented The core focus is the product The core focus is the customer Product Customer satisfaction Product VS market oriented Product oriented Inward looking Product focused Market research done after production Riskier Higher failure rate Less flexible Market oriented Outward looking Customer focused Market research done before production Less risky Lower failure rate More flexible Factors affecting which approach a business may adopt Market-highly technical products such as industrial vacuum cleaners tend to be product oriented Customer-B2B producers tend to be product oriented Business values-businesses who value customer satisfaction most tend to be market oriented Barriers to entry-the less the barriers, the less customer focused a business tends to be Commercial versus social marketing Commercial marketing involves designing marketing activities for the purpose of increasing sales and profit. Social marketing involves designing marketing activities for the purpose of modifying behavior. Social marketing Defined as programs and tactics aimed at bringing about social change in behavior and/or beliefs. It uses some of the commercial marketing tactics. Philip Kotler (1971), founder of social marketing defines it as: “any activity that seeks to influence social behavior to benefit the target audience and society as a whole.” NPO’s tend to use social marketing. Examples of social marketing campaigns Social marketing Pricing decisions in social marketing tend to be based on NET BENEFITS. I.e. the difference between the benefits and the costs of a certain behavior. For instance, in Hong Kong where littering is heavily fined, people are likely to modify their littering behavior faster than other countries with lesser fines for littering. This is where social marketing tends to work best! Promotion in social marketing Messages must be persuasive, clever, innovative, often shocking to trigger reactions in the intended target first but others as well to implement change. Place in social marketing Place is significant in social marketing since convenience is key if behavior change is to take place. Where messages are displayed is chief to success to ensure the intended target receives them!! Process in social marketing Extensive use of distribution channels. For instance donation boxes for NPO’s can be available in supermarkets at the cash till stand. Purpose??? Convenience, convenience, convenience!! Marketing in NPO’s NPO’s tend to use social marketing tactics employing: Catchphrases De-marketing (Philip Kotler)-reducing demand for socially undesirable products such as alcohol. Public relations Social media and internet technology Difficulties in Social marketing In general, social marketing is more difficult than conventional commercial marketing, requiring as much or more perseverance and greater ingenuity and imagination. For market analysis, social marketers have much more difficulty accumulating valid, reliable, and relevant marketing data. In the area of market segmentation, they often face pressures against segmentation, especially segmentation that leads to the ignoring of certain segments. Further, their target segments often consist of those consumers who are most intensely resistant to their message. Commercial vs social marketing Commercial marketing involves using strategies and tactics that aim to meet consumer needs and wants for the purpose of increasing sales toward higher profit. WHILE………. Social marketing uses commercial marketing methods toward changing behavior. Commercial marketing Social marketing Purpose-making profits Benefits-customers through product satisfaction and business through profits Users-Private sector enterprises Focused on customer needs and wants Changing behavior Benefits intended audience and society as a whole Users-NGO’s Focused on customer behavior Commercial VS social marketing CUEGIS Links to the course concepts??? Social marketing ethics Commercial marketing strategy? Marketing mix culture?? International marketing globalization Other?? TOK TOK links?? To what extent can the success of social marketing be measured?