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Marketing 1. Identify customers’ needs and wants 2. Anticipate changes in these needs and wants 3. Satisfy customers’ with products/services offered at a price the customer is prepared to pay Marketing orientation: focus organisational attention on customer Aim isn’t to develop the best product but to develop the best product which the customer needs & is willing to pay for. Marketing personnel are typically responsible for: Researching customer needs Assisting in design of the product Suggesting a suitable pricing strategy Promotion: advertising, public relations etc. Distribution: identifying how the product should be distributed Customer Service: specifying service levels Reasons for Segmenting the Market o Focus strategy: firm can build itself a niche whose special needs can be catered for. o More money: customer likely to spend more on specifically rather than generic product o Convenience: a firm cannot be all things to all people. Need to choose how & where to compete Typical Market Segments Geographical Area Occupation Sex Lifestyle End use Family Life cycle Education Buyer behaviour Age Income Social Class Example Commercial radio stations targeting local interest news Men’s suits Magazine content Hobby magazines, activity sports shops Quality of paper for formal reports versus rough work Housing needs will depend on Single/married, children/no children Newspapers Impulses buyer, customer loyalty, sensitivity to sales promotions Women’s clothes; children’s clothes & toys Housing, luxury items etc. Multi-variable segmentation o Will generally need to use more than one variable to define a useful market o Clothes for “20-30 year old well-off women” (age, income, sex) Testing Segment validity o Ask yourself: o Can the segment be measured? (qualities like being a conservative person exist but may be difficult to measure how many people share this trait) o Is the segment big enough? (potential market needs to be profitable) o Can the segment be reached? (are there specific promotion/distribution channels that will go to these potential customers) o Do segments respond differently? (do they react differently to a marketing mix. than other segments. If not then no point in distinguishing as you could market to them both) Targeting Deciding which segments to prioritise in the company’s marketing effort. Need to clearly understand: o Needs & wants of end user o Market size & structure o The company’s current market share & its resources & capabilities o The intensity of competition Product Positioning How a product relates to others on offer to appeal to a particular target market (e.g. higher price/higher quality) The differences perceived by customers Internal Marketing Idea where internal departments within organisation have to “market” their services (e.g. an IT department). They are asked to research what user departments want, involve end users in development, meet customer needs as far as possible and in some instances charge for its services. Societal Marketing Organisation should mould itself so as to satisfy customer needs more effectively & efficiently than its competitors in a way that preserves/enhances the consumers’ and society’s well-being. (e.g. ‘green’ products – lead free petrol, recyclable cards etc.) Consumer Marketing Branding Reasons: o Product differentiation o Separate product identity (particularly where products are v. similar e.g. pet food) o Wholesalers & retailers (often shops will only stock branded goods) o Facilitates self selection (allows consumers find your product) o Reduces importance of price differentials o Brand loyalty o Convey psychic benefits (fashionable, exclusive etc.) Strategies: o Individual Name (unique) o Family Branding (loyalty, consistent brand e.g. Kelloggs) o Brand Extension (loyalty to existing product e.g. Mars ice-cream) o Multi-Branding (different names for similar goods in same market) Buyer Behaviour – Industrial Markets Decision Making Unit (DMU) – people who actually take the decision to buy Industrial buyers more rational. Main factors in motivation mix: o Quality o Price o Budgetary Control o Fear of breakdown o Credit Developing International Markets Three ways of entering: o Exporting Indirect exports Direct exports o Overseas Manufacture Considerations Firm’s Marketing Firm’s size Mode availability Mode quality Personnel Requirements Marketing feedback Learning Curve Risks Control Needs Expectation of volume & timescale of sales e.g. setting up a factory abroad inappropriate if sales expected to be short term or low volume. Small firm wouldn’t have resources to set up overseas facility Some countries restrict imports but encourage inward investment Practicality. Does the product need specialist technical installation or maintenance? If so cannot just be exported. Is suitable staff available abroad? If not exporting may be only option Would having your own sales staff/distribution channels on the ground give you necessary feedback from the market If you company plans heavy future expansion abroad might need to gain experience now i.e. not use indirect exporting. Political risk. Indirect export is safer option than manufacture for certain countries. Production by an overseas sub = full control. Indirect exporting = virtually no control. Advantage of Exporting Concentrate production in a single location (economies of scale & consistency of quality) Gain experience by trying international marketing on a small scale Can test overseas marketing plans before risking investment in overseas operations Minimise operating, administrative and personnel requirements Indirect Exporting Firms goods sold abroad by other organisations Export houses (benefit from market knowledge & relieved of risk around financing the export transaction & the documentation requirements. Usually little control over the market or the marketing effort) Specialist export management firms (similar to in house export department but out sourced. Usually paid on commission) Irish buying offices of foreign stores/governments (e.g. Tesco have permanent buying house in Ireland which purchases €650m Irish products annually) Complementary exporting (“piggy backing”) (a company with an established international network uses them to sell the other company’s product as well) Direct Exporting Sales to final user (usually industrial, government or mail order customer) Overseas export agent (sets up contracts between exporter & local buyer. Earns commission) Company Branch abroad Advantages Disadvantages When sales reach a certain level a branch is Higher investment, overhead and running costs more effective than an agency Own staff should be more committed Political risk Retains complete marketing control Subject to local employment law Acquire better marketing information Customer service should improve Overseas Manufacture Benefits: o Better understanding of overseas customer o Economies of scale in a large market o Production costs may be lower in some other countries o Lower storage and transportation costs o Overcomes the effects of tariff & non-tariff barriers o Manufacture in the country may help win order from public sector Options o Contract Manufacture Advantages Disadvantages No need to invest in plant Not easy to identify suitable producer Lower risk from currency fluctuations Need to train contractee producer’s staff Risk of asset expropriation minimised May eventually become a competitor Control of marketing is retained Quality control problems can arise Lower transport costs (& sometimes production costs) o Joint Ventures Some governments discourage/prohibit foreign firms setting up independent operations. Instead encourage joint ventures with indigenous companies. JV with local firm provides local knowledge quickly o Wholly owned Overseas Production Either by acquisition or by creating new capacity Advantages Disadvantages Does not have to share its profits Need for a substantial investment Full decision making authority Difficult to obtain suitable managers None of the communication problems of JVs, Some governments oppose/prohibit 100% licence agreements etc. ownership by a foreign company Able to operate integrated international Forgoes benefits of a local partners knowledge, systems distribution networks etc. Gains more experience in the overseas market Financial Implications of Marketing Marketing Return on Investment (M-ROI) – difficult to quantify brand awareness; results of marketing might not be seen for some time etc. Attempts are being made to evaluate return. E.g. Brewery might view daily statistics of their volume shipments versus the actual size of the market Marketing costs can be viewed like normal costs: o Fixed: Marketing dept salaries, long term sponsorship etc. o Stepped – cost of direct sales staff, extended opening hours, limited free gift with purchase o Variable – reduced price sales promotion, sales force commission, advertising campaign Online Marketing 4 types of online markets o Business to consumer (B2C) Largest section (buying airline tickets online, Tesco shopping etc) Important difference. Traditionally marketer targets a specific group of consumers. Online the consumer generally initiates and controls contact. o Business to business (B2B) o Consumer to consumer (C2C) E.g. eBay C2C areas (e.g. blogs, Facebook, Youtube) can offer highly targeted audiences & huge market penetration. Beginning to be targeted for advertising. o Consumer to business (C2B) Consumer can communicate with the provider. Possibility to bid for certain products & services. “Click Only” o Online only business e.g. Amazon (books). “Click and Mortar” o Traditional retail stores with an added online presence (e.g. Tesco) Setting up a presence online. Any combination of the below 4: o Creating a website “corporate website” – designed to provide positive information about the company. Not designed to sell the product directly e.g. Big 4 websites. “marketing website” – designed to allow the customer buy online (e.g. Tesco) or move the customer closer to a final purchase through detailed product specifications and price info (e.g. Volvo) o Creating web communities Blogs or other forums are a medium to target potential customers with specific interests. These communities tend to have a high sense of belonging & company can develop a strong position from this. o Placing advertisements or promotions online Banner ads Interstitials – ads that display between screen changes on a website Pop-up ads – pop up in front of the screen being used e.g. gambling site 888.com Rich media ads – incorporate animation, video or interactivity Search related/contextual ads on search engines – e.g. Google get paid for the links from the search engine to the advertisers website o Using email Encourage customers to interact with the marketer Ideal for creating and using mailing list Risk as customers dislike ‘spam’ mail Ethics of Online Marketing/Reputational Risks Invasion of privacy and time wasting with unsolicited emails & pop-ups Internet fraud – ‘phishing’ or seeking to gain personal details e.g. AIB Online security breaches – credit card details could be lost e.g. Sony Inappropriate access – underage access to adult sites or auctions Marketing Mix and Marketing Plan Marketing Mix (5 P’s) o The set of controllable variables that the firm uses to influence the target market o Product Design (size, shape) Features Quality and reliability After-sales service Packaging Protect the contents Ease of distribution Attract buyers User convenience Meet government regulations o Price Pricing strategies Value based pricing – based on customers perception of value not on the producers cost Cost based pricing – based of cost of production + profit margin Value added pricing – aim to add value to maintain pricing power and avoid price competition Good value pricing – get the right combination of price & standard – e.g. less expensive versions of established brand products Influenced By: Economic influences Competitors prices Quality connotations (price too cheap, end up viewed as poor quality) Payment terms Stage of product life cycle o Place Channel: Supermarkets, wholesalers, online, to the customer’s door etc. Channel management is vital: Advantages of direct distribution Advantages of using intermediaries Need to demonstrate a technical product (esp A wide geographical market area makes the in the sale of industrial goods) costs of direct selling high Retailers will try & sell all products they have Financial resources can be more profitably & won’t favour your products employed elsewhere Intermediary profit margins affect final sale Lack of retailing know-how and expertise price to consumer If small market direct selling may be cheaper Cheaper Maintains good relationship with end Often no other way of reaching consumer customers & obtains feedback Logistics/speed of delivery: how fast does it get to the place o Promotion Aim is to: 1. Arouse Attention 2. Generate Interest 3. Inspire Desire 4. Initiate Action (i.e. get them to buy) Advertising, sales promotions, direct selling by sales personnel, PR, online marketing etc. A mix above depending on product e.g. product with a wide target audience (e.g. breakfast cereal) might be advertised on TV while a more niche product might go for a cheaper, more specific option (e.g. a popular blog or special interest magazine) “Above the line”: Advertising – seen as long term “Below the line”: Sales promotion – seen as short-term Consumer promotions – free samples, drives consumer demand Retailer promotions – extended credit, gets product into stores Sales force promotions – bonuses Industrial promotions – exhibitions and trade fairs, client events o People Appearance Professionalism Personal selling – emphasis on personal selling for specific items (e.g. railway engine) more advertising for wide product bases (e.g. toothpaste) PR – important element is publicity – unlike advertising it is not paid for directly Varies between industry – attractive to music & tourist trade Corporate Communication – Influencing the way an organisation behaves & communicating the benefits of this behaviour to the public Research suggests people believe company with good reputation & well known would not sell a poor product Sponsorship – while cost can be high, the cost per second of TV exposure can be much smaller Attitude Skills Commitment Number of Product Life Cycle o Introduction – development costs mean generally loss making at this point o Growth – products sales rise quickly as do profits. Competition will begin to increase. o Maturity - sales and profits peak. Competition can be intense and weaker players are forced from the market. o Decline – sales & profits decline. Sooner or later company withdraws product. Growth Products have marked quality & technical differences Customers increase in number Promotion Introduction No standard & frequent design changes Need to be convinced about buying. May be able to extract high price High advertising costs Competition Few or none Profit margins & Pricing High prices but losses due to high fixed costs Over capacity High production costs High labour skill content Few distribution channels More entries. Barriers important High prices and increasing margins Products Customers Manufacturing & distribution Behaviour Discretion High costs but falling as % of sale Under capacity Move to mass production & away from skilled labour Flourishing distribution channels Marketing plan – several interrelated decisions Maturity Products become more standardised Decline Products even less differentiated. Mass market Repeat buying & brand image becomes important Segmentation & extending maturity phase key Competition at its keenest Falling prices but good margins due to high sales volume Optimum capacity Low labour skills Developed distribution channels Sophisticated customers understand what they are buying well Less money spent on advertising & promotion Competition gradually exits Still low price and falling volumes Over capacity as mass production still in use Dwindling distribution channels o Sales targets – set for each product & division o Total marketing budget must be set o Resources must be allocated to: Sales staff salaries Above the line expenditure (advertising) Below the line expenditure (promotion) Marketing of Services Characteristics of service o Intangibility (e.g. an audit) Counter by emphasising quality brochures & physical reports Word of mouth referrals are more effective emphasis on alumni clubs. o Inseparability e.g. created & consumed together e.g. dentist doing a filling) Counter by having staff who deliver service also have marketing skills o Variability (quality service depends on who & when provided) Counter by careful recruitment, signoff procedures to maintain standard o Perishability (cannot be stored/used later i.e. a day lost cannot be replaced later) Counter by better matching supply and demand Differential pricing – cheaper audit price during quiet summer months Reservations Part-time employees during peak demand o Ownership (no transfer of ownership) Expanded Marketing Mix for Services o Marketing mix difficult for services as extra complexity (e.g. poor service on one occasion, difficulty in quality testing service before going to customer etc.) o Extra 3 P’s Processes o E.g. queuing, information, capacity levels, speed/timing, accessibility etc. Physical Evidence o Environment (furnishings, layout, ambience etc.) o Facilities (vans, equipment, uniforms etc.) o Tangible Evidence (labels, tickets, logos, packaging) People o Selection, induction, training, remuneration, incentivisation of people who have direct contact with customers o Effects customer perception of the value & quality they have received