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Marketing Strategies 15.5.2014 The extended marketing mix refers to the combination of people, processes and physical evidence with the four main elements – product, price, promotion and place. People – refers to the quality of interaction between the customer and the business that delivers the product/service. Processes – flow of activities that a business will follow in its delivery of a service. Physical evidence – refers to the environment in which the service will be delivered including materials needed to carry out the service such as signage, brochures, calling cards, letter heads, business logo and website. The 3 P’s have become increasingly significant due to the expansion of service-based businesses within our economy. These 7 P’s make up the strategies of marketing and become the core of the marketing plan. The main goal of marketing is to develop and maintain a marketing mix that precisely matches the needs and wants of customers in the target market. The marketing mix may be varied when a business wants to reach different target markets. Marketing strategies are place to meet the marketing objectives. To develop a marketing strategy a business owner must understand: Market segmentation Product/service differentiation Appropriate blend of the 4 P’s Knowledge of these aspects will ensure customer preference for and satisfaction with a product. Market segmentation – refers to the process of finding groups of customer within the total market who share a similar characteristic – allows a business to focuses its marketing strategies on the most suitable part of the market (target market). Reasons for market segmentation include: Narrows target market Means a better chance of understanding market needs and characteristics Allows business to focus on research and the 4 P’s Ultimate aim of market segmentation is to increase sales, market share and profits by better understanding and responding to the desires of different target customers. Segmentation variable is the characteristic of individuals/groups that are used by marketing managers to divide a total market into segments. Marketing Strategies Segmentation begins by dividing up the total market into sections: Type of market – households, businesses Demographics Lifestyle Behavioural Geographic Demographic segmentation: Demographic segmentation - is the process of dividing the total market according to particular features of a population, including the size of the population, age, sex, income, cultural background and family size. Geographic segmentation: Demographic segmentation - is the process of dividing the total market according to geographic locations. Psychographic segmentation: Psychographic segmentation - is the process of dividing the total market according to personality characteristics, motives, opinions, socioeconomic group and lifestyles. 5 different market segments: Young married couple, no children – furniture, lawnmower, financial adviser, health insurance Female teenager, partime worker – makeup, Dolly magazine, textbook Old single person, female, retired – ballet tickets, bus tour Younger single person, working – health insurance, lawnmower Make teenager, full time student – school textbook, Apple iPad Product/service differentiation – process of developing and promoting differences between the business’ products/services and those of its competitors. Occurs when products that are same or similar are made to appear different from and/or better than those of their competitor’s. Eg toothpastes, soap, snacks. Marketing Strategies Differentiation can mean simple changes to packaging or labeling or complex such as offering top quality service, greater convenience, more features and better value for money, environmentally friendly products. 4 important points of differentiation: Customer service – pre sales and after sales service especially with expensive items such as cars and appliances. Environment concerns – quality of life and the physical environment, pollution and “green” philosophy (environmentally friendly products). Eg The Body Shop. Convenience – todays consumers are busy so they look for ready-made products. Eg ready made meals. Social and ethical issues – consumers are becoming ethically minded and will purchase products/brands that they believe do not exploit workers, producers or the environment. o Ethical consumerism - involves buying products that are not harmful to the environment, animals and society. o Fair Trade Movement - is an alternative method of international trade that promotes environmentalism, fair wages, alleviation of global poverty and a fair price for growers. Differeination examples: Chocolate – o Packaging: colour, logo o Size portions o Type of chocolate, where it is from, Australia, Belguim, Positioning Positioning – refers to the techniqye by which marketers try to create an image/identity for a product/service compared with the image of competing products/services. Eg Prada & Guess portray an image of sophsitcation and luxury. Positioning relates to how the product/service will fit into the market in which it competes. Eg a new snack food postions itself as healthy, made of soy, no fat, low in salt compared to the range of other snack foods – potato, rice and corn chips, pretzels Products Product are goods/services that can be offered in an exchange for the purpose of satisfying a need/want. Most products are combinations of tangible and intangible – total product concept. With mass-produces products it is often on the differences in the intangible benefits that product competition is based. Eg cars. Tangible –seating, colour and shape. Intangible – quality reputation and comfort. The relationship between a business and its customers is based mainly on the product – goods Marketing Strategies and/services. Explain why marketing manager prefer to use the term “total product concept” rather than simply “product”. Marketing managers prefer to use the term “total product concept” rather than the simpler term “product” because “total product concept” is more apt (appropriate) as it reflect the intangible and tangible of the product. Branding Branding make product/service recognizable and distinguishable from its competitors: Name (BMW, Apple, Telstra) Symbol or logo (Nike swoosh, Apple’s apple, Mcdonalds, golden arches Brand names should be easy for consumers to say, recall and spell. Short names such as Omo, Mars, Kellogg’s, KFC and Ford satisfy this requirement, A brand name is that part of the brand that can be spoken. Benefits of branding Benefits for consumers Benefits for businesses Reduce their level of perceived risk of purchase, as they rely on the brand Gives business an identity Quality of products, especially when a consumer lacks the expertise to judge a product’s features Sales increase as consumers become know the product Helps identify the specific products that like otherwise they will be purchasing products that are not known Encourages loyalty and allows higher prices to be charged A brand symbol or logo is a graphic representation that identifies a business or product. It does not have to duplicate the words in the brand name. eg 3 pointed stars of Mercendes Benz. Some businesses encourage instant recognition of their brand symbol rather than their brand name. Eg “golden arches” used by Mcdonalds. In some advertisements the brand name does not appear only the brand symbol – a clever and a subtle method used to reinforce the meaning of the symbol and associate it with a brand name. A trademark signifies that the brand name or symbol is registered and the business has exclusive right of use. When a brand name becomes well recognised a business will benefit from a carry on effect when introducing new products, eg Kellogg’s – crackers, chips. This will give a business, a direct competitive advantage over its competitors. Nokia mobile phones – durable, battery life, simple, easy to use, high quality Marketing Strategies Apple computers – aesthetics, brand reputation, popular, high tech, software uniqueness LG electric products – positive impression, value, reliable, customer service Brands are generally classified according to who owns them. Different branding strategies a business can use: Manufacturer’s brands or national brands – those owned by the manufacture. Eg Sunbeam appliances, Kraft foods. These brands have high appeal with customers because they are recognised nationally, and are widely acceptable and offer reliability with constant quality. Private or house brands – those that are owned by a retailer or a wholesaler. These products are cheaper because the wholesaler/retailer can buy at lower costs. Eg Myer sells products from its own label such as Reserve, Miss Shop. Generic brands – products that have no brand name and carry only the product name and are in plain packaging. Eg IGA Black and Gold, Woolworths Home Brand and Select, Coles Farmland, Aldi Just Organic. Packaging Packaging – is the way a product/service is presented at the point of sale. It includes: Wrapping – colour, information, pictures. Protection – foam buffers, boxes. Preservation – can, sealed container, bottles. To assist sales, packaging is often as important as the product itself. Well-designed packaging will give a positive impression of the product and encourages first time customers. Packaging is critical to the success of a product because: Preserves (can, sealed container, bottles). Protects (foam buffers, boxes). Attracts the customer’s attention (colour, information, picture). Divides the product into convenient units. Assists with its display. Makes for easier transportation and storage. Labeling – is the presentation of the information on a product or its package. A label is the part of the package that contains the information. Marketers can use labels to promote other products or to encourage proper use of the products and therefore greater consumer satisfaction. Usually the label will provide information about ingredients, operating procedure, shelf life, package size or country of origin. All labels must be truthful. In Australia, there are a number of statues (laws) and government regulations specifying information that must be included in the labeling for certain products. Eg food labeling. These regulations are aimed at protecting the consumer from misleading or deceptive claims and the unsafe use of products. They also make it easier for consumers to compare products. Marketing Strategies Price Price refers to the amount of money a customer is prepared to offer in exchange for a product. Prices set too low could mean low sales unless superior benefits are offered whereas prices set too low may give customers the impression that the product is “cheap and nasty” – between these extremes is the right price for a product. In any market, businesses will attempt to gain some control over the price by differentiating their products. When this occurs the business has more leverage or control over the price. Eg clothes with a designer labels can set higher prices for their garments than clothing sold under the Big W or Target brand levels: The price offered to the buyer must: Appeal to the target market. Be approved by financial management. Cover all costs. Pricing methods: Cost-based (mark up) pricing – derived from the cost of producing or purchasing a product and then adding a mark up. Mark based pricing – setting prices according to the interaction between the levels of supply and demand. Competition-based pricing – where the price cover costs (raw materials and costs of operating the business) and is comparable to the competitor’s price. A business can select a price that is below, equal to or above that of the competition. o Below that of competitors – undercutting the competition, which is often used to break into an established market. o Equal to competitors – following the price established by a price leader (major business in an industry whose pricing decisions strongly influence the pricing decisions of competitors) is an easy option as it avoids the business undertaking market research to ascertain what consumers would actually pay. o Above competitors – favoured practice by businesses who want consumers to perceive their product as superior – appeals to the status-conscious buyer. Pricing strategies Pricing strategies change due the position of a product in the product life cycle, target market and competitors. Bundle pricing, common in telecommunication businesses, Internet providers and cable TV operators where customers are offered all kinds of packages. Businesses use pricing methods if: They want to achieve their marketing objectives. The life cycle of the product. The market for the product. Marketing Strategies The pricing strategies used by marketers will modify depending on changes within the external business environment, especially from the influence of technology. For example, the growing use of internet and the expansion of e-commerce have weakened some business’s control over prices and has caused some marketers to change their strategies. An example is the widespread use of bundle pricing (is where customers gain a ‘package’ of goods and services in addition to the tangible good they purchased) which is common with the telecommunications businesses. Price skimming Price skimming occurs when a business charges the highest possible price for the product during the introduction stage of its life cycle. Consumers will pay a high price for a product if the ownership gives them prestige or a status. Price penetration Price penetration occurs when a business charges the lowest price possible for a product/service, to achieve a large market share. This strategy also refers to the “mass-market pricing”. The objective of this strategy is to sell a large number of products during the early stages of life cycle. Loss leader A loss leader is a product sold at or below cost price. Some businesses deliberately place a product at a price, lower than the cost, so that customers become attracted to the business. The business can recover the loss of that product from other sales of the other items/services that the customer buys from that business. An example of a industry who adopts the loss leader strategy are supermarkets who have weekly promotions, and these discounted items are located next to the higher priced items. Successful pricing strategy that is often used when: A business is overstocked or a product is not selling. Business wishes to increase flow of customers or gain new customers. Wants to build a reputation of having low prices. Price points Price points (also known as price lining) is selling products only at certain predetermined prices. This strategy is used mainly by retailers, especially clothing shops. Marketing Strategies Price and quality interaction The price and quality interaction is based on prestige and premium and is designed to encourage statusconscious consumers to buy the product. High- priced and infrequently purchased items such as cars, homes and furniture display a stronger price have quality relationship than frequently purchased products such as grocery items. Price and quality interaction – normally products of superior quality are sold at higher prices. Prestige or premium pricing. This strategy where a high price is charged to give the product an aura of quality and status Buyer’s perception of price might influence pricing decisions because a cheaper product will usually be perceived as being inferior in quality. Customers link price to quality. Features of price and quality interaction are: Higher the price, the higher the quality. “You get what you pay for”. Low price is usually mass-produced items. High price is usually niche market. Price used as a status to build an image. (Refer to article) Promotion Promotion - describes the methods used by a business to inform, persuade and remind a target about its products. 1. Recall what promotion attemps to achieve. The purpose of promotion is to: Attract new customers by increasing the awareness of a particular product. Increase brand loyalty by reinforcing the image of the product. Encourage existing customers to purchase more of the product. Provide information so customers can make informed decisions. Encourage new and existing customers to purchase new products. Promotion mix Promotion mix – refers to the various promtions methods a business uses in its promotional campaign to inform and persuae. 2. Identify the four elements of the promotional mix. The four element of the promotional mix include: Marketing Strategies i. Advertising Advertising is a paid non-personal message communicated through mass medium. The purpose of advertising is to inform, persuade and remind consumers about the business. Advertsing is a tool for successful marketing. 3. Recall the main advantage of advertising. 4. Define “advertising media”. 5. Outline the 6 main types of advertising media. Advertining in the media – refers to the forms of communication used to reach an audience. o Forms of advertsing in the media include – Mass marketing - television, radio, newspapers and magazines Direct marketing catalogues - catalogues mailed to individual households Telemarketing - the use of the telephone to personally contact a customer E-marketing - the use of the internet to deliver advertising messages Social media advertising - online advertising using social media platforms such as Facebook and Twitter Billboards - large signs placed at strategic locations. 6. Identify the variables which determines the type of advertsing media a business selects. o Which type of advertising media a business selects depends on a number of variables including the: Type of product and its positioning Size of the target market and its characteristics Business’s marketing budget • cost of the advertising medium Product’s position on the product life cycle. o Example of advertising in the media – if Covergirl wants to advertise a new range of cosmetics to young female teenagers, then the business might select girl teenage magazines to advertise their products, such as Golly or Girlfriend. *7. Account for why it is important to identify the target market when designing an advertising program. It is important to identify the target market when deisgning an advertising program, as the market needs to be covered for their needs and suitablities and for the target market to respond to the advertisement, as to buy the product. Marketing Strategies ii. Personal selling and relationship marketing – involves the activities of a sales representative directed a customer in an attempt to make a sale. 8. Recall why some marketers prefer to use personal selling as a promotional strategy. For some businesses such as those offering expensive, complex or highly individual products personal selling is the main promotional strategy. These products in particular require the personal contact of a sales representative to familiarise the customer with the product. 9. Clarify why personal selling can be much more persuasive than advertsining. Peronal selling can be more persuavsive that advertising because the business can modify their message to suit the individual customer’s cirumsatnces. The individualised assistance to a customer can create a long-term relationship resulting in repeat sales. The sales consultant can provide after-sales customer service in relation to product features, installation, warranties and servicing. 10. Define “relationship marketing” Relationship marketing - is the development of long-term, cost- effective and strong relationships with individual customers. 11. What is the main aim of relationship marketing? The main aim of relationship marketing, is to create customer loyalty by meeting the needs of customers on an individual basis and creating reasons to keep customers to come back. 12. Account for the recent popularity with consumers of loyalty rewards and programs. The Fly Buys loyalty reward program operated by the Coles Group. This was followed in 2007 by the Woolworths Everyday Rewards scheme. These schemes offer ‘rewards’ to those ‘loyal’ customers who spend specified amounts or make repeat purchases. Relationship marketing can provide a business with a competitive advantage. *13. Determine the benefits to a business of this type of relationship marketing. The benefit to a business, gives a competitive advantage because not many buisnesses adopt this strategy. Marketing Strategies iii. Sales promotion – is the use of activities/materials as direct inducements to customers. Eg End Of Financial Year. 15. State the aims of sales promotion. Entice new customers. Encourage trial purchase of a new product. Increase sales to existing customers and repeat purchases. Sales promotion technqiues are used primarily to increase the effectiveness of other promotion activities especially advertsing. 16. Outline the various special promotions a business can use. • Coupons. These offer discounts of a stated amount on particular items at the time of purchase. Coupons work best for new or improved products. • Premiums. A premium is a gift that a business offers the customer in return for using the product. For example, a food producer may offer customers a cookbook as a premium. • Refunds. Part of the purchase price is given back to those customers who send in a voucher with a specific proof of purchase. In recent years, refunds have become widely used on power tools and kitchen appliances. • Samples. A sample is a free item or container of a product. For example, when you visit a supermarket, you will often find a sales representative encouraging you to taste a product such as cheese, fruit, biscuits or cake (see figure 8.24). • Point-of-purchase displays. Special signs, displays and racks are supplied and installed by the manufacturer in retail outlets. They are usually located at the end of aisles in supermarkets to gain consumer attention and make more efficient use of floor space. A premium is a gift that a business offers the customer in return for using the product. iv. Publicity and public relations – 17. Distinguish between publicity and public relations. Publicity is any free news story about a business’s products, whereas public relations (also refereed to as PR) are activities aimed at creating and maintaining favourable relations between a business and its customers. 18. “Advertising is what you pay for and publicty is what you pray for”. Explain the meaning of this statement. In realtion of publicity, is a about personeel to deign, implent and manage the publicity event of the business. 19. Summarise the four main ways in which relations can assist a business to increase its sales. Marketing Strategies • Promoting a positive image: reinforcing the favourable attitudes and perceptions consumers have regarding the business’s reputation • Effective communication of messages: using advertising, sales promotions, publicity and personal selling to convey information about the business and its products • Issues monitoring: protecting sales by providing an early warning of public trends that could affect the business’s sales. Remedial action can be taken before much harm is done to sales. • Crisis management: protecting a business’s reputation as a result of negative or unfavourable rumours and adverse publicity, which, if left unchecked, might result in a loss of sales. 20. “Public relations should be viewed as a two-way communication process”. Explain the meaning of this statement. Public relations should be viewed as a two-way communication process as this can be done by working with the media, by making speeches on special occasions or by some attention-seeking gesture such as a donation or a give-away sale that is reported by others. This means that PR is often more effective than paid advertising. Sometimes PR can even work out to be cheaper The Communication Process Marketing managers must be able to communicate clearly, efficiently and should be able to clearly express to their target markets. They can use a varity of channels. The method of communication is known as the channeld of delivering the message. 21. Account for the use of opinion leaders in the promotion of a product. Products three examples from current promotional campaigns. An opinion leader is a person who influences others. Marketing managers use opinion leaders as information outlets for new prodcuts ot endorse an existing one. Examples include: Delta Goodrem and So Good Milk. Proactive – Katy Perry. People, process and physical evidence Traditional 4 P’s appropriate for tangible products (goods) such as clothing, electronic appliance, perfume and cars. 3 traditional P’s added that apply especially to intangible products (services). Important to extend the marketing mix in the current business environment because the service sector has expanded and the traditional view was considered outdated. The extension of the marketing mix means that some of the more traditional P’s are less relevant today as services require a more people-orientated approach, processes are more sophisticated and the physical evidence has changed. The traditional P’s take a more manufacturing-based approach using traditional marketing strategies. Marketing Strategies People – quality of interaction between the customer and those within the business who deliver the service, example personal trainers in a gym. o Consumers base their perceptions and make judgment about a business based on how the employees treat them – encourage repeat sales. o All businesses should develop a culture of customer focus and put it into practice as a positive perception of a business will be great benefit. o A business where the “people” element is outstanding has high quality, attentive service, good product values that are well explained and excellent after sales service. Processes – flow of activities that a business will follow in it delivery of a service, example renewal notice for insurance before the due date, another example is when booking a flight. o Without a tangible product the processes must be highly efficient to achieve customer satisfaction. o Any business that has inefficient processes will lose customers and damage to its reputation. Physical evidence – environment in which the service will be delivered. It includes material needed to carry out the service such as signage, brochures, calling cards, letterheads, business logo and website. o Customers judge whether the business has met their expectation, example a clean restaurant and having the food delivered on time. o Important for a business to display favourable physical as to create an image of value and excellence. E-marketing With rapid changes in electronic communication and the development of the information superhighway, marketers are beginning to exploit all types of e-marketing. E-marketing – is the practice of using the Internet to perform marketing activities. Large Australia retailers have been slow to adopt e-marketing because many see it as costly to establish and don’t believe that the benefits are great enough. Further, many don’t know enough about it and find the process too difficult. Online shopping is very popular with Australian customers because they see the process as efficient and effective, and it gives them access to a much wider range of goods/services available here in Australia. it is also more convenient. Australia is the world’s 3rd largest per capita (per person) online consuming nation and consumers expect businesses to have an online presence. Risk for Australian business is that consumers seeking the convenience of online shopping will purchase from overseas retailers and completely bypass local businesses. Technology not only provides a faster, more efficient way of doing business it also be a very effective way of attracting new customers. Main technologies currently available for e-marketing include web page, podcasts, SMS, blogs, Web 2.0. The world wide web is the total of all publicly accessible websites and home pages. The use of the Internet to distribute audio/digital files is known as a podcast, while an online journal that can be accessed and added to by readers is called a blog. The transformation of the Internet into a more interactive form has led to the use of the term Web 2.0. A business can easily communicate with customers about delivery of orders by the use an SMS. Marketing Strategies Explain how each of the following could be used in e-marketing: Webpages – is a display of information accessible on the web through a web browser. Podcasts – involves the distribution of digital audio or video files over the internet. SMS – is the means by which text messages can be sent between mobile phones. Blogs – is an online journal that can be added to by readers. Web 2.0 – refers to the transformation of the world wide web into a creative and interactive space of sharing, rather than retrieving information. 1. Define the term “social media advertising” (SMA). SMA is a form of online advertising using social media platforms such as Facebook, YouTube and Twitter to deliver targeted commercial messages to potential customers. 2. State the main advantages disadvantages of SMA. Advantages: Inexpensive in comparison to traditional advertising methods Easy to use and monitor An effective method to gain exposure Disadvantages: A marketer does not have control over what online consumers write about the business’s product. Bloggers have the freedom to discuss, review, criticize and even ridicule a product or a specific business. Unlike more traditional online advertising, it is difficult for a marketer to accurately measure the reach (the number of people exposed to the message) and frequency (the average number of times someone is exposed) of SMA. 3. Outline how the SMA enables businesses to constantly build relationships with their customers. Businesses are getting customers they have reached via a social network platform to, in turn, reach out to other potential customers. Online customers are not simply being targeted for advertising; in many cases they are contributors in the creation and distribution of advertising. In this way, the SMA enables businesses to constantly build relationships with their customers. 4. Why is it important to preserve confidentiality of customer information gathered through emarketing strategies? It is important to preserve customer information as there are a number of illegal issues such as the limitation of age for users, example YouTube prohibits some material to users under 18 years old. 5. Predict the future of SMA. It is expected that SMA will expand rapidly over the next few years as new, highly interactive mobile platforms and networks increasingly gain consumer acceptance. Marketing Strategies Global marketing Within each global market a business will be faced with a marketing environment and target markets that will differ from the domestic (Australian) marketplace. The marketing mix will need to be adopted to suit the demands of the global marketplace – marketing plan must be modified and adapted to suit global markets. TNC (Trans National Corporations) – refers to business that has production facilities in two or more countries and that operate on a world-wide scale. Many TNC’s adopt a global marketing approach that involves developing marketing strategies as if the entire world were one large market – standardized approach. Other customize their marketing mix to take into account difference between cultures, religion and tastes, example McDonald’s in Asian countries have rice dishes, Italy have spaghetti dishes. Regardless of which approach a business chooses they need to rely on market research to understand the complexities of the global marketing environments before they can design their marketing mix. Before a business engages in global marketing should: Be aware of any information that enables it to make specific marketing decisions such as the price to change. Avail itself of any information regarding the countries economic, political, social and cultural features. Global branding – way a seller separates itself from the rest of the market, that translates across cultures/languages via logo. Name/term (“Just Do It” is the term for Nike) Symbol (McDonalds golden arches) 1. Define the term “global branding”. 2. State 3 main reasons why businesses use a global branding strategy. Cost effective, because one advertisement can be used in a number of locations. For example Mc adverstisement take a generic approach, with no reference to location or price. Provides a directed worldwide image. Mc standardidsed, allowance from minor differenice linked bwteen counties. A successful brand name can be linked to new products being introduced into the market. Coca cola has new product. 3. Distinguish between a standardized and customized global market strategy. Provide examples. Standardized: Definition – approach is a global marketing strategy that assumes the way the product is used and the needs it satisfies are the same the world over. Examples – electrical equipment, moble phones, soft drink, cosmetics. Coca cola’s standard is avalible using the same taste worldwide. Marketing Strategies Customized: Definition – is a global marketing strategy that assumes the way the product is used and the needs it satisfies are different between countries. Examples – PepsiCo makes local soft drinks like Shani, a blackberry and current flavoured soda, which is popular in the Middle East during Ramadan, the Moslem holy month. 4. Account for why McDonalds would use a combination of a standardized and a customized marketing strategy. McDonalds, will use a combination of standardized and customized marketing strategy as different countries have different. Because it have a reputable and popular menu, translated in United States, uses this to address local tastes, for example alcohol in European franchises. Global pricing – how businesses coordinate their pricing across different countries. Global pricing is more complex than domestic pricing as businesses must earn a profit while also meeting the local needs and dealing with: Currency fluctuations Tariffs Any price controls – local tariffs How revenue is transferred from the country to the business (payment methods). 1. Summarie the 3 global pricing methods 2. Explain which global pricing methods you condider is the most felxibel. 3. Clarify how comp in the oversears market affects global pricing.