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Business Studies
Preliminary Course
Topic 2:
Key Business Functions
Section 2.4:
Marketing
Section Overview:
2.4.1
The role of marketing
2.4.2
Identification of the target market
2.4.3
Overview of the marketing mix — product, price, promotion, place
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Section 2.4
Marketing
A simple definition of MARKETING is that it is the process of satisfying consumers’ wants
and needs at a profit. A more formal definition is: ‘Marketing is a total system of
business activities designed to plan, price, promote and distribute want-satisfying
products and services to markets in order to achieve the objectives of the business’.
2.4.1 The Role of Marketing
The key role of marketing is to identify consumer demand and communicate to customers
how the products or services of the business can satisfy this demand. Marketing is the
process that involves identifying consumer wants and needs, establishing how the business
can satisfy those wants and needs, closing a sale, and building a relationship.
Marketing and selling should not be confused. Selling simply involves persuading
consumers to buy goods and services that a business has produced. The concept of
marketing goes much further. Marketing embraces identifying consumer expectations,
formulating the best plans and strategies to fulfill these expectations and delivering products
to satisfy those wants.
While operations will actually order the raw materials and make the products, marketing will
decide what sort of goods and services a business will produce, and the range of colours,
styles and sizes that will be available. Marketing will also decide how much the goods and
services will cost and where they will be available.
2.4.2 Identification of the Target Market
A TARGET MARKET is that part of a market on which the business will focus its
marketing activities. In trying to select its target market, a business has a choice of two
general approaches:
1)
To look at the market as a single unit, a mass ‘aggregate’ (combined) market.
This would be the strategy of market aggregation.
2)
To look at the market as being made up of smaller segments. This is a strategy
of MARKET SEGMENTATION.
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Marketing
The total market for a product is often too wide and complex to be treated as an individual
unit, and hence, the second option of market segmentation is the approach that is most
commonly used. There are several easily identifiable factors that allow us to segment the
market. These factors are considered below.
A)
Demographic Factors
Demographic factors consider characteristics of the population such as age, sex,
education, religion, job and level of income.
B)
Geographical Factors
Geographical factors consider the needs of the consumer in a particular location.
For example: a resident of far North Queensland may have a greater need for
sunscreen and light weight cotton clothing than a resident of Tasmania.
C)
Psychographic Factors
Psychographic factors are concerned with lifestyle characteristics, including the
personality types of consumers and their perceived social class. These factors are
often difficult to measure accurately.
D)
Behavioural Factors
Behavioural factors are concerned with the motivation behind a consumer’s decision
to buy a particular product. For Example: They may perceive that they are receiving
value for money, or a superior quality good.
2.4.3 Overview of the Marketing Mix — Product, Price, Promotion,
Place
The MARKETING MIX refers to the combination of the marketing tactics of product,
price, promotion and place. These four elements are commonly referred to as the 4 P’s of
marketing. A marketing mix must be designed to satisfy the wants of customers and achieve
the marketing objectives of the business.
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Section 2.4
A)
Marketing
Product
A product refers to a good, service or idea which is going to be exchanged in the
market. A product is characterized by a set of tangible and intangible benefits or
attributes which are aimed at satisfying the customer’s demands and needs.



TANGIBLE BENEFITS are physical attributes such as size, colour, shape
and model.
INTANGIBLE BENEFITS relate to non-physical attributes such as
prestige of the label or brand name, and the reputation of the company.
The combination of all these benefits combine to produce what is known as
a TOTAL PRODUCT CONCEPT.
The picture below (Figure 2.4.1) provides an example of both the tangible and
intangible features of a sports car.
Figure 2.4.1
People buy products for the benefits they receive.
As part of this marketing element, there are other additional factors complementing or
helping to create a total product. These are branding, positioning and packaging.
i)
Branding is a symbol, name, term, design, or any combination of these that
identifies the product and distinguishes it from its competitors.
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Marketing
For Example:
Nike
ii)
Positioning is about creating a certain perception or image of the good or
service in the eyes of the consumer.
For Example:
iii)
Streets Magnum Ice Creams are considered to be a superior
type of ice-block. They are promoted as an indulgence and as
one of lifes little luxuries. They have been priced accordingly.
Packaging is an activity concerned with designing and producing a wrapper or
container for the product. Packaging plays an important part in creating an
image for the product in the marketplace and helps create a difference between
the product and the product’s competitors.
For Example:
The different beers have been packaged in such a way that
many have become very easy to identify at a glance. i.e. a
Crown lager as compared with a Hahn Premium.
Crown Lager
B)
McDonald’s
Hahn Premium
Price
The price of a product is one of the most important factors in a customer’s decision
to buy a product. Consumers usually choose from a number of competing products
which offer similar benefits. Price is often the difference that will push a customer
to buy one product over another.
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Section 2.4
Marketing
Businesses have a number of pricing strategies that they can use. They include:
i)
Penetration Pricing
This is where the business sets the price of the product below the price of
competitors, making its product more attractive.
ii)
Market Skimming Pricing
This is where a new product is priced relatively high in order to achieve
maximum returns before the entry of competitors.
For Example: Hyper-Colour T-Shirts
iii)
Meet-the-Competition Pricing
As the name suggests, this is where the prices are set at around the same level
as its competitors. This strategy often results in ‘head-to-head’ battles with
competitors and forces them to utilize other methods to attract customers.
iv)
Psychological Pricing
This is where businesses price their goods at a level such as $19.95 rather than
$20.00. The rationale for doing this is to create an impression in the
consumers mind that the product is cheap.
The role of the marketing department is to select the pricing strategy that will best
help achieve the objectives of the marketing plan. The price chosen must make the
product accessible to the customers in the target market. The price should also
cover the business expenses and include an appropriate profit margin.
C)
Promotion
Any business wanting to sell a good or service has to bring it to the attention of its
target market and try to make sure that the consumers recognise and want it.
Effective communication with the target market is essential for the success of any
product and business. Promotion is designed to inform the marketplace about who
you are, how good your product is and where they can buy it.
Essentially, promotion is about changing the buying behaviour of the consumer. In
order to capture the hearts, minds and dollars of the consumer, businesses have a
variety of promotional methods available to them. These include:
i)
Personal Selling
Is where the consumer is directly approached by the sales-person. The aim is
to persuade the customer to buy the product. Therefore, the key element in
using this method is the effectiveness of the salesperson in selling the product.
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Section 2.4
Marketing
Matters such as explaining the benefits, educating the customer and responding
to questions about the product are important in promoting the sale of the
product. Cars are sold in this manner.
ii)
Advertising
Is any paid, non-personal presentation or message which is communicated to
the consumer through the use of the mass media. It is probably the most
effective way of communicating with the largest number of people in a variety
of geographical areas. The medium used to communicate to the consumer can
be one, or a combination, of the following: magazines, radio, television,
newspapers, billboards, brochures, the Internet.
iii)
Sales Promotion
Is the practice of providing inducements or incentives to customers to
purchase the organisation’s goods. Sales promotion is usually tied to an
advertising campaign and is specifically aimed at encouraging the purchase of
and brand loyalty to a product. Promotional activities include contests,
coupons, free samples, point-of-purchase displays, and exhibitions.
iv)
Publicity
Is non-personal promotion that is not paid for by the business. Essentially, it
is free. Good examples of publicity are mentions of products in magazines and
newspapers.
As with all the other elements of the marketing mix, the promotional mix will
be trying to achieve the objectives of the marketing plan in the most effective
manner, and the marketing plan will include a combination of these
promotional tools. Depending on the amount of money available for
promotion, most businesses will use some mix of the four types discussed
above to communicate with their customers.
D)
Place
Place really refers to the methods and channels that can be used to get the product to
the marketplace – how it is distributed. This involves things such as transportation
and storage of the product, as well as what type of stores will sell the product.
DISTRIBUTION needs to be discussed in two separate ways:
i) How the product is going to be made available for the consumer to purchase.
A marketing distribution channel is a business, or group of businesses, involved
in moving goods and services from the manufacturer to the point of final use.
The most common distribution channel is manufacturer to retailer to consumer.
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Marketing
Wholesalers, agents and retailers are called intermediaries because they operate
between the source of the product and the final user. Of course, many
manufacturers sell directly to the final consumer; however, this usually means
distribution is fairly limited.
ii) How the product is going to get to the place of sale.
The producer of the product or the business aims to physically get the product to
the place of sale or the marketplace at minimum cost. Therefore, physical
distribution involves:




Transportation of the product to the marketplace
Warehousing of the product and the costs associated with this activity
Ordering the product and the procedures for physical distribution
Inventory management, which is concerned with making decisions about when
to order, how much to purchase and the costs associated with this activity.
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Section 2.4
Marketing
DEFINITIONS:
Advertising
Promotional activities of a paid, non-personal kind which
convey a message to the consumer.
Branding
A symbol, name, term, design, or any combination of these
that identifies the product and distinguishes it from its
competitors.
Distribution
The institution or activities used to transfer the product or
service to the marketplace.
Intangible Benefits
Non-physical attributes of the product such as prestige of the
label or brand name, and the reputation of the company.
Marketing
Is a total system of business activities designed to plan, price,
promote and distribute want-satisfying products and services
to markets in order to achieve the objectives of the business.
Marketing Mix
A combination of the marketing tactics of product, position,
price, promotion and place.
Market Segmentation
Being able to divide a market into various ‘slices’ based on
criteria such as geography, demographic traits and consumer
behaviour.
Packaging
An activity concerned with designing and producing a
wrapper or container for the product.
Personal Selling
Face-to-face sales activities which are addressed directly to
the consumer.
Positioning
Creating a certain perception or image of the good or service
in the eyes of the consumer.
Sales Promotion
The practice of providing inducements or incentives to
customers to purchase the goods of a business.
Tangible Benefits
Physical attributes or characteristics of a product such as
colour, size and shape.
Target Market
That part of a market in which the business will focus its
marketing activities.
Total Product Concept
The combination of both the tangible and the intangible.
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Marketing
HOMEWORK ACTIVITIES:
Activity 1:
Answer the following questions:
i)
ii)
iii)
Activity 2:
Identify possible target markets for the following goods:
a)
b)
c)
d)
Activity 3:
What is marketing?
What is meant by the marketing concept?
Why is marketing important for a successful business?
A Ferrari sports car
A Sony playstation
VIP tickets to an outdoor Opera valued at $300
Budget accommodation
Log on to the Internet site below and answer the following questions:
(www.toyota.com.au/showroom+sales)
i)
ii)
iii)
Identify the four segments that Toyota uses to segment the total motor
vehicle market.
Select the Camry button under ‘passenger vehicles’ and list the different
models that are available.
Describe the target market for each of the different models.
Activity 4:
You have been asked to advise the owners of a pizza business on how to
increase their sales. Describe how you would use the different product
strategies to reach that objective.
Activity 5:
List the tangible and intangible characteristics of:
a)
b)
c)
d)
Coca-Cola
Adidas athletic clothing
A Mercedes Benz
A boat
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Section 2.4
Marketing
Activity 6:
Coca-Cola is one of the best recognized brand names in the world. Using
your own knowledge of how Coca-Cola is promoted, explain some of the
key features of its marketing mix.
Activity 7:
You have to select a particular pricing strategy for each of the following
products. In each, explain why you select the strategy.
a)
b)
c)
d)
A new wonder drug.
A tablet that purifies water in 1 minute.
A house paint that lasts twice as long as any competitor’s paint.
A low-calorie chocolate mud cake.
Activity 8:
You are the marketing manager of Pepsi and have to launch a brand new
flavour. Describe which promotional techniques would encourage a lot of
people to try the product quickly, and explain why.
Activity 9:
Vocabulary Exercise and Chapter Review
Marketing is a system of business activities designed to ______, _______,
promote and distribute _______, services and _______ in order to
_________ the _______ and _______ of the customers. Marketing plays a
major role in any organisation’s __________ ______. It is actually a subpart of a business plan. In order to find out what the customer needs are,
_________ and ___________ research is undertaken. On completion of
this activity, business will often _________ the market in order to focus their
marketing resources to ensure the needs of the buyers are going to be
satisfied. Each segment has a set of strategies known as the marketing mix.
This refers to _________, _______, _______ and ___________. These
represent a set of ____________.
plan, price, satisfy, wants, needs, primary, secondary, segment, goods,
ideas, business plan, place, strategies, promotion, product, price
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