Download Marketing #5

Role of Marketing
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Marketing can be designed as the system of business activities designed to plan, price,
promote and distribute a product that satisfies the specific needs of an identifiable
group of customers for a profit
A common business goal is profit maximisation, and it is the role of marketing to
translate this into reality
Modern marketing places much more emphasis on customer-oriented marketing
An organised marketing campaign is necessary to develop customer awareness and
demand as well as a solid customer base – all of which begin with the marketing plan
Marketing plan is a document listing activities aimed at achieving particular
marketing outcomes
A successful business develops a marketing plan based on careful research and design
Customer MUST be central focus of marketing plan
Interdependence with other KBFs
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Marketing concept is the primary link between marketing and other KBFs
Marketing concept is a business philosophy that states that all sections of the business
are involved in satisfying a customer’s needs and wants while achieving the business’
goals
Marketing Approaches
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Production approach:
o If we make it they will buy it
o Focuses largely on operations
o Eg T-Model Ford
Sales approach:
o Design and make product then convince consumers they want
o Characterised by high levels of advertising
o Eg 1950s/60s home appliances
Marketing approach:
o Focus on customer needs, then design and produce a product that they will
actually want/need
o Customer orientation with the aim of customer satisfaction
Types of Markets
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The production and sale of goods and services is not restricted or targeted solely at
customers
Some organisations simply buy a finished good from a manufacturer to sell to
customers eg Rebel Sport
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There is a diverse range of markets that demand goods and services, many of which
don’t sell to customers
Markets that do not involve customers include:
o Resource markets – those markets where the production and sale of raw
materials occurs eg agriculture
o Industrial markets – where goods that are used as supplies in the production
process are traded ie secondary and some tertiary businesses
o Intermediate markets – commonly referred to as wholesalers; they sell
products that have been produced by other organisations to retail businesses
Consumer markets consist of:
o Mass markets – apply to goods and services that appeal to all types of
consumers eg water, electricity, Australia Post
o Market segments – where a business chooses to focus its marketing processes
on a particular area of the market eg New Idea magazine  middle aged
women
o Niche markets – can be considered as a ‘segment of a segment’ or a very
specific market segment eg wealthy women over the age of 40 without
children
Influences on Marketing
Factors Influencing Consumer Choice
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There are four main factors that influence consumer and organisational purchasing
decisions:
o Psychological influences – personal characteristics affecting an individual’s
buying behaviour, including:
 Perception
 Lifestyle
 Attitudes
 Personality
o Sociocultural influences – forces exerted by other people and groups that
affect an individual’s buying behaviour, including:
 Social class
 Reference/peer
 Family and roles
groups
o Economic influences have an enormous impact on the buying behaviour of
businesses and customers. As the level of economic activity fluctuates , this
influences the marketing environment:
 Boom
 Contraction
o Government influences – policies directly or indirectly influence business
activity & consumer spending habits and as such will influence marketing plan
 MP
 Purchase restrictions
Consumer Laws and Ethical Marketing
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While marketers need not be legal experts, they must be aware of any and all laws
affecting their business
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In 2011 the Australian Consumer Law (part of the Competition and Consumer Act)
was introduced, replacing 17 existing national and state consumer laws
It is enforced by each of the states as if it was state law, but is also enforced by the
ACCC as a Cth law
The Competition and Consumer Act 2010 (Cth) is the most important piece of
legislation affecting marketing in Australia and has two major purposes:
o Protect consumers against undesirable practices
o Regulate certain trade practices that restrict competition
The CCA is enforced and administered by both the ACCC and each state/territory’s
consumer agency
The CCA allows the courts to impose penalties of up to $1.1 million for companies
and $220 000 for individuals for any breaches of the Act
When considering these fines in addition to consumer law suits, legal fees and
reputation damage, the cost of breaching the CCA can be seen as quite high
The ACCC also has the power to issue public warning notices of suspected illegal
activity, whereas in previous years it had to gather evidence and obtain a court
injunction while the illegal activity continued
Of all the unfair trading practices, false or misleading advertising can be the most
serious because of the influential nature of advertising
Examples of deceptive and misleading advertising under the CCA include:
o Fine print
o Before and after advertisements
o Tests and surveys
o Country of origin
o Packaging
o Special offer
The two most common deceptive and misleading advertising techniques are:
o Bait and switch
o Dishonest
Price discrimination refers to the illegal process of a business giving preference to
some retail stores by providing them with stock at a lower price than other retail
businesses, giving them an advantage over their competitors
Implied conditions or terms are unspoken and unwritten terms in a contract, and in
relation to marketing the two most important ones are:
o Merchantable quality
o Fitness for purpose
A warranty is a promise by the business to repair or replace faulty products, and all
businesses have certain obligations regarding the products they sell
Regardless of whether the product is carrying a warranty, a business must, by law,
either refund a customer’s money or offer an exchange of the product or repair the
product, should the good be recognised to have been faulty at the time of leaving the
store – ie an implied warranty
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Ethics in marketing refers to a combination of broad principles that establish
standards of behaviour and guidelines for people working across the marketing plan
They are NOT legally enforceable
Some major ethical criticisms of marketing include:
o Creation of needs – materialism
o Stereotypical gender images
o Use of sex to sell products
o Product placement
Ways in which marketers may engage in unethical advertising may include:
o Untruths due to concealed facts
o Exaggerated claims
o Vague statements
o Invasion of privacy
In Australia, the self-regulating Advertising Standards Bureau is responsible for
ensuring that acceptable standards of good taste are followed
There is a growing perception of products and services that damage people’s health as
being ‘sin’ products, and as such the government has imposed restrictions on these
products in response to changing ethical standards within the community:
o Restrictions on tobacco sponsorship
o Plain packaging cigarettes
o Alcopops tax
In recent years there has been a push to ban the marketing of junk food towards
children, in response to the child obesity epidemic
The role of the ACCC is to ensure businesses are not engaging in anti-competitive
behaviour, including:
o Price fixing
o Long-term loss leader
o False and/or misleading advertising
The ACCC attempts to regulate the level of competition within a range of industries
by aiming to promote fair and ethical behaviour by businesses towards their
competitors and allowing businesses and individuals to lodge complaints against other
businesses regarding behaviour that they think is unfair and against the CCA
Selling under the guise of a survey (called sugging) is a sales technique disguised as
market research
While sugging is not illegal, it does raise several ethical marketing issues, including
the invasion of privacy and customer deception
This also has the unfortunate side effect of making legitimate market research more
difficult as many individuals reject it as they think they are trying to be convinced into
buying the product
Marketing Process
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Planning is a central activity of any business or organisation
The marketing plan allows businesses to examine their current position within the
market, consider opportunities to strengthen that position and determine the most
effective method of implementing the required changes
The elements of a marketing plan are:
o Situational analysis
o Market research
o Establishing marketing objectives
o Identifying target market
o Developing marketing strategies
o Implementing, monitoring and controlling
Situational Analysis
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A situational analysis provides the firm with an opportunity to examine its current
position within the markets
There are two key elements to a situational analysis:
o SWOT analysis – the use of a SWOT analysis provides clear information
regarding the business’ competitiveness compared with its competitors
 Strengths/weaknesses  large degree of control
 Opportunities/threats  little control
o Product lifecycle analysis – examines the current position of the product/s that
a business produces in the marketplace (one of four distinct stages):
 Establishment
 Growth
 Maturity
 Post-maturity
 Renewal
 Decline
 Steady
Market Research
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The business should know the type of information that it requires eg customer
profiles, brand awareness etc as a result of the situational analysis
One info needs are established, the business can determine the most appropriate
market research method
Marketing data refers to the information, usually quantitative, relevant to a defined
marketing problem
Primary research is the data collected from original sources for the purpose of the
specific research problem. This data can be collected by the business itself but is very
expensive and time-consuming, which is why it is usually outsourced
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Types of primary market research include:
o Surveys - interviews, questionnaires, telemarketing
o Observation – personal and mechanical look at research and surveillance
footage
o Experimental – field tests to evaluate cause and effect (eg Burger King
removing Whopper from menu)
Secondary data is information that has already been collected by some other person or
organisation
The two types of secondary data are:
o Internal
o External
Statistical interpretation and analysis is the process of focusing on the data that
represents averages, typical patterns or deviations from typical patterns
Businesses will analyse and interpret the collected data so that management can gain a
better understanding of the impact of the data on the operations of the business, and
then determine the appropriate marketing objectives to rectify any problems
Establishing Marketing Objectives
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Businesses generally should adopt a SMART approach to setting goals and
objectives:
o Specific
o Measureable
o Achievable
o Realistic
o Time-Specific
Marketing objectives should be closely aligned with the overall business objectives
Some common marketing objectives include:
o Increasing market share
o Expanding product range
o Expanding existing markets
o Maximising customer service
Identifying Target Markets
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A primary target market is a market segment at which most of the marketing
resources are directed
A secondary target market is usually smaller and less significant in terms of the
business’ overall sales
A business identifies and selects a target market so it can direct its marketing
strategies to that group of customers, allowing them to better satisfy their wants and
needs
The three approaches to identification of target market are:
o Mass marketing
o Market segmentation
o Niche market
Developing Marketing Strategies
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Marketing involves a number of strategies designed to plan, price, promote and place
products in the market place
The marketing mix consists of:
o Product
 Quality
 Design
 Brand/name
 Warranty
 Packaging
o Price
o Promotion
o Place
Implementing, Monitoring and Controlling
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Implementation is the process of putting the marketing strategies into operation
Implementation of the marketing plan involves integrating it with all the sections of
the business, establishing lines of communication, motivating employees and making
employees familiar with the marketing objectives and strategies
Monitoring means checking and observing the actual progress of the marketing plan
The info collected during the monitoring process is used to control the plan
Controlling involves the comparison of planned performance with actual performance
and taking corrective action to make sure the objectives are achieved
When evaluating alternative marketing strategies, a business must develop a financial
forecast that details the expected costs and revenues for each strategy, as this puts the
business in the best position to decide how to allocate its marketing resources
Three KPIs used to measure the success of the marketing plan are:
o Sales analysis
o Market share analysis
o Marketing profitability analysis
Revisions to the marketing plan could include:
o Product modifications
o Price modifications
o Promotion modifications
o Place modifications
o New product development
o Product deletion
Marketing Strategies
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When devising a marketing strategy, it is important to know who to target the strategy
at
In particular, promotional and pricing strategies MUST cater to the chosen target
market
Market Segmentation
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The process of breaking down a total market into small markets based on the similar
characteristics of a customer group is known as market segmentation
The consumer market can be segmented according to four main segmentation
variables:
o Demographic – according to particular features of a population eg age, sex,
income
o Geographic
o Psychographic – according to personality, motives, opinions
o Behavioural – according to customers’ relationship with product
Differentiation and Positioning
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In relation to marketing, the four most important points of differentiation are:
o Customer service
o Environmental concerns eg McDonald’s rainforest alliance certified coffee
beans
o Convenience
o Ethical issues eg McDonald’s rainforest alliance certified coffee beans
Product positioning refers to the technique used by marketers to try to create an image
or identity for a product compared to competitors products
o Eg Ferrari v Toyota
Product Strategies
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The term product can refer to either a good or a service
All products offer both tangible and intangible benefits eg expensive restaurant:
o Tangible  food and drinks
o Intangible  prestige and pleasant atmosphere
The total product concept refers to the combination of tangible and intangible benefits
associated with a product
The three most common product strategies are:
o Positioning – the image that a particular product has in the mind of a consumer
eg Rolex watches
o Branding – any name, term, symbol, phrase, logo or design that identifies a
specific product from its competition eg McDonald’s:
 Logo  golden arches
 Brand name is globally recognised
 Phrase  I’m lovin’ it
 ‘Mc’ prefix  association
o Packaging – the physical appearance of the good and is thus the first image of
the good that the consumer will receive (apart from any advertising)
Pricing Strategies
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Price refers to the amount of money a business charges for the purchase of its
products
A brand that is well established and highly regarded may sell for a higher price, given
the quality expectations
General pricing strategies include:
o Cost plus markup – total cost + profit margin
o Price points – only selling products at a predetermined price
o Psychological pricing – eg $99.98 instead of $100
o Price & quality interaction – increase price to give image on better quality
(may or may not actually be the case)
Pricing strategies that can be used to generate fast sales include:
o Penetration pricing – introduce new products at low price to capture share of
the market
o Loss-leader – sell products at a loss with the hope of customers purchasing
other products in the store
o Product deletion – sell prices extremely low to clear excess/useless stock
Pricing strategies aimed at generating the highest returns include:
o Price skimming – high price to capture top end of market
o Demand pricing – also known as market pricing; price corresponds with level
of demand for product
o Prestige pricing – similar to price & quality interaction
Promotion Strategies
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Promotion allows a business to give its products public image and profile
Usually the first point of contact between a customer and the business
The promotional mix consists of:
o Personal selling – aims to establish a direct link between the business and
customer eg door-to-door salesmen
o Relationship marketing – involves creating high levels of customer service and
satisfaction with the aim of securing future sales eg Fly Buys
o Advertising – seeks to convey a specific message through an array of mediums
o Sales promotion – creates awareness of and interest in a particular product eg
coupons, samples
Market research allows the business to develop strategies that will attract the interest
of the product’s intended market via:
o Opinion leaders
o Word of mouth
Place/Distribution Strategies
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The process of distributing the product from where it is made to the consumer
Distribution channels – the channels by which the product is moved from the place of
manufacture to the customer
An intermediary is a business that purchases the final product and then takes on the
responsibility of selling this product to the consumer (eg retailers)
There are three main channels of distribution:
o Producer to consumer eg farmers’ markets
 Adv = producer maintains total product control
o Producer to retailer to consumer eg Woolworths produce
 Adv = producer can concentrate on manufacturing
o Producer to wholesaler to retailer to consumers eg most clothing
 Adv = producer holds less idle stock and very little responsibility for
marketing/sales
The choice of distribution channel will influence the type of customers that the
product attracts and this the business must carefully select a channel that attracts the
target market they have identified
There are three main categories of distribution channels:
o Intensive – readily available to a wide range of stores eg milk, bread
o Selective – limited number of stores/locations allowing producer to control
market eg electronics, fashion
o Exclusive – a restriction on the number of products and/or availability of the
product (eg jewellery, watches etc.)
Some physical issues with distribution include:
o Transport
o Warehousing
o Inventory
People, Processes and Physical Evidence
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Only applicable to service businesses
People element refers to the quality of the interaction between the consumer and those
people within the business who deliver the service eg friendly customer service staff
Processes refers to the actual way in which the service is delivered to the customer,
and includes such things as the quality of inputs used in the delivery of the service
Physical evidence refers to the environment in which the service will be delivered, as
well as other materials associated with the service (eg signage, brochures, business
cards)
E-Marketing
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E-marketing is the process of using the internet to perform marketing activities
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Technology not only provides a faster, more efficient way of doing business – it can
also be a very effective way of attracting new customers
The main technologies presently available for e-marketing include web pages,
podcasts, SMS and blogs
A web page is a display of info accessible of the internet and is a powerful marketing
tool
Podcasting involves the distribution of digital audio or video files over the internet
The main application of podcasting in a marketing context is for advertising products
and product reviews
Text messages can also be used to alert regular customers of any special deals on
offer and notify suppliers of the arrival of a shipment of goods
Many businesses establish external blogs, which allow for communication between
the business and its target market
The development of social networking sites has made it easier for individuals and
businesses to create and share many different types of content on the web
SMA is a form of online advertising using social media platforms such as FB,
YouTube and twitter to deliver targeted commercial messages to potential customers
SMA enables businesses to constantly build relationships with their customers
o Eg Kleenex allowed customers to use FB to send a free sample to any address
they entered
Global Marketing
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A business’ marketing plan must be modified and adapted to suit overseas markets if
it wishes to expand overseas
All businesses marketing on a global scale need to rely on market research to
understand the complexities of the global marketing environment before designing
their marketing plan
Global branding refers to the worldwide use of a name, term, symbol or logo to
identify the seller’s products eg Coca-Cola, McDonald’s
A standardised approach is a global marketing strategy that assumes the way the
product is used and the needs it satisfies are the same between nations
It is possible for a business to adopt a middle path – that is a combination between
standardised and customised approach
Global pricing is how businesses coordinate their pricing policy across different
countries
Customised pricing occurs when customers in different nations are charged different
prices for the same product
o Eg ‘Big Mac’ test
Market-customised pricing sets prices according to local marketing conditions – this
strategy allows for even more flexibility than the customised pricing strategy
Standardised pricing is the practice of changing customers the same price for the same
product anywhere in the world  very inflexible