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Business Administration 2B Table of Content 1. Welcome and Introduction 2. PART A: Managing the exchange process The marketing Environment Consumer Behaviour Market segmentation, targeting, positioning Marketing information and research Table of Content 3. Part B: The marketing mix Product Pricing Promotion Place New product development 4. Assignment and Exams 5. Conclusion PART A Managing The Exchange Process 1. WHAT IS MARKETING? 2. EVOLUTION OF MARKETING 3. THE MARKETING CONCEPT 4. WHAT MARKETERS DO 1. Managing the exchange process - What is Marketing “Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.” This definition speaks about “exchanging products and value with others”, which leads us to understanding the exchange process. The following conditions must exist for a marketing exchange to take place: Two or more people or organisations must be involved, and each must have needs or wants to be satisfied. If you are totally self-sufficient, there is no need for an exchange. The parties involved must do so voluntarily. Each party must have something of value to offer in the exchange, and each must believe that it will benefit from the exchange. The parties must communicate with each other. The communication can take many forms and may even be through a third party, but without awareness and information there can be no exchange. 4. What Marketers Do Marketing Management is responsible for handling specific aspects of the marketing function. In practice, these functions may appear in departments other than the marketing department as such, but they are still marketing functions since they directly address customer needs. These aspects are collectively known as the marketing mix. 1960 – McCarthy – 4Ps (Product, Price, Promotion, Place) 1982 – Booms and Bitner (People, Process, Physical evidence) The Marketing Environment 1. WHAT IS ENVIRONMENTAL MONITORING? 2. MACRO ENVIRONMENT 3. MICRO-ENVIRONMENT 1. What is environmental monitoring According to Etzel et.al (2006:30) environmental monitoring – also called environmental scanning – is the process of: Gathering information regarding a company’s external environment Analysing it, and Forecasting the impact of whatever trends the analysis suggests Why scan the environment? •Environmental variables are constantly changing the environment in which businesses operate •The South African environment has changed significantly over the past 20 years •New opportunities and threats are emerging daily •Management must adapt to these changes to ensure survival in a competitive environment •To do this, it is crucial to understand the composition of this environment Macro and Micro environments Macro environment Macro environmental forces affect all firms in the industry influencing the marketing opportunities and activities. The External environment can be audited using a PEST analysis. Political Factors Economic Factors Sociocultural Factors Technological Factors Micro environment The micro environment affects the organisation directly. It includes competitors, suppliers, consumers and other local stakeholders. Consumer Behaviour 1. WHAT IS CONSUMER BEHAVIOUR? 2. UNDERSTANDING CONSUMER BEHAVIOUR 3. THE STIMULUS RESPONSE MODEL 4. CONSUMER DECISION MAKING 5. THE FIVE STAGE MODEL OF THE CONSUMER BUYING PROCESS What is Consumer Behaviour and understanding consumer behaviour Consumer behaviour studies all the activities that influence people to behave in particular ways when obtaining, consuming and disposing of products and services. Understanding the way people think, what motivates them, their decision-making processes, and post-purchase behaviour are key factors in ensuring successful marketing. The marketers task is to understand what happens in the buyers consciousness between the arrival of an outside stimuli and the buyers purchase decisions. They must answer 2 important questions: • How do the buyers characteristics – cultural, social, personal and Psychological – affect buying behaviour? • How does the buyer make purchasing decisions? Market segmentation, targeting, positioning 1. WHAT IS MARKET SEGMENTATION? 2. WHAT IS TARGETING? 3. WHAT IS POSITIONING? What is market segmentation? The purpose of segmenting the market is to ensure that a company’s limited resources are directed at those groups of people or organisations likely to yield the best returns. Segmentation operates at four levels: • Mass marketing: This is based on the premise that one product fits all. Example: Coca Cola’s one drink “Coke” for everybody. The purpose behind this is to mass- produce large volumes at low cost. • Segmented markets: A company seeks to identify substantial groups of individuals with similar needs, and aims to satisfy those needs. • Niche Marketing: The focus is on small sub-groups within larger segments. Niche products command a premium price. Example: BMW’s 7 series targets a narrowly defined exclusive audience. • Micro-marketing: This is customizing and tailoring products to suit the individual needs of its customers. The advent of technology has made micro-marketing on a mass scale possible. Market Targeting, and positioning According to Blythe (2006:200) Targeting is a process of choosing a segment or segments, deciding on a tactical approach to marketing the products to that segment, and developing the tactics into practical actions. Positioning refers to distinguishing the firm’s offering relative to the competition, so that it occupies a distinctive position in the mind of the consumer. There are generally eight generic factors, which are used in positioning products: Top of the range - Service - Value for money - Reliability - Attractiveness - Country of origin - Brand name - Selectivity Marketing information and research 1. WHAT IS MARKETING RESEARCH? 2. TYPES OF MARKETING RESEARCH 3. THE MARKETING RESEARCH PROCESS 4. TYPES OF DATA 5. ETHICS IN MARKETING What is Marketing research? Etzel et al (2005:175) define marketing research as the “development, interpretation, and communication of decision-oriented information to be used in all phases of the marketing process. According to Kotler and Armstrong (2006:105) marketing research is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organisation. All business decisions involve an element of risk. The purpose of marketing research is to minimize the risk. Types of marketing research Marketing research can be divided into six broad groupings: • • • • • • Customer research Advertising research Product research Distribution research Sales research Marketing environment The marketing research process Define the Problem, the Decision Alternatives, and the Research Objectives Develop the Research Plan Collect the Information Analyse the Information Present the Findings Make the Decision Types of Data Primary Data: Data collected from an original source for the specific purpose on hand (Focus groups, surveys) Secondary Data: This refers to data that already exists somewhere, having been collected for another purpose. Examples of secondary data include the company’s internal database, online databases, external information sources such as commercial data services and government sources. Primary and secondary data could be further classified as either being qualitative or quantitative. Quantitative Data: Data which can be expressed numerically. Effective for sales forecasts Qualitative Data: Data which cannot be expressed in numbers. This type of research is effective for finding out why people behave in ways they do. Ethics in Marketing The following are some of the ethical issues arising in marketing research: Intrusion of privacy Misuse of research findings Competitive information gathering Sugging (selling under the guise of marketing research) PART B The Marketing Mix 1. 2. 3. 4. Product Pricing Promotion Place 5. People 6. Processes 7. Physical evidence The Marketing Mix - Product A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. Products include physical objects, services, experiences, events, persons, places, properties, organisations, information and ideas. The Marketing Mix - Product Product managers need to think about their merchandise range on three levels: Core products: The core products stand at the centre of the total product. In Ritz- Carlton Hotels know that they offer their guests more than simply rooms for rent – they provide “memorable travel experiences”. Actual Product: Actual products may have as many as five characteristics: A quality level – Features – Design - A brand name - Packaging Augmented Products: The augmented product, offers additional customer services and benefits. These may include the warranty on parts and workmanship, instructions on how to use technical products, quick repair services when required, toll free numbers for assistance etc. The Marketing Mix – Product - BRANDS A brand is a name, term, sign, symbol, or design, or a combination of these intended to identify the goods or service of one seller or group of sellers and to differentiate them from those of competitors. Brand Strategies - major brand strategy decisions involve brand positioning, brand name selection, brand sponsorship, and brand development. The Marketing Mix – The Product life cycle The Marketing Mix - Price WHAT IS PRICE? It is the amount of money a person is willing to pay for a product or service taking into account its perceived value. Both internal and external factors affect pricing decisions: • Internal factors eg. Marketing objectives, marketing mix strategy, costs and organizational considerations • External factors include the nature of the market and demand, competition, and other environmental elements The Marketing Mix – Pricing Approaches Pricing approaches can be divided into cost-based pricing, value based pricing and competition based pricing. Cost based pricing: Cost-Plus pricing: This implies adding a standard mark-up to the cost of the product. For example it cost a manufacturer R50 to manufacture a toaster. He decides to add 20% as a profit mark-up on cost. He will then charge the customer R60 (R50 + R10) for the toaster. Target profit pricing: Based on break-even pricing, which is, setting price to cover costs (break even point) of making and marketing a product; or setting price to make a target profit. Value-based Pricing: This is based on setting prices on buyers’ perceptions of value rather than on seller’s cost. Value pricing: Offering just the right combination of quality and good service at a fair price Value added marketing: Here value is built at each stage of the marketing offer. Most companies attach value-added services to differentiate their offers and thus support higher margins. Competition based pricing: Involves setting prices based on the prices that competitors charge for similar products. The Marketing Mix – Promotion Promotion serves to inform, persuade, and remind the market of a product and/or the organisation selling it in the hope of influencing the recipients’ feelings, beliefs or behaviour. Marketers must choose the specific blend of advertising, sales promotion, public relations, personal selling, and direct-marketing tools to pursue the company’s marketing objectives. The Marketing Mix – Place Place is the point at which an organisation offers its product or service to its customers. In order for a company to sell its product to its target market, various channels, sometimes referred to as distribution channels, middlemen, or even intermediaries, have to be used. The Marketing Mix – Place New Product development 1. WHAT IS A NEW PRODUCT? 2. NEW PRODUCT DEVELOPMENT PROCESS 3. SOURCES OF IDEAS 4. CRITERIA FOR ADOPTING NEW PRODUCTS 5. ORGANISING FOR INNOVATION IN NEW PRODUCT DEVELOPMENT 6. ADOPTION AND DIFFUSION OF INNOVATION 7. NEW PRODUCT PRICING STRATEGIES New Product development Process Organising for innovation in new product development There are six broad types of innovation strategy: Offensive: Firms take pride in being the first to enter the market and capture a substantial portion of the market before competitors. Defensive: This involves producing slightly improved copies of leaders’ products. Only innovates in response to competition. Imitative: Simply produces copies of other firms’ products with few (if any) adaptations. Dependent: Performed in response to customer-specified innovations. Traditional: Not innovative at all – merely resurrects old-fashioned designs or produces products which have been around for many years. Opportunist: This company produces and markets its inventions. These inventions generally fail, mainly because they tend to be technically driven rather than marketdriven. Adoption and diffusion of innovation Everett M. Rogers (1962) as cited in Blythe (2006:432) classified consumers as follows: Innovators : Those who like to be first to own the latest products. Early adopters: Those who are open to new ideas, but like to wait a while after the initial launch. Early majority: Those who buy once the product is thoroughly tried and tested. Late majority: Those who are suspicious of new things, and wait until others already have one. Laggards : Those who only adopt new products when it becomes absolutely necessary to do so. New Product Pricing Strategies Skimming – Initially set a high price, then “skim” off layer by layer Penetration pricing – low initial price to gain a large market share Product line pricing – when sales of one product is directly linked to another – set one price low and other higher in order to even out profits Psychological pricing – High prices to indicate a quality product – set prices at 5.99 or 5.95 as opposed to 6 Promotional pricing – Pricing below cost to capture high short term sales Assignment and Exam 1. Assignments - Tutorial Letter 2. Case studies / Past Exam Papers 3. Closure THANK YOU