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V
CONTENTS IN BRIEF
1
pa rt 1 M ODE R N M A R K E T I N G
CHAPTER 1
The field of marketing
2
CHAPTER 2
The marketing environment
38
CHAPTER 3
Gathering marketing information
76
113
pa rt 2 u n d e r s ta n d i n g m a r k e t s
CHAPTER 4
Market segmentation and targeting
114
CHAPTER 5
Understanding the consumer market
152
CHAPTER 6
Understanding the business market
200
The international market
231
APPENDIX A
237
pa rt 3 T H E M A R K E T I N G M I X
Product planning and development
238
CHAPTER 8
Product-management strategies
276
CHAPTER 9
Services marketing strategies
312
CHAPTER 10
Pricing strategies
346
CHAPTER 11
Distribution strategies
388
APPENDIX B
Retailing and wholesaling
417
CHAPTER 12
The promotional program
436
APPENDIX C
Marketing planning models
APPENDIX D
Measuring marketing programs
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CHAPTER 7
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Glossary
563
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index
550
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VI
CONTENTS IN FULL
About the author
xii
E-student
xvi
Preface
xiii
E-instructor
xvii
Acknowledgments
xiv
What’s new
xviii
Competency grid
xv
Text at a glance
PA RT 1
MODERN MARKETING
1
CHAPTER 1
THE FIELD OF
MARKETING
2
What is marketing?
4
The development of marketing
7
3
CHAPTER REVIEW
32
EXERCISES AND PROBLEMS
34
KEY TERMS AND CONCEPTS
35
THE CAMPAIGN TRAIL:
CLOSING CASE
36
CHAPTER 2
The marketing approach versus the sales approach
10
The marketing concept
11
Marketing in the digital era
13
Criticisms of marketing
20
The marketing plan
22
Marketing plans in practice
25
THE MARKETING
ENVIRONMENT
38
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THE CAMPAIGN TRAIL:
SPINBRUSH
Your changing world: Are you prepared?
THE CAMPAIGN TRAIL:
NATIONAL PRESCRIBING
SERVICE
39
CHAPTER REVIEW
71
The external micro-environment
EXERCISES AND PROBLEMS
72
The internal environment
KEY TERMS AND CONCEPTS
73
The elements of the marketing environment
THE CAMPAIGN TRAIL:
CLOSING CASE
74
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40
46
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The external macro-environment
65
70
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68
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VII
CHAPTER 3
THE CAMPAIGN TRAIL:
THE SUPERCAR CLUB
77
CHAPTER REVIEW 108
EXERCISES AND PROBLEMS 110
GATHERING
MARKETING
INFORMATION
76
The need for marketing information
78
Defining marketing research
80
Marketing research projects
86
105
Where to get help with marketing research
107
PA RT 2
U N D E R S TA N D I N G M A R K E T S
113
CHAPTER 4
MARKET SEGMENTATION
AND TARGETING
114
Market segmentation
116
How to segment a market effectively
119
Bases (or dimensions) for segmenting markets
121
Target-market strategies
132
Positioning
138
Forecasting market demand
144
THE CAMPAIGN TRAIL: 115
INCU LAUNCHES
OPENING CEREMONY
CHAPTER REVIEW 147
EXERCISES AND PROBLEMS 148
KEY TERMS AND CONCEPTS 149
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THE CAMPAIGN TRAIL:
CLOSING CASE 150
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THE CAMPAIGN TRAIL:
CLOSING CASE 112
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Marketing research in small businesses
KEY TERMS AND CONCEPTS 111
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THE CAMPAIGN TRAIL: 153
CELESTIAL SEASONINGS
CHAPTER REVIEW 194
EXERCISES AND PROBLEMS 197
KEY TERMS AND CONCEPTS 198
THE CAMPAIGN TRAIL:
CLOSING CASE 199
CHAPTER 6
THE CAMPAIGN TRAIL: 201
SPOS LAUNCHES ICANDY
CHAPTER REVIEW 227
EXERCISES AND PROBLEMS 229
KEY TERMS AND CONCEPTS 229
Understanding consumers
154
Population distribution and composition
154
Consumer demographics
157
Consumer income and its distribution
166
Consumer decision making
169
The buying-decision process
170
Information and purchase decisions
175
Social influences on consumer purchasing
176
Psychological influences
183
Situational influences
191
UNDERSTANDING
THE BUSINESS
MARKET
200
What is the business market?
202
The characteristics of demand in the business market
205
Influences on demand (sales) in business markets
210
The importance of relationships in business markets
222
Appendix A The international market
231
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THE CAMPAIGN TRAIL:
CLOSING CASE 230
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CHAPTER 5
UNDERSTANDING
THE CONSUMER
MARKET
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IX
THE MARKETING MIX
237
CHAPTER 7
PRODUCT
PLANNING
AND DEVELOPMENT
238
The meaning of ‘product’
240
Classifications of products
242
The importance of product innovation
252
The development of new products
252
A new-product strategy
254
New-product adoption and diffusion
260
Product life cycle
263
PRODUCT-MANAGEMENT
STRATEGIES
276
Product management
278
Managing a product range
278
Presenting products to customers
283
Branding
283
Brand strategies
288
CHAPTER REVIEW 272
EXERCISES AND PROBLEMS 273
KEY TERMS AND CONCEPTS 274
THE CAMPAIGN TRAIL:
CLOSING CASE 275
CHAPTER 8
THE CAMPAIGN TRAIL: 277
SHADY DESIGNS
CHAPTER REVIEW 308
EXERCISES AND PROBLEMS 310
KEY TERMS AND CONCEPTS 310
THE CAMPAIGN TRAIL:
CLOSING CASE 311
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THE CAMPAIGN TRAIL: 239
CARMELA CERRONE
COLLECTION
s
PA RT 3
Types of brands
290
295
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Packaging
Other product features
302
307
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Support services
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X
CHAPTER 9
THE CAMPAIGN TRAIL: 313
PAYPAL
CHAPTER REVIEW 342
EXERCISES AND PROBLEMS 343
KEY TERMS AND CONCEPTS 343
SERVICES
MARKETING
STRATEGIES
312
What are services?
314
The characteristics of services
317
Marketing strategies for services
322
The not-for-profit market
339
PRICING
STRATEGIES
346
The meaning of ‘price’
348
Stage 1: Set a pricing goal
350
Stage 2: Consider costs, demand and competitors
352
Stage 3: Set the base price
360
Stage 4: Adjust the base price
370
DISTRIBUTION
STRATEGIES
388
THE CAMPAIGN TRAIL:
CLOSING CASE 344
CHAPTER 10
THE CAMPAIGN TRAIL: 347
RESTAURANT 2060
CHAPTER REVIEW 384
EXERCISES AND PROBLEMS 385
KEY TERMS AND CONCEPTS 386
THE CAMPAIGN TRAIL:
CLOSING CASE 387
KEY TERMS AND CONCEPTS 415
THE CAMPAIGN TRAIL:
CLOSING CASE 416
393
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Designing distribution channels
Step 1: Decide on the role distribution within the mix
394
Step 2: Select the channel type
394
Step 3: Set the level of distribution intensity
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EXERCISES AND PROBLEMS 415
390
Step 4: Work with channel members
407
410
417
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Appendix B Retailing and wholesaling
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CHAPTER REVIEW 414
The role and functions of distribution
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THE CAMPAIGN TRAIL: 389
THE FRESH + FAST
COOKBOOK
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CHAPTER 11
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XI
CHAPTER 12
THE CAMPAIGN TRAIL: 437
JODIE MCGREGOR
FLOWERS
CHAPTER REVIEW 489
EXERCISES AND PROBLEMS 492
KEY TERMS AND CONCEPTS 492
436
What is promotion?
438
Promotion is communication
440
What forms of promotion should we use?
445
Choosing a push or pull strategy
448
Planning a promotional campaign
450
How much should we spend on promotion?
451
The regulation of promotion
454
Managing the promotion mix
455
Appendix C Marketing planning models
496
Appendix D Measuring marketing programs
525
Glossary
550
Index
563
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THE CAMPAIGN TRAIL:
CLOSING CASE 495
THE PROMOTIONAL
PROGRAM
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XII
ABOUT THE AUTHOR
Peter Rix has marketed a diverse range of marketleader goods and services in Australia and South-East
Asia. His marketing experience ranges from food lines
in Australia to wines and spirits in Hong Kong, and
from outdoor challenge courses to childcare services
in Australia. Peter has undertaken sales, marketing,
management and consulting roles for companies such
as CSR, Edgell-Birds Eye, Wattyl, Zurich Investment
Management, NSW Valuer General’s Department,
Windsor Farm Foods, Australian Timber Shutters
and many others. Today, he combines his writing and
teaching with business interests in the childcare, food
processing and outdoor education industries.
Peter has also taught and written extensively in the
marketing, customer relationship management and
sales fields. His involvement with Vocational Education
and Training extends over thirty years in both the public and private systems. His
aim has been to demystify marketing. ‘There are certain concepts underpinning
the practice of marketing’, he says, ‘but they are largely based on common sense
responses to human behaviour. I have always questioned overly theoretical
approaches to our discipline.’
Peter Rix has two clear goals for readers of his texts: firstly, to encourage the
customer-focused mindset that is the basis of all good marketing; secondly, to
demonstrate through repeated and varied practical examples how marketing is
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XIII
PREFACE
teachers and students to contribute their comments,
examples, cases and questions on marketing as it is
actually practised.
In pursuit of the aim of demystifying marketing, we
have also worked hard to further clarify explanations of
marketing concepts and principles included in the text.
In the workplace, young marketers are expected to be
clear and succinct in presenting their analyses of market
or competitive situations and their proposed strategies for
responding to these; they have a right to expect the same
straightforward communication from their textbook.
Perhaps the most important of all marketing adages
is ‘Do one thing well’. In this edition we have refocused
our attention on this goal. The twelve chapters each
take students through the essential learning fields of a
practical introductory marketing course. Four appendixes
then offer additional material for those who wish to
extend themselves beyond the fundamentals.
I welcome your feedback, comments and suggestions
through this forum. Visit www.mhhe.com/au/rix7e for
more information.
Peter Rix
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I regularly hear employers commenting that young
marketing graduates are often great on theory but unable
to perform marketing tasks in practice. Marketing is first
of all a business philosophy, but the fundamental idea
behind marketing has to be effectively implemented if it
is to achieve organisational goals.
Over many years McGraw-Hill and I have branded this
textbook Marketing: A Practical Approach for a very good
reason. We are determined that every explanation of a
marketing term and practice, every illustrative photograph
or diagram, every review question or activity, will genuinely
help students develop practical marketing knowledge and
skills. Yes, there are theoretical concepts in marketing that
students should be familiar with, but more importantly
they need to learn how marketing is done in the field.
With this seventh edition we have taken that
commitment several steps further. First, over fifty separate
practical demonstrations of real marketing action are
included through the Marketing on the street and
the new Marketing up close features. Second, each
chapter is topped and tailed by a marketing practitioner
outlining an actual marketing campaign. And third, The
Online Learning Centre associated with the book invites
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XV
COMPETENCY GRID
COMPETENCY
CHAPTER
BSBMKG401B Profile the market
4
BSBMKG402B Analyse consumer behaviour for specific markets
5, 6
BSBMKG408B Conduct market research
3
BSBMKG409A Design direct response offers
12
BSBMKG412A Conduct electronic marketing communications
1, 2, 12
BSBMKG413A Promote products and services
12
BSBMKG414A Undertake marketing activities
3, 4, 7–12
BSBMKG410A Test direct marketing activities
Appendix D
BSBMKG411A Analyse direct marketing databases
Appendix D
BSBMKG415A Research international markets
3, Appendix A, Global focus
BSBMKG416A Market goods and services internationally
Appendix A
BSBMKG501B Identify and evaluate marketing opportunities
2, Appendix C
BSBMKG502B Establish and adjust the marketing mix
7,8,9,10,11,12
BSBMKG506B Plan market research
3
BSBMKG507A Interpret market trends and developments
2
BSBMKG514A Implement and monitor marketing activities
7–12, Appendix D
BSBMKG515A Conduct a marketing audit
Appendix D
BSBMKG508A Plan direct marketing activities
12, Appendix D
BSBMKG509A Implement and monitor direct marketing activities
Appendix D
BSBMKG510A Plan electronic marketing communications
1, 2, 12
BSBMKG511A Analyse data from international markets
Appendix A, D, Global focus
BSBMKG512A Forecast international market and business needs
Appendix A, D, Global focus
CERT IV
Core
Electives
DIPLOMA
Core
Electives
BSBMKG513A Promote products and services to international markets
Appendix A, 12
BSBMKG516A Profile international markets
Appendix A, Global focus
BSBMKG517A Analyse consumer behaviour for specific international markets
Appendix A, Global focus
BSBMKG603B Manage the marketing process
1, Appendix C, D
BSBMKG607B Manage market research
3
BSBMKG608A Develop organisational marketing objectives
1, Appendix C
BSBMKG609A Develop a marketing plan
1, Appendix C, D, Marketing plan
worksheets
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Electives
BSBMKG605B Evaluate international marketing opportunities
Appendix A, D, Global focus
BSBMKG606B Manage international marketing programs
Appendix A, C, D, Global focus
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ADV DIP
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Please note: This grid refers to competencies within BSB07 and is subject to change. Refer to
www.mhhe.com/au/rix7e for updates.
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XVI
E-STUDENT
PowerPoint® slides for students
A set of PowerPoint® presentations summarise the key
points of each chapter. They can be downloaded as a
valuable revision aid.
Video interviews
These case studies provide a real-world insight into
marketing from the perspective of our interviewees. They
are ideally suited to enhancing practical skills by drawing
together the underlying principles of marketing.
Marketing plan worksheets
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Marketing plan worksheets are an effective tool. When
used with the textbook, they will enable students to
create useful marketing plans in a step-by-step process.
These worksheets will be available online for students to
download.
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TH E ONL INE L E A RN I N G
C ENTR E TH AT A C C O MPA N I E S
TH IS TEX T I S A N I N T E G RAT E D
O NL INE PR O D UC T T O A S S I S T
Y O U IN G ET T I N G T H E MO S T
F R O M Y OU R C O URS E
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XVII
E-INSTRUCTOR
PowerPoint® slides for instructors
Test Bank
PowerPoint® presentations summarise the key points of
each chapter. PowerPoint presentations on each Campaign
trail case study provide for in-class activities and extension
assignments. They may be downloaded and adapted to suit
individual instructor requirements or distributed to students as
lecture notes.
A bank of test questions lets instructors
build examinations and assessments
quickly and easily. The test bank is
available in a range of flexible formats; in
Microsoft Word, in EZ Test Online or formatted
for delivery via
Blackboard or WebCT.
Artwork Library
Marketing up close and Marketing on the street features from
the text are available in an online artwork library as digital
image files. Instructors thus have the flexibility to use them in
the format that best suits their needs.
Instructor Resource Manual
The instructor resource manual provides chapter summaries,
solutions to end of chapter questions and additional quality
teaching resources. It saves time for instructors and helps
provide consistency across teaching teams.
EZ Test Online
EZ Test Online is a powerful and easy to use test generator
for creating paper or digital tests. It allows easy ‘one click’
export to course management systems such as WebCT and
Blackboard, and straightforward integration with Moodle.
EZ Test Online gives instructors access to the test banks of
this text and a range of others from one point of entry and
also permits them to upload or edit their own questions. More
information is available via the Online Learning Centre.
Video interviews
Online Updates
These case studies provide a real-world insight into marketing
from the perspective of our interviewees. They are ideally
suited to enhancing practical skills by drawing together the
underlying principles of marketing.
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Every six months the Online Learning Centre will feature new
material from the author on marketing updates and brand
new case studies and photos.
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A s a l ea d in g p u b lis h e r o f e le c troni c m a t e ri a l , M cGra w - Hi l l ha s b e e n p rod ucing a v ar iety
o f o nl i n e t o o ls t o a s s is t in c o u rs e - w ork f or m a ny y e a rs . T he Pre m i um cont e n t ar eas, which
a re a c c e s s e d b y r e g is t e r in g t h e cod e a t t he f ront of thi s te x t , p rovi d e y ou with excellent
o nl i ne r e s o u r c e s .
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www. m h h e . c o m / a u/ ri x 7e
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XVIII
W H AT ’S N E W ?
This table highlights the key content changes in each chapter of the seventh edition of Marketing:
A Practical Approach. The new edition has been revised to reflect the ever-changing marketing
environment and the needs of the VET curriculum.
PART 1
MODERN MARKETING
CHAPTER 1
THE FIELD OF
MARKETING
• Establishes the fundamental marketing principle of customer focus and identifies the
role of modern marketing in the twenty-first century world of business (both large and
small), government and not-for-profit organisations.
• Introduces today’s consumer who wants to be ‘involved,’ not merely marketed to.
• Identifies new or increasingly important fields such as social media and customer
relationship management, global marketing, marketing integration and the use of
communications technologies.
CHAPTER 2
THE MARKETING
ENVIRONMENT
• Identifies the major trends impacting on organisations, including the importance of
China and other regional markets, the global financial crisis and resultant instability,
fast-changing consumer behaviours and market fragmentation, and the effect and use
of new technologies.
• Highlights the need for marketers to adapt strategies for the digital age environment,
including social network trawling, website strategies such as search engine
optimisation, and the need for customer engagement through interactive marketing.
GATHERING
MARKETING
INFORMATION
• Maintains the role of fast, accurate, relevant information as critical to informed
marketing decision making.
• Highlights new sources and channels of data gathering, especially digital sources
such as online, SMS and Bluetooth.
PART 2
UNDERSTANDING MARKETS
CHAPTER 4
MARKET
SEGMENTATION
AND TARGETING
• Identifies increasing market fragmentation in today’s marketing environment,
highlighting the need for effective segmentation.
• Clearly demonstrates how to conduct a segmentation study.
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CHAPTER 3
UNDERSTANDING
THE CONSUMER
MARKET
• Traces the characteristics and behaviour patterns of today’s new consumers as they
work through purchase decisions, highlighting the influences on consumers and the
changes these influences are bringing.
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CHAPTER 5
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• Identifies behavioural segments such as internet or mobile phone usage.
UNDERSTANDING THE
BUSINESS MARKET
• Provides a close examination of the B2B market: its attributes, motivations and
purchase behaviours.
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CHAPTER 6
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• Clearly identifies the increasingly age-fragmented consumer markets, especially in
younger and older age groups.
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• Provides extended coverage of B2B relationship marketing strategies: winning
business trust and building barriers to entry and exit.
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XIX
APPENDIX A
THE INTERNATIONAL • Provides an introduction to the strategic opportunities and requirements of the
international market. Note that practical insights and tactics for global marketing are
MARKET
included in the Global focus features throughout the text.
PART 3
THE MARKETING MIX
CHAPTER 7
PRODUCT
PLANNING AND
DEVELOPMENT
• Begins the examination of the marketing mix, highlighting the interdependence of
the elements and the requirements for effective product management.
• Examines critical issues of new product development.
• Clarifies factors affecting product adoption rates and adopter categories.
CHAPTER 8
CHAPTER 9
CHAPTER 10
PRODUCTMANAGEMENT
STRATEGIES
• Extends the management of physical products into specific strategies, such as
ranging, brands, packaging, quality and style.
SERVICE
MARKETING
STRATEGIES
• Provides a comprehensive yet concise analysis of services strategies under the
headings of the additional three Ps—people, physical evidence and process,
including servicescapes and blueprinting.
PRICING
STRATEGIES
• Deals with the practical activities of setting and adjusting prices: economics-based
aspects of pricing are condensed, including demand curves and marginal costs.
• Provides new insights into contemporary product presentation strategies.
• Provides a practical focus for pricing tactics in modern organisations, including the
new pricing models for online selling.
CHAPTER 11
DISTRIBUTION
STRATEGIES
• Presents distribution as the means of providing customer access to an
organisation’s goods or services.
RETAILING AND
WHOLESALING
• Outlines the structure of the retail and wholesale markets and the evolving
requirements of successful retailing, including catalogue and online retailing.
CHAPTER 12
THE
PROMOTIONAL
PROGRAM
• Lays out the planned, strategic approach to determining and allocating
promotional resources, now giving extended emphasis to customer retention.
APPENDIX C
MARKETING
PLANNING
MODELS
• Introduces commonly used strategic planning models, clearly demonstrating
their purpose and providing analysis and critique of their use in modern market
environments.
APPENDIX D
MEASURING
MARKETING
PROGRAMS
• Provides in-depth, formula-based financial and marketing metrics across a wide
range of market, sales and marketing mix elements.
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• Highlights new methods of achieving convenient access in today’s time-poor
marketing environment, including using online and mobile phone as access
channels for local and international customers.
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XX
T E X T AT A G L A N C E
The features described on these pages are specially designed to encourage and enhance students’
understanding of and interest in the concepts of marketing in a truly practical and involving way.
PART OPENER
The text is broken up into three main parts. Each part covers
an important element of marketing:
• Part 1 Modern marketing
• Part 2 Understanding markets
• Part 3 The marketing mix
Four appendices supplement the main chapter material:
A: The international market
B: Retail and wholesale markets
C: Strategic marketing models
D: Measuring marketing programs
The detailed appendices cater for those who wish to carry the
text though into advanced subjects or who have an interest in
these particular areas of learning.
MODE R N M A R K E T I NG
In Part 1 we will introduce the principle of modern
the process that marketers use to manage their
marketing programs, investigate trends and changes in
the marketing environment and look at how marketers
use marketing research to inform and guide their
CHAPTER 1
The field of marketing
CHAPTER 2
The marketing environment
CHAPTER 3
Gathering marketing
information
decisions.
PA RT O N E
Understanding Markets
the
CAMPAIGN
TRAIL
1
Chapter One
THE FIELD OF M ARKETING
Spinbrush
LE A R N I N G O B JE C T I VE S
Welcome to the study of marketing! You are entering the field at one of the most critical times in its
economic crisis) and changes in consumer attitudes and behaviours—are having an enormous
influence on the practice of marketing. And yet the fundamental principle of marketing, developed
Situation analysis
groups of customers better than your competitors. In this chapter you will come to appreciate those
• The toothbrush market has three primary types—manual, power (i.e. plug-in) and battery.
While the vast majority of Australian consumers currently use a manual brush, in the United
States the power and battery segments account for close to half the market.
principles and be introduced to the many ways in which marketing practice is changing.
• The Australian battery toothbrush market is dominated by two household name brands that
Spinbrush would have to compete with to win market share. In the United States, however, the
Spinbrush brand is the market leader in the battery segment.
After studying this chapter, you should be able to:
1.1 Explain what marketing is, both in a general sense and in a narrower business context.
1.2 Trace the stages of the development of marketing management.
1.3 Distinguish between the marketing and selling approaches to business development.
• Clinical research had shown that Spinbrush offered a significantly better teeth-cleaning
experience—removing up to 70 per cent more plaque in hard-to-reach places than a manual
brush. (Note: this is the core benefit or major customer need the product can satisfy.)
• Toothbrushes are sold through supermarkets and pharmacies; retail shelf space in these stores is
very crowded and difficult to obtain.
• As this was a new brand in a small market segment, the launch budget was not large.
1.4 Explain the marketing concept.
Objectives
1.5 Identify recent developments in the practice of marketing.
• Win product trial among men and women aged 24–54 who are concerned with the
appearance and health of their teeth; offer this target market an attractive opportunity to ‘trade
up’ from manual toothbrushes.
1.7 Outline the marketing management process.
• Achieve a suitable share of the battery segment of the toothbrush market.
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What marketing strategies do you feel will achieve these three critical objectives? See page 36 for
the campaign developed by Alison Goodall and the Church & Dwight team.
CHURCH & DWIGHT
• Gain 100 per cent retailer ranging; as with all convenience products, wide distribution was
essential.
1.6 Evaluate some of the common criticisms of marketing.
MARKETING ON THE STREET
MARKETING O
ON
NT
THE
H STREET
Many different types of
businesses practise marketing,
from global corporations to
local tradespeople.
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This feature takes students into the ‘down-town’ of marketing
campaigns and tactics—from displays to transit advertising,
from billboards to street signage. This feature encourages
students to observe and assess the many examples of
marketing practice they will encounter simply by being out
and about. It aims to help students appreciate the wide
variety and scale of marketing activities used by large and
small organisations.
more than fifty years ago, remains largely unchanged; that is, satisfying the needs of specific
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MARKETING ON THE STREET
▼
At the beginning of each chapter practising marketers
outline situations facing their products or brands that
require campaigns to be developed. Sufficient background
information is provided to enable students to consider how
they would respond. At the end of the chapters the actual
campaign developed by the firm is described. These features
can be used as class openers, discussion points or expanded
into individual or group assignments.
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history. Right now, three massive forces—digital technology, globalisation (including the 2008/09
As a qualified marketer with fifteen years’ experience with
health and beauty brands, Alison Goodall and her team
were well equipped to manage the new Spinbrush line
her company was looking to introduce to the Australian
consumer.
Church & Dwight Australia markets well-known brands
such as Nair, Dencorub, Pearl Drops, Curash and First
ALISON GOODALL
Response. The firm has great expertise marketing through the
grocery, discount variety and pharmacy distribution channels.
First, Alison had to consider vital background information and set several objectives.
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JENNY RIX
At the start of each chapter the Learning objectives clearly
match the competencies of the training package and are
highlighted with revision questions in the margins of all
chapters. Throughout the text, questions and activities allow
students to consider actual marketing strategies and to test
themselves against each Learning objective.
THE CAMPAIGN TRAIL
CONTENTS
marketing known as the marketing concept, outline
▼
LEARNING OBJECTIVES
Part One
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XXI
▼
?
MARKETING UP CLOSE
JENNY RIX
The campaign to find a new
name for Kraft’s Vegemite
and cheese snack product
is a good example of a firm
engaging with its customers
to build relationships.
MARKETING UP CLOSE
Much as an anatomy class allows medical students to see
the actual constituent parts of the body, so this new feature
brings students in close to consider the detail of logos and
brands, packaging and label design, pricing and promotion.
Pointers and highlighters give students specific and fast
access to critical elements in ads and packs and signs that
are the working parts of marketing.
E
EI
ETHICAL INSIGHTS
▼
ETHICAL INSIGHTS
Marketers face a constant barrage of criticisms on what might be called ethical issues.
In this feature throughout the text we’ll raise many of these questions for you to
consider. Note, they are for you to consider. Ultimately, each of us is responsible for our
own actions. It is up to you to decide what’s the right thing to do in a given situation.
Ethical insights features give students an example of ethical
issues relating to the concepts covered in the chapter.
Students are then asked to apply critical-thinking skills to
consider discussion points relating to each example.
Sex in
advertising
Advertising
to children
Sharing
information
with third
parties
Product
quality
Product
testing
Ambush
marketing
Deceptive
packaging
MB
MARKETING bytes
so should marketers be looking at how
they can deliver promotional messages
in real time to take advantage of this
trend? And if so, how? Some marketers
are using Bluetooth to reach customers
in local geographic spaces such as
shopping malls or nightclubs. A problem,
however, seems to be that although we
expect commercial messages on our TVs,
radios and newspapers, we resent getting
them on our phones. It may be that these
devices are more personal to us and we
regard promotional messages as not only
annoying but also an invasion of our
privacy.
Recruiting
competitors’
staff
Selling under
the guise of
research
MARKETING BYTES
This feature provides concise snippets of hot topics in the
emerging world of digital and interactive media. Students can
assess the marketing uses of social media such as Facebook
and Twitter, blogs, viral campaigns, SEO strategies, pay-perclick versus pay-per-result ads, and many more.
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From the Walkman to the iPod to the
iPhone and iPad, the trend over the last
decade is well known; people want access
to music, news and information wherever
they are. Many people today spend more
time looking at or listening to their mp3
or mobile (or their smart phone, which
combines the two devices plus internet
access) than they do listening to radio
or watching TV. This presents marketers
with both a problem and an opportunity.
When consumers are out and about
they are also likely to be making buying
decisions—for snack products, magazines,
and entertainment services, for example—
▼
TAKE IT WITH YOU
Exaggeration
in
advertising
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CONTINUED ❯
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These feature boxes provide practical information and tips on
overseas marketing. They show, for instance, how to tap into
the service of Austrade, how to use to FOB or FIS pricing,
how to hedge foreign exchange, and how to exchange
business cards with a Japanese counterpart.
MARKETING
STAGE
Identify and satisfy
targeted customer
wants = Success
SOCIETAL
MARKETING STAGE
Satisfy customer
wants and community
needs = Success
Stages in the evolution of
marketing as a business
approach
32
CHAPTER REVIEW
The Chapter review succinctly explains the concepts
taught in each chapter. This summary of concise, pointform ‘must know’ material is a useful tool for students
revising for exams.
l
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Definitions of marketing (p. 4)
6. Using a marketing approach (i.e. seeing business in
terms of the benefits provided or wants satisfied), an
the question ‘What business are you in?’ for each of
following organisations:
supply. In the marketing
approach, an organisation bends
its supply to fit consumer demand.
1. In a general sense, marketing
is any exchange activity
intended to satisfy human
wants. Marketing is practised by
individuals, businesses, sports
clubs, political parties, charities
and many other organisations.
The principle of marketing: the
marketing concept (p. 11)
1. The marketing concept is
a business philosophy that
Exercises and problems
These are aimed both at testing students’ understanding of
concepts and providing them with opportunities to apply the
chapter concepts to practical situations. They are used by
many teachers as in-class reviews and formative assessments.
(a) Radisson Hotels (hospitality)
key terms and concepts
KEY TERMS AND CONCEPTS
cloud computing......................................................18
customer relationship management (CRM) ..................13
customer service ......................................................16
demand ...................................................................4
exchange activity ......................................................4
four Ps (product, pricing, placement and promotion) ..... 29
globalisation...........................................................19
integrated marketing ................................................19
loyalty marketing .....................................................14
marketing concept ...................................................11
marketing controls ...................................................31
marketing management ............................................22
marketing metrics ....................................................31
marketing mix .........................................................20
marketing plan ........................................................34
marketing objectives ................................................27
marketing stage of development (orientation) ................9
mass customisation ..................................................18
mass marketing .......................................................33
needs ......................................................................4
not-for-profit (non-profit) organisations ..........................6
positioning .............................................................28
products ...................................................................4
production stage of development (orientation) ...............7
quality (and marketing) ............................................15
relationship marketing ..............................................13
sales stage of development (orientation) .......................8
services industries....................................................16
situation analysis .....................................................27
social engagement ..................................................13
societal-marketing stage of development (orientation) ...... 9
target markets .........................................................20
viral marketing ........................................................18
wants.......................................................................4
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These provide students with page-referenced access to the
important terms from the chapter.
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both approaches you have observed or encountered
illustrate your answer.
5. Describe the planning, implementation and evaluatio
steps in the management process and explain how th
three steps are connected.
▼
2. One way of explaining the importance of marketing in
our economy is to consider how we would live if there
were no marketing activities. Describe some of the ways
in which your daily activities would be affected under
such a situation.
These topic outlines are useful to study for exams.
▼
EXERCISES AND PROBLEMS
1. Marketing has been increasingly used by not-for-profit
organisations in recent years. Why do you think this is
so? Describe some of the ways in which not-for-profit
organisations that you have encountered are engaging
in marketing activities.
FIGURES
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Chapter review
Can Australian products
and brands be successful
overseas? The international
market is highly competitive
and often expensive to
access, but more than
60 000 Australian firms are
now trading internationally,
and many of them are SMEs
(small and medium-sized
enterprises).
Why have they taken the
Figures are designed to offer enhanced visual ways of
helping students understand concepts and models.
▼
SALES STAGE
Stronger sales force
and better selling
techniques =
Success
▼
FIGURE 1.1
PRODUCTION
STAGE
Well-made products at
good-value prices =
Success
GF
TAKING AUSTRALIA TO THE WORLD
GLOBAL FOCUS
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GLOBAL FOCUS
NEWSPIX
▼
XXII
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Part One
MODE R N M A R K E T I NG
In Part 1 we will introduce the principle of modern
CONTENTS
marketing known as the marketing concept, outline
CHAPTER 1
The field of marketing
the process that marketers use to manage their
CHAPTER 2
Thema rketinge nvironment
s
marketing programs, investigate trends and changes in
the marketing environment and look at how marketers
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CHAPTER 3
Gatheringm arketing
information
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use marketing research to inform and guide their
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decisions.
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2
PA RT O N E
Understanding Markets
1
Chapter One
THE FIELD OF M ARKETING
L EA RN IN G OB J EC T IV ES
Welcome to the study of marketing! You are entering the field at one of the most critical times in its
history. Right now, three massive forces—digital technology, globalisation (including the 2008/09
economic crisis) and changes in consumer attitudes and behaviours—are having an enormous
influence on the practice of marketing. And yet the fundamental principle of marketing, developed
more than fifty years ago, remains largely unchanged; that is, satisfying the needs of specific
groups of customers better than your competitors. In this chapter you will come to appreciate those
principles and be introduced to the many ways in which marketing practice is changing.
After studying this chapter, you should be able to:
1.1 Explain what marketing is, both in a general sense and in a narrower business context.
1.2 Trace the stages of the development of marketing management.
1.3 Distinguish between the marketing and selling approaches to business development.
1.4 Explain the marketing concept.
1.5 Identify recent developments in the practice of marketing.
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1.6 Evaluate some of the common criticisms of marketing.
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1.7 Outline the marketing management process.
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the
CAMPAIGN
TRAIL
JENNY RIX
Spinbrush
As a qualified marketer with fifteen years’ experience with
health and beauty brands, Alison Goodall and her team
were well equipped to manage the new Spinbrush line
her company was looking to introduce to the Australian
consumer.
Church & Dwight Australia markets well-known brands
such as Nair, Dencorub, Pearl Drops, Curash and First
ALISON GOODALL
Response. The firm has great expertise marketing through the
grocery, discount variety and pharmacy distribution channels.
First, Alison had to consider vital background information and set several objectives.
Situation analysis
• The toothbrush market has three primary types—manual, power (i.e. plug-in) and battery.
While the vast majority of Australian consumers currently use a manual brush, in the United
States the power and battery segments account for close to half the market.
• The Australian battery toothbrush market is dominated by two household name brands that
Spinbrush would have to compete with to win market share. In the United States, however, the
Spinbrush brand is the market leader in the battery segment.
• Clinical research had shown that Spinbrush offered a significantly better teeth-cleaning
experience—removing up to 70 per cent more plaque in hard-to-reach places than a manual
brush. (Note: this is the core benefit or major customer need the product can satisfy.)
• Toothbrushes are sold through supermarkets and pharmacies; retail shelf space in these stores is
very crowded and difficult to obtain.
• As this was a new brand in a small market segment, the launch budget was not large.
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Objectives
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• Win product trial among men and women aged 24–54 who are concerned with the
appearance and health of their teeth; offer this target market an attractive opportunity to ‘trade
up’ from manual toothbrushes.
CHURCH & DWIGHT
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• Gain 100 per cent retailer ranging; as with all convenience products, wide distribution was
essential.
• Achieve a suitable share of the battery segment of the toothbrush market.
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What marketing strategies do you feel will achieve these three critical objectives? See page 36 for
the campaign developed by Alison Goodall and the Church & Dwight team.
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4
PA RT ON E
MODERN MARKETING
WHAT IS MARKETING?
First let’s dispel a common myth. If you are like many people new to marketing,
you probably think of it as being advertising, promoting or selling—in other words,
persuading people to buy something. Marketers are often singled out for criticism
on this basis, even though many others—teachers, doctors, even ministers of
religion—also use persuasion. The difference seems to be that we see these other
professions as trying to persuade us to think or do something that will be in our best
interests.
But, in fact, the ethical practice of marketing can make a similar claim.
At its simplest level, marketing involves identifying one or more people or
organisations who have particular needs or wants, developing goods or services to
meet those needs or wants, and then demonstrating how these goods or services
meet those needs or wants better than other suppliers’ goods or services can. Once
you understand this fundamental aspect you will see marketing as a problemsolving activity, just as you might regard the practice of teaching or medicine.
Do some marketers try to persuade people unethically? Yes, as do some teachers,
doctors and religious leaders. However, marketing itself has an ethical and
extremely valuable role to play in our society, and the vast majority of marketing
programs reflect this.
So, advertising, promoting and selling are really some of the final steps in a
marketing process that begins much earlier and has as its basic aim the satisfaction of
wants in exchange for money.
In a general sense, then, marketing is any exchange activity intended to satisfy
human wants.
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for entertainment on a wet and cold Melbourne weekend
might give rise to a desire—a want—to attend an AFL
game, go to a movie or visit the Arts Centre.
It is the function of marketing to bring about exchanges
between an organisation and its customers. An exchange
activity takes place when something of value is offered
in return for something else of value. In this regard,
marketers talk of the demand for products. Demand
occurs when consumers or organisations are willing and
able to pay for the goods or services they want (that
is, make an exchange). A fundamental requirement of
marketing then is to understand the nature and level
of demand that might exist for a particular product.
Marketers spend a great deal of time and money on this
quest, rather than simply advertising or promoting their
products.
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ecause the terms wants and needs tend to be used
interchangeably by many marketers and non-marketers
alike, in this text we will not draw clear-cut distinctions
between them. However, it is worth noting the basis upon
which the distinction is usually made.
If, for example, I am hungry, it could be said that I
have a ‘need’ for food. The alternatives that I consider
to meet this basic need, however, will reflect my ‘wants’.
I might choose to prepare a salad, buy a take-away
hamburger or go to a restaurant for a bowl of pasta. So,
at this level, my wants might result from my sociocultural
background, personality, lifestyle, and attitudes to food
and eating.
Similarly, a need to write a business report could give
rise to the want for a basic ballpoint pen, or an expensive
and prestigious Mont Blanc fountain pen. Or, my need
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WANTS, NEEDS AND DEMAND
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THE FIELD OF MARKETING
CHAPTER ONE
5
?
MARKETING UP CLOSE
JENNY RIX
Marketing aims to satisfy
needs and wants. We need
food for survival but Aussie
kids want something more
from their breakfast cereal.
WHO IS INVOLVED IN MARKETING?
Another way of helping you to understand ‘What is marketing?’ is by looking at who
does it. Marketing is practised by individuals, businesses, governments and not-forprofit organisations. Goods and services, ideas and causes, images and even people
are all marketed. Marketing is directed at consumers, organisational buyers and others
who are interested in, or affected by, an organisation’s activities. Here is a definition
of marketing that focuses on its role in business:
Marketing is a system of business activities aimed at achieving
organisational goals by developing, pricing, distributing and promoting
products, services and ideas that will satisfy customers’ wants.
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There are several important points about this definition:
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• To be a ‘marketing organisation’, everything the firm does must be customer
oriented. Customers’ needs or wants must be identified and satisfied effectively.
‘Find an unsatisfied need and fill it’ is a useful way of thinking about
marketing.
• Marketing is more than just ideas or methods for advertising or selling; it is a
complete system for guiding and running an organisation. Marketing activities
include researching market needs, developing products, pricing and promoting
products, and making them available to customers.
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6
PA RT ON E
MODERN MARKETING
• Marketing is results oriented—a marketing program starts with an identified
want or product idea and does not end until the customers’ wants are completely
satisfied and the organisation’s own goals, such as to increase market share or
profit, are met.
• The definition implies that successful marketing helps the organisation to
achieve short- and long-term goals. For many firms these days, this means
ensuring that customers’ wants are so well satisfied that they remain loyal to the
firm’s products. Repeat business is recognised as an important key to long-term
success.
• The definition also implies that the organisation can satisfy customers’ wants
better than its competitors—if it cannot do this, it is unlikely to achieve its own
goals, particularly in the long term.
Marketing is often thought of as an activity or a function performed only by large
firms such as Toyota, Billabong, Coca-Cola or Westpac; we immediately recognise
their promotions and advertising as the work of marketers. But marketing is not
limited to large public businesses. For example:
• Not-for-profit (non-profit) organisations also engage in marketing. Their
products might be holiday places they want you to visit, social causes or ideas
they want you to support, people they want you to be aware of, or cultural
institutions or events they want you to attend. Organisations such as The
Salvation Army, the Catholic Church and Opera Australia are all engaged in
marketing, even if sometimes they might not think of their activities in this way.
MARKETING ON THE STREET
MARKETING O
ON
NT
THE
H STREET
JENNY RIX
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Many different types of
businesses practise marketing,
from global corporations to
local tradespeople.
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THE FIELD OF MARKETING
CHAPTER ONE
7
• Small businesses are often excellent marketers, although again they may not
recognise what they are doing as marketing—plumbers, clothing retailers,
personal trainers and hairdressers all rely on their ability to understand and
satisfy their customers’ wants. The reason these small operators often don’t see
their activities as marketing is that they are very close to their customers, so
identifying and satisfying wants is simply what they do to stay in business.
We can also consider the scope of marketing by considering what is marketed:
•
•
•
•
•
•
Physical goods—tractors, clothes, DVDs.
Services—banks, theatres, health insurance.
Ideas—Clean Up Australia, road safety, anti-drug-use campaigns.
People—Adam Goodes, Delta Goodrem.
Places—the Daintree rainforest, a new business estate or shopping centre.
Experiences—travel, yoga, a photography course.
So, marketing is diverse, complex and involves almost all of us!
In your own words explain what marketing is, using examples to describe the
following key terms: exchange, business activities, organisational goals, customer
wants.
1.1
REVISION QUESTION FROM
LEARNING OBJECTIVE 1.1
THE DEVELOPMENT OF MARKETING
To understand exactly what marketing is, it is helpful to learn a little of its history
as a management approach. Although marketing has been practised ever since
business and trading began, the formal principles were developed relatively recently.
Management thinking about business in Western economies, including Australia, has
evolved through several stages of development over the past century (see Figure 1.1).
Many companies, though, are still in the earlier stages (also known as orientations);
this often means that they talk about marketing but still follow business practices that
are not really true to the principles of modern marketing.
THE PRODUCTION STAGE
Organisations in the production stage were very common until around the start of the
Great Depression in the 1930s. In this first stage:
SOCIETAL
MARKETING STAGE
Satisfy customer
wants and community
needs = Success
Stages in the evolution of
marketing as a business
approach
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MARKETING
STAGE
Identify and satisfy
targeted customer
wants = Success
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SALES STAGE
Stronger sales force
and better selling
techniques =
Success
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PRODUCTION
STAGE
Well-made products at
good-value prices =
Success
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FIGURE 1.1
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• The focus was on increasing production because for many products, demand
exceeded supply—people wanted more than firms could produce, so producing
more goods meant selling more.
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8
PA RT ON E
MODERN MARKETING
MARKETING ON THE STREET
MARKETING O
ON
NT
TH
HE STREET
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• Production and engineering staff had control of the organisation; there were
sales departments, but their functions were simply to sell the company’s output
at prices set by the production and financial managers.
• Firms in this stage assumed that people would naturally look for and buy products
that were well made and reasonably priced. And for quite a few years, they were
right. So, marketing effort was not really needed.
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JENNY RIX
Marketing techniques are used
for many purposes, not only
to help sell cars or clothes or
computers.
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THE SALES STAGE
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Organisations in the sales stage were common in Australia right up until the 1970s.
In this stage:
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THE FIELD OF MARKETING
CHAPTER ONE
9
• Supply began to exceed demand because more and more firms had come into
the market. Simply having a good product was no longer a guarantee of success,
because consumers could choose between many similar products.
• As a result, the firm’s emphasis shifted from production to selling.
• Suddenly, selling skills and sales managers were given new respect and
responsibilities.
• Promotional efforts and activities were dramatically increased to help the firm
compete.
Unfortunately, it was during this period that selling acquired a bad reputation,
because it was the age of the ‘hard sell’—the unscrupulous used-car salesman or the
door-to-door encyclopaedia salesperson. Worse, even today, many organisations still
believe that to do well they have to use hard-sell methods. And, as long as there are
companies operating with a hard-sell philosophy, there will continue to be criticisms
of selling and marketing.
THE MARKETING STAGE
The marketing stage began in the 1960s. In this stage:
• A firm’s two main goals became customer orientation (understanding and
responding to customer wants) and profitable sales volume (rather than simply
making sales to build volumes).
• Companies began to adopt the idea of coordinated marketing management.
Activities that were previously not considered marketing came under the
control or influence of marketing staff, such as packaging, inventory control,
warehousing, delivery and some aspects of product planning.
• Marketing principles began to guide, or at least influence, all short-term and
long-range company planning.
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In this stage, firms’ senior management also needed to be aware of and support
marketing activities. This is not to say that marketing executives should always
hold the top positions in a company, but rather that they needed to be marketingoriented. In fact, many organisations that follow a marketing orientation make sure
that managers from other departments such as accounting and engineering are given
marketing training.
Many Australian firms are now in this stage in the evolution of marketing
management.
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THE SOCIETAL-MARKETING STAGE
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• Marketing managers see that they should act in a socially responsible manner in
order to succeed, or even survive.
• External pressures need to be resolved—consumer complaints, concerns for
environmental problems (including the depletion of natural resources) and
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Over the past twenty years we have seen the emergence of the idea that organisations
have a duty not only to their customers but also to the community as a whole. This
has led to the fourth stage in the evolution of marketing management. In the societalmarketing stage:
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10
PA RT ON E
MODERN MARKETING
political–legal forces began to influence the marketing programs of the firm. Cases
of illegal or unethical practices by firms such as packaging firms Visy and Amcor
and the cash-for-comment case involving talkback radio personalities and several
large marketing organisations are examples of how pressure has been exerted on
marketers to behave in ways that are acceptable to the community. Various recalls
of contaminated or unsafe products, community concerns about individual rights
to privacy, and the promoting of fast foods to children are all examples of the need
for engagement between a business and the society in which it operates.
• The internet has made it virtually impossible for firms to avoid being scrutinised
by their customers and the community. There are so many ways for people to
report and compare their experiences with a firm and its products: blogs, YouTube,
Twitter, Facebook, LinkedIn, Digg, StumbleUpon. On the other hand, social
engagement experts (see The campaign trail feature with on page 313) are helping
marketers to use these new methods to engage with their customer groups, showing
firms how to get and respond to customer feedback.
• One mark of an affluent society is a shift in consumption from physical goods to
services; the aim of marketing should focus more on creating and delivering a
better quality of life rather than just a material standard of living.
1.2
REVISION QUESTION FROM
LEARNING OBJECTIVE 1.2
Match each statement below with the relevant stage of marketing development.
‘A meeting has been organised
between the marketing and
production departments to discuss
customer attitudes and preferences
relating to our proposed new product.’
Marketing stage
Production stage
Sales stage
Societal-marketing stage
‘It’s a tough market out there:
customers only buy what they are
sold, and that’s marketing’s job.’
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THE MARKETING APPROACH VERSUS
THE SALES APPROACH
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‘The factory understands production
so it decides which products will be
made; marketing’s job is to get them
to the customers.’
‘I’m pleased to announce that our
new product has been awarded the
Heart Foundation endorsement for
healthy food.’
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These stages of marketing development show that there are quite important differences
in the various ways of running an organisation. Perhaps it is most critical for new
marketers to clearly understand the difference between the marketing and sales (or
selling) approaches to business management, especially as the differences might not
be apparent on the surface. Two organisations might each think of themselves as
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THE FIELD OF MARKETING
CHAPTER ONE
11
being a ‘marketing company’ and have staff with marketing titles and backgrounds.
Yet they might be quite different in their actual application of the fundamental ideas
behind marketing.
Many people, including some business managers, still do not understand the
difference between the sales and marketing approaches as methods of business
activity. Under the sales approach, a company first makes a product and then uses
various selling methods to persuade customers to buy it. In effect, the company is
trying to bend consumer demand to fit the company’s supply. Just the opposite occurs
under the marketing approach—the company finds out what the customer wants and
then tries to develop a product that will satisfy that want and still yield a profit. Now
the company is bending its supply to the will of consumer demand.
Of course, it is not quite as simple as this. A supermarket chain like Aldi or Costco,
for example, might say to a customer who wants her shopping carried to her car: ‘Sorry,
we are focused on satisfying customers’ wants for the lowest possible prices, so we can’t
satisfy your need for additional service’. Remember, marketing is not about trying to
satisfy the wants of all customers, nor even all wants of a targeted group of customers.
For the paired statements below, which part describes the sales stage of marketing
and which describes the marketing stage?
1. (b) Emphasis is on customers’
wants.
2. (a) Management is profit-oriented.
2. (b) Management is sales-volume
oriented.
3. (a) Company first determines
customers’ wants and then works
out how to make and deliver a
product to satisfy those wants.
3. (b) Company first makes the
product and then works out
how to sell it.
4. (a) Stress is on the needs of the
seller.
4. (b) Stress is on the wants of buyers.
5. (a) Planning is long-run oriented,
in terms of new products,
tomorrow’s markets and future
growth.
5. (b) Planning is short-run oriented,
in terms of today’s products and
markets.
1.3
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1. (a) Emphasis is on the product.
REVISION QUESTION FROM
LEARNING OBJECTIVE 1.3
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So far we have looked at definitions of marketing and traced the development or
evolution of marketing practice. Now these threads can be drawn together into a
statement of marketing principle. This is known as the marketing concept, and it is
the most fundamental idea behind all marketing practice (or should be!).
The marketing concept first requires an organisation to say: ‘The reason for our
existence is the satisfaction of our customers’ wants. Only by satisfying these wants
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THE MARKETING CONCEPT
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FIGURE 1.2
The marketing concept
in action
Whole firm
concentrates on
customers’ wants
Firm focuses on
markets where its
products can
compete profitably
Satisfied customers
and company goals
achieved
Departments
coordinate all
marketing activities
can we expect to achieve, in the long term, our own objectives for survival and profit’.
This statement might at first glance seem no big deal. However, as many organisations
have found, the principle is much easier to say than to do. So, how does a firm ‘live
up’ to the marketing concept? (See also Figure 1.2.)
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1. All company planning and operations should be customer-oriented. This means
that every department and employee—from sales reps to forklift drivers, from
chemists to accountants—should be focused on contributing to customers’ want
satisfaction. Marketing becomes then not so much a functional department but
a way of operation for the entire firm. The enterprise needs to ask itself: Are
the ingredients in our products clearly stated? Are our deliveries made when
the customer wants them? Is our invoice easy to understand? Can customers get
through to us quickly on the phone or by email?
2. All marketing activities in the firm should be coordinated. Product planning, pricing,
distribution and promotional activities should be consistent and under one
authority. Without this coordination—or if, as happens in some organisations,
the different functions are actually in conflict—it is unlikely that we will ever
truly satisfy our customers. This can happen even when the various functional
departments are actually trying to deliver their particular version of customer
satisfaction. For example, Production is trying to make a very high quality
product, Sales want to get the price down as low as possible, Marketing wants
extra features added; the result is that everyone is doing their best, but not in the
same direction. There needs to be a common understanding of which wants of
which customers we are trying to satisfy.
3. The firm operates only in markets in which it can profitably or effectively ‘compete’
with other suppliers of similar goods and services. The firm’s goal has to be profitable
sales volumes—if we cannot satisfy customers’ wants in this market and make a
profit doing so, we should get out of that market.
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In its fullest sense, the marketing concept is a philosophy of business that states
that customers’ want satisfaction is the economic and social justification for a firm’s
existence. So, all company activities should be devoted first to identifying and
understanding customers’ wants and then to satisfying those wants, while still making
a profit over the long run.
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Think about the organisation you work for or even one with which you are familiar
as a customer, such as a fast-food outlet or the college or university where you
are studying. To what extent is this organisation applying the marketing concept?
Can you suggest how it could change its practices to become more of a marketing
organisation?
CHAPTER ONE
13
1.4
REVISION QUESTION FROM
LEARNING OBJECTIVE 1.4
MARKETING IN THE DIGITAL ERA
The marketing concept is not a static principle. As the world changes, so too does the
way in which the marketing concept is being applied. Let’s look at some of the most
relevant developments that you might need to deal with.
SOCIAL ENGAGEMENT, DATABASES AND CUSTOMER
RELATIONSHIP MANAGEMENT
The terms social engagement, customer relationship management (CRM) and
relationship marketing are used to describe a variety of marketing practices in recent
times, but there are no commonly agreed definitions. In essence, however:
• They mean having two-way interaction with customers, and focusing on
continuing relationships with them, rather than merely on making sales to them.
• They are based on the principle that customers no longer want to be sold to—
they want to be involved; they want experiences, not just products. Marketers
believe also that making repeat sales to current customers is more profitable
than continually seeking new customers, because each new sale does not need to
absorb the costs of finding and winning new customers. Ongoing sales are more
likely if a customer feels genuinely engaged with the firm, or at least with the
process of obtaining the goods or services it provides.
This new approach to marketing can be thought of like this. Social engagement
with customers is the aim of many firms and CRM in its many forms provides the
technological solutions to managing the engagement between a firm and its customers.
Many organisations today use social networking websites such as Facebook, Twitter
and YouTube to develop relationships with customers. They might use online resource
software such as crazyegg.com and clicktale.com to track how customers are using their
website. And many also have CRM systems using sophisticated databases aimed at:
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There are many examples of how CRM systems are being used to carry out
relationship marketing. Event organiser Swap My Style has tens of thousands of
‘members’ who log on to check out the latest in fashion, and are given tips and offers
of sponsored products. Motoring organisations such as the NRMA and RACV have
expanded their products from roadside service to insurance, travel advice and financial
services—extending the ways in which they can serve their customers. CRM systems
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• identifying each customer’s actual or potential needs and preferences
• measuring the profitability of the firm’s relationship with each customer
• encouraging each customer to continue with mutually beneficial exchanges.
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MARKETING UP CLOSE
JENNY RIX
The campaign to find a new
name for Kraft’s Vegemite
and cheese snack product
is a good example of a firm
engaging with its customers
to build relationships.
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Loyalty marketing schemes
One popular application of relationship marketing is known as loyalty marketing.
The largest of these schemes in Australia is Fly Buys operated by Coles and National
Australia Bank. This scheme has attracted well over 500 000 members, all of whom
are given incentives to purchase from these organisations. This type of program is
known as loyalty marketing because customers are rewarded for remaining loyal to
(continuing to buy from) the organisers. You will see other examples in airlines’
frequent flyer schemes and many suppliers’ preferred customer clubs. Or, on a small
business level, your local coffee shop might be one of those businesses that operate a
simple stamped-card system to give regular customers every ‘nth’ cup free.
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are used to manage the new relationships that the organisations are trying to develop
with their customers.
The Harley-Davidson Motor Company sponsors its own division, the Harley
Owners’ Group (HOG International), which uses a CRM system to distribute news
and information of interest to its chapter (club) members, organises events and
facilitates other interaction between Harley-Davidson bike owners. So, the company
acts as a catalyst to assist the development of relationships between HOG members
and the firm, and between the members themselves. The club, and many like it, offers
valuable and varied benefits to its members, plus a feeling of ‘belonging’. In turn, the
firm can use these channels of communication to learn more about its customers’
wants, thus further enriching the information in its CRM system.
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TAKE IT WITH YOU
From the Walkman to the iPod to the
iPhone and iPad, the trend over the last
decade is well known; people want access
to music, news and information wherever
they are. Many people today spend more
time looking at or listening to their mp3
or mobile (or their smart phone, which
combines the two devices plus internet
access) than they do listening to radio
or watching TV. This presents marketers
with both a problem and an opportunity.
When consumers are out and about
they are also likely to be making buying
decisions—for snack products, magazines,
and entertainment services, for example—
CHAPTER ONE
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MB
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MARKETING bytes
so should marketers be looking at how
they can deliver promotional messages
in real time to take advantage of this
trend? And if so, how? Some marketers
are using Bluetooth to reach customers
in local geographic spaces such as
shopping malls or nightclubs. A problem,
however, seems to be that although we
expect commercial messages on our TVs,
radios and newspapers, we resent getting
them on our phones. It may be that these
devices are more personal to us and we
regard promotional messages as not only
annoying but also an invasion of our
privacy.
Two points can be made about loyalty programs:
• The number of firms using these schemes has risen dramatically in recent years,
almost to the point in some industries (e.g. the airline market) where the benefits
to the firms are questionable.
• The schemes are sometimes complex and the actual benefit to loyal customers
does not live up to the implied promise. Customers can become confused or
disappointed. But, of course, once the schemes are part of the requirements of
doing business in that market, they are difficult to avoid.
QUALITY AND MARKETING
While quality has always been important to customers, the management of quality is a
recent development, beginning in Japan after World War II. Japan’s global success of
the post-war period saw the evolution of a new management movement, often known
as total quality management (TQM), based on the aims of:
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1. reducing variability in product quality—customers should receive the same
‘experience’ each time they purchase a particular good or service
2. increasing responsiveness to changing customer needs—firms must be organised so
that they can quickly adjust their offerings to meet the inevitable changes in
preferences
3. reducing costs through less wastage or re-working—reducing the number of ‘mistakes’
can significantly reduce the total cost of supplying products.
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The ultimate objective, and the reason for the natural alignment of TQM and
marketing, is to consistently and reliably meet the expectations of the customer.
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Quality management aims to ‘build in’ the processes that lead to quality assurance,
because quality is defined by the customer. This can be contrasted with earlier
approaches that tried to ‘check’ quality after the product had been produced.
‘Building in’ quality involves:
• creating genuine partnerships between employers and employees, and especially
empowering employees to make independent decisions
• creating partnerships between suppliers and their customers, so that they work
together to improve quality, rather than each being interested only in their own
specific issues
• constantly measuring the firm’s processes—production, distribution and customer
service—and the satisfaction levels of its customers. Only by measuring can the
firm know where it needs to improve.
As discussed, TQM and marketing should go hand in hand—they both focus
ultimately on satisfying customers.
Another marketing-related movement, customer service, has developed a set of
principles and practices that attempt to bridge some of the gaps between TQM and
marketing. This movement has focused on conducting research to identify those
elements of service that are most important to customers, measuring the extent to
which the firm is satisfying customers on these specific elements, and then modifying
the firm’s services to improve customer satisfaction.
In the future, all three ‘disciplines’ will hopefully work together to create a
‘whole-of-firm’ approach to creating customer satisfaction.
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All Western societies have now well and truly moved beyond the manufacturing stage
of economic development to become services based. In Australia, services industries
such as finance and insurance, telecommunications and media, travel and tourism,
entertainment, education and training, health and well-being, and government
services now employ more than three-quarters of the workforce. They also account
for over half of all consumer expenditure.
Some services industries were slow to adopt marketing as a guiding influence for
their businesses. A major issue was how to ensure that customers received satisfaction
each time they interacted with the service provider. Unlike physical goods, which
can be standardised in the factory, services are often ‘produced’ by individual staff
members, and therefore customers’ satisfaction can vary according to the experience,
skill and even mood and attitude of the personnel who serve them.
A further complication for services firms trying to apply the marketing concept
has been measuring the profitability of particular services provided to individual
customers. Services firms have now developed complex sets of measurements, or
customer metrics, to guide their strategies. However, in some instances this has
resulted in confusion and even conflict between organisations and their customers as
services previously supplied have been altered or withdrawn. Banks closing branches
and encouraging customers to use telephone or online banking is a good example of
this trend, as is News Limited’s move to charge for access to online news, which had
previously been free.
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TREMENDOUS GROWTH IN SERVICES
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CHAPTER ONE
17
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MARKETING UP CLOSE
C O U RT E S Y O F M C D O N A L D ’ S
These ads are aimed at
communicating the quality
of McDonald’s new Grand
Angus burger.
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More recently, firms in banking, healthcare and some other industries have
combined the principles of marketing with the techniques of customer service. Many
have also adopted the CRM techniques we discussed earlier in this section.
Services marketing is discussed at relevant points throughout the text, and
especially in Chapter 9.
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During the past few years, many government departments and instrumentalities,
charities, arts companies, educational and healthcare institutions have realised they
need effective marketing programs to make up for shrinking government funding,
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MARKETING IN THE NOT-FOR-PROFIT SECTOR
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decreases in contributions from the private sector and unfavourable economic
conditions. Examples include:
• Universities and TAFE colleges have targeted full-fee-paying students, many from
overseas, to offset declining funding from governments.
• Museums and art galleries import and promote special exhibitions to raise funds.
• Government departments are held accountable for meeting their clients’ needs.
• Charities such as the Salvation Army and Vision Australia employ professional
marketers to develop campaigns that will cut through community reluctance to
donate.
Until recently, many of these organisations rejected the idea of marketing.
Now they see it as a means of growth, or even survival. Marketing in not-for-profit
organisations is discussed in more detail in Chapter 9.
MARKETING ONLINE
The internet has, of course, brought many changes to the field of marketing. Very
few firms today do not use the internet to attract buyers, make sales and maintain
relationships with customers. Online retailing and interactive marketing are used by
banks, insurance firms, airlines, supermarkets, in fact almost all large and most small
firms in almost every industry. Here are some benefits for firms using the internet:
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Innovative ways of using online technology are constantly emerging. Viral
marketing involves sending provocative or interesting material to selected customers
suggesting that they send it on to their friends and colleagues, who in turn will
send it on to more people, with the hope that eventually the message will be seen
by thousands or even millions of potential customers. Many firms are using social
websites such as Facebook or open content sites such as YouTube.
In consumer marketing, the prospect of linking various multi-channel digital
communication and entertainment media such as television, broadband, the internet
and especially ‘smart’ mobile phones is coming ever closer. Certainly the ‘big players’
such as News Corporation, Google, Yahoo! and Microsoft want to be part of this
revolution in information, entertainment and consumer purchasing. The main
battleground between these firms is cloud computing, where software, documents
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• Size doesn’t matter—large and small companies have the same access to
customers and can create the same kind of internet presence.
• Location becomes largely irrelevant—a company is as close to its customers as
their PC or notebook screens (or mobile phones).
• Mass customisation is possible—communication with each and every customer
can be customised according to preset parameters and action triggers.
• Customers can feel in control—to access information, make purchase decisions
and complete transactions at any hour of the day, any day of the week.
• Customer feedback is faster and easier—online surveys or visitor tracking let
firms better understand their customers’ behaviours and preferences.
• Data mining can be used to cross-sell and up-sell—by tracking customer
behaviour, firms can suggest related products or encourage upgrades to increase
sales.
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CHAPTER ONE
19
and other services such as email are delivered by the internet and stored in vast
warehouses of computers (the cloud) rather than on each person’s PC or laptop.
Cloud computing presents real challenges for hardware firms like Dell and Lenovo
and software firms like Microsoft. More relevantly for us here, though, is that it will
take online advertising onto new levels and into new methods and applications;
imagine if you are offered all the software and data storage you need (and now pay for)
for free, as long as you allow marketers of various goods and services you are interested
in to promote themselves and their products to you.
INTEGRATION OF MARKETING FUNCTIONS
Another trend of the digital era is integrated marketing, the increased overlapping of
various marketing-related functions such as advertising and promotion, CRM, digital
and direct marketing, personal selling, social engagement and customer service. In
the past, departments or separate agencies that often had little contact with one
another carried out many such functions; as a result they had no real understanding
of one another’s aims and constraints. Marketing and sales departments, for example,
often had an ‘us and them’ attitude towards each other. Similarly, mainstream media
advertising agencies had little contact with direct marketing and promotional firms.
And to many ‘traditional’ marketers, the principles, methods and even the language
of their digital marketing peers were totally foreign.
Increasingly, management is insisting on better integration of all the firm’s
marketing functions, and many of these barriers are being removed. This is in line
with the marketing concept’s requirement that all activities be coordinated. For
example, for many years an ad agency’s traditional creative team (the individuals who
develop the ideas for ads) has consisted of a copywriter (who develops the text or
words) and an art director (who works on the visual elements). Today, some agencies
are adding a third person to this team, a specialist in digital media such as email,
the internet and SMS. Consumers are no longer distinguishing between their TV
viewing, newspaper reading and online searches for information or entertainment,
so why should the marketers responsible for communicating with them? In other
cases, the idea of a ‘creative team’ is disappearing altogether, replaced by a interactive
marketing expert who develops both the creative strategy and the web-based tools
and designs to implement it.
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Many markets are no longer limited by national or regional borders or boundaries.
Consider the youth market for clothes, music and other related products. Check
out teenagers on the streets of New York, Tokyo, Istanbul, Sydney, São Paulo and
Moscow. The similarities will be more evident than the differences. The speed of this
trend for globalisation has been driven by international travel, global music, TV and
movie distribution and, of course, the internet.
Marketers operating in global markets must develop strategies for crossing the
boundaries with their products, just as their customers have crossed them with their
communications, their lifestyles and their product preferences.
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GLOBALISATION
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GF
GLOBAL FOCUS
1.5
REVISION QUESTION FROM
LEARNING OBJECTIVE 1.5
TAKING AUSTRALIA TO THE WORLD
Can Australian products
and brands be successful
overseas? The international
market is highly competitive
and often expensive to
access, but more than
60 000 Australian firms are
now trading internationally,
and many of them are SMEs
(small and medium-sized
enterprises).
Why have they taken the
plunge into the overseas
market? Here are the main reasons:
• Australia is a small market (22 million
people).
• The Australian population is growing
more slowly than the populations of
other countries in our region.
• Local firms face increased competition at
home from foreign firms.
NEWSPIX
20
• Opportunities to make sales overseas
sometimes just present themselves,
especially in the internet era.
• Many product markets are mature in
Australia but are still growing in lessdeveloped countries.
• Economies of scale can often be
achieved through export expansion.
The trends in marketing are all around us. Scan your work, college or home
environment to identify one practical example of each of the trends we have
discussed. (Read the newspaper, check your email or SMS messages, and be alert for
global brands. Perhaps you’ve received some direct mail?)
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For many years, critics of our marketing system have raised a variety of thoughtprovoking questions and generated many discussions. Let’s examine some of their
criticisms.
We can summarise the major charges against marketing by grouping them in
relation to the parts of the marketing mix. (This is the combination of product, price
structure, distribution system and promotional activities employed by marketers to
attract specific target markets. The mix is discussed more fully later in this chapter
and the individual elements are examined in Chapters 7–12.) Some criticisms of
marketing, in terms of the elements of the marketing mix, are outlined in Table 1.1.
First, let’s be honest: in some cases the criticisms of marketing are justified. There
certainly are instances of each of the criticisms listed in Table 1.1. Not all marketers—or
people who call themselves marketers—operate ethically. But this does not mean that
marketing per se is unethical or without value. The test of this is to imagine a world in
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CRITICISMS OF MARKETING
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TABLE 1.1
CHAPTER ONE
21
Criticisms of marketing—some examples, in terms of the
elements of the marketing mix
Field of marketing
Possible criticisms
Product
Quality
MP3 players don’t work properly; clothes shrink; software programs have bugs
Packaging
Not enough information on labels; deceptive graphics; poor operating instructions
Services
Service is slow or uncaring; repair services are overpriced
Range
Too many brands and varieties with few real differences
Price structure
Levels
Prices are too high; prices are controlled by large firms; price comparisons are difficult to make
Discounts
Quoted discounts are not genuine; some buyers are not able to get special deals; little real price competition
between firms
Distribution system
Intermediaries
Too many ‘middlemen’, each taking a ‘cut’
Delivery
Inflexible and slow; lack of care in storage and handling
Promotional activities
Poor-quality retail salespeople; high-pressure tactics; poorly informed and trained salespeople; insufficient
attention to customer service
Advertising
Overemphasis on a material standard of living; manipulative; causes people to buy things they don’t really need and
can’t afford; ads deceptive and misleading; overemphasis on sex; ads play on fear; too many ads (especially on
TV); advertising adds too much to the cost of products; advertising helps firms to dominate markets
Direct and digital
marketing
Customers’ details are on lists without their permission; telemarketers phone at inconvenient times; mobile phones
and PCs are flooded with annoying email and text promotions
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which marketing does not exist: no marketing research to uncover customers’ wants,
no development of new products to meet those wants, no advertising or promotion to
inform customers, no competition between suppliers for customers’ loyalty. This is not
to mention that all of those currently employed in fulfilling these functions would be
out of a job. Clearly, this is not a world most of us would choose to live in.
In fact, marketing has been responsible for many of the improvements in our
standards of living, health and well-being and the life choices we enjoy today. Freely
operating markets provide mechanisms for us to tell organisations what we want and
for them to work hard to answer our demands. The demise of other systems such as
socialism (command economies where supply and consumption decisions are made
by governments) has demonstrated that while it is far from perfect, the market has
provided a better way of allowing us access to goods and services that we can use to
improve our lives. And it is the principles and practices of marketing that allow the
market to do its job.
This is not to say that we should be defensive in the face of criticism. Let’s admit
to the mistakes and excesses, let’s be the strongest critics of those who give marketing
a bad name, and let’s be socially responsible, even when it costs us in the short term.
It’s possible that marketing will come under even more criticism in years to come.
If the profession is to avoid being over-regulated by governments, it must tackle the
criticisms honestly and head-on. Marketers should respond to instances of unethical
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Personal selling
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JENNY RIX
With these brochures,
National Australia Bank
is demonstrating its social
responsibility as a corporate
citizen.
or illegal practice just as doctors or lawyers do, discipline or exclude the wrong-doers,
and promote to the community the overall value of the profession.
1.6
REVISION QUESTION FROM
LEARNING OBJECTIVE 1.6
Visit the website of the Australian Competition and Consumer Commission
(ACCC) or the Privacy Commission (www.accc.gov.au or www.privacy.gov.au).
Locate an article or feature that involves a criticism of marketing. Suggest ways that
the marketing industry could respond to this criticism. What should it say and do,
and to whom?
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The marketing concept requires marketers to organise the firm’s activities to satisfy
the wants of its customers. This seems a worthwhile, logical and, on the surface,
straightforward business strategy. In practice, however, it is much more difficult than
it first appears. To give themselves the best chance of success, marketers use a formal
planning process to organise and guide their programs. The marketing plan documents
this process of planning and managing the firm’s marketing effort.
Before we examine the marketing plan in detail, let’s clarify exactly how
management and marketing are combined. Marketing management aims to make the
marketing concept an operational reality, rather than simply an ideal to which the firm
pays lip service. It involves a three-step process—one of planning, implementation
and evaluation (see Figure 1.3).
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THE MARKETING PLAN
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CHAPTER ONE
23
E
EI
ETHICAL INSIGHTS
Marketers face a constant barrage of criticisms on what might be called ethical issues.
In this feature throughout the text we’ll raise many of these questions for you to
consider. Note, they are for you to consider. Ultimately, each of us is responsible for our
own actions. It is up to you to decide what’s the right thing to do in a given situation.
Sex in
advertising
Advertising
to children
Sharing
information
with third
parties
Product
quality
Product
testing
Exaggeration
in
advertising
Ambush
marketing
PHOTODISC
Deceptive
packaging
Selling under
the guise of
research
Recruiting
competitors’
staff
OverRights to
promising
privacy
Appeals to
prejudice
Rights to
privacy
Gifts
and
entertainment
Pricing of
replacement
parts and
refills
FIGURE 1.3
PLAN
Analyse situation
Set goals
Develop strategies
IMPLEMENT
Organise and
carry out marketing
activities
The marketing management
process
EVALUATION
Measure actual
performance
against goals
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Review and adjust marketing strategies as needed
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PLANNING
The planning step asks, and then provides answers to, marketing questions such as:
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Which markets should we be operating in?
Which customers should we be trying to attract?
How do we identify them?
How can we understand their wants?
Which of their wants should we be attempting to satisfy?
With which goods and services should we do this?
How many products can we sell?
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•
•
•
•
•
•
•
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IMPLEMENTATION
The implementation step converts the plans into action by deciding on the answers
to these questions:
•
•
•
•
•
How should the business be structured and organised?
Which departments should perform which tasks?
Who are the right people or outside agencies to do the job?
How do we find them?
When and how will we carry out the marketing activities?
EVALUATION
The evaluation step monitors the organisation’s actual performance as it carries out
the marketing programs. Financial reports and marketing metrics (or measurements)
are used to answer questions such as:
•
•
•
•
•
How many of each product did we sell?
How much did we sell to each market sector or customer?
How much did it cost us to make these sales?
How much profit did we make from particular products, areas or customers?
Were our product, pricing, distribution and promotional programs effective?
STRATEGIC PLANNING
The highest level of planning in an organisation is known as strategic planning,
which is the managerial process of matching an organisation’s resources with its
opportunities. ‘If you don’t know where you are going, then any road will take you
there.’ This saying suggests that organisations need a well-defined plan to succeed.
Quite simply, planning is deciding today what you want to do tomorrow.
A more thorough analysis of the strategic marketing process and the tools it uses
is contained in Appendix C.
So, an overall strategic company plan is often developed for the organisation as a
whole, often covering a five- or even ten-year timeframe. Planning issues here include:
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PBL Ltd’s decision to diversify from media businesses such as the Nine Network
and Women’s Weekly magazine into gaming businesses such as casinos is an example of
planning at this level. It is worth noting here that long-term strategic decisions often
carry significant elements of risk—for example, Telstra took a strategic decision in the
1990s to enter the Asian telecommunications market but ten years later has written
off most of its investment in Hong Kong.
Issues such as where to locate production facilities for market expansion, which
particular markets to enter, in what timeframe and with which product types, are also
part of this level of planning. Not that planning is a guarantee of success. In the early
1990s, Foster’s Brewing invested large amounts to expand its beer production and
sales in China. This venture was unsuccessful and the company finally sold its assets
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1. setting the direction for the business as a whole
2. deciding on the expansion or contraction of production capacity
3. developing broad markets and product ranges.
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THE FIELD OF MARKETING
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25
in that market. Then it entered the Russian beer market, another long-term strategic
planning decision. More recently, the company decided to sell the rights to the highly
successful Foster’s brand for all its business in Europe.
Once the strategic company plan is complete, plans are developed for each
functional division, including marketing. These might cover a one-, two- or threeyear period. Strategic marketing planning consists of four processes:
1. Conducting a situation analysis to analyse the organisation’s environment and its
capabilities.
2. Setting objectives and controls to guide marketing programs and evaluate
performance.
3. Selecting target markets that are both attractive to and feasible for the organisation.
4. Developing a marketing mix (or mixes) that will allow the firm to effectively enter
the chosen market(s), satisfy the wants of the target customers and achieve the
organisation’s objectives.
Annual marketing plans are also developed for individual brands, products or
categories. They serve as specific guides for the operational managers responsible for
marketing particular products or with responsibility for particular markets. In these
plans, the marketing issues are largely tactical and include:
•
•
•
•
•
modifications to product range, packaging and so on
specific promotional campaigns
pricing tactics
locating new distribution points
particular staffing requirements.
Although many businesspeople believe that there can be an overemphasis on
planning (especially in organisations where planning becomes an alternative to
action), most agree that planning can reduce business risk. Systematic marketing
planning:
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s
• allows for the coordination of activities between departments and within the
marketing department
• provides individuals with a clear sense of the organisation’s overall goals and
their role in achieving them
• encourages marketers to critically and systematically examine the environment
they will be operating in
• ensures that marketing programs are rigorously thought through rather than
impulsively carried out
• provides the basis for motivating staff to achieve the plan’s goals.
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MARKETING PLANS IN PRACTICE
While most marketing plans follow similarly structured outlines, they do vary
significantly in the depth and breadth of analysis employed. For instance:
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• An annual plan for a well-established product in a stable market, for example,
might require only a summarised and updated situation analysis, and details of
the specific activities to be undertaken during the year.
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26
PA RT ON E
TABLE 1.2
MODERN MARKETING
Elements of the marketing plan
What’s involved
Examples (for a new wine range)
Situation analysis
Analysis of trends or changes in
the firm’s external environment
Might any of the following affect our product—the economy, drink-driving
laws, new wine technologies, our ageing population etc?
Analysis of the specific market
Who is drinking wine?
How many bottles of wine are sold, of what type and is the market
growing or declining?
Do drinkers prefer red or white wine?
Analysis of competitors
Who are our main competitors? What market share do they have?
What are their strengths and weaknesses?
Analysis of the company/
product situation—strengths and
weaknesses, resources
How well placed are we to launch this new product—our production
capacity, branding, sales team and advertising?
Can we afford to carry another product line?
Marketing objectives
Development of clearly
expressed statements of what the
plan is to achieve
How much do we want to sell, at what price, through which outlets
and in which areas?
Market segmentation,
targeting and
positioning strategies
Identification of groups of
people or organisations at whom
to direct marketing strategies
Should we target male or female wine drinkers, young or older?
Selection of a particular image to
be used for the product or brand
What image do we want for our new wine—an everyday, good-value
wine, or a wine for connoisseurs?
Marketing mix
Development of specific tactical
action plans for the product,
its pricing, distribution and
promotion
How many different wines will we offer? What brand, bottle and label
will we use?
Will we price just under $10, or $15, or more expensively? What
discounts might we offer?
Will we sell through liquor stores, or supermarkets, or only through
restaurants?
Will we use TV ads to promote our wine, or magazines, or just our
sales reps?
Budgets and marketing
metrics
Preparation of forecasts of sales,
costs, expenses and profit
We need to prepare a detailed budget by product and customer
group, with all anticipated prices, costs and expenses included.
Preparation of other
measurements or metrics
to be used to check actual
performance against marketing
objectives (see Table 1.3)
We also need to establish specific performance metrics such as
consumer awareness of our brand, trial purchase rates, price levels
achieved and so on.
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Marketing plan section
• A plan for the launch of a brand new product range, however, will require
considerably more research, analysis and strategy development.
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The elements of a marketing plan are outlined in Table 1.2. Let’s look at each
section of the plan in more detail. Even at this early stage, it is critical to your
development as a marketer that you understand the marketing plan’s role and the
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THE FIELD OF MARKETING
CHAPTER ONE
27
MARKETING PLANS MADE EASY!
A
ll the elements of a marketing plan are examined in
more detail in various chapters of the book, as noted
in the sections below. On the textbook’s website you’ll also
find a set of step-by-step work sheets that will guide you
through the process of developing a marketing plan for a
product of your choice. The work sheets refer you back to
specific sections of the text to help you to stay on track.
Go to www.mhhe.com/au/rix7e.
process of constructing a plan. The sections below will help prepare you for this
important task.
SITUATION ANALYSIS
Marketers do not carry out their activities in isolation. Their actions are influenced
by many other individuals, firms, governments and products.
Marketers monitor their ‘environments’ to detect changes, threats and opportunities.
They collect information from various sources and analyse it so that they can make
informed decisions for their firm and products. A full strategic situation analysis will
include:
• an analysis of changes in the broad marketing environment (demographic and
social trends, for example)
• an industry overview (concentration, competitive intensity, industry forces)
• a market analysis (size, growth, segments, trends)
• a competitor analysis (shares, positioning, strengths and weaknesses)
• a company SWOT analysis (strengths, weaknesses, opportunities and threats).
The environments faced by marketers, both external (outside the organisation)
and internal (within the organisation itself), are previewed in Chapter 2. Strategic
tools for analysing the firm and its industry are outlined in Appendix C. Methods used
by marketers to gather information about their operating environment, customers
and competitors are the subject of Chapter 3.
MARKETING OBJECTIVES
Objectives, or goals, are desired outcomes—in other words, what you are trying to
achieve. In marketing terms:
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In order to be worthwhile, objectives should be specific, measurable and realistic.
Table 1.3 overleaf demonstrates these principles.
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• Marketing objectives flow from the firm’s financial goals. These goals in turn
come from the organisation’s corporate mission, a statement of what the
organisation aims to achieve and for what purpose it exists (see Appendix C).
• Marketers want consumers to be aware of, and have a favourable attitude
towards, their products. They want to achieve certain levels of sales, market
share, distribution, realised prices, and gross profit margins and expenses. Each of
these can be expressed as an objective.
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PA RT ON E
MODERN MARKETING
TABLE 1.3
Making objectives specific, measurable
and realistic
Poorly expressed objectives
Well expressed objectives
Objective:
‘To improve our sales position [non-specific]
significantly [non-measurable] and double our
net profit [unrealistic]’
Objective:
‘To increase our market share, measured by
units sold [specific] by 5 percentage points,
by year end [measurable] and improve net
profit by 10% [realistic]’
Objective:
‘To have our product sold through as many
outlets as possible’
Objective:
‘To increase our weighted distribution through
the retail pharmacy channel from 58 to 70%’
Objective:
‘To keep our retail prices down’
Objective:
‘To be the cheapest brand on retail shelves by
a minimum of $1.00 per bottle’
Objective:
‘To ensure our brand is well-known’
Objective:
‘To achieve 80% unprompted brand
awareness by the end of the current period’
Objective:
‘To develop an effective advertising
campaign’
Objective:
‘To achieve 60% advertising message recall
among our target audience’
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Most organisations cannot hope to sell to all the individuals or organisations in their
market place. So, marketers identify particular groups of customers whose wants they
feel they can most completely and accurately satisfy.
First, they divide the overall market into groups of current or potential customers
who share common wants in respect of the particular product category. The car
market, for example, will be segmented into a number of different customer groups—
the people within each group want similar things from a car and will be different from
the people in each of the other groups.
Firms then decide which market segments they will direct their marketing efforts
towards—those whose wants they have the best chance of profitably satisfying. This
often means not targeting some groups or market segments. Diners Club, for example,
targets international business travellers—it will, of course, accept business from
tourists or any other person who can pay for the card, but its services, pricing and
promotional programs are specifically targeted to travelling businesspeople.
Once a firm has selected particular market segments to target, it decides how to
‘present’ itself and/or its products to those customers. The development of a particular
image or perception for a product or organisation is called positioning. For example:
s
MARKET SEGMENTATION, TARGETING
AND POSITIONING STRATEGIES
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• Woolworths positions itself as ‘The Fresh Food People’.
• Etnies is positioned as a ‘street’ clothing brand.
• APIA (Australian Pensioners Insurance Agency) is positioned as better
understanding the insurance needs of the over 55s.
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THE FIELD OF MARKETING
CHAPTER ONE
29
Each organisation is hoping to attract customers by creating a specific and definite
perception in people’s minds as to what the company does, and what it stands for. The
means that marketers use to select target markets and develop positioning are analysed
in Chapter 4. Firms often make the first cut (or segmentation) of their market by
dividing it into individuals and households on the one hand (the consumer market,
or B2C) and organisations on the other (the business market, or B2B). In Chapter 5
we will look at the consumer market, and in Chapter 6 the business market.
THE MARKETING MIX
A marketing mix is the combination of the four major elements that make up a
company’s tactical marketing program—production, pricing, distribution (or place of
availability) and promotion. The four Ps, as they are known, are described below.
The marketing mix is also shown in Figure 1.4, together with the decisions involved
for each element.
• Product. The product element of the marketing mix involves developing the
right goods and/or services for the target market, changing existing products and
deleting unsuccessful product lines, and developing branding, packaging and
other product features (see Chapters 7 and 8). Chapter 9 examines an expanded
mix for intangible services, incorporating three additional Ps—physical evidence,
people and process.
• Pricing. The pricing element involves selecting the right base-price level, setting
special prices, and deciding on discounts, allowances, and whether and how to
charge delivery costs (see Chapter 10).
• Distribution. The distribution element involves selecting distribution channels
to make the product available to customers, selecting and negotiating with
middlemen, and arranging physical handling, storage and delivery (see Chapter 11).
The marketing mix
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COORDINATED
MARKETING
MIX
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TARGET
MARKET
e
PROMOTION
• advertising
• personal selling
• sales promotion
• public relations
• online/digital
promotions
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PRICE
• list price
• discounts
• geographic
pricing
• allowances
• credit terms
FIGURE 1.4
PLACE
• channels
• coverage
• locations
• transport
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PRODUCT
• quality
• features
• style
• brand name
• packaging
• sizes
• services
• warranties
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MODERN MARKETING
?
MARKETING UP CLOSE
This Kathmandu catalogue
contains each of the elements
(4Ps) of the marketing mix.
Promotion
Product
JENNY RIX
Price
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Distributor
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• Promotion. The promotion element involves informing and persuading the
market about the company’s products, using advertising, personal selling, public
relations and sales promotion (see Chapter 12).
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Note: To make them easier to learn, we will look at the individual marketing
mix elements separately in the text. In practice, however, they are closely linked or
interrelated—decisions in one area will always affect other areas.
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THE FIELD OF MARKETING
CHAPTER ONE
31
Marketers of services, such as health care, education, entertainment and travel,
often add a further three Ps to their mix:
• Physical evidence. The physical evidence element includes aspects such as
buildings, promotional material and vehicles that are used to create an image of
the company and its service offering.
• People. The people element covers managers and other staff who ‘deliver’ the
service to the firm’s customers.
• Process. The process element involves the operational logistics for ensuring
customers receive a timely and effective service.
These extra marketing mix elements for services are examined in Chapter 9.
BUDGETS, EVALUATION MEASURES AND CONTROLS
(OR METRICS)
Businesses carry out marketing programs to make a profit. Not-for-profit organisations,
too, have to operate within certain financial constraints. In both situations, budgets
are established to guide the programs and provide a means of measuring their success.
Budgets are usually set annually. The marketing budget begins with sales forecasts—
how many units the organisation is going to sell that year, and at what price. The
costs of achieving these sales—sales costs, advertising expenses and so on—are also
budgeted. The marketing department will usually be held accountable for achieving a
certain level of profit contribution, or profit from the sales it makes. During the year,
comparisons will be made between the budgets and actual performance.
Other controls—known as marketing metrics—will also be in place to help
marketers to assess their progress against the marketing plan. Such marketing
controls measure the effectiveness of distribution, personal selling, advertising and
other promotional activities. We will look at these in Appendix D.
1.7
REVISION QUESTION FROM
LEARNING OBJECTIVE 1.7
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List and briefly explain the elements in a modern marketing plan. Use an example of
a product you are familiar with to show the role of each element of the plan.
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32
CHAPTER REVIEW
These topic outlines are useful to study for exams.
Definitions of marketing (p. 4)
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Marketing in the digital era (p. 13)
1. Marketing has always been about
trying to better understand
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1. Since the Industrial Revolution
began in the eighteenth century,
the methods that businesses have
used to find customers, then
promote and sell their products
have evolved through several
stages (orientations):
(a) The production stage
assumes that marketing
effort is not needed to make
people buy products that are
well made and reasonably
priced.
(b) The sales stage calls for a
substantial promotional ‘hard
sell’ to persuade customers to
buy a firm’s products.
(c) The marketing stage sees
companies adopting the twin
goals of customer orientation
and a profitable sales volume.
The companies under this
orientation shift to satisfying
customer wants.
(d) The societal-marketing
stage extends the marketing
concept to consider societal
well-being.
2. The stages of marketing
management orientation can
be traced historically. It is clear,
however, that the production
and sales orientations are
still followed today by many
organisations, including some
that appear on the surface to be
following marketing principles.
3. A distinction can be drawn
between the sales (or selling)
approach to business management
and the marketing approach.
A sales approach involves
persuading consumers to buy
goods and services that an
organisation has already decided
to produce or make available.
A marketing approach involves
identifying consumers’ wants and
developing goods and services
to satisfy those wants. In the
sales approach, an organisation
attempts to bend consumer
demand to fit the company’s
1. The marketing concept is
a business philosophy that
states that the satisfaction of
customers’ wants is the economic
and social justification for an
organisation’s existence. This is
the basic principle underlying all
marketing practices.
2. To implement the marketing
concept, an organisation (and
all who work in it) should:
(a) be customer oriented in
all decision making and
activities
(b) focus on profitable market
opportunities rather than
simply trying to increase sales
at any cost.
(c) systematically coordinate all
marketing activities so that
everyone in the organisation
has the same view as to
which customer wants are to
be satisfied, and how.
3. In adopting the marketing
concept, an organisation thinks
about its business in terms of the
wants it is satisfying, rather than
in terms of the products it makes
or sells.
e
Stages in the development of
marketing management (p. 7)
The principle of marketing: the
marketing concept (p. 11)
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1. In a general sense, marketing
is any exchange activity
intended to satisfy human
wants. Marketing is practised by
individuals, businesses, sports
clubs, political parties, charities
and many other organisations.
2. In a business sense, marketing
is a system of business activities
aimed at achieving organisational
goals by developing, pricing,
distributing and promoting goods,
services and ideas that will satisfy
customers’ wants.
supply. In the marketing
approach, an organisation bends
its supply to fit consumer demand.
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THE FIELD OF MARKETING
firms, but also presents issues
and problems when firms have to
market in places with different
legal, political, cultural and
economic environments.
Criticisms of marketing (p. 20)
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1. Over many years, criticisms of
marketing have included its
responsibility for unsafe products,
deceptive packaging, excessively
high prices, invasion of privacy
and misleading advertising.
Marketers need to analyse these
criticisms coolly and respond to
them positively.
2. During the past twenty years,
concern has grown for the
conservation and appropriate
allocation of scarce resources, the
protection of the environment and
the safeguarding of quality of life.
Marketers are increasingly being
faced with a choice between
profitably satisfying the wants of
their customers and complying with
the wishes of various other groups
in the community. This choice will
become increasingly complex.
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rix87006_ch01_001-037.indd 33
33
pl
2. Today’s customers are
extremely quality conscious.
Marketing and quality
management are used together
to ensure firms maximise
customer satisfaction by:
(a) reducing variability in
product quality
(b) increasing responsiveness to
changing customer needs and
(c) reducing costs through less
wastage and re-working.
3. The digital era has been
accompanied by and has helped
develop a vast range of services,
especially in the fields of
communication and information
processing, hospitality,
entertainment, sports and
events. Services firms have been
increasing their use of marketing
in recent years, especially using
loyalty marketing and other
customer-retention strategies.
4. Organisations in the not-forprofit sector (also referred to as
‘non-profit’ or ‘non-business’)
have adopted marketing
principles and practices in
response to reduced funding from
government and other sources.
5. Marketing campaigns work
best when they are integrated;
advertising, promotion, CRM,
direct and digital marketing, and
personal selling are increasingly
being planned and carried out in
a coordinated manner.
6. Many markets today are global.
This has opened up many
opportunities for Australian
m
customer wants. As markets are
increasingly fragmenting and
rapidly changing, this is now
more important than ever. Many
firms today are using interactive
methods and tools such as blogs
and social networks to engage
with customers so that they can
better understand them. Another
major tool in this quest is the
database. A customer database
enables an organisation to gather
and analyse large amounts of
detailed information about its
customers so that well-targeted
offers can then be developed.
This customised approach is
known as customer relationship
management (CRM) and is
considered more cost effective
than previous mass marketing
campaigns.
CHAPTER ONE
CONTINUED ❯
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34
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CHAPTER REVIEW CONTINUED
The marketing plan (p. 22)
1. Marketing management may
be described as the process of
planning, implementing and
evaluating marketing programs.
2. Strategic planning is the
managerial process of matching
an organisation’s resources with
its opportunities.
3. The main document used by
marketers to plan and carry out
their programs is the marketing
plan, which consists of:
(a) Conducting a situation
analysis—supplying a review
of the company’s existing
marketing program, an
analysis of the external and
internal environment, and a
review of the marketing mix.
(b) Setting marketing
objectives—establishing
the desired outcomes of
marketing activities and the
means by which success will
be measured.
(c) Segmenting the market,
selecting target markets and
developing a positioning
strategy.
(d) Designing the marketing
mix (or mixes)—identifying
the combination of elements
that are the core of an
organisation’s marketing: the
four Ps—product, pricing,
placement (distribution)
and promotion.
(e) Establishing financial budgets
and other marketing metrics
to check performance and
enable corrective action to
be taken.
EXERCISES AND PROBLEMS
(a)
(b)
(c)
(d)
(e)
Radisson Hotels (hospitality)
Adidas (sports shoes)
Apple (iPhone)
Village (cinemas)
Goodyear (tyres and brakes).
s
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4. Explain the difference between the marketing and selling
approaches to business management, using examples of
6. Using a marketing approach (i.e. seeing business in
terms of the benefits provided or wants satisfied), answer
the question ‘What business are you in?’ for each of the
following organisations:
ge
3. Using as an example an organisation you are familiar
with, explain the three steps an organisation should
follow to implement the marketing concept effectively.
5. Describe the planning, implementation and evaluation
steps in the management process and explain how these
three steps are connected.
pa
2. One way of explaining the importance of marketing in
our economy is to consider how we would live if there
were no marketing activities. Describe some of the ways
in which your daily activities would be affected under
such a situation.
both approaches you have observed or encountered to
illustrate your answer.
e
1. Marketing has been increasingly used by not-for-profit
organisations in recent years. Why do you think this is
so? Describe some of the ways in which not-for-profit
organisations that you have encountered are engaging
in marketing activities.
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35
KEY TERMS AND CONCEPTS
mass customisation ..................................................18
mass marketing .......................................................33
needs ......................................................................4
not-for-profit (non-profit) organisations ..........................6
positioning .............................................................28
products ...................................................................4
production stage of development (orientation) ...............7
quality (and marketing) ............................................15
relationship marketing ..............................................13
sales stage of development (orientation) .......................8
services industries....................................................16
situation analysis .....................................................27
social engagement ..................................................13
societal-marketing stage of development (orientation) ...... 9
target markets .........................................................20
viral marketing ........................................................18
wants.......................................................................4
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cloud computing......................................................18
customer relationship management (CRM) ..................13
customer service ......................................................16
demand ...................................................................4
exchange activity ......................................................4
four Ps (product, pricing, placement and promotion) ..... 29
globalisation...........................................................19
integrated marketing ................................................19
loyalty marketing .....................................................14
marketing concept ...................................................11
marketing controls ...................................................31
marketing management ............................................22
marketing metrics ....................................................31
marketing mix .........................................................20
marketing plan ........................................................34
marketing objectives ................................................27
marketing stage of development (orientation) ................9
For more information on this chapter topic, visit the OLC website at www.mhhe.com/au/rix7e.
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(from page 3)
the CAMPAIGN TRAIL
Spinbrush
Here is the Spinbrush launch campaign developed by Alison Goodall for Church & Dwight.
•
•
•
•
s
•
• Using the success of the product in the US market to
encourage retailers to stock the line; buyers are always
interested to know what the product has done in other
markets.
• Producing a full-colour sales presenter to be used with head
office buyers and store managers. Sales aids like this help
sales reps to ‘tell the story’ and to back it up with hard
evidence such as statistics, graphs and charts.
• Showing the retailers the level of support Church & Dwight
would give to the brand both with media, online and at pointof-sale.
The company was convinced that once consumers tried the
Spinbrush battery-powered toothbrush they would not go back
to manual brushing. Here is how they gained customer trial:
Spinbrush was priced at $12.95 RRP, a good-value offer by
comparison with the two household-name brands. (Note that this
price level still offered retailers an attractive dollar profit margin
compared to manual brushes.)
• A 15-second commercial was run nationally on free-toair TV in metro areas. This short and sharp ad campaign
communicated very clearly the Spinbrush core benefit. (Check
it out at www.spinbrush.com.au.) Several months after launch a pay TV campaign was
used to build frequency. (Note also that a 15-second TVC also allowed Alison to extend the
campaign’s reach and frequency.)
The TV campaign was supported by advertorials in selected retail magazines such as Good
Taste. These are sold in the same stores as Spinbrush and so target the consumer perfectly.
Spinbrush ads were also placed in several Christmas gift guides: a very clever tactic as the
Spinbrush’s good-value price made it an excellent ‘stocking stuffer’.
A specific Spinbrush Australia website was developed to give consumers access to additional
information on oral health care.
A publicity campaign targeted editors of twenty ‘beauty’ magazines.
Follow-up email shots targeted media such as local and regional newspapers, especially
duringD entalH ealthW eek.
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JENNY RIX
First, support from the major supermarket, discount variety and pharmacy chains and independent
stores was achieved by:
The sales results?
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Achieving retailer support and consumer trial helped Spinbrush to exceed sales budgets and after
two years to gain an impressive share of the targeted market segment. This is an excellent example
of how effective marketing campaigns are planned and carried out.
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