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Introduction to Business
Chapter 7: Marketing
Definition of Marketing
• Is defined as “the process of planning and
executing the concept, pricing, promotion,
and distribution of ideas, goods and services
to create exchanges that satisfy individual and
organizational goals.
Key concepts
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Value, Benefits and Costs
Utility
Consumer Goods and Industrial Goods
Services and Ideas
Value, Benefits and Costs
• Value
– Refers to the comparison between product’s
benefits over its costs
• Benefits
– What the product can do emotionally and
physically for the consumers
• Costs
– The cost of the buyer’s time and emotional costs
of making a purchase decision
4 Types of Utility
Organizational
Function
Responsible
Type
Description
Examples
Form
Conversion of raw
materials and
components into finished
goods and services
J.P. Morgan Chase checking account;
Lincoln Navigator; Ramen Noodles
(nutrition for students who are hungry,
broke, and can’t—or won’t—cook)
Production
Time
Availability of goods and
services when consumers
want them
Digital photographs; LensCrafters
eyeglass guarantee; UPS Next Day Air
Marketing
Place
Availability of goods and
services at convenient
locations
Soft-drink machines outside gas
stations; on-site day care; banks in
grocery stores
Marketing
Ownership
Ability to transfer title to
goods or services from
marketer to buyer
Retail sales (in exchange for currency
or credit-card payment)
Marketing
Consumers Goods and Industrial Goods
• Consumer goods
– Convenience goods
– Shopping goods
– Specialty goods
• Industrial goods
– Expense items
– Capital items
Convenience Goods
• like milk, bread, and occasional groceries
which are frequently bought locally, with little
consideration of the price charged since
purchases are usually on a small scale and
convenience is rated more highly than
economy
Shopping goods
• which are relatively rare purchases. More time
is usually taken over their selection, and the
customer may travel long distances for a
particular purchase.
Specialty goods
• Consumer products that are unique or special
enough to persuade the consumer to exert
unusual effort to obtain them.
Expense items
• Materials and services normally consumed
within a year by other suppliers of services or
producers of goods.
• They include goods used directly in production
process such as timber, rubber, nuts and bolts,
chemical etc.
Capital items
• Items that are permanent, long-lasting goods
and services that are useable for more than
one year.
• They include: buildings (office, warehouse,
factories), fixed equipment (computer servers,
stove and ovens), and accessory equipment
(tractors, cranes).
Services and Ideas
• The characteristics of services marketing are:
– Intangibility - once a service is performed there is nothing to take
home
– Inconsistency - every employee has different abilities, you will not
always get the same person performing the service every time
– Inseparability - distinguishing between the service and the server
– Inventory - having enough stock to meet demand
• E.g. airlines, insurance, investment and financial planning, health clinics,
public accountants, consultancy, leisure and tourism
The Marketing Environment
• Elements of the
Marketing Mix
within an
Environmental
Framework
Macro
environment
Political and Legal Environment
The political arena has a huge influence upon the regulation of businesses, and
the spending power of consumers and other businesses. You must consider
issues such as:
1.How stable is the political environment?
2.Will government policy influence laws that regulate or tax your business?
3.What is the government's position on marketing ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and religion?
6. Is the government involved in trading agreements such as EU, NAFTA,
ASEAN, or others?
Economic Environment
• Marketers need to consider the state of a trading
economy in the short and long-terms. This is
especially true when planning for international
marketing. You need to look at:
1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long-term prospects for the economy Gross
Domestic Product (GDP) per capita, and so on.
Competitive Environment
• Marketers understand the limitation of resources available by
consumers
• Therefore compete for the purchasing power of buyers
• Types of competition:
– Substitute competition: different products that can fulfill
the same needs
– Brand competition: similar product that can fulfill the same
needs but provided by different producers
– International competition: refers to the competition
between domestic and imported products.
Technological Environment
• Technology is vital for competitive advantage, and is a major driver
of globalization. Consider the following points:
– Does technology allow for products and services to be made more cheaply and
to a better standard of quality?
– Do the technologies offer consumers and businesses more innovative products
and services such as Internet banking, new generation mobile telephones, etc?
– How is distribution changed by new technologies e.g. books via the Internet,
flight tickets, auctions, etc?
– Does technology offer companies a new way to communicate with consumers
e.g. banners, Customer Relationship Management (CRM), etc?
Social and Cultural Environment
• The social and cultural influences on business vary from country to
country. It is very important that such factors are considered. Factors
include:
• What is the dominant religion?
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What are attitudes to foreign products and services?
Does language impact upon the diffusion of products onto markets?
How much time do consumers have for leisure?
What are the roles of men and women within society?
How long are the population living? Are the older generations wealthy?
Do the population have a strong/weak opinion on green issues?
The Marketing Mix
•
Refers to four core activities:
– Product
• The product is the physical product or service offered to the consumer.
– Pricing
• Pricing decisions should take into account profit margins and the probable
pricing response of competitors.
• Pricing includes not only the list price, but also discounts, financing, and
other options such as leasing.
– Place
• Place (or placement) decisions are those associated with channels of
distribution that serve as the means for getting the product to the target
customers. The distribution system performs transactional, logistical, and
facilitating functions.
– Promotion
• Promotion decisions are those related to communicating and selling to
potential consumers.
Summary of Marketing Mix
Product
Price
Place
Promotion
Functionality
Appearance
Quality
Packaging
Brand
Warranty
Service/Support
List price
Discounts
Allowances
Financing
Leasing options
Channel members
Channel motivation
Market coverage
Locations
Logistics
Service levels
Advertising
Personal selling
Public relations
Message
Media
Budget
Target Marketing& Market Segmentation
• Target Marketing: are groups of people with similar wants,
needs and/or buying behaviors
• The division of a market into different homogeneous groups
of consumers is known as market segmentation.
– Geographic segmentation is based on regional variables such as region, climate,
population density, and population growth rate.
– Demographic segmentation is based on variables such as age, gender, ethnicity,
education, occupation, income, and family status.
– Psychographic segmentation is based on variables such as values, attitudes, and
lifestyle.
– Behavioral segmentation is based on variables such as usage rate and patterns, price
sensitivity, brand loyalty, and benefits sought.
Continue
• Product Positioning
– Is the process of adapting, adjusting and communicating
the nature and features of the product to cater for a
specific market segment.
• Data Warehousing
– Involves the collection, storage and retrieval of large
groups of data pertaining to individuals
• Data Mining
– Involves the processing and use of these consumer data to
uncover useful information and plan for new products that
will appeal to identified market segments.
Consumer Behavior
• Consumers usually buy a product because of some influences
that encourages them to choose one and not other products:
– Psychological: individual’s motivation/perception
– Personal: lifestyle, economic status
– Social: reference group such as family/ friend/ professional
– Cultural : subculture and social class
• When individual consumer regularly purchase the same
products, they exhibit brand loyalty because they are satisfied
with the product.
Consumer Buyer Decision Process
• The five stages in the Consumer Buyer Decision Process are:
– Problem or Need Recognition
• Recognize a problem or need to buy a product
– Information Seeking
• Stage to seek information
– Evaluation of Alternatives
• Compare competing product and evaluate alternatives available
– Purchase Decision
• Choose the preferred product and buy them
– Post-Purchase Decision
• Customer will decide if they make a right choice
Consumer behavior & Organizational Marketing
• Organizational markets divided into three categories:
– Industrial market: includes companies that buy goods either to
convert raw materials to semi-finished or finished goods
– Reseller market
• Marketing intermediaries such as wholesalers and retailers
that buy finished products and resell them either without
changing/ repacking goods
– Government market
• Includes federal/ territorial/ states on built/maintain
highway/ roads
– Institutional market
• Non-governmental market such as nursing home, church,
private hospitals
Product Development & Branding
• Key concepts used:
– Value
– Features
– Benefits
– Product mix
– Product lines
Branding and Packaging
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Branding
– National brands
• Brand-name widely distributed that carry the name of the manufacturer:
Honda/ Ford
– Licensed brands
• Brand-name product that carry the name of the organization: Spiderman/
Harley-Davidson/ David Beckham
– Private brands
• Private brand-name that a wholesaler has commissioned from a
manufacturer e.g. Giordano/ SEED/ Swatch
Packaging
– Purposes:
• In-store advertisement, Display brand name
• Protector to reduce risk of damage
Developing New Products
• New Product Development Process (NPD)
– is very essential for business expansion and
diversification, long and complex process
– Is necessary to ensure the continuous existence
and survival of the organization
• Product Mortality (survival) Rates
– Lot of ideas to create one successful product
• Product Introduction – Speed to Market
– Introducing a product ahead of competitors will
more likely to survive
Developing New Products
• Product Life Cycle
• BCG Matrix
Product Life Cycle and BCG
Product Price Determination
• Following are the key issues related to Pricing:
– Pricing for Business Objectives
• Profit maximization objective refers to the marketers attempt to
set prices to sell the number of units that will generate the highest
possible profits.
– E-Business Objective
• Marketing and promotion via internet allow business to set at
lower price
– Market Share Objective
• Set low prices for new products to secure a high level market share
• Price setting tools
• Pricing strategies
Distribution Mix
1. Channel Intermediaries - Wholesalers
• They break down 'bulk' into smaller packages for resale by a retailer.
• They buy from producers and resell to retailers. They take ownership or
'title' to goods whereas agents do not.
• They provide storage facilities. For example, cheese manufacturers seldom
wait for their product to mature. They sell on to a wholesaler that will
store it and eventually resell to a retailer.
• Wholesalers offer reduce the physical contact cost between the producer
and consumer e.g. customer service costs, or sales force costs.
• A wholesaler will often take on the some of the marketing responsibilities.
Many produce their own brochures and use their own telesales
operations.
Distribution Mix
2. Channel Intermediaries - Agents
• Agents are mainly used in international markets.
• An agent will typically secure an order for a producer and will take a
commission. They do not tend to take title to the goods. This means that
capital is not tied up in goods. However, a 'stockist agent' will hold
consignment stock (i.e. will store the stock, but the title will remain with
the producer. This approach is used where goods need to get into a
market soon after the order is placed e.g. foodstuffs).
• Agents can be very expensive to train. They are difficult to keep control of
due to the physical distances involved. They are difficult to motivate.
Distribution Mix
3. Channel Intermediaries - Retailers
• Retailers will have a much stronger personal relationship with the
consumer.
• The retailer will hold several other brands and products. A consumer will
expect to be exposed to many products.
• Retailers will often offer credit to the customer e.g. electrical wholesalers,
or travel agents.
• Products and services are promoted and merchandised by the retailer.
• The retailer will give the final selling price to the product.
• Retailers often have a strong 'brand' themselves e.g. Ross and Wall-Mart
in the USA, and Alisuper, Modelo, and Jumbo in Portugal.
Distribution Mix
4. Channel Intermediaries - Internet
• The Internet has a geographically disperse market.
• The main benefit of the Internet is that niche products reach a wider
audience e.g. Scottish Salmon direct from an Inverness fishery.
• There are low barriers low barriers to entry as set up costs are low.
• Use e-commerce technology (for payment, shopping software, etc)
• There is a paradigm shift in commerce and consumption which benefits
distribution via the Internet
Promotion- Communication Mix
• The Promotion Mix:
– Personal Selling
– Sales Promotion
– Public Relations (PR).
– Advertising.
– Sponsorship.
Personal Selling
• Personal Selling
– is an effective way to manage personal customer
relationships. The sales person acts on behalf of
the organization. They tend to be well trained in
the approaches and techniques of personal
selling.
Sales Promotion
• Sales promotion tend to be thought of as
being all promotions apart from advertising,
personal selling, and public relations. For
example the Buy One Get One Free.
• Others include
– couponing,
– introductory offers (such as buy digital TV and get
free installation)
Public Relations (PR)
• Public Relations is defined as 'the deliberate, planned
and sustained effort to establish and maintain
mutual understanding between an organization and
its publics'
• It is relatively cheap, but certainly not cheap.
• Successful strategies tend to be long-term and plan
for all eventualities.
• All airlines exploit PR; just watch what happens when
there is a disaster.
Advertising
• Advertising is a 'paid for' communication. It is used to develop
attitudes, create awareness, and transmit information in
order to gain a response from the target market.
• Advertising 'media' such as
– newspapers (local, national, free, trade),
– magazines and journals,
– television (local, national, terrestrial, satellite) cinema,
– outdoor advertising (such as posters, bus sides).
Sponsorship.
• Sponsorship is where an organization pays to be
associated with a particular event, cause or image.
• Companies will sponsor sports events such as the
Olympics or Formula One.
• The attributes of the event are then associated with
the sponsoring organization.