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Marketing Marketing • Marketing is the function that involves identifying the needs of consumers and developing a product to fulfil and satisfy those needs. What strategies will generate sales, increase market share and increase profits? Key concepts in Marketing: • Identifying the nature and characteristics of the product or service demanded by the customer. • Anticipating the changing expectations of consumers in order to be ahead of the market, rather than just following other businesses competing in that market. • Satisfying their customers which involves offering value. The more $ spent the higher the expectation of the product. • Ensuring profitability Businesses must generate profits in order to have funds to carry out its various activities. What is the ‘market’? • A mechanism that allows people to trade, which has three characteristics: a product or service for sale, willing buyers and a location in which to buy. The role of marketing • Research the market, types customers and needs. • Segment the market, identifying a target market. • Develop product to satisfy needs. • Package to differentiate product. • Brand for loyalty and recognition. Identifying the target market • Identifying the target market is crucial in determining the prime function of a business. The total market is often too wide and complex to be treated as an individual unit. • Marketing managers divide the market into segments in which consumers have similar spending patterns. • Specific strategies are planned for each segment the business seeks to aim at. Products and services are designed to meet the target markets demands. • Eg. 18-30 Year old females for a particular cosmetic product. Identification of target market • Marketing managers segment the market into homogenous (the same) groups: Methods are listed below –Demographic segmentation –Geographic segmentation –Psychographic segmentation –Behaviouristic segmentation Demographic segmentation • Dividing the market according to characteristics of population ie. • Age, gender, ethnicity, income, wealth, family structure, or religion Geographic segmentation • Dividing market into regional groups where consumers are located. • Nationally, state, surburban loacation • Includes climatic factors such as rainfall and temperature Psychographic segmentation • Dividing market according to personality traits of consumers. • People’s attitudes and values determine the choices they make about lifestyle, image and how they spend their money. Behaviouristic segmentation • Dividing market according to what consumers do and how they use products. Different behaviours by consumers influence what products they use their usage rates and their customer loyalty Activities • Copy out Fig 10.4 on p.235 • Copy out Table 10.1 • Identify examples of how products have been marketed according to demographic, geographic, psychographic and behaviouristic segmentation. • How would you go about identifying the market for the car in Fig 10.6? Targeting strategy • Undifferentiated strategy: Targets a mass market, ignores segments, one marketing mix appeals to large no. of consumers ie electricity and newspapers • Differentiated strategy: Biz targets segments of market, varies marketing mix for each ie soft drink and car makers • Concentrated strategy: Targets one large recognisable segment of market ie Bridal wear biz hiring out clothing for weddings. • Niche strategy: Targets small segment of market where consumers share unique need. eg Hot Rod magazine Overview of marketing mix • The marketing mix is the combination of the four P’s: Product, price, promotion and place. Businesses control these elements and uses these to reach its target market. Product Price The Four P’s Promotion Position Product • The good or service – Tangible attributes: shape, design, appearance, features – Intangible attributes: after sales service, image, warranties • The Product Line – Similar products offered to appeal to different segments of the market. Product Line example: Coke • Length: how many similar varieties of a product are in the category. eg Coke has over 10 different brands within the soft drink category eg. Fanta, Lift, Mt Franklin, Sprite, • Width: number of different product lines offered by the business. Eg Coke sell soft drinks, but also sell snack foods. • Depth: Slight variations made to one product such as Coke, Diet Coke, Coke Zero, Caffeine free and Vanilla Coke. Other product strategies • Size: eg. Larger volumes for families. • Branding: Brand name, logo or symbol to increase recognition and customer loyalty. Customers are more likely to buy a product from a known and trusted brand. Branding strategies • Overall brand name for all products – Campbell’s Soup, BMW • Using individual brands for each product – Unilever Washing detergents: Drive, Omo, Surf etc. • Unbranded products under generic names sold in supermarkets. Coles “Smartbuy” products. • Packaging: Protect product from damage and tampering, provides necessary information, visibility and differentiation, freshness. • Colouring: Appeal to different segments. Price • Choosing the correct price is a difficulty for many businesses. 4 methods below: • Cost Plus Margin: The cost of production plus a % margin for profit. • Market Price: Price according to the interact between the quantity customers want to purchase (Demand) and the quantity producers are able to supply. Ie if there is a shortage of the product, the price will rise. If there is a surplus of the product, the price will fall. • Competitors Price: Choosing a price that is either below, equal or above that of competitors for similar products. • Discount Price: Reduce the price of stock that is not selling to stimulate demand. Price Setting Strategies • Penetration Pricing: Setting price below competitors to try and increase sales volume. • Market Skimming: High prices for product when little or no competition. Decrease prices when competition increases. Often used with technology products. • Loss Leader pricing: Selling products below production costs in order to attract customers to store or other products. • Price Points: Setting a price at a particular level so it can be compared with other products in the market (in terms of perceived quality). Promotion • Building awareness of the product in the market. • Advertising: (Above the line promotion) – Educates consumers about product and its features. – Above the line promotion: TV, radio, internet, magazines, billboard posters, signs, brochures, direct mail. • Sales Promotion: (Below the line) – Encourage customers to use product. – Below the line Promotion: Coupons, scratch and win, tokens, lucky numbers, free samples, contests, trade displays, in store demonstrations, POS displays, BOGOF sales. • Personal Selling: In store or travelling with aim to persuade a customer to purchase a product. • Public Relations: Building trust and publicising product. – Press releases – Educational kits – Well known experts opinions about product – Endorsement – Sponsorship of events, organisations or people. Develops a positive image (or negative ie Cronulla Sharks) Place • The distribution network that a business uses to make its product available to its target market is the place strategy. • Distribution depends on: – The Business owner deciding how to transport and store finished products. – How many intermediaries (middle agents) to involve in the distribution of the product. (wholesalers and retailers). Distribution can be carried out… • Exclusively - Product only available from the manufacturer or its stores eg. Ikea • Selectively – Available from a few outlets which have been permitted to sell it eg. Sealy Mattresses. • Intensively – Widely available. Being sold in many outlets Producer Consumer Producer Retailer Consumer Producer Wholesaler Retailer Consumer Producer Wholesaler Agent Retailer Consumer