Download Higher Business Management

Higher Business Management
Unit 2
Learning Outcome 2
Marketing
BM Unit 2 - LO2
1
The Marketing Topic
This is probably the most
important topic in Higher Business
Management. Do as much reading
on it as you can and arm yourself
with as many up-to-date examples
of marketing as you can!
BM Unit 2 - LO2
2
Marketing
“The process involved in
identifying, anticipating
and satisfying consumer
requirements profitably”.
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Marketing
Identify
 Anticipate
 Satisfy

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Identifying Consumers’
Requirements

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

What do they want? Consumers
must buy products and continue to
do so
Fierce competition and consumers’
expectations mean that products
must be constantly updated and
altered to suit
Other factors - price, quality,
prompt delivery, attractive
packaging and after-sales service
Advertising and promotion play a big
part
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Anticipating Consumers’
Requirements

What do they want today?

What do they want in the future?


Trends must be considered to
anticipate future needs
Volatile markets - fashion, toys,
technology (mobile phones, computers,
etc)
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Satisfying Consumers’
Requirements
“The customer is king!”


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Businesses must be customerfocused
No customers
no business
Must offer - good service, quality
products, value for money, prompt
delivery, good after-sales service
(eg returns), well presented and
packaged goods, at the right
price and available at the right
place
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The casualties of not
adapting to the market


The American car industry
The British motor cycle
industry
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Marketing Successes

Swatch

Easyjet and Ryanair
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Marketing a Strategic Activity

Inception/design

Price

Distribution

Selling and promotion

After-sales services
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Assessment of the Market





Where are the consumers of
the product?
How many consumers are
there?
What are their attitudes and
preferences?
How effective are the
distribution methods?
What are the strengths and
weaknesses of competitors?
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Product-led Product Orientated

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
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Putting a product on the market
without prior market research
Assumption of best available and no
real competition
Often new inventions like Dyson
vacuum cleaners or Playstation 2
A risky approach which can fail British motor bikes
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Market-led Customer Orientated



Considering what the customers
want before putting a product on
to the market
Competition has led to companies
focusing on the needs of the
customer
Also looks at the influences on
purchasing decisions
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Marketing Products and
Services



Consumer goods
Industrial goods (capital
goods)
Services (intangible)
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The Marketing Environment
Consumer trends and behaviour
Competition
Government
THE MARKET
The economy
Technology
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Branding

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Branding distinguishes a product
from its competitors
Instantly recognisable by
consumers
Often linked to quality and
reliability
Can command a premium price
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Unique Selling Point (USP)


Try to identify
the USP of each
of the products
listed opposite
Think of how they
are presented to
you in the
advertising you
see daily on TV, in
newspapers and
magazines

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Coca Cola
Nike
Kit Kat
Sunny D
Skoda Cars
Mercedes
Cars
Baxter’s
Soups
Fairy Liquid
Finish
(dishwasher tablets)
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Own Brands



Products branded
with the name of
the store selling
them
Most of the big
supermarkets
(Tesco) and chain
stores (Boots)
have their own
brands
Often cheaper
alternatives to
branded goods

Make a list of
as many “own
brands” you can
think of.
Indicate which
branded
product they
are designed to
rival
Eg “Wheat
Bisks” by
Safeway to
rival
BM Unit 2 - LO2 “Weetabix”

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The Marketing Mix
Product
Price
Promotion
Place
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Product/Service

Core


Actual


Augmented

The basic product - eg
toothpaste cleans teeth
The way the product is
presented - design,
brand name, packaging,
etc (Colgate toothpaste
- red packaging)
Additional features protection against
decay, fresh breath,
attracting the opposite
sex, etc
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The Product Life Cycle
£000
Costs/Sales
New
Idea Product
Launch
Youth
Growth
Maturity
(Saturation)
Decline
Death
Time
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Extension Strategies
To stop the product from entering the
decline phase, companies often try
some of the following extension
strategies to prolong the life of the
product.
Extension Strategies

Improve the product;
Manufacturers will often produce, what
they claim to be, new and improved
versions of their products.
Extension Strategies

Change the packaging;
To appeal to a different market
segment.
Extension Strategies

Change the channel of distribution;
e.g. the introduction of internet
shopping.
Extension Strategies

Change product prices;
Extension Strategies

Change the promotional activities;
Extension Strategies

Change the use the customers have for
the product;
Extension Strategies

Rebrand the name of the product;
A name change can generate
considerable publicity and new appeal.
Extension Strategies

Produce line extensions;
The Product Mix


A firms product mix or product portfolio
is the range of products that it
produces.
Proctor & Gamble have a product
portfolio that includes -
The Product Mix

By identifying the stage in the life-cycle
of each of their products, a business
can plan when to introduce new
products as old products go into
decline.
The Product Mix

Most firms have a range of products in order to
spread risks. If a firm only produced one product and
it failed, the firm itself would fail. A wide range of
products can meet the needs of different market
segments, increase profits, and raise the profile of
the firm to become market leader.
The Product Mix
The Product Mix

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Very few companies have only one
product
Some companies have a range of
related products eg Proctor &
Gamble
Some companies have totally
unrelated products in their
product portfolios eg Virgin Group
It is important that you have new
products being launched to replace
products going into decline in your
“Product Mix”BM Unit 2 - LO2
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Product line

The product mix may contain product
lines. These are groups of products that
are similar. e.g. Proctor & Gamble hair
products.
Branding

A brand is a name, symbol, design or
combination of these given to a product
or products by the producer which is
intended to identify the goods
produced.
Own labels/own brands

An own label/own brand refers to a
retailer’s own product which may be the
retailer’s own name such as;
Product Innovation

Generating an idea

Analysing the idea

Producing a prototype

Test market

Adapt product to solve problems

Launch the product
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Pricing Strategies

Low-price strategy
in a market with strong
competition

Market-price strategy
petrol – matching competitors

High-price strategy
up-market, exclusive image
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The Price of a Product?


The price of a product is one of
the main factors in buying that
product. Too low a price could
give the impression of poor quality
and too high a price may not give
the feeling of value for money
Price is influenced by:- the
product being new, what
competitors are charging, the
product’s stage in its life-cycle,
the selling location, the market
segment and many other factors
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Short-term Pricing Tactics
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Skimming – high initial price for
max profit
Penetration – low initial price for
new product
Destroyer – eliminating the
competition (‘Go’ and
‘EasyJet’/’Ryanair’)
Promotional – lowering prices for a
period to ‘promote’ more sales
Demand-oriented – charging
different prices according to the
level of demand eg cross-channel
BM Unit 2 - LO2
ferry fares in summer
42
Place - Distribution Channels
Producer 1
Producer 2
Producer 3
Consumer
Retailer
Wholesaler
Consumer
Retailer
Consumer
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Channel of Distribution
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The Chanel of Distribution chosen depends on a variety of
factors, such as;
The product being sold
The finance available to the organisation
The reliability of companies in the chain
The desired image of the product
Government Restrictions
The product’s life-cycle
The manufacturer’s distribution capability
Methods of Direct Selling
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Internet
Mail Order
Direct Mail
Newspaper/magazine selling
Personal selling
The Wholesaler Function
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Buys in bulk from producers (low
transport costs) and sells to
retailers in smaller quantities
Bears stock-holding risk
Offers a wide variety of goods in
small quantities
Packages and labels goods
Offers advice to both producers
and retailers as to which goods
are selling well
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The Retailer Function
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Breaks down bulk to quantities
consumers wish to buy and store
at home
Provides information to consumers
through advertising, displays and
trained staff
Stores a variety of goods, displays
them and marks on prices
Offers range of related services credit, HP, after-sales service and
delivery
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Types of Retailer

Independent - convenience stores, corner
shops

Multiple Chains - M&S, Dixons, Boots
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Supermarkets - Tesco, Asda, Safeway, etc

Co-operatives

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Department Stores - Jenners, Harrods,
Selfridges
Franchises - Benetton, Body Shop,
McDonald’s
Others - mail-order, internet, directresponse advertising, telephone and TV
shopping channel
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Promotional Strategies
Three main aims:


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Persuading - to purchase the
products
Informing - telling consumers
about the product
Reminding - that the product
still exists
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Two Main Types of Promotion
Above The Line
 TV and newspapers to reach mass
audience
 A lot of waste
Below The Line
 Directly controlled by the
business
 Sales promotion, direct mail,
trade fairs - targeted consumers
who may be interested
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Promotion includes



Advertising
Into and out of the pipeline sales
promotions
Public Relations
Advertising

Informative Adverts: used to
increase awareness of the
product/service and to inform the
customer about the product/service
Advertising

Persuasive Adverts: used to persuade
customers to buy a product,
emphasising it’s desirability!
Advertising

Product Endorsement: when
celebrities are paid to wear and use a
companies products.
Advertising

Product Placement: when a firm pays
for it’s product to be used in films or
T.V. programmes.
Advertising Decisions

The effect on Sales?

The target market?

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Why do the consumers NOT buy the
product?
Which is the best medium to use?
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Types of Advertising Media
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Print - newspapers and
magazines
Broadcast - TV, radio and
cinema
Outdoor - billboards, posters,
etc
See Leckie&Leckie p70+71 for adv &
disadv of different types of media
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Choosing Advertising Media?
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The product to be advertised
The market segment to be targeted
The type of coverage required (national or local)
The budget available
How competitors approach advertising
How technical the product is
The size of the organisation
Legal restrictions (e.g. tobacco products cannot be
advertised in Britain)
The Advertising Standards
Authority


The ASA is the organisation that
monitors all advertising, sales,
promotions and direct marketing.
Remit covers; newspapers, magazines,
billboards, text messages, internet
banner adverts, radio and T.V.
The Trades Description Act
(1968)

This Act states that a product must be
advertised in an honest way which is
not misleading to consumers.
Two Main Types of
Sales Promotion
Into the
pipeline


Enhancing
sales to trade
outlets
Helping
retailers to
sell to their
customers eg
displays,
posters,
videos, etc
Out of the
pipeline


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Helping to
persuade
customers to
buy from
retailers
Providing free
samples, a
percentage
extra free, 2 for
1 offers, moneyoff coupons, etc
61
Public Relations (PR)

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Improving the image of the
product and organisation
Supporting and promoting a
charity
Sponsoring sporting or cultural
events
Product endorsement by
celebrities
Press conferences and press
releases in times of difficulty or
when good publicity can be
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obtained
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Extending the
Product Life Cycle

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Changing the product - size, colour,
taste
Providing variants - Mars: funsized, yoghurt, ice cream, minisized, giant-sized
Altering the packaging for
different market segments
Altering the channels of
distribution
Changing the price
Special promotions - offers, gifts,
competitions
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Market Segmentation
“Breaking down of markets into sub-groups
that can be targeted with a specific marketing
mix.”
Advantages
 Seller can meet buyers’
requirements
 Advertising can be focused - less
wasteful
 Expertise developed for a specific
market
 Higher sales
 Increased profits
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Methods of Segmentation
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Age
Gender
Socio-economic grouping
Education level
Income
Religion
Residential area
Lifestyle preferences - hobbies,
politics
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Market Research Definitions
“Market research is
the systematic
gathering, recording
and analysing of data
about problems
relating to the
marketing of goods
and services.”
BM Unit 2 - LO2
“Market
research is the
means by which
those who
provide goods
and services
keep themselves
in touch with the
needs and wants
of those who buy
these goods and
services.”
66
The Need for
Market Research

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Predict changes
required in its
product/service
Identify what is
selling
Identify who is
buying the
product/service
Explain what is
happening in the
market
Investigate possible
courses of action
Identify the size of
the market





BM Unit 2 - LO2
Discover what
consumers think of
the product
Discover what
consumers are
willing to pay
Discover if a
promotion is
appropriate
Discover if the
packaging is
appropriate
Identify what
competition exists now and in the
future
67
Methods of Research Primary
Primary data is gathered by field research
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Personal interview
Focus group/group discussions
Telephone survey
Postal survey
Consumer Audit
Hall Test
EPOS
Observation
Test Marketing
(see Leckie & Leckie for Adv & Disadv)
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Market Research Secondary
External Sources
Internal Sources
Sales figures

Stock figures

Accounting
records

Customer
comments

Sales reps reports

Market research
data gathered
previously
(for Adv & Disadv
see Leckie &
Leckie P30)




BM Unit 2 - LO2
Government
publications - social
and economic
trends, annual
statistics,
population census
Competitors’ data annual reports,
promotions, price
lists, web sites
Newspapers, trade
magazines, Mintel
(research org), etc
69
Sampling



Random sampling
Stratified random sampling
Quota sampling
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ICT and Market Research

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

Databases compiled by
research agencies
Electronic point of sale
information (EPOS)
Supermarket loyalty cards
Stock control software gives
sales breakdown
Web sites - customers can email comments back to the
company
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Problems with
Market Research



Sampling Bias - small sample can give a
wrong impression
Human Behaviour - opinions change
rapidly
Interviewer Bias - leading questions
may be asked
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