Download of a product? - Muncy School District

Chapter 10
Marketing
10-1 Marketing Basics

After finishing this section, you will be able
to:



Define important marketing concepts
Identify the steps in a marketing strategy
Describe the consumer decision-making process
Understand Marketing


Marketing- organizational function and a set
of processes for creating, communicating, and
delivering value to customers and managing
customer relationships in ways that benefit
the organization and its stakeholders
A complex but key part of every business
Marketing Activities





As a consumer, you are exposed to marketing
activities all the time.
You see or hear advertisements for products and
services.
You see the brand names on packages of food and
clothes
You read descriptions on a company’s Web site
You interact with salespeople at a retail store





There are less obvious but equally important
marketing activities:
Storing products in warehouses and
distribution centers
Moving the products to places where they will
be used or sold
Establishing and accepting credit
Arranging means of online payment



Not all marketing is aimed toward final
consumers
Businesses market products and services to
other businesses
More time and money is spend in business-tobusiness marketing than business to
consumers
Marketing Businesses


All businesses must complete some marketing
activities even if it is not its focus.
Many businesses are directly involved in
marketing.




Marketing businesses include:
Advertising agencies
Market research firms
Transportation companies such as:






Trucking
Railroad
Air freight
Shipping and delivery companies- provide express pickup
and delivery of documents and packages
Financial service companies- issue and manage credit cards
and grant loans to businesses
Wholesalers and retailers- store, distribute, and sell products
Marketing Functions

Marketing activities can be categorized into
seven functions, each of which take place
every time a product or service is developed
and sold.

Product and service management- designing,
developing, maintaining, improving, and
acquiring products and services that meet
consumer needs


Other businesses are involved in product/service
management when they obtain products for
resale
Services are created and provided by the
employees of a service business

Distribution- involves determining the best
ways for customers to locate, obtain, and use
the products and services of an organization

Careful shipping, handling, and storing of
products are needed for effective distribution

Selling- communicating directly with
potential customers to determine and satisfy
their needs

Can be face-to-face, over the phone, or
videoconferencing with a customer

Marketing-information managementobtaining, managing, and using market
information to improve business decisionmaking and the performance of marketing
activities

Includes market research and the creation of
databases with information about products,
customers, and competitors

Financial analysis- budgeting for marketing
activities, obtaining needed funds, and
providing financial assistance to customers


Customers must have the resources to pay for
their purchase
Businesses must receive timely payments to
continue to operate

Pricing- setting and communicating the value
of products and services


Customers must easily be able to identify the
price or they will move on to another product
Consumers want to know they are getting a fair
value for their money

Promotion- communicating information
about products and services to potential
customers


Advertising is done through tv, newspapers,
magazines, radio, direct mail, and the Internet
Other methods include; contests, product
displays, and sponsorships
Checkpoint>>

Why is it important for businesses to
consider/complete each of the seven
marketing functions?
MARKETING STRATEGY


Marketing activities often cost 50% or more
of the selling price of a product.
In order for a company to make a profit,
marketing must be carefully planned.
Marketing Planning






Marketing strategy- company plan that identifies how it will
use marketing to achieve its goals
Developing a marketing strategy is a two step process:
Step 1
Target market- a specific group of consumers who have
similar wants and needs
Many companies try to promote their products to a wide
group of consumers with similar wants and needs.
Focusing on a target market makes it easier for companies to
develop products and services that specific consumers want.



Step 2
Marketing mix- blending of four marketing
elements –product, distribution, price, and
promotion
A successful marketing mix satisfies the
wants and needs of the target market and
provides profit for the company.
Develop a Successful Marketing
Strategy

To increase the chances of developing a
product or service that meets customer needs
and can be sold at a profit, companies adopt a
marketing orientation.



Marketing orientation- considers needs of
customers when developing marketing mix
Business people don’t assume they know
what customers want.
They use research to study customers and
their needs.

Results of the research used to plan marketing
mix to meet customer needs
Checkpoint>>

Why are both steps in developing a
marketing strategy important to the success
of businesses?
UNDERSTAND CUSTOMERS



Effective marketing begins with customers
Many new businesses fail because owners
have an idea for a product but fail to consider
customers and their needs.
If customers do not see a need for a product or
think they have better choices the product
won’t succeed



Businesses can develop products for two
types of consumers:
Final consumers- people who buy products
and services for their own use
Business consumers- people, companies, and
organizations that buy products for the
operation of a business for incorporation into
other products and services, or for resale to
their customers
Consumer Decision Making



Consumer decision-making process- specific
sequence of steps consumers follow to make a
purchase
Both the steps and the sequence of decisions
are the same for all consumers.
The length of time taken to complete the
process and the information used to complete
each step might be quite different from one
consumer to the next.






Steps in the Consumer Decision-Making
Process
1. recognize a need
2. gather information
3. select and evaluate alternatives
4. make a purchase decision
5. determine the effectiveness of the decision
Step 1



If the need is urgent, you will try to satisfy it
right away.
If it is less important, you may put it off or
even ignore it.
If it is a need that has been satisfied before,
you will use previous experience to help make
a decision.
Step 2



People use information to make decisions.
Choose sources that you trust and that provide
information you understand.
Using this information, you will select very
few products that seem to meet your needs.
Step 3

Once the choices are narrowed, you will
compare them to determine if one appears to
be a better choice or a greater value than the
others.
Step 4



Based on the information you have obtained
and the urgency and importance of the need,
you will make a decision.
The decision is usually to buy the product that
is best for you.
The decision may also may be not to buy due
to no satisfying choices or lack of experience
to make a good choice
Step 5

If the product was not what you expected, you
will likely not purchase the product again.
Buying Motives



Buying motives- reasons consumers decide
what products and services to purchase
Emotional buying motives- reasons to
purchase based on feelings, beliefs, and
attitudes
Rational buying motives- guided by facts and
logic
Checkpoint>>

Why is it important to follow all steps in the
consumer decision-making process?
10-1 Assessment

Complete the 3 assessment questions for
section 10-1 located at the end of the packet.
10.2-Develop Effective Products and
Services

After finishing section two, you will know:



Justify the importance of marketing research
Identify the components of a product
Describe how services differ from products
CREATE AND IMPROVE
PRODUCTS




Often products that are identified as new in
advertisements are not new at all.
Some type of change has been made in the product
that may be a major improvement.
The change may also be a minor one that provides
little benefit to the customer.
The business calls the product new to attract the
attention of customers and encourage them to buy.





Totally new products that have never been seen
before by customers are not often introduced.
Most products you use today are major or minor
improvements in existing products.
Example: A CD or MP3 player uses new technology
to store and replay music.
New improvements occur through the development
of new technology or redesign of current products.
Marketing research- finding solutions to problems
through carefully designed studies involving
consumers
Plan Marketing Research







Many types of research procedures can be used to
solve marketing problems.
Each type of research follows the scientific problem
solving process:
1. Define the marketing problem
2. Study the situation
3. Develop a data collection procedure
4. Gather and analyze information
5. Propose a solution


Secondary research- analyzing existing
information gathered for another purpose but
used to solve a current problem
Primary research- studies carried out to
gather information specifically directed at a
current problem
Types of Research Studies




Surveys- gather information from people using a
carefully planned set of questions
Focus groups- small number of consumers take part
in a group discussion
Less structured way of gathering ideas, experiences,
and opinions
Group leader acts to identify areas of agreement and
disagreement and to develop new ideas


Observations- collect information by
recording the actions of consumers rather
than asking them questions
Experiment- presents two carefully controlled
alternatives to subjects in order to determine
which is preferred or has better results


Checkpoint>>
Why is it important to follow all steps in the
Marketing Research Study?
PRODUCT PLANNING

Each part of the marketing mix is important
when you decide to buy a product.
Parts of a Product



Product- everything a business offers to
satisfy a customer’s needs
Basic product- simplest form of a product
Not unique and usually available from several
companies.



Product features- additions and improvements
to the basic product
Options- features offered to customers
Example: When buying a car, features
offered to customers include color, engine
size, manual or automatic transmission.





Brand name- unique identification for a company’s products
Packaging- provides protection and security for the product
before it is used
May make product storage easier.
Example: A new container for ground coffee is created with
indentations that allow customers to pick it up easily with one
hand. This was changed because some customers struggled
with the original container.
Package is also a convenient way to provide information to
customers that helps them make a purchase decision or
explain a product.

Guarantee or warranty- if a product breaks or
does not meet customer expectations, the
company will repair, replace, or provide a
refund.
Product Planning Procedures

New product planning is a costly and timeconsuming process
There are six steps to new product
planning:



idea development- generating new product
ideas is a creative process
idea screening- companies evaluate ideas to
determine which have the best chance to be
successful
strategy development- target market is
studied and alternative marketing mixes are
developed and tested



production and financial planning- the company
develops a production procedure and identifies the
facilities, equipment, and people that will be needed
to produce the product.
limited production and test marketing- if a new
product idea makes its way through the planning
process , a company may produce a limited quantity
to test it on the market.
full-scale production- if each of the preceding steps
is completed successfully, the product will move
into full-scale production and marketing.


Checkpoint>>
What are the components (parts) of a
product?
SERVICES



Services- activities that are consumed at the
same time they are produced
Intangible- having no physical form
Marketers must find a way to describe the
service in understandable ways.




Effective service marketing is done in much the
same way as product marketing; using the two-step
marketing strategy:
Step 1- identify the target market
Step 2- develop a marketing mix that appeals to the
market
In addition to the service itself, the marketing mix
includes distribution, pricing and promotion.





Inseparable- consumed at the same time they are
produced
The person or technology must be available when
and where the customer needs it
Perishable- the availability of a service must match
the demand for that service at a specific time
Cannot be stored for later consumption
Example: If all seats at a concert are filled, no more
people will be able to hear that performance.


Heterogeneous- there will be differences in
the type and quality of service provided
Because people usually provide services at the
time they are consumed, there is less control
over quality than is possible with products.


Checkpoint>>
In what ways are services different from
products?
Assignment

Complete the three 10-2 Assessment
Questions at the end of your packet.
10-3 Price and Distribute Products

After finishing this section, you will be able
to:


Discuss how the selling price of a product is
calculated
Differentiate between a direct and an indirect
channel of distribution
VALUE AND PRICE





When you decide to purchase a product, how do you
determine what to pay?
Do you always pay the price that is marked on the
product by the seller?
Do you compare prices of several businesses to find
the lowest price?
Do you consider how much money you will have
available to spend on other things?
Buyers usually want to pay the lowest price possible
and sellers what to charge the highest price possible.
Pricing Factors




Supply and demand
A product that has a ready supply will have a
lower price than a product with a very limited
supply.
If demand for a product is high, prices will
increase.
Products with low levels of demand will have
comparatively low prices.





Uniqueness
When a product has few competitors because it is
unique, the price will be higher than similar
products.
Age
When products are first introduced to the market,
their prices will be high.
As products age, the price gradually decreases.






Season
Many products are used at a particular time of year
Examples: winter apparel, air conditioners, and
holiday decorations.
These products have high levels of sales for a short
time and then almost no sales for the rest of the year.
Prices will be highest right before and at the
beginning of the season.
Prices will be lower during other times of the year.






Complexity
Highly complex and technical products have higher
prices than simple products.
Products with many features and options will also
cost more.
Convenience
If a product is easily available and the seller provides
a high level of customer service, prices will go up.
Customers expect to pay low prices if they shop at a
large warehouse store that offers little service.
Price a Product



Price- money a customer must pay for a
product or service
The price of a product changes as it moves
from producer to consumer.
The manufacturer sets a price that is paid by
other businesses that will sell the product to
the final consumer.

The price is set by the business following a
formula that identifies the components of the
price:

Selling Price = Product Costs + Operating Expenses + Profit




Selling price- price paid by the customer for the
product
Product costs- costs to the manufacturer of
producing the product or price to businesses to buy
the product
Operating expenses- all expenses of operating the
business associated with the product
These can include; salaries, storage and display
equipment, facilities, utilities, or taxes.



Profit- amount of money available to the
business after all costs and expenses have
been paid.
Gross margin- difference between selling
price and the product costs
Represents the amount of money on hand to
pay for operating expenses and provide a
profit.



Markup
A pricing concept related to gross margin.
Markup- amount added to the cost of a
product to set the selling price.




Markdown
Businesses are not always able to sell products at the
original price.
If customer demand is not as high as projected, the
selling season is ending, or if there is a flaw in the
product, the business may have to take a markdown.
Markdown- reduction from the original selling price


Checkpoint>>
What is the formula for calculating the
selling price of a product?
CHANNELS OF DISTRIBUTION


Distribution- locations and methods used to
make a product or service available to the
target market
Channel of distribution- the route a product
follows and the businesses involved in moving
a product from the producer to the final
consumer
Need for Distribution Channels




In complex economies, exchanges of goods
are difficult due to several differences existing
between producers consumers.
Differences in Quantity
Businesses produce or sell large amounts of
each product to many consumers.
Each consumer needs only a very small
number of products at a given time.





Differences in Assortment
Businesses typically specialize in producing a
specific type of product while consumers want to
purchase a variety of products.
Differences in Location
It today’s global economy, thousands of miles often
separate producers and consumers
Businesses may need to distribute their products to
customers in many countries.




Differences in Timing
Businesses gain efficiency by producing large
amounts of a product at one time.
Some agricultural products can only be
produced at a specific time of the year.
Consumers may want to buy products at
different times than when they are produced.
Channels and Channel Members




Channel members- businesses that take part in a
channel of distribution
Direct channel of distribution- products move from
the producer straight to the consumer
Indirect channel of distribution- includes one or
more others businesses between the producer and
consumer
Channel members may be: transportation
companies, sales organization, or financial
institution





Retailers- final business in an indirect
channel of distribution for consumer products
Offer a range of products at convenient
locations for consumers.
Help consumers select the best products
Provide financing and delivery services
Assist manufacturers by storing, displaying,
and advertising products.


Checkpoint>>
What is the difference between a direct and
an indirect channel of distribution?
Assignment

Complete the two questions at the end of your
packet.