marketing foundations notes

8/2/2019 Marketing Foundations Notes

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Marketing Foundations Notes

Content:- The Role of Marketing- Strategic Marketing & Planning- Market Research- Customer Behavior- Market Segmentation, Targeting & Positioning- Products & Pricing- Distribution Channels & Placement- Integrated Marketing Communications & Electronic Marketing- International Marketing, Compliance & Ethics

Role Of MarketingLecture one FOCUS: Introduction to Marketing & The MarketingEnvironmentTOPICS:

- Marketing exchange- Value- The market- Ethics- Stakeholders- Marketing mix- Marketing environment

- Situational analysisDefinition: The Process of marketing refers to set of institutions andprocesses aimed to communicate and deliver goods and services thathave value and purpose for a range of customers, clients and overallsociety.

Why study Marketing:

The exchange of a product is channeled and is produced through marketing.

Marketing = offering = the way something Is marketed creates a total

product offer i.e. prestige

Companies that are marketing orientated are more financially successful

marketing drives economic growth play a role in stimulating

consumer demand.

Currently in societal market orientation more environmentally aware

e.g. low impact on society

When a business is establishing its marketing plan, needs to distinguish

between needs and wants this is consumer behavior the difference

between the need and want of a customer.

Marketing is constantly evolving in sync to the changes to society,

technology, trends, sociocultural influences -marketers need to be on thecutting edge.


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o In order to understand the changes that are affecting society and the

choices that influence their buyer behavior marketers must

undertake market research.

Marketing EXCHANGE:

The mutually beneficial transfer of offerings of value between the buyer

and seller.

Successful Marketing Exchange:

- Two or more businesses (parties) each with something of value

and is desired by the other party.

- All parties must benefit from the transaction.

- The exchange must meet both parties expectations e.g. quality or

price

VALUE:

A customers overall assessment of the utility of an offering based on

perceptions of what is received and what is given.

o Utility is satisfaction how much happiness the product gives

the customer.

o Value refers to the total offering it evolves continually and is

unique for each individual.

o Value quality/ prices how much satisfaction per dollar.

o Value goes to total offering

The MARKET:

A market is group of customers with heterogeneous (different) needs and

wants.

o Customers purchase goods and services for their own or

other peoples use the one who purchased it but it is not

necessarily the person who will use the product.

o Consumers use the good or service is the ultimate end

user of the product.

o Clients are customers of the products of non-profit

originations

Ethics and corporate social responsibility

Ethics, laws and regulatory bodies and corporate social responsibility.

Ethics:

Set of moral principles, that guides attitudes & behavior.

- Each company are able to implement their own codes of conduct ,

which can effectively guide how they under go marketing practices.

Laws:

- Laws & regulatory bodies govern the conduct of individuals &

businesses in order to ensure that their actions are beneficial or at least


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acceptable to society.

Social responsibility:

- Refers to the obligation that businesses have to act in the interest of the

society, which implementing practices that sustain the current an future

societies.

Stakeholders

Individuals, organizations and other groups that have a rightful interest in

the activities of a business e.g. owners, employees.

MARKETING MIX:

Framework describing the different elements that marketers needs to

consider essential to a businesses successful implementation of a

marketing plan.

ProductPricePromotionPlace

o Product, prices, promotion, place core structure of any

marketing plan.

o Taking a need and turning into a want successful marketing of a

product

o The marketing mix is a interrelated chain -that ensures the successand profitability of a product.

MARKETING ENVIRONMENT:

All the of internal and external forces that affect a marketers ability to

create, communicate, deliver and exchange offerings of value.

Internal within the company things that the business has reasonable

control over.

Strengths and weaknesses are internal factors that positivityaffects the organizations ability to compete in market place.

External outside the business marketers can only seek to influence

the external environment but have no direct control of the people and

behavior THUS through the marketing strategies, mix etc. they AIM to

influence the external environment and there buying behavior towards the

businesses desired product.

The external environment faces opportunities and threats,

which positively and negatively affect the organizations abilityto serve the market.


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Microenvironment industry level - it is not directly controllable by the

organization the microenvironment consists of customers, clients,

partners and competitors.

Competition between microenvironment pure competition,

monopolistic competition, oligopoly, monopoly, monopsony.Macro everything outside the industry customers and clients

marketers must understand the current and future needs and wants of their

target market totally external, beyond the businesses control e.g.

interest rates.

Political forces there are numerous political forces that

influence our marketing decisions the political forces can be

on a local, national or international level.

Economic forces e.g. interest rates economic forces

directly affect how much the marketing budget can be e.g..Princes, level of savings, the level of debt.

Sociocultural forces these are the forces such as beliefs,

culture and behaviors that influence a buyers choice thus the

company dose not have affect over these forces but must

recognize them in order to cater to a certain groups of people.

Demographicsage, gender, race, ethnicity, educationalattainment, martial status e.g. aging population marketing a

supplement for the aging population as it is taking up large

proportions of the overall population in Australia. Technology technology changes the expectation and

behaviors of customers and clients and can have huge effects

on how suppliers work.

Laws/ regulations legislation has direct influence on the

framework of marketing plan businesses and directors must

adhere to the legislation in place for businesses.

Outsourcing transferring an internal function to an external provider

blurs the line between internal and external environments.

SITUATIONAL ANALYSIS:

SA is used to identify the key factors that will be the framework of the

marketing plan.

Marketing metrics:

- Return on investment,

- Customer satisfaction

- Market share- Brand equity awareness, loyalty.


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These are ways to measure the success of the product.

SWOT:

Strength, Weaknesses (internal) Opportunities, Threats (External)

When undergoing SWOT analysis you must remember to relate to the4PS product, place, price, and promotion.

MARKET RESEARCH:Learning Objectives: Define research problem

Discuss the importance of MR as a basis for marketing decision-making. Outline the issues in research design, the role of primary and secondary data,

and the uses of quantitative and qualitative research Understand the key principles of data collection and analysis, and the subsequentreporting of market research findings to inform marketing decisions.

Gathering and discovering information that is in in the interest of the business.Through market research, the business discovers vital information about thetarget market that allows the business to directly market their product to thetarget markets desires.

- Market research needs to be relevant- Its helps solve a problem(Target market groups of customers with similar needs and wants, may sharethe same cultural beliefs, attitudes, needs etc.)

UNDERSTAND CREATE COMMUNICATE DELIVER.

- Market research is an ongoing process as things are always changing thisis evident through technology, sociocultural influences etc.

- Through market research its helps to understand and make decisions on thefollowing influences/ factors.

o Market segmentation

o Sales performance

o Product

o Distribution

o Promotion

o Pricingo Attitudes/ behaviors

MR involves 5 major components:1. Defining the research problem

2. Designing the research methodology how we address the researchproblem e.g. focus groups, survey

3. Collecting data4. Analyzing data & drawing conclusions

5. Presenting the results and making informed decisions &recommendations offering actionable solutions

Key thing asking the right/ relevant questions aim of MR is to offer actionable


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solutions.

MR allows the business to identify trends and consumer trends. With MR you

want to look into the future what might happen key reason for conduction MR.

Before undertaking MR the following factors need to be considered:- Relevance

- Timing- Availability of resources

- Need for new information if you are small medium business and do no havea large funds directed to research secondary information e.g. ABS - can beused to find data e.g. average income in a certain area.

- Cost benefit analysis.

Ethics in market research

Slugging selling under the guise of research.

Fugging fundraising under the guise of research

The Research problem

The research problem is a question that the market research project is intended toanswer.

- A clearly specified research problem ensure that the research will actuallyanswer the question asked of It need to address exactly what is happening.

- MR Brief: A set of instructions & requirements that generally states theresearch problem e.g. the information required, specifies the time frame,budget and other conditions of the project.

Typical MR brief includes:

Executive summary --

Introduction

Background

Problem definition Time and budget

Reporting schedule

Appendices- Despite being a large company e.g. apple hiring an external company is

extremely useful in order to get an objective view.

Research design/ Data Collection & AnalysisThe detailed methodology created to guide the research project andanswer the research question:

Hypothesis a tentative explanation that can be tested when as amythology is a direct question.

Research

Methodology

Info

Exploratory Gathers more information about a loosely defined problem


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Research focus groups, surveys is used for exploratory research.DescriptiveResearch

Solves a defined problem by clarifying the characteristics of

certain phenomena. You have the data set.CasualResearch

Where you are using a hypothesis you can test ahypothesis.

Other Types of DATA SETSPrimary Data Data collected specifically for the cure MR project.Mining Data Processing large data sets - in doing this you can identify

patterns and trends, which are not obvious or even

discernible by observation this is time effective as thereis so much data constantly going around this is a timeeffective method to collect and analyze data that wouldotherwise go undetected.

Secondary Data You can utilize it without the research, cost effective,suitable for small medium businesses.

QuantitativeData

Numerical data surveys are the most common quantitativeresearch tool.

QualitativeData

Research intended to obtain rich, deep and detailedinformation about the attitudes and emotions that underlie

the behaviors that quantities research identifies. this typesof research helps to identify behavioral patterns.

SamplingProbabilitySampling

When studies and surveys are undertaken samples aretaken as the population is to large. The sample comes from aspecified demographic / population e.g. undergraduates.EQUALS Probability sampling e.g. 10/ 100 of Australianundergraduates.

WITH Prob sampling every member of specifieddemographic has a chance of being selected.

Non Probability

sampling

Non probability sampling only takes a certain group e.g.

Sydney undergraduates dose not take a holisticapproach to all undergraduates.

WITH Non Prob sampling no way of knowing the chance ofparticular member of the population being selected.

Survey Pilot Sampling is very expensive THUS businesses usuallyundertaken a survey pilot e.g. send out 50 surveys inorder to see that the targeted group responds well to thesurvey and thus they do not waste resources and funds.

DATA COLLECTION, ANALYSIS, REPORTING- Data must be collected according to the methods specified in the Research

Design- This process can be conducted In house OR outsourced


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- Time & financial resources are limited so budgeting & scheduling need tobe planned and managed to ensure that the most benefit is derived fromthe research investment.

Process: 1. Data Analysis Filtering & organizing collected data

2. Quantitative Analysis the numerical data, is usefultool to make educated decisions. Statistics, based onone, two, or more variables show trends, patters andhelp to support or refute the hypothesis.

3. Qualitative analysis

4. Conclusions state what the data has shown, interms of the original research question/ suggestcourses of action.

5. Recommendations

CONSUMER BUYER BEHAVIOUR- Phycology- Motivation- Consumer, buying behavior processIn comparison to MR which sought to understand consumer, buyerbehavior we seek to understand, why individuals chose certain products.

Why they behave a certain way

Why they have preference to particular brands e.g. iPhones

Central Question: How do consumers respond to various marketingstimuli (marketing mix)?

Consumer behavior Different motivations that are intrinsically linked tothe marketing mix. E.g. might be price sensitive, or time sensitive.


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FACTOR INFLUENCES Further InformationSituational(In thepresent)

Why youpurchase or notpurchase.- Physical- Social

interaction- Time Available- Purchase

motivation

- Consumermood

Situational influences results in the circumstancesa consumer finds themselves when making

purchasing decisions.These influences can be divided into numerouscomponents that are imperative to affectingpurchase behavior:

- Physical At a rugby game

- Social With family VS friends

- Time Running late VS time to ponder

decisions.Once a marketer understands these influences they can strategically place certain things, toaccommodate these situational influences.Purchase Motivation:

- Social influences Having a social drink VSaiming to get drink

- Mood Tense/ Time

Group Set of

Characteristicsthat link us to aparticular factionof society.TWO mainSECTIONS:Cultural- Subcultural- Cultural- Social classSocial

- Reference- Groups- Family- Roles/ status

Cultural:

Cultural factors includes:Tangible factors: E.g. Clothing, foods e.g. GOTHICORIntangible Elements: Such as Laws, religiousbeliefs, ethics, personable beliefs.These elements are constantly evolving and slowly

shifting Which is IMPERATIVE for those studyingC/B behavior as the Target Market, are slowlyshifting through intangible elements which are noteasily recognized. E.g. Laws, personal beliefs. VSTangible influences, which are easily, recognizede.g. fashion trends.

Influences:

Subculture: Group of individuals who sharecommon attitudes, values and behaviors thatdistinguish themselves them from broader culturein which they are immersed.

Social Class:

Similar rank, within social hierarchy it is definedby values, lifestyles, and often by indicators suchas: Income, education.SOCIAL INFLUENCESReference group: any group to which anindividual looks for guidance for.Three types:- Member groups- Aspirational- Dissociative group

Opinion Leader: Reference group member, who provides relevant& influential advice about specific topic of interestto group members. This links to Diffusion ofInnovations.This is a theory explaining the way in whichinnovations are adapted. Opinion leaders


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LEARNING THEORIESThere are two main learning theories:- Behavioral Learning Theory- Cognitive Learning Theory

Behavioral: Stresses the role of experience and reputation of behavior.RELEVANT In: Low cost purchases e.g. every day times, milk.

Cognitive: High-end purchases thought making process = HIGH RISKThe Cognitive learning theory is directly related to the decision makingprocess.

Decision Making Process:

Habitual: Involving small, routine, low risk products.

Limited: limited engagement, infrequently bought but familiar products.

Extended: High engagement high price, high risk, and or/ infrequent,unfamiliar products.AIM: Marketers generally want habitual making process. As this dose NOTresult in comparison-shopping they are just automatically picking yourproduct.

CONSUMER, DECISION, MAKING PROCESS:1. Recognition of a need or want2. Information search3. Evaluation of options4. Purchase

5. Post purchase evaluation6. Cognitive Dissonance.Cognitive Dissonance:This occurs when consumer has second thoughts or doubts aboutoriginal purchase.

A marketerneeds to manage cognitive dissonance if businessesfail to manage this; it acts as critical element in the success of their

product. If CD occurs need to reassure the consumer has made theright decision.

You want to retain customer and loyalty and repeat customers.

Business Buying BehaviorLearning objectives:- Explain the characteristics of different types of business markets- Understand the major issues involved in marketing to business customers- Discuss the characteristics of demand, in business markets- Analyze business buyer behavior and decision-making.

Business Markets: Individuals or organizations that purchase products for

resale, use in the production of other products or for use in their dailybusiness operations.


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TYPES OF Business Markets:

Reseller markets e.g. retail Coles. Supplier Shelves. All the steps betweenthe producer and the consumer are intermediaries. There are often many

intermediaries within the reseller markets.Wholesaler sell to other intermediaries.

Retailers DIRECT to consumers.

Producer markets: Markets in which business organizations purchase productsfor use in the production of other products or in their daily business operations.E.g. buying raw materials, office supplys, professional services.

Government markets:The market fro selling products to national(commonwealth), state (provincial) and local (municipal) governments for use inproviding services for citizens.

These market are subject to extensive rules and regulations which aredesigned to ensure that government businesses are conducted ethically andlegally.

Institutional markets: Usually NGOs in which non-public, not for profitorganizations buy & sell products.

Despite being not for profit they fundamentally have the same structure andrequire the same capital input to set up and run there non profit business.

Marketing to Business Customers:

Two Types for, Business to Business:High value: Businesses purchasing decisions frequently involve very large sums

of money for high value products or high volume purchases.

High volume e.g. Coles High Volume high volume purchases is common inthe reseller market.

Relationships in B-to-B market are extremely important as there are so fewbuyer and sellers in the B-to-B market.

Price Competition & Negotiation:

In the business market, price competition is intense, as price is open to negotiationbased on purchase volumes B to B you have that incentive.

Number of buyers & sellers: there are far fewer buyer and seller in thebusiness market than in the consumer market. This makes long-term stablerelationships crucial and can possibly give some organizations enormous marketpower.

Formal assessment of purchase alternatives: Business customers demand

extensive product information businesses use this information along with price,distributional and promotion factors to compare relative S & W of alternatives.

Ongoing relationships: Close ongoing relationships provide a degree ofsecurity for both parties.


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Demand for Business Products:

Ultimately it is the C (Consumer) in the overall market where the demand comesfrom in the reseller market.

The derive demand comes from the C in the B-to-B market. B-B-C. (Overall thedemand is ultimately being determined and will be affected by change in thedemand from the END consumer).

Derive Demand = C B B (Knock on effect) Derive demand = Demand in thebusiness markets that is due to demand in consumer markets. Derive demand hasa knock on effect at all levels of the value chain.

Fluctuating Demand: Business customers make purchase decisions infrequentlyand based on expectations of:

Long run demand resulting in demand that fluctuates more so than in customermarket.

Deals / purchases are done less often and infrequently in B-B market.

Joint Demand: Interdepend demand for products that are used together in theproduction of another product. That the product is not ready unless all thesecomponents are ready at the same time for the product to be complete. In B-Bmarket especially in manufacturing this is HUGE.Pricing & Demand:

Inelastic Demand not price response / Elastic price sensitive

Inelastic Demand in B-B is then passed onto consumer.

Business Buying Behavior:

Straight rebuy usually for little purchases common goods that businesses

need e.g. paper reliable source of income for suppliers.

Modified rebuy the purchase of a product that is similar, but not identical toone previously purchased after evaluating a small range of alternatives e.g.Windows XP to windows 7.If where B-to-B (Microsoft to UTS) have to modify and see how compatible thenew windows is for C (Students).

New Task Purchase: Never purchased something like this before as abusiness, they are required to do a lot of research. Underlying aim for a new task

purchase is to increase efficiency and PROFIT.

As Marketers you want to introduce something new to the market in a specificmarket. You want to target the business at the top e.g. fast food market you

want to target McDonalds as they are one leading the market and influencingthe others.

Purchasing Decisions:They INVOLVE:

- Negotiation price, supply, agreements, volumes etc.- Description meet your technical specifications- Inspection when description and specification are not enough


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- Sampling a sample may be inspected or analyzed for quality (receivinginspection)

- Buying center collective group of people that make purchase decisions in acompany, larger the company, more complicated this structure gets. ROLESinclude:

o Initiatorso Users

o Influencers

o Decides

o Buyers

o Gatekeepers

Business Decision Process:- Problem recognized by initiator- Research / information search- Evaluation for options- Purchase

- Post purchase evaluation

Internal Environmental factors: - This helps to explain why each organizationsmakes different purchase decisions.

In B-B purchasing need to no who to target when trying to sell your product toB.Factors Include:

- Nature of organization size, location, objectives, resources- Organization structure- Individuals within the organization!! The individual buyers are KEY to when

wanting to target a business to purchase your product. (B2B).

External environmental factors: include macro environment PESTAL:- Political- Economic- Sociocultural- Technological- Legal forces

These are not directly controllable by the organization

Markets: Segmentation, targeting & positioningObjectives:

- Explain the broad concept of market- Understand the target marketing concept- Identify market segmentation, variables for consumer and business markets

and develop market segment profiles- Select specific target markets based on evaluation of potential market


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segments- Understand how to effectively position an offering to a target market in

relation to competitors and develop an appropriate marketing mix.

Market:A group of buyers who have the opportunity, willingness and ability topurchase a product or products.This include:

- Consumer markets- Business markets

o Reseller markets

o Producer markets

o Government markets

o Institutional markets

TARGET MARKETING:Markets have a variety of characteristics, with common needs and wants withinthese common characteristics there is the development of market segments.

This refers to the subgroups within the total market that have relatively similarcharacteristics.

Target Marketing: Refers to the approach of marketing that is based on:- Identifying- Understanding

- Developing an offering for the particular segments.


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TARGET MARKETING PROCESS:

The TM process is fundamental component of the marketing strategy for anyorganization. The process involves three main stages:

1. Segmentation

Identify segmentation variables Profile market segments

2. Targeting

Evaluate potential segments

Select target markets3. Positioning

Determine positioning for each segment e.g. A, B, C

Determine the marketing mix for each segment.

STAGE PROCESS INFO

MarketSegmentat Characteristics that buyers have incommon and that might be closely Geographic SegmentationBased on variables of geography

StrategyMass Marketing - Buyers have common wants, needs and demands

- A single product will meet the needs of the majority with an undifferentiated product.

- Production: Large volumes, at a low cost achieveeconomies of scale and capture large % of market =high profitability.

One to One marketing - Provides a unique, customized offering to meetindividual needs.

- More restricted market higher unit costs- The one to one marketing approach forms basis of

niche strategy.- Example hair dressing.

Differentiated targetingstrategy

- A marketing strategy that involves developingdifferent marketing mix for each TM segment.

- Market Segmentation FORMS BASIS OF TARGETMARKETING.

- Production: entails high costs to achieve highprofit, requires, higher retail prices high marketshare and strong customer loyalty.

Product and MarketSpecialization

Small organizations with limited financialresources, usually

adopt one of thefollowing specializedapproach to targetmarketing.

ProductSpecialization

Market efforts are concentrated on offering asingle product range to a number of market

segments e.g. Nikon pure focus oncameras.

MarketSpecializatio

n

Marketing efforts are focus on meeting widerange of needs within a particular market

segment.Product Marketspecialization

Marketing efforts are concentrated onoffering a single product to a single marketsegment.


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ion elated to there purchasing behavior.

The variables for consumer marketsfall into 4 broad categories:

- Demographic

- Geographic- Psychographic- Behavioral

Effective Segmentation = choosingvariables that are easy to measure &

readily available linked closely tothe purchase of product in question.

- Climate, local population,market density, region, urban/suburban/ rural footprint.

- Combines Demographic &geographic areas to profile a

very small area e.g. suburbs.

Demographic SegmentationBased on variables, which are the vitalsocial characteristics of the

populations e.g., age, education andincome.

- These variables are the mostcommonly used variables formarket segmentation.

Physiographic Segmentation:Based on the psychographic variables

of lifestyle, motives and personalityattributes.

- This segmentation based on theNEED to understand not whoyou are but HOW you live yourlife.

- This is reflected in hobbies orchoice of entertainment.

- In contrast to demographicsalone this variable seeks tounderstand consumers by

identifying their mindsets andhow this is expressed in theirlifestyles.

Behavioral:

In contras to the above variables this segment is NOT based onconsumer characteristics; it is based onACTUAL PURCHASE / and orconsumption behavior.

Therefore better indicator on marketsegments and their purchasingbehavior in comparison to

generalized consumer characteristics.

Variables include:- Benefit expectations- Brand loyalty- Occasion- Price sensitivity- Volume usage

Segmenting Business Markets (Continued from Segmentation)As a business markets are often characterized by a small number of buyers who might

display a very close relationship with the seller, customized or one to one marketing isa good approach to use.


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- Business marketers isolate business customers by using commercial/ industrialdirectories that contain detailed information on companies.

Effective Segmentation involves ensuring:

- Measurability abstract variables can be difficult to measure- Accessibility through distribution and communication channels

- Substantiality the segment must be sufficient size to allow profitability- Practicability segments are only of use if they can be identified and serviced- Stability segment stays stable & long enough for the marketing strategy to produce

results.

Market Segment Profile:Market Segment profile refers to the description of the typical potential customer in themarket segment (i.e. the common variables shared by members of the MS and how thevariables differ between segments).

- Market segments must be different from each other for a distinctive offer to becreated for each segment.

- Otherwise this will create overlapping segments or send confusing images andmessages do not want to confuse the consumer.

2.MARKETTARGETING

The selection of target marketsresulting from a evaluation ofidentified market segments.

Segmentation Targeting (evaluate

segments then select) Positioning.

Evaluating Potential Segments:Involves analysis of sales potential,the competitive situation and coststructure.

Market Potential: The total sales ofa product category which allorganizations in the industry are

expected to sell in a period of time,assuming a specific level f marketing

activity. Maximum possible sales inthe total market of the productcategory.Sales Revenue:Total Vol of Sales Xthe average selling price. The total Volof sales is determined by marketshare.Market Share:The proportion of thetotal market held by an organization.

Company Sales potential: Anestimate of the maximum salesrevenue and market share that anorganization can expect to achieve fora specific product. The potential is

influenced by the market potential Level of marketing activity, and theeffectiveness of orgs promotionalspending.

3.

POSTIONING

Refers to way to in which the market

perceives an organization, its productsand its brands in relation to

Organization can peruse positioning

for following reasons:- How it, as whole perceived In


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competing offerings.

The organization must determinehow offer is positioned in the mindof each of it target market segments

and develop its marketing mixaccordingly.

The crucial fact is how thepotential buyers see the brand thisrequires the organization to undertakequalitative and quantitative researchto obtain an accurate understandingof the position it occupies in the mid ofits target customers.

relation to competitor.

- How its brand are seen focusing on distinguishingbrand attributes e.g. BetweenMac Books

- How the market distinguishesits offering firm those closelycompetitive brands.

Brand positioning:A positioning strategy designed tocreate a market perception of aparticular brand, usually based onproduct attributes.

(Look at picture)

Correlates b/w high-perceivedquality and status, related to

extensive personalized services. Low perceived quality and statuslinked to limited service and lesspersonal.

When the knowledge of the optimal

practicable, positioning of our brand the final step with the TM process itto determine appropriate marketingmix for each target market segment.

PRODUCTObjectives:

- Define product and understand different ways to view and analyze products- Describe the product lifecycle, new product development and the product

adoption process

- Outline how an organization can differentiate its product to obtain acompetitive advantage

- Explain how the value of branding and the major issues involve in brandmanagement

- Describe the functional and marketing roles of packaging- Explain key aspects of product management and positioning through theproduct life cycle.

A good service or idea offered to the market for exchange.

Good Tangible

Service Intangible

Idea concept / Philosophy

Total Product Concept:Describes the CORE productFour layers:

- Core basic function


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- Expect expected result the simple expectations/ result of the product- Augmented something that you might get, however not expected this is

a positive- Potential things that might be in the future release however not in the

present.

Once you get down to the augmented and potential product differentiation startsto come into play.

Product:

Product item: particular version of a product

Generalize that toProduct line: A set of product items that are related by characteristics, such as end

use, target market, raw materials. Bigger spectrum:Product Mix: The set of all products that an organization makes available tocustomers.

They are all a subset of one another within the product mix.

Consumer Product:Those products purchased by individuals and households for their own privateconsumption.

Types:

- Shopping products e.g. washing machine- Convenience products (fast moving consumer goods) e.g. milk There are

substitutes of these products

- Specialty products e.g. Ferrari- Unsought products e.g. emergency situation

Depending on the type of product the frequency of purchase behavior changes:

- High involvement Low Frequency e.g. Specialty products- Low involvement High frequency e.g. convenience products

Business 2 Business productThose products purchased by individuals and organizations for use in the

production of other products or for use in their daily business operations.

TYPES:

- Part and Materials B2B products that form part of the purchasingbusiness products

- Equipmen t Capital equipment and accessory equipment used in theproduct of the businesses products.

- Supplies and services B2B products that are essential to businessoperations do not directly form part of the production process.

PRODUCT LIFE CYCLE:Refers to the typical stages a product progresses through:

- New Product Development- Introduction


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- Growth- Maturity- Decline

New product Development:- Idea generation- Screening- Concept Evaluation- Marketing Strategy

- Business Analysis Here the product is killable- Product Development- Test marketing- Commercialization

PRODUCT ADOPTION PROCESS

- Awareness With the explosion of mass media, it now commonly used to

create interest and buzz about products.- Interest- Evaluation- Trial- Adoption

Diffusion of Innovations This is the theory that social groups, influence thedecisions that individuals make in such a way that innovations are adopted by themarket in a predictable pattern over time.

These are used in the PA process to gain momentum for the product.

2.5% Innovators13.5% early adaptors

34% Early Majority

34% late majority

16% Laggards

PRODUCT DIFFERENTIATIONThe creation of products and product attributes that distinguish one product fromanother, this starts to take place at the augmented and potential layer of the

product.

ISSUE: If you differentiate your product to much

the consumer becomesconfused. Which forces them to look at the price attribute of the marketing mix and purchase what eve is cheapest. This is a NEGATIVE.

BRANDINGThe collection of logos, slogans, and design. Which is intended to create an imagein customers mind, that differentiates their product from the competing market.Brand Image The set of beliefs that a consumer has regarding a particular

brand.

Brand Name Part of the brand that be spoke, including words, letters, andnumbers.

Brand Mark The part of the brand NOT made up by words, it consists ofsymbols or designs.


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Trade Mark A brand name/mark that has been registered secure exclusiveuse of brand.

Brand equity Added value that a brand gives to a product.Brand Loyalty Customers highly favorable attitude and purchasing behavior

towards a brand.

BrandMetrics: Measure the value of brands and include:- Brand assets- Stock price analysis- Replacement cost- Brand attributes- Brand loyalty

IndividualBranding

A branding approach in which each product is branded

separately Most popular.FamilyBranding

A branding approach that uses the same brand for several of theorganizations products. E.g. Arnotts

BrandExtension

Giving an existing brand name to new product in a differentcategory e.g. BMW making 4WD.

ManufacturerBrands

Brands owned by producers and clearly identified with theproduct at the point of sale.

Private LabelBrands

Brands owned by resellers, such as wholesalers or retailers andnot identified with the manufacturer.E.g. Home brand

GenericBrands

Products that only indicate the product category.

- working off price target hose who are price sensitive lookat price.

Licensing The brand owner permits another party to use the brand on itsproduct.

Franchising Agreement to use an establish business model.

Benefits:- Coordinated promotional activity- Reduced risks and effort.

Co-Branding Use of two or more brand names on the same product.PACKAGING

Packaging of a product can be essential to create free promotion creating

awareness through people having stylish, innovative, fresh packaging. used todifferentiate product.Labeling - Part of the package

- Provides identifying, promotional, legal and otherinformation.

EXISTING PRODUCT EXPANSION:

Line extensions Taking existing product/ item, placing a new twist on it e.g. VBpale AleIn contrast to:

Brand expansion: Where you are moving into a new product category youdo this when you want to invigorate the brand.

Product Modifications: Changes to the characteristics of a product that results ina product that supersedes the original. The main are:

- Functionality- Quality


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- Aesthetics.POSITIONING

Product positioning is achieved through altering the product and overallmarketing mix e.g. new product, new price, new promotion.

PRICE

- Understand the objectives that guide pricing strategies- Analyze demand to inform the development of an appropriate pricing

strategy- Describe the principles of pricing based on costs- Explain the role of competitive analyze in determining pricing- Appreciate the issues involved in pricing for business markets- Understand how to manage prices as part of the marketing mix.

Price most flexible out of all components

It is the most important, out of the marketing mix.

Price = value that the buyer gives in exchange for the product in a marketingtransaction. It is the major determinant of sales volume. It is directly related to

profitability.

PRICING

Price can be indicative of the true quality of the product -- > however this is notalways true e.g. higher price, higher value.

Buyer Benefit Satisfaction derived from the consumption or ownership of theproduct.

Seller Benefit The revenue the sale derives.

Pricing how you manage the price e.g. different pricing across differentgeographical locations e.g. City VS the suburbs.

- When a product is regarded as homogenous the only thing you can

compete on is pricing. Businesses do not want to get stuck onthis.

PRICING OBJECTIVESDetermining price objectivesShould be:

- Specific- Measurable- Actionable- Reasonable- Timetabled

Profits

Generated when total rev exceed total costs. Prices must exceed costs.

Want Return on investment.


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Objectives:Tend to focus on the following issues.

- Profitability Profit VS Profitability this is referring to the long-term price in such a way that ensures long run profitability not just a short-termprofit.

- Long term Prosperity- Market Share- Positioning

o Prestige pricing Very important for positioning charging an

artificial higher price create prestige around the product onlycertain sections of society can afford it. This is not driven by theforces of supply and demand they are targeting those can affordthis higher artificial price.

Not for Profit Pricing:

- While not for profit pricing organizations do not seek to make profits theydo seek a return on their activities and many charge for their products.

- There OBJECTIVES INCLUDE:o Generating enough funds to sustain activities

o Make products/ activities appealing to TM.

o Encouraging a change in attitude or behavior among a TM.

The legal Environment includes areas subject to legal restrictions:

- Essential services these are regulated e.g. Monopoly monitored byGovernment e.g. Australia Water.

- Misleading and deceptive conduct Bait and Switch (Come in for acheap product, and switch it for more expensive product they really

never intended to sell you the cheap car this is illegal.

-Price Collusion When companies get together to set the prices act asa monopoly so then they set the price within the market = illegal.

- Price Discrimination B2C Market this is legal Price Discriminationis not allowed in B2B market it is illegal.

- Comparability and clarity of pricing.

Government sometimes, intervene in markets to control prices (e.g. medicalcare).

Trade Practices Act (Australia) and Fair Trading Act (NZ) Prohibitdeceptive advertising.

Selling the Pricing Method:Pricing decisions should be based on an understanding of the customer and shouldreflect the value of the product to the customer.

- Pricing needs to consider INTERNAL AND EXTERNAL factors.- Prices need to appeal to target customers.

DEMAND CONSIDERATIONS

Demand =The relationship between the price of a particular product and thequantity of the product that consumers are willing to buy.

Demand Based Pricing:

Have to look at the pricing through each segment.This is an approach to pricing, in which prices are set based on the level of


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demand within the market.

SUCCESS depends on orgs ability to predict fluctuations in demand.

Peoples response to different prices create segments within the market =price sensitive = elasticity.The demand schedule and demand curve:

LOOK AT SLIDE Insert notes

Demand Curve = the other three Ps are still embedded in However thedemand curve only reflects the price in relation to quantity.

When price is low with prestige products the prices go low, as it is toocommon.

Not responding to the product/ price = inelastic this occur to needed common

goods e.g. water/ toothpaste you are going to purchase it, regardless of price.

Increasing price

goes along the curve

if the curve shifts

changing otherPs.

Inelastic Not really responding the product is inelastic to changes of the pricewithin the market happens with / specialized and common goods.

Elastic Very responsive to price changes Luxury goods

This is very important when businesses cant cover costs generally respondthrough increasing prices if they Elastic they could further alienate their

consumer base the right decision could be to lower the price to increaseconsumer base.

COST CONSIDERATIONS:The cost mix include:

- Fixed costso Do not vary with changes in output

- Variable Costso Do not vary with changes in output.

- Marginal Costso Additional or one more.

o Variable costs expressed in cost per extra unit of production. Shelling

out money VS how much is coming in.- Shared Costs

o Costs shared across products.o However this is not even.,

- Price Floor

o Price floor Cannot go below a certain price.

o A minimum price that must be charged to cover cots.

o While a business may sell at a loss for a short time, it cannot

maintain this approach.Low prices may generate high sales volume, but may conflict with high quality differentiated positioning.

In relation to the product life cycle the price will change within differentstages. Mature Stage sales and profits are beginning to decline prices will

need to be lowered in order to keep sales this is when outsourcing comes intoplay in order to reduce manufacturing costs, allowing them to charge low price.


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- Price Leadero A high volume product priced NEAR cost to attract customers into the

store. Where it is expected they will buy other normally pricedproducts.

o

Trying to get you in.o Not making any profit not losing.

- Loss Leadero High volume product priced BELOW cost to attract customers into the

store, where it is expected they will buy other, normally priced,product.

WHY: Because in general people buy bundles of goods thus they use thesepricing strategies in order to get people into the store at the first place thenattract people to other normally priced or higher priced products.

E.g. leading you in with the milk as they assume you are going to buycomplementary products e.g. cereal which could be priced higher then, normal

with the milk being a loss leader. THEY DO this through PLACEMENT /LOCATION put it at the back of the store advertisement at the front, product atthe back so they have to walk through the store.

Evaluating cost structure requires a detailed understanding of relationshipsbetween price, demand and costs and the link to profits.

- Break Even Analysiso Need to find out before they go to produce the product that will

they even make enough to cover all costs they need to do thisthrough market research. How many do they need to sell to evenbreak even.

o An analysis designed to estimate the volume of unit sales required, tocover total costs.

o Important to test price and volume sensitivity.

- Contribution Margino Different between the price and the variable cost per unit.

- Marginal Analysiso An Analysis designed to determine the effect on costs and revenue

when an organization produces and sells one more unit of theproduct.

Look at Slides

TYPES OF PRICING

Pricing can be based upon:

- Costs including profits and margins- Demand- Competition

Cost Based Pricing:An approach to pricing in which a % or dollar amount is added to the cost of theproduct in order to determine its selling price.Can be:

- Cost Plus Pricing

- Mark Up Pricing


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Competition Based Pricing:An approach to pricing based on prices charged by competitors or on the likelyresponse of competitors to the organizations prices.

This is undesirable unless seller has cost advantage, which arises through:

- Economies of scale as the amount of units produced increases the cost

to produce each unit decrease.- Low cost production- Price competition can result in Price Volatility e.g. Petrol Retailing- Price Wars can break out as Competitors try to match low prices.

This can ultimately force weaker competitors form the market. This is theworst possible scenario for businesses as businesses are cutting prices allthe way to floor where costs are not being covered.

- In Developed countries long term price competitors can create oligopolies.

COMPETITON CONSIDERATIONS

OligopolyWhere the market is dominated by a small number of large suppliers.

Look at slide, for the rest.

You dont want to make pricing the fundamental way of your marketing

strategy marketing of last resort. You really want to differentiate your product

in terms of promotion, place, product. As you can easily change price howeverit is much harder for other.

marketing foundations notes

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