Unit 2

Topic 1 - Marketing

Promotion• Internet• Advantages and disadvantages

of e-commerce• QR codes• Social Networks• Deal of the Day• Apps• Text Messaging• E-mail advertising• On-line ratings• YouTube• Other Advertising methods• Special offers• Celebrity endorsement• Ethical MarketingMarket Research• Field/Primary research• Costs/benefits of field research• Desk/Secondary research• Costs/benefits of desk research

Functional ActivitiesCustomers• Market Growth, Market Share, Mark

et Leader• Market Segmentation• Target MarketProduct• Product Development• Risks involved• Product Mix• Product Lifecycle• BrandingPrice• Factors affecting price• Pricing StrategiesPlace• Location Factors• Distribution Channels

Areas Covered – click on topic to revise

Functionalactivities

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There are four functional activities of a business

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What is marketing

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Marketing involves trying to meet the needs and wants of customers by finding out what they want and providing it at a price that can make a profit.

In large organisations, marketing will be done by a the marketing department. In small organisations it may be done by the owner, along with many other tasks.

What is Marketing?

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What is a Market?

Outdoor market Shopping mall High street shop Ice-cream van Housing market Banks/mobile banks Through an app

Mail order

Dispensing machine

Door to door eg Avon

Telephone sales

TV shopping channels

Internet – e-commerce/e-business

A market is where buyers and sellers come together.How many different types of markets can you think of?

If people buy products/services in quantity, there is a market. A market requires buyers and sellers

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• It can attract new customers by letting them know about the range of products the business has

• It can allow the business to enter new markets (eg using the internet to sell a product on the other side of the world

• It can help the business grow

• It can increase the amount of profit a business makes

Why is Marketing Important?

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Marketing can help a business grow it’s number of customers – Market Growth.

This increases the proportion of customers it has from the market – Market Share

If they have more customers than all other providers, they are Market Leaders

Market Growth, Market Share, Market Leader

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UK Supermarket Market

share

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Sex/Gender – eg Male/Female – products directly produced for females or males

Age – eg Pampers, teenage magazines, SAGA holidays

Income/Social class -

eg people who can afford the latest gadgets when they first come onto the market (socio-economic groupings A, B, C1, C2, D and E)

Where they live -

eg garden centre who specialise in plants for the local area (weather/soil).

Religious or cultural belief –

eg Halal meat (speciality butcher for beliefs and religion)

Lifestyle – eg into sport/fitness

Occupation - eg - Stethoscope

Market Segments

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Target market

A target market is the group of people that a business thinks are the most likely to buy their good or service. Consider:

Since you are not old enough to drive, you are not the target market for car manufacturers

You do phone a lot so you are a target market for phone providers and manufacturersReturn

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Why?

To make sure the product is suitable and meets the specific needs of a customer group

Make sure it is sold where those people will see and buy it

It is priced so that it reflects the target group

To use the correct advertising and marketing strategyReturn

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How do we define or describe a target market?

Marketing use different things to group people. Often, the product will be targeted towards a segment that is made up of different types.

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Marketing mix

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ProductThis is the good or service which is sold on the market

The product must be what the customer wants – market research helps with this

PriceThis is how much a business charges for the good or service. Different pricing strategies can be used

The price must suit the customer. If competitors prices are lower, customers will buy from them. Price should reflect quality

Promotion

This is how customers are told that the product exists and are encouraged to buy it

The product must be advertised so customers know about it. Promotion encourages customers to buy

PlaceThis is the way businesses make the product available and where it is sold

The product must be accessible often via different places eg websites, shops, apps, TV

The Marketing Mix

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Marketing mix -

PRODUCTReturn

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To succeed, all businesses must attempt to be ahead of their competitors.All businesses must be aware of:

developments in technologydevelopment in their own marketchanging needs and wants of the market

To do this they need to invest time and resources in order to come up with new ideas (ie to be innovative).

Billions are spent each year on product developmentReturn

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Have a look at these videos of product development …

dyson

toothpaste

transit

mobility aid

snowboard

google

food

Burrs!

Note – some of these products are completely new, others are changing/improving to remain

competitive

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Stages in Product Development and Research

Market Research

Carried out to find out what the customer wants

Ideas developed, either from extensive scientific research, from identifying a market through market research or through ‘brainstorming’ sessions

Prototype or development

lab experiments or production of a model may be necessary, designs have to be shaped and altered and perhaps even some preliminary testing undertaken.

Test marketing

stage where the product is tested on a representative sample of consumers. This results in useful feedback and hopefully reduces the risks of failure when the product is finally launched

Changes Based on feedback received from testing the prototype

Method of production

Has to be decided, eg mass production?

Price Price charged will have to be decided

Place Decide where the product will be sold

Promotion Types of promotion to be used will have to be decided

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http://www.mackies.co.uk/

video Mackie's Vision

is to be a global brand from the greenest company in Britain created by people having fun.

The main elements in our vision are•to build our brand and increase export (which includes England and the rest of the world), • to look after our environment  and continually reduce our carbon footprint (leaving nothing behind except ice cream) • to have fun.

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• Customers may not want to buy the product (ie there is no demand for it)

• The money invested in developing the product would be wasted

• The business reputation could be damaged if nobody wants the product or if it is inferior quality

• External factors (eg the economy or competitors) might impact upon the success of the product.

Some RisksClick for video

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Many organisations produce a large range of products

This is done for a number of reasons, including

•To spread the risk and not be dependent on one single product

•To suit different types of customers

The Product Mix

Range of Procter and Gamble products

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Once a product has been launched onto the market, it has a life cycle. The product life cycle shows the different stages of the product’s life. The four stages are:

Product Life Cycle

Research and Development

Lots of market research and testing. The business is spending money but receiving no income from the product. At this stage, some products are abandoned if there is no prospect of selling.

Introduction

The product is introduced or launched onto the market. Lots of promotion and advertising to encourage sales but product is not really profitable

Growth Once customers know about the product, sales begin to grow. Lots of advertising. Later in this stage, the organisation starts to make profit. Other businesses may have developed similar products

Maturity Everyone who wants the product has heard of it, they have a loyal customer base – sales are at their highest and other companies will enter the market selling similar products. Spend money developing new products

Decline Sales begin to fall – product is getting older and newer versions are coming on the market – customers no longer want the product.

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Product Life Cycle Graph

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When a product reaches decline stage, the organisation may take steps to extend its life. To do this, they will look at the marketing mix

Product – does the product have to be changed to attract new customers

Price – should the price be dropped, or should special offers be introduced to attract interest

Promotion – this may include preparing a new brand image for the product along with a fresh advertising campaign

Place - better offers and display materials to the shops stocking the products. Sell on-line to increase market

How organisations can extend the product life cycle

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What is a brand

A brand can be a logo, symbol or name that is given to a group (eg Cadbury) or type of product (ipad). Branded products usually have an easily identifiable logo and a slogan

Vorsprung durch Technik

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• It is easily identifiable and is recognized by customers

• It is used to differentiate from competitors

• Encourages customer loyalty and repeat custom

• It encourages people to pay more• It is used to get customers to try a

new product – they already know and trust the name

What are the Reasons for Developing a Brand?

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• Very expensive and time consuming process to develop a brand

• One product getting a bad reputation can damage the name of the brand

• Some organisations try to copy brands and produce low quality, fake products

Drawbacks of Branding

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Marketing mix - PRICE

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The stage in the life cycle

Price charged by competitors

How much it costs to make

How much profit is wanted

How much of the product can be supplied

The market segment that the product is aimed at

The decision may depend on:

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Life Cycle At the beginning of the life cycle, the product may be priced high as they are in high demand. They may also have incurred high costs in research and development. As demand begins to fall, the price may be reduced so they continue to sell

Competitors’ prices

If price is higher than competitors, they may lose customers to them

Manufacturing cost

A business must cover its costs in order to break even. It must calculate the cost of the product before it can set a realistic price

Profit required

The more profit wanted, the higher the price that will have to be charged. Some organisations do not exist to make a profit so will set prices accordingly.

Rarity value Products made in small quantities may be priced higher eg high performance/value cars or limited edition prints

Market segment

Products aimed at people with high incomes may be priced higher (Waitrose) where products aimed at low income (eg Tesco value) are priced lower.

Some further information on Price

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High Price

Setting price higher than competitors – customers will think it is better quality eg branded goods like Tesco finest

Low Price Setting price lower than competitors – customers looking for a bargain will buy the product “own brand” goods like Tesco value

Cost plus pricing

The manufacturer calculates the cost of the product then usually adds on a % in order to make a profit. This ensures a profit is made eg building jobs

Penetration pricing

Set the price low for a new product when there are already similar products in order to penetrate the market. Increase price as product is established eg new cereals/chocolate bars/crisp flavours

Pricing Strategies

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Pricing Strategies (cont)

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Marketing mix - PLACE

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Disneyland, Paris

Opened in 1992

An estimated 17 million people could drive there within 2 hours

300 million could fly there within a few hours

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Place - Braehead Shopping Centre

Why is Braehead located where it is?

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Where the customer is

Locate close to the people who will buy the products

Premises A business may have specific requirements, eg kitchen or large warehouse area

Parking Customers need to be able to park

Infrastructure

Water, fuel, transport

Place - Many factors will be considered when deciding where to locate:

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Government incentives

Sometimes the Government or Local Authority will offer grants to businesses setting up in the area

Market segment

Being close to the market segment, eg Soar – ski wear shops

Employee availability

Employees needed to work. May require particular skills eg shipbuilding

Competition May wish to be far away or close to increase market share

Environmental impact

Consider the impact on the environment eg windfarms

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Website

Mail Order Catalogue Retail Outlets

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Catalogues

Newspaper and magazines

Home shopping parties

Telephone ordering

Shops

E-commerce websites

Markets

Tv shopping channels

Vending machines

Place - Where the product is sold:

We have already considered this topic (What is a market – see early slides)

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Place – Distribution Channels

MANUFACTURERSA DCB

CONSUMERS

Company warehouse

WholesalersEg Bookers

Company outlets eg Ikea

Retailers eg Soroba Shop

RetailersEg Tesco

direct eg from farmer to customer at farmers’ market

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Place - Advantages and Disadvantages of Different ChannelsChannel Advantages Disadvantages

Producer to consumer

Cheaper – no middle man. Better quality

May have to collect

Manufacturer wastes time selling goods

Producer to retailer to customer

Cheaper than chain including wholesaler

Retailers bear marketing costs

Retailer will have a mark-up so increasing the cost

Producer to wholesaler to retailer to customer

Small retailers can obtain variety of goods

Goods more expensive as wholesaler and retailer will add to cost

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What are the different methods of physically getting the product to the customer.

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Marketing mix -

PROMOTIONReturn

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Product promotion involves persuading customers to buy the product using a variety of techniques, for example competition entry, money-off vouchers, discounts, BOGOF – customers think they are getting a good deal.

Advertising involves making customers aware of the product. It also gives information about the product and tries to encourage customers to buy it.

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Using Technology to raise awareness of products

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Lots of information about products can be made available using company websites. Websites can also be used to sell the company products – this is called e-commerce. Many people now do shopping online and look for bargains

Internet websites

Click for video

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Advantages of E-commerce to the business

Disadvantages of E-commerce to the business

Customers worldwide can be targeted

Customers may not want to disclose personal details

Product information can be updated quickly

Can be expensive to make and maintain a website

Businesses may not have to pay for premises to display stock

Employees need training to maintain and update the website

More environmentally friendly than printing leaflets

Advantages of E-commerce to the customer

Disadvantages of E-commerce to the customer

Customers can buy online 24/7 The goods can’t be seen or handled before buying

Customers can usually buy cheaper than going into a store

There is no personal contact with the organisation

Stock availability can be checked instantly

Will have to wait for the product to be delivered

Products can often be personalised eg trainers

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Can be used to direct people to company websites

QR Codes

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Facebook, Twitter, blogs, wikis are very useful for raising awareness of products

Social Networking

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Deal-of-the-day (also called flash sales or one deal a day) is an ecommerce business model in which a website offers a single product for sale for a period of 24 to 36 hours. Potential customers register as members of the deal-a-day websites and receive online offers and invitations by email or social networks.

Examples Groupon, itison

Deal of the Day

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Apps which allow customers to browse products and buy online are becoming more popular eg the Amazon app

•Can be used on the move•Can be used using wifiHowever•Training would be needed by creator so that app is easy to use•Depends on good internet connection

Apps

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Text messaging is widely used by businesses to communicate and promote products to customers. Specific customers can be targeted quickly with information

•This is cheaper than some other methods of promotion

•Lots of customers can be targeted

However

•Texts only include a small amount of information

•Customers may receive lots of text messages and start to feel annoyed!

Text Messaging

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Many businesses use e-mail to send mailshots to customers. Customers can sign up to a mailing list and be e-mailed with detaails of special offers, new products and other promotions.

•E-mails can be sent at any time•Message can be sent to many different people simultaneously•Can be sent worldwide at little cost•Environmentally friendlyHowever•Some e-mails can be filtered as spam•Receiving lots of e-mails can be irritating to the customer•Viruses can be spread through e-mails

E-mail Advertising

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Can help customers to decide whether or not buy a product based on information provided by other customers

On-line Ratings

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Companies can post videos of their products in action and allows customers to view before they buy the product

YouTube

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Other Advertising Methods

Method Advantages Disadvantages

Television Reach millionsTarget audience

Expensive

Cinema visual/sound impact target particular films. captive audience

Expensive

Leaflets and Junk Mail

Cheap to produce Easy to ignore

Newspapers/

magazines

Know their readers – can target

Often read twice

Can be expensive

Radio Target audience, cheaper Smaller audience

Poster/

billboard

High visual impact

In place for long time

Can’t contain much information

Internet High visual impact

Can link to buy product

Product placement Manufacturers pay for products to be used in films/television productions

Video clip

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Choosing a Method of Advertising

Product Method ReasonChristmas function in Royal Hotel

Local newspaper – Oban Times

Not too expensiveReaches target audience

New restaurant opens in Oban

Menus delivered to doors by postman

Fairly inexpensiveCustomers keep info

Cadbury launch new chocolate bar

TV and cinema adverts

Info must reach large audience

Rock Concert to be held in Hampden

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Promotion – Special OffersMethod InformationBOGOF (buy one get one free)

Eg Boots 3 for the price of 2. Customer usually buys more than required

Free gifts/samples

Eg fast food restaurants. May be used to increase demand at quieter times of the year

Loyalty cards Eg Tesco, Boots. Regular customers save points to spend in store. Also used to monitor customer purchases

Discounts Encourage purchase of particular product. May be money off voucher

Competition Eg prize draw on wrapper of product if purchased

Point of sale advertising

Special display cases in store

Sales Encourage people to visit shops theywouldn’t normally.

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Promotion – Celebrity Endorsement

Celebrities are used to raise awareness of a product or encourage customers to buy it

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All marketing and advertising must be:•an accurate description of the product or service•legal•decent•truthful•honest•socially responsible (not encouraging illegal, unsafe or anti-social behaviour)

Ethical Marketing/Advertising

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Market Research

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Market Research is the the process where businesses find out information about their customers and the market. It involves finding out what customers want, but also finding out about what other businesses are selling and for how much. This allows businesses to make key decisions like

•Altering the price of the product

•Changing the product in some way

•Launching a new product

•Changing where the product will be soldReturn

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• Primary or Field Research

• Secondary or Desk Research

There are 2 main types of Market Research

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Field Research involves going out into the market place and finding out NEW information for your own business. This is called primary information.

PRIMARY/FIELD RESEARCH

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MethodPersonal interview

Face to face discussion where interviewer asks questions

• The interviewer can encourage the respondent to answer questions

• Points can be clarified

• Time consuming and expensive to carry out

• Interviewers will need training

Postal Survey Questions are sent out through the post

• Fairly cheap to send the survey• Survey can be completed at

own pace

• People may not go to the bother of completing survey

• No opportunity for clarification

Tel Survey People are contacted by phone to answer questions

• Large numbers can be contacted

• Less expensive than personal interviews

• Information obtained instantly

• People get annoyed about receiving phone calls

• Useful for short surveys only as people don’t want to spend time

Online Survey Questions are displayed on a website

• Links can be set up for large numbers of people

• Inexpensive

• Relies on people having internet connection

• No personal contact

Methods of Field Research (1) - Surveys

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Focus Groups This is a discussion among a specially chosen group of people, eg BBC viewers

• Feelings and views can be observed

• Points can be clarified and expanded upon

• Time consuming and expensive to carry out

• Info can be difficult to analyse• May not be a representative

group

Observations This involves watching and recording situations eg number of visitors to a shop or children playing with a new type of toy

• Facts and figures are easy to analyse

• People being observed may not act naturally

• Those being observed are not usually asked for opinions

• Privacy and ethical issues

EPOS Electronic Point of Sale gathers information at the chechout

• Large quantities of information • Expensive to buy system• No opinions sought from

customers

Social Networking

FB and Twitter used to gather feedback from customers. Often used to interact with customers and find out their reactions and opinions

• 2-way interaction• Large numbers can be

contacted

• Information not usually private

• Not all customers join websites

Hall Tests Product is given to customers to try and feedback sought

• Product is tried and feedback is based on experience

• Relatively inexpensive to carry out

• Response may give the response they think the organisation wants to hear

Field Research (2) – Other Methods

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Costs (Disadvantages) of Field Research

Benefits (Advantages) of Field Research

Expensive to carry out this type of research

This provides up-to-date and reliable information

Can be time consuming to carry out and find results

The Information has been gathered for a specific purpose and is therefore relevant to the business

Costs and Benefits of Field Research

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Desk Research involves finding out information from existing sources, using information that has already been gathered for another purpose. This is called secondary information.

SECONDARY/DESK RESEARCH

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Government records

The government publishes information from a variety of sources eg the census for population figures, import and export figures

Printed information

This could include books, journals, magazines and newspapers

Online research There is a vast amount of information available from websites which can be used for market research. If using this data, however, it is important to ensure that the websites being used are reliable and contain accurate information.

Methods of Desk Research

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Costs (Disadvantages) of Desk Research

Benefits (Advantages) of Desk Research

The information may not be exactly relevant to your needs

The information does not always cost money to obtain

The information may not be accurate or up-to-date – if it has been gathered by someone else

The information is usually easy to obtain as the research has already been carried out

Costs and Benefits of Desk Research

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