Business Studies Notes - Marketing

Marketing

Marketing

The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

Strategic Marketing

The long-term, broad aims affecting all key business areas.

• maximising sales and profit

• increasing brand awareness

• improving customer satisfaction

• increasing market share

• corporate social responsibility

• expanding product range

Marketing Plan

A document that lists activities aimed at achieving particular marketing outcomes in relation to goods or services, providing a template for future action.

• outline strategies to be used

• core of marketing is satisfying customer wants

• marketing is the revenue-generating activity of any business

McDonalds:

• McDonalds ‘Accelerating the Arches’ strategy focuses on maximising its marketing effort, including brand advocacy and affordability.

• The business has a US$4 billion annual advertising spend.

Interdependence

The mutual dependence that key business functions have on one another.

• Operations: ensures products are ready to sell by a certain date, gives a suggestion of sales that affect volume of products produced, impacts ordering of materials.

• Finance: provides funding for advertising, information of sales forecasts are used to prepare budgets, sales provide finance with money.

• Human Rights: ensure the right staff are employed to create the product, determines the volume of sales based on the demand for products.

Production Approach (1820s–1920s)

Focused on the production of goods and services, with marketing as a spin-off and production design based on mass production techniques - product-oriented.

• Example: Ford's early production lines focused on mass-producing affordable cars, with less emphasis on marketing.

Selling Approach (1920s–1960s)

Emphasises selling because of increased competition, with businesses becoming sales-oriented and increasing advertising spending. Sales representatives used high-pressure tactics to convince customers to buy products.

• Example: Encyclopedia sales in the mid-20th century relied heavily on door-to-door sales tactics and aggressive advertising.

Marketing Approach (1960s–1980s)

Focused on finding out what customers want through market research and then satisfying that need, placing the customer at the center of all marketing activities - customer-oriented.

• Example: McDonald's adapting its menu to suit local tastes in different countries.

Societal Marketing Approach (1980s–Present)

Emphasises social responsibilities, as well as the importance of maintaining and improving the wellbeing of customers and society. Corporate Social Responsibility (CSR), Customer Orientation, and Relationship Marketing.

• Example: McDonald's Sustainable Sourcing.

Market

A group of individuals, organizations, or both that:

• need or want products

• have the money to purchase the product

• are willing to spend their money

• and are legally authorised to purchase the product

Types of Markets

• Resource

• Industrial

• Intermediate

• Consumer

• Mass

• Niche

Resource Market

Individuals or groups engaged in all forms of primary production, including mining, agriculture, forestry, and fishing.

• Provide land, labour, capital, and enterprise.

• Limited buyers, large-scale transactions.

Industrial Market

Industries and businesses that purchase products to use in the production of other products or in their daily operations, e.g., purchasing wheat from a farmer to make flour.

• Provides partly made raw materials and finished items.

• Bulk purchasing, fewer customers, specific needs.

Intermediate Market

Wholesalers and retailers who purchase finished products and resell them to make a profit - allows producers to focus on manufacturing, e.g., Flemington Markets.

• Transactions between businesses, price negotiation.

Consumer Market

A market that consists of individuals who plan to use or consume the products they buy, e.g., Woolworths, Myer, McDonalds.

• Markets are segmented into categories.

• Large number of buyers, often driven by emotional or convenience factors.

Mass Market

The seller mass-produces, mass-distributes, and mass-promotes one product to all buyers, without targeting a specific group.

• Highly cost efficient - business can achieve economies of scale and appeal to a large audience in a single-showing, e.g., basic food items, electricity, water.

Niche Market

A narrowly selected target market segment, concentrated or micro , with buyers who have specific needs or lifestyles.

• High customer loyalty, specific targeting.

Customer Choice (PEGS)

The decisions and actions of customers when they search for, evaluate, select, and purchase goods and services.

• Psychological

• Sociocultural

• Economic

• Government

Psychological Influences

Internal influences within an individual that affect their buying behavior, including perception, motives, attitudes, personality, self-image, and learning.

• Example: McDonalds ran a successful collab with Crocs in 2023 - tapped into customers’ motivations including the need to ‘belong’ to a current fashion trend, and feelings of nostalgia with the use of McDonald’s iconic characters.

Sociocultural Forces

Forces exerted by other people and groups that affect an individual’s behavior, including social class, culture, family, and reference groups.

• McDonalds: Aggressive expansion plans in China were driven by the rapid expansion of China’s middle class – more Chinese citizens than ever have the disposable income to choose a meal at McDonalds.

Economic Influence

A business' capacity to compete and a customer’s willingness and ability to spend, influenced by economic conditions such as booms and recessions.

Government Influence

Uses a number of economic policy measures to influence the level of economic activity and regulate consumer markets.

• Competition and Consumer Act 2010 (Cth)

• Sale of Goods Act 1923 (NSW)

• Fair Trading Act 1987 (NSW)

• Job Keeper, Coronavirus Supplement, Economic Support Payment

Consumer Laws (WIPD)

Competition and Consumer Act 2010 (Cth): protects consumers against undesirable practices, and regulates trade practices that restrict competition - Australian Consumer Law (ACL)

• Deceptive and Misleading Advertising

• Price Discrimination

• Implied Conditions

• Warranties

Deceptive and Misleading Advertising

When a business makes any representation, they must ensure it is not untrue or false and is not likely to mislead the type of consumers at which the advertisement is targeted.

• Bait Advertising - products not available at reduced prices

• Fine Print and Qualifications - must must not contradict overall message

• Comparative Advertising - comparison can be inaccurate or not appropriate

• Environmental Claims - must be be able to be substantiated

• Country of Origin - illegal to make false claims

• Premium Claims - give the impression of some kind of added benefit when compared to similar products

• Prize Giveaways and Competitions - must not mislead customers about items on offer/chance of receiving these

• Dishonest Advertising - converys a false impression of the exact nature of the product

Example: Voltaren were fined $4.5 million in 2020 for marketing Osteo Gel as more effective then Emulgel, despite the products being the same.

Price Discrimination

The setting of different prices for a product in separate markets.

• Used based on the seller’s belief that customers in certain groups can be asked to pay more or less based on certain demographic or on how they value the product.

• No longer prohibited but it does contravene the Competition and Consumer Act which prohibits misuse of market power.

Examples: McDonalds - Big Mac costs $6.40 at Westfield Parramatta but $6.15 in Haberfield - not consistent across Sydney.

Implied Conditions

The unspoken and unwritten terms of a contract, assumed to exist regardless. The Competition and Consumer Act introduced new consumer guarantees - provide rights to certain remedies where goods fail to comply.

• safe, lasting, with no faults

• look acceptable

• match descriptions made by packaging, labels, promotions, advertising

• be fit for purpose

• not carry any hidden charges or debts

• meet extra promises such as lifetime guarantees

• have spare parts and repair facilities available

Example: McDonalds is bound by the labelling requirements in the Australia New Zealand Food Standards Code - must label the kilojoule intake for each item.

Warranties

A promise made by a business that they will correct any defects in the goods they produce or services they deliver.

• Offers a degree of protection and assures the business has confidence in the product.

• Businesses must state clearly and simply, the terms and conditions of the warranty.

Sony: In 2020, Sony paid $3.5 million in penalties as they told 4 customers they were not entitled to a refund if 14 days had past, however the rights of consumers to a remedy do not expire.

Australian Association of National Advertisers (AANA) Code of Ethics 2012

Set standards, and ensure marketing is legal, decent and truthful.

• Consumers can make complaints to Ad Standards - will either be dismissed or upheld by the Community Panel depending on if there is a breach.

• Monitored by the Advertising Standards Bureau.

Ethical Influences (DTFS)

• Truth, Accuracy, and Good Tasting in Advertising

• Products that May Damage Health

• Engaging in Fair Competition

• Sugging

Truth, Accuracy and Good Taste in Advertising

• Untruths Due to Concealed Facts - infor purposefully omitted

• Exaggerated Claims (Puffery) - no reasonable person would take as factual

• Vague Statements - ambiguous words so customers assume intended messages

• Good Taste - what society deems as appropriate or not.

Products that May Damage Health

All consumer products must be safe and meet consumer guarantees under Australian Consumer Law.

• Marketing of junk food is criticised by nutritionists, especially as childhood obesity increases. No advertising of junk food is permitted for TV shows targeted for preschoolers.

• If there is a risk a product may cause injury, it must be recalled.

• If there is awareness of death, injury or illness, the business must report it within 2 days.

• Areas of concern are gambling, alcohol and tobacco.

Example: McDonalds ‘Player of the Week’ awards contravened a voluntary code that stated advertisers must not give food or beverage vouchers to children as awards or prizes.

Engaging in Fair Competition

Businesses have to be ‘fair’ when referring to competitors in their marketing - Competition and Consumer Act 2010 (Cth).

• Cartel Conduct

• Anti-Competitive Agreements

• Misuse of Market Power

• Exclusive Dealing

• Resale Price Maintenance

• Mergers and Acquisitions

Sugging

‘Selling under the guise’– a sales technique disguised as market research.

• May be a phone call pretending to be doing market research, that turns into a sales pitch.

• Potentially deceptive and an invasion of privacy.

• Affects market research in the long-term - many consumers now refuse to do surveys.

Marketing Process

• Situational Analysis

• Market Research

• Establishing Marketing Objectives

• Identifying Target Markets

• Developing Marketing Strategies

• Implementing, Monitoring and Controlling the Marketing Plan

Situational Analysis

Developing a precise understanding of the business’ current position and a clear picture of where it is heading.

• SWOT Analysis

• Product Life Cycle

SWOT Analysis

Involves the identification and analysis of the internal strengths and weaknesses of the business, and the opportunities in, and threats from, the external environment.

• Gives a clear indication of the business’ strategic position compared with its competitors.

Example: McDonalds:

• Strengths - brand value, extensive access to capital

• Weaknesses - lack of central control, multiple jurisdictions

• Opportunities - new products, anticipate consumer preferences

• Threats - perception of unhealthiness, economic conditions

Product Life Cycle

The stages a product passes through; introduction, growth, maturity and decline.

• Introduction: tries to increase consumer awareness

• Growth: brand acceptance is actively pursued

• Maturity: sales plateau as market becomes saturated

• Decline: sales decline as business faces several options

Market Research

The process of systematically collecting, recording and analysing information concerning a specific marketing problem.

• Determining Information Needs

• Data Collection

• Data Analysis and Interpretation

Primary Data

Gathering original data direct from customers and target market.

• observations

• focus groups

• surveys

• questionnaire

• market testing

Secondary Data

Information already researched and published.

• internal - own record keeping, sales/delivery records, product performance, budgets

• external - ABS reports, databases, research firms, magazines

Data Analysis and Interpretation

Researchers look at relationships between raw data to develop meaning from facts and figures.

• Statistical Interpretation Analysis: process of focusing on the data that represent average, typical, or deviations from typical patterns.

Marketing Objectives

The realistic and measurable goals to be achieved through the marketing plan.

• Should be closely aligned to the overall business goals, but more customer-oriented.

• SMART Goals - specific, measurable, attainable realistic, time-bound

Increase Market Share

The business’ share of the total industry sales for a particular product - an increase can improve profits.

Example: Free-To-Air Commercial Television Broadcasters:

• Nine, Seven and Ten are constantly trying to increase their market share of public viewing - highest ratings can charge more for a commercial spot.

Expand Product Range

The total range of products offered by a business - increases profits in the long term by satisfying customer needs.

Example: McDonalds launched ‘spin-off’ stores called CosMcs offering an entirely new range of drinks.

Maximise Customer Service

How well a business meets and exceeds the expectations of customers in all aspects of its operations - results in improved customer satisfaction.

Example: Ritz Carlton allows employees a budget of up to $2000 to fix customer problems.

Identifying Target Markets

A group of present and potential customers to which a business intends to sell its product – customers share similar characteristics such as age, income, lifestyle, location, etc.

• Primary: most marketing resources are directed.

• Secondary: smaller and less important segment.

Target Market Approaches

• Mass-Marketing

• Market Segmentation

• Niche Market

Marketing Strategies

Actions undertaken to achieve the business’ marketing objectives through the marketing mix.

• Product - quality, packaging, brand name

• Price - price quality interaction, selecting ‘correct’ price

• Place - distribution channels, intermediaries

• Promotion - inform, persuade and remind customers

• People - use of staff to sell, customer service

• Processes - experience, ease of access

• Physical Evidence - presentation

• E-Marketing - digital media, websites, socials

• Global Marketing, standardisation, customisation

Implementation

The process of putting the marketing strategies into operation. Business must develop a financial forecast detailing the costs and revenue for each strategy.

• Cost Estimate: how much is the marketing plan expected to cost?

• Revenue Estimate: how much are consumers expected to buy and for what price?

Monitoring

The process of measuring actual performance against planned performance.

• Sales Analysis: comparing actual sales with forecasted sales.

• Market Share Analysis: comparing actual market share with forecasted market share.

• Marketing Return on Investment: measures how much revenue a marketing campaign is generating compared to the cost of running it.

  (Sales Growth - Marketing Cost/Marketing Cost x 100)

Controlling

Taking corrective action to make sure the objectives are attained.

• product modifications

• price modifications

• promotion modifications

• place modifications

• new product development

• product deletion

Example: McDonalds constantly evolves menu to appeal to modern customers - they replaced blueberry muffins with double choc muffins.

Marketing Strategies

• Market Segmentation - product/service differentiation, positioning

• Products - branding, packaging

• Price - pricing methods, strategies, price quality interaction

• Promotion - promotion mix, communication process

• Place - distribution channels, channel choice, physical distribution issues

• People, Processes, Physical Evidence

• E-Marketing

• Global Marketing

Market Segmentation

Occurs when the total market is subdivided into groups of people who share on or more common characteristics.

• Demographic

• Geographic

• Psychographic

• Behavioural

Demographic Segmentation

Particular features of a population:

• Age, Gender, Education, Ethnicity, Occupation, Income, Social Class, Religion

Example: McDonalds Happy Meals appeal to young children.

Geographic Segmentation

Dividing the total market according to geographic locations:

• Rural, Urban, Suburban, Landforms, Region, City Size, Climate.

Example: McDonalds alters menu to suit local tastes, e.g., rice is featured in Hawaii.

Psychographic Segmentation

Dividing the market according to personality characteristics, motives, opinions, socioeconomic groups and lifestyles:

• Lifestyle, Motives, Socioeconomic Group, Consumer Opinions, Personality

Example: McDondalds caters for “health conscious consumers” through their range of salad items.

Behavioural Segmentation

The customers’ relationships to the product – users and nonusers:

• Purchase Occasion, Loyalty, Benefits Sought, Usage Rate, Price Sensitivity.

Example: McDonalds reward customers with points via the app which can be coverted into free products over time.

Product/Service Differentiation

Involves creating characteristics unique to the product to persuade customers to purchase it over a rival product – goal is to gain competitive advantage.

• Customer Service

• Environmental Concerns

• Convenience

• Social and Ethical Issues

Product Positioning

The technique in which marketers try to create an image or identity for a product compared with the image of competing products.

• Allows businesses to market new products more easily.

• Achieved through product/service name, price, packaging, styling, promotion, distribution channels.

Example: In 2019, Zara hired an advertising agency to redesign their logo - the serif font and block capital letters helps them to be perceived as luxury but still accessible.

Products

Goods and/or services that can be offered in exchange for the purpose of satisfying a need or a want – most products are combinations of tangible and intangible components.

• Total Product Concept: both the tangible and intangible benefits of purchasing a product.

Branding

A name, term symbol, design, or any combination of these that identifies a specific product and distinguishes it from its competition.

• Builds brand recognition, helps businesses gain repeat sales, encourages customer loyalty.

Example: More people can recognise the “golden arches” than the Christian Cross - McDonalds has filed hundreds of trademarks.

Packaging

Involves the development of a container and a graphic design for the product – sometimes just as important as the product itself.

• preserves the product from damage or tapering

• form of communication

• makes transportation and storage easier

Example: McDonalds’ packaging protects the food and reinforces a consistent brand design that is modern and fresh.

Labelling

The way in which information is presented on a product or its package.

• Provide information about ingredients, operating procedures, shelf-life, country or oigin.

• Allows for ease of comparison.

Price

The amount of money a customer is prepared to offer in exchange for a product.

• TOO HIGH: could deter sales.

• TOO LOW: could give the impression of a cheap product.

Pricing Methods

• Cost-Based

• Market-Based

• Competition-Based

Cost-Based

The total cost of producing/purchasing one unit and then adding a mark-up → cost + (cost x markup percentage) = price.

• Profit margin is called a markup - predetermined amount.

• Can be difficult to accurately determine an appropriate markup percentage.

Market-Based

Determined according to the interaction between the levels of supply and demand – whatever the market is prepared to pay.

• Demand > Supply - shortage occurs, pushing prices UP.

• Supply > Demand - surplus occurs, driving prices DOWN.

Competition-Based

Where the price covers costs and is comparable to the competitor’s price.

• BELOW competitors – undercutting the competition to break an established market.

• EQUAL to competitors – uses price leader as a guide to avoid undertaking research while reducing risk of competition war.

• ABOVE competitors – businesses who wish to be perceived as superior.

Pricing Strategies

• Price Skimming

• Price Penetration

• Loss Leader

• Price Points

Price Skimming

Charging the highest possible prices for the product during the introduction stage of its lifestyle.

• Business ‘skims the cream’ off the market to recover costs of research and development as quickly as possible before competition enters the market.

Example: Apple charges a premium price to signal the high quality of the products and to suppress competition.

Price Penetration

Occurs when a business charges the lowest price possible for a product – opposite of skimming.

• Aims to achieve a large market share as quickly as possible - ‘mass market pricing.’

• Can become difficult to raise prices in the future.

Loss Leader

A product sold at or below cost deliberately to attract customers.

• Aims to generate sales as a result of increase customers.

• Cost is recovered from the sale of other items customers otherwise wouldn’t purchase.

Example: McDonalds Loose Change menu attracts customers to purchase both a cheaper item and a more expensive item.

Price Points

Selling products at certain predetermined prices – businesses choose a limited number of key prices or price points for selected lines.

• Easier for customers to find the product they need.

• Allows businesses to encourage a customer to ‘trade up.’

Price and Quality Interaction

The perception that a product is superior to others because it is sold at higher prices.

• Prestige Pricing: designed to encourage status-conscious customers to buy based on the tendency for consumers to assume expensive products are of superior quality.

Promotion

Methods used by a business to inform, persuade, and remind a target market about its products – concerned with communicating with potential customers.

Promotion Mix

The different techniques that marketers can use to promote a product.

Advertising

A paid non-personal message communicated through a mass medium – text, images and/or audio: Television, radio, film, newspapers/magazines (print), billboards (outdoor), direct mail.

• Increased product and brand awareness —> increases sales and profits.

• Can be expensive and usually short-term.

Example: During the 2022 World Cup, McDonalds launched its largest global marketing campaign to promote McDelivery for fans in 75 countries.

Publicity and Public Relations

Any free news story about a business’ products – PR aims to create a positive image for the company and increase exposure without having to pay for ads.

• Aim is to generate ‘chatter’ about the product.

• Out of the business’ control which can potentially lead to a negative image.

Personal Selling

Involves direct, two-way communication between a sales representative and the buyer, in an attempt to persuade the customer to buy the product.

• Can be modified to meet individual circumstances, creating long-term relationships - customer satisfaction.

• Can be expensive and time-consuming.

• Requires a balancing act between offering too much and not enough support.

Relationship Marketing

Involves focusing on developing long-term relationships with customers to form repeat-customers.

• Establishes customer loyalty by meeting the needs of customers on an individual basis.

• Loyalty programs - entice customers to shop again to earn points or a discount.

• May involve an immediate discount to entice customers to join the relationship marketing program.

Example: McDonalds’ app has a reward point system.

Sales Promotion

Short-term reductions in price, such as discounts, cashbacks or ‘two for one’ deals.

• Entices customers to act fast, often with a short time frame in which the offer is available.

• Buy things otherwise not considered - volume of sales makes up for the decrease in profit per item.

Example: during the McDonalds 2022 FIFA World Cup campaign, fans in Canada could offer a promo code to order free items whenever a yellow or red card was shown.

Communication Process

A series of steps that marketers can use to spread information about a product to potential customers as part of its promotion – needs to be clear, sufficient, and succinct.

• Opinion Leaders

• Word of Mouth

Opinion Leaders

Certain customers in a target market who have considerable influence over their peers due to their position or reputation.

Example: In 2018, Nike signed an endorsement deal with Colin Kaepernick who protested during the national anthem. Nike’s stock increased by 18% ($26.2 billion).

Word of Mouth

The impact influential individuals can have over sales by affecting the perceptions of other potential customers about a product.

• What consumers tell others can be extremely good or extremely bad for a business - it can make or break future sales in their peer group.

Place/Distribution

The element of the marketing mix that is concerned with how products are transferred from the business to the final customer.

Channels of Distribution

Routes taken to get the product from the business to the consumer.

• Usually involves a number of intermediaries, such as wholesalers or retailers.

Producer to Consumer

Simple channel – no intermediaries involved.

Producer to Retailer to Consumer

Retailers are intermediaries who buy from producers and resell to customers.

• Used for bulky or perishable items.

Producer to Wholesaler to Retailer to Consumer

Wholesalers are intermediaries who buy in bulk from the producer, then resells in smaller quantities to retailers.

• Most common method for the distribution of goods.

Producer to Agent to Wholesaler to Retailer to Consumer

Agents distribute products to wholesalers but never own them, earning commission from the producer.

Innovative Distribution Methods

• E-Commerce: via the internet.

• Mobile Commerce: via wireless handheld devices.

Channel Choice

Intensive: business wishes to saturate the market with its products, e.g., convenience goods.

Selective: only a moderate proportion of all possible outlets, e.g., clothing, furniture, electrical appliances.

Exclusive: only one retail for a product in a large, geographic area, e.g., designer goods.

Physical Distribution Issues

• Transport - method depends on the type of product and degree of service the business wishes to provide.

• Warehousing - receiving, storing, and dispatching of goods.

• Inventory - balancing stock levels to ensure products are in stock but costs are minimised.

People

Anyone involved in the provision of the service – refers to the quality of interaction between the customer and those who deliver the service.

• Appropriately recruited, qualified, and trained employees - customer service.

Processes

The flow of activities that a business will follow in its delivery of a service.

• Focused on functionality, accessibility, ease of acquiring, length of wait times.

• Must be efficient and customer-friendly.

Physical Evidence

Everything that the customer sees when interacting with a business.

• Signage, business logo, brochures.

• Businesses should provide high-quality physical evidence to create an image of value and excellence.

E-Marketing

The practice of using the internet to perform marketing activities - efficient and effective for exposure, however marketers don’t have complete control over what consumers write online.

• Web Pages

• Podcasts

• Electronic Messages

• Blogs

• Location-Based Marketing

• Social Media Advertising

Global Marketing

In each foreign market, the business will encounter different marketing environments and target markets – the marketing plan must be modified.

• global branding

• standardisation

• customisation

• global pricing

• competitive positioning

Global Branding

The worldwide use of a name, term, symbol or logo to identify the seller’s products.

• ONE uniform worldwide image - cost effective.

• Equates to global recognition, irrespective of language barriers.

Example: 88% of the world recognise the ‘Golden Arches.’

Standardisation

A global marketing strategy that assumes the way the product is used, and the needs it satisfies, are the SAME all over the world.

• Marketing mix is the same - saves costs (economies of scale, reduced R&D costs, after-sales service is simplified, standardised promotion)

Example: Apple’s iPhone is the same in 100 countries - standardised design and same range of products.

Customisation

A global marketing strategy that assumes the way the product is used, and the needs it satisfies are DIFFERENT between countries (local approach).

• Customised according to the economic, political, and socio cultural characteristics of the target country.

Example: McDonalds has local variations, e.g., macarons in France.