IB business management unit 4

marketing goods and service

marketing goods and service

• Promotion- to build brand recognition, awareness and trust

  use physical environment

  make it easy to visualise service quality

  branding, logos, celebrity endorsement, slogans

• Product strategy - a tangible good or intangible services that satisfies the needs and wants of a customer (attracts more customers)

• Price strategy- The amount paid for a particular good or service that should entice customer yet allow the firm to be profitable

  source of value to customer- used to price product

• Place strategy- Distribution channels that enable customers to conveniently buy the product

  online

  customers would not go to inconvenient and remote location

marketing goods vs service

Goods: Use of the 4Ps (place, price, product, promotion)
- Services: Use of the 7Ps (place, price, product, promotion, process, people, physical evidence)

Market research

• Market research is essential in helping businesses to identify products/services they can develop in response to the needs and wants that their customers have
   

• Market research is the process of systematically gathering data from consumers which can be used to influence the business decisions

Market orientation

An approach to marketing that focuses on the needs of a customer and uses this information to design products that meet customer needs

Market orientation aims to develop products to meet consumer needs identified during the market research process

• The result of market orientation is that the firm will benefit from increased demand, increased profits, and a valued brand image as its products become more desirable 

• However market research (needed for the process) is expensive and does not guarantee success

Product orientation

• An approach to marketing that focuses on the characteristics of the product rather than the needs of the consumer

marketing plan

• The process of formulating the marketing strategies and tactics that will help a business to achieve its marketing objectives

• Three tools of marketing planning include

  • Market segmentation

  • Market mapping

  • Market positioning

• marketing audit- review of current position of an organisation’s marketing- once completed marketing plan is prepared

Marketing objectives

• These are specific SMART (specific, measurable, achievable, relevant, time bound)

Research

• Marketing research identifies the factors expected to impact upon the marketing plan such as

  • Market size and growth

  • Market segments

  • Competitor positioning- SWOT

  • Customer tastes, preferences and views

  • The nature of distribution channels

The marketing mix

• This involves planning the medium- and short-term marketing activities the business intends to undertake

  • Pricing strategies and tactics

  • Promotional activity

  • Distribution and logistical plans

  • Product specifications, features and packaging

  • Physical evidence such as branding

  • How people and process are developed to support delivery of the rest of the marketing mix

advantage and disadvantages of market planning

advantages-

• improves chances of success

• clearer idea of objectives

disadvantages-

• no time

• inflexible

• Quickly outdated

Marketing objectives

• Targets the marketing departments aims to achieve

• These are specific SMART (specific, measurable, achievable, relevant, time bound)

Market strategies

Market development-

• selling existing products in new markets

• e-commerce- selling over the internet

• internationally

Product development-

• new products in existing markets

Diversification-

• new products in new markets

• high risk

• stable businesses looking for growth

Product innovation-

• original or new product launch

• first mover advantage

Unique selling point

• A unique selling point (USP) is a distinguishing factor or characteristic of a product, service or brand that sets it apart from its competitors

• The USP helps a business to differentiate itself and give customers a reason to choose one product or service over others because it offers something distinct and valuable

There are a range of reasons why businesses develop a USP which can include

• Developing a brand identity

• Achieving a competitive advantage over rivals

• Effective communication with customers

• The attraction and retention of customers

• Achieving power over pricing

• Encouraging innovation and adaption

Differentiation

• Product differentiation is an attempt by a business to distinguish its products from those of competitors

reasons for differentiation

• Strong product differentiation helps the firm to develop its competitive advantage

• The development of product differentiation often helps a firm to create a unique selling point for its product which can be used in marketing

Common methods used by businesses to differentiate products include

• Marketing and branding activities

• Eye-catching packaging

• Attractive functions and features

• Product customisation

• Excellent customer service

Commercial marketing

• marking strategies that focus on meeting the demands of customers in a profitable way

• the main purpose is to generate benefits for the owners of the business

Social marketing

• marketing activities that aim to influence or change people’s attitudes and behaviour for the good of society as a whole, rather than primarily to make a profit

Market share (%)

(firm's sales)/(total sales in the market) x 100

Importance of market share and leadership

Benefits
- Increased sales ---> higher profits
- Economies of scale
- Branding

Limitations
- Market share calculations must be looked at carefully

Elements of a marketing plan

- Marketing objectives
- Key strategic plans
- Detailed marketing actions
- Marketing budget

Four P's of marketing mix

Marketing mix: Key elements of a marketing strategy that ensure the successful marketing of a product

• Product: a tangible good or intangible services that satisfies the needs and wants of a customer

• Price: The amount paid for a particular good or service that should entice customer yet allow the firm to be profitable

• Promotion: communicating relevant products information to inform and persuade customers to buy the good or service

• Place: distribution channels that enable the customers to conveniently buy the product

Bargain products

• Goods or services that are perceived by customers to be high quality but sold at a low price

customer profiles

• the demographic and psychographic characteristics of consumers in different market segments

cowboy products

• goods or services that are perceived by customers to be of low quality

Market segment

• A distinct group of customers with similar characteristics, tastes, preference

Targeting

• Targeting is the marketing practice of creating and using an appropriate marketing mix and marketing strategies to cater for different marketing segments

Target market

• The group of customers that an organisation focuses on selling its product to

Niche market

• marketing approach that focuses on supplying highly specialised products to cater to a small and select target market

Mass market

• industries that buy and sell mass market products, catering for a broad range of target markets

non-profit organisation (NPO)

• a business that does not primarily aim to earn a profit but to serve a purpose beyond the organisation itself, the betterment of society as a whole

people

• the employees who deliver the customer service element of the extended marketing mix

physical evidence

• the observable and tangible aspects of a service

premium products

goods or services that are perceived by customers to be of high quality and high price

Product position map

• A map showing how consumers perceive a business, its products, and/or its brand in comparison to other businesses in the industry

psychographic segmentation

• segmentation that involves characterising consumers according to people’s lifestyle choices and personal values

Sales forecasting

• A quantitative technique used to predict a firm’s level of sales revenue over a given period of time

Terminology of sales forecasting

- Sales trend: Underlying movement or pattern of the data presented, either in months of years (can be used to determine future sales)

- Seasonal/cyclical variations: When the trends vary in seasons, there are seasonal variations. When trends vary over years, there are cyclical variations

- Random variations: Some times there are one off events which affect data

Methods of primary research

- Surveys
- Interviews
- Focus groups
- Observations

Methods of secondary research

- Market analysis
- Academic journals
- Government publications
- Media articles

Qualitative and quantitative research

Quantitative: A category of market research based on the opinions of participants. it creates detailed and non-numerical information

Qualitative: A category of market research based on gathering facts and numerical information

sampling methods

• quota sampling- select a number of candidates from different market segments

• random sampling - selects anyone in the population for market research

• snowballing- relies on participants referring or recommending further subjects to take part in the market research

• stratified sampling - segmented into various strata

Product

- Any good or service that is offered to the market with the aim of satisfying consumer needs or wants

Product life cycle

- Shows the course that a product takes from its developments to its decline in its market

Stages:
1- Development (market research, innovation, prototypes, commercialisation)
2- Introduction (launch of product into market)
3- Growth (revenue increases after repreated sales)
4- Maturity (slow growth)
5- Saturation (saturation of market)
6- Decline (Steady drop in sales)

Each stage has different use/effect on marketing mix, investment, profit and cash flow

Extension strategies

- Plans by firms to stop sales from falling by lengthening product life cycle (repackaging, new markets, reposition of product, promotion)

BCG matrix

Visual marketing management tool used to analyse a firm’s product portfolio

• Stars: High market growth and high market share

• Cash cows: Low market growth and high market share

• Question mark: High market growth and low market share

• Dogs: Low market share and low market growth

Branding

- The process of distinguishing one firm's product from another

Brand awareness

• The ability of consumers to recognise the existence and availability of a firm's good or service

Brand development

• part of a firm’s marketing strategy in communicating the value of a brand and what the brand stands for

Brand loyalty

• When consumers become devoted to a brand

Brand value

• The expected earning potential of a brand

Cost plus pricing

• Adding a percentage or predetermined amount (markup) to average cost per unit to set the selling price

• Ensures a product will produce contribution

competition based pricing

• price leadership

  • Set by the market leader and other firms simply follow

• Predatory pricing

  • Temporary reduction in price to drive away competition

• Going-rate pricing

  • Simply pricing at about the average price level of most products in the market

market led pricing

• Penetration pricing

• Price/market skimming

• Price discrimination

• Loss leadership

• psychological pricing

• promotional pricing

Penetration pricing

• Newcomers set their prices low to entice people to buy

• Price changes from low to high

• Risk: lower prices = lower reputation

Price skimming

• understand what the market is like, set the price high, then as you understand the market better your prices will slowly decrease

• Prices changes from high to low

price discrimination

• The price of a product varies per country, which depends on the market; however, the products should not be easily traded

• Results to the government applying taxes/tariffs

loss leadership

• Products are sold at a loss, but regain their losses through their other products

Psychological pricing

• Some numbers are more appealing

promotional pricing

• Offer discounts, rebates, promotions, etc.

types of promotion

• Above the line (ATL)

  • Use of mass media for promotions

  • Very wide reach, but also very expensive

  • e.g. TV, radio, newspaper, magazine, outdoor, cinema, etc.

• Below the line (BTL)

  • Use of non-mass media promotional activities focused at target market

  • e.g. price deals, money-off coupons, direct Marketing/direct selling, sponsorship

Promotional mix

• Promotional mix is the combination of promotional techniques that communicate benefits from a product

• Elements

  • Advertising – information and persuasion

  • Public relations – image building and goodwill

  • Sales promotions – stimulate sales and activities

  • Personal selling – sales forces and agents

Guerilla marketing

• Use of unconventional, and memorable interactions in order to promote a product

• Generally used by smaller businesses

• Uses smaller teams of promoters in a specific area, rather than through mass media campaigns

• Benefits

  • Relatively low in cost and risk

  • Helps engage in networking with not only customers, but even other potential business partners as well

• Limitations

  • Success depends highly on market research

Distribution channels

• The different ways the product reaches the customers

• Zero level distribution- manufacturer sells directly to consumers

• Two channel distribution- involves the use of two intermediaries usually wholesalers and retailers

• Three channel distribution channel- three intermediaries-wholesalers sell to retailers on behalf of the producers

wholesalers

• buy products from a manufacturer and sells these in smaller quantities to retailers

direct agents

• independent businesses w/ exclusive right to trade a product in a territory

• agents may act on behalf of buyer or seller

retailers

• outlets that sell directly to customers

International marketing

• Sale and marketing of a firm’s products in a foreign country

Methods of entry into intl. markets

• internet

• Exporting

• Direct investment

• Joint venture

• International franchising

Opportunities and intl. markets

• Expand marketing operations into growing and emerging markets

• Spreading overall risk between more markets, each at different stages within the economic cycle

Threats

• High-barriers of entry

• Strong competition from the well-established local industry

• Differing consumer demands

Globalisation

Globalisation

• Adopting a differentiated marketing mix that meets national and regional tastes and cultures

advantages

• Caters to local tastes

• More products (diversification)

• Spreads risks

• Cater to wider market

Disadvantages

• More costly

E-commerce

- The buying and selling of goods and services through the internet

types of e-commerce

• B2B – Business to business

  • Caters to needs of business, transactions and distribution

• B2C – Business to consumer

  • Sells directly to customers and provides other necessary services

• C2C – Consumer to consumer

  • Customers trade with each other for either good and/or services

E-commerce and the marketing mix

• Product: Higher customisation and broader product range to suit wide variety of individual

• Price: direct selling approach

• Promotion: Quicker and cheaper communication

• Place: 24/7 accessibility and global reach

Costs of e-commerce

- Internet security
- Vulnerable to competition
- Starting website may be expensive

Benefits of e-commerce to consumers

• Convenient and accessible

• Relatively inexpensive when considering the total size of the potential market reach

• cost benefit