Business chapter 5 :(

Market

Market

number of all actual and potential buyers of a product

Marketing plan

document that lists activities aimed at achieving particular marketing outcomes in relation to a good/service, providing a template for future action aimed at reaching marketing objectives, such as establishing a customer base

Marketing

The process of planning, pricing, promoting and distributing products to present, as well as finding potential customers. It is a way of thinking instead of advertising which is highly visible and everywhere

Customer base

group of customers who repeatedly purchase products of a business

The customer profile

Includes location and environment, demographics (age, gender education level), interests, lifestyles, favourite activities, opinions and values, behaviour and needs that the business needs to satisfy

Benefits of establishing a customer base

• product being of value and has a connection to the customer

• potential to gain repeat purchasers

• customers should develop a loyalty to the business

  • improved marketability of products results in a high level of sales and improved market share

How businesses make a profit

• increase value or volume of sales

• increase market share

• expand business size

  • maximising customer service to have high customer satisfaction

Market share

A business’ share of the total industry sales for a market or product

Product mix

The total range of products offered by a business (businesses aim to increase this)

Customer service

Responding to the needs and problems of customers

Monitoring marketing objectives

1. Establishing market plan

2. monitor performance

3. Evaluating performance

   1. Take corrective action

Performance indicators

A means by which a business can measure its performance and evaluate the degree to which it’s achieving its objectives

Sales analysis

A performance indicator, and is the most common method as sales reports are readily available in most businesses. Sales data is used to evaluate the business’ current performance and the effectiveness of the marketing mix.
Compares Forecast sales (what was expected) with Actual sales (what was achieved) to determine marketing strategy success

Market share analysis

A performance indicator that evaluates how a business’ marketing strategies are working compared with those of its competitors. Can reveal whether changes in sales have resulted from marketing strategies or some uncontrollable external factor (sale revenue + market share = declined - marketing strategies need to be reviewed)

Marketing profitability analysis

A performance indicator that breaks down its total marketing costs into specific marketing strategies (advertising, transport, administration). Business can assess the effectiveness of each strategy and how best to allocate marketing resources in the future. Presents the full picture whereas sales and market share analysis don’t

Brand/Brand identity

a name, term, symbol, design or any combination of these that identifies a specific product and distinguishes it from its competitors - the message the customers receive about the business and its products

Owners and managers

Internal environment that can affect the establishment of a customer base and brand identity:

Leaders in a business that need skills to develop a customer profile, or hire a marketing manager with the necessary skills. They are expected to have a defined idea of of business objectives, and to ensure the marketing strategy is consistent with those objectives. Recognize the need for a change in the marketing plan and implementing them

Employees

Internal environment that can affect the establishment of a customer base and brand identity:

details of marketing strategy must be instilled in them so that they act consistently with the marketing strategy towards customers. Friendly, polite and efficient service establishes and expands the customer base and enhances brand identity

Culture and policies

Internal environment that can affect the establishment of a customer base and brand identity:

The beliefs, values and expectations will form the basis of how the business operates. A successful marketing strategy will become a part of these operations, and reputation and values become apart of the bran identity

Customers

Stakeholders in the operating environment that can both influence the marketing strategy and be influenced by it:

The most important stakeholders in the operating; their needs and preferences are crucial. Businesses must strive to satisfy them and to ensure they get the right product at the right time, offering products tailored to their needs (helps develop their loyalty to the product). A marketing strategy that isn’t customer focused is doomed to fail, hence why high levels of customer service should be apart of a business marketing strategy

Suppliers

Stakeholders in the operating environment that can both influence the marketing strategy and be influenced by it:

They depend on the success of the business to which they sell their products. If they provide goods for resale, the marketing strategy of them will also influence the way in that the retailer markets those products (a cafe who sells soft drinks will use the marketing material provided by the manufacturer of those drinks)

Competitors

Stakeholders in the operating environment that can both influence the marketing strategy and be influenced by it:

Important marketing strategy is to distinguish the business from its competitors. A business owner must be aware of their marketing strategies in order to develop a unique marketing plan. Increasing market share is likely to take customers away from competitors, meaning the marketing strategy must be more effective than competitors if a business wants to expand their customer base and present a bran identity that has a greater appeal

Economic forces

Little to no control over macro environment, however a business plan must take this into account as potential customers are likely to be found here:

Periods of strong economic growth = favorable time to establish a business and to expand customer base. Employment levels are high and consumer’s disposable income increases.
A successful marketing strategy will tap into the greater levels of consumer confidence

Periods of difficult economic conditions - a marketing strategy could place emphasis on value for money and low prices

Legal forces

Business subject to ‘Competition and Consumer Act’, which can make certain types of marketing practices illegal (misuse of market power, false/misleading representation of good/service, misleading/deceptive conduct, bait advertising)
Marketing practices should be ethically and socially responsible and shouldn’t include any illegal practices

Technological forces

This can promote the business through an online presence in order to have access to a global marketplace. To improve customer base and brand identity, business should consider processing payments electronically through credit card, EFTPOS, Afterpay, PayWave

Social Forces

Business can tap into social and fashion trends for a powerful marketing plan - should take into account demographics of specific area and social issues that affect potential customers

3 steps of market research

1. determining information needs

2. collecting data from primary and secondary sources

   1. Analyzing and interpreting data

market research

identifies and outline marketing opportunities and problems, and evaluates the implementation of the marketing plan (can determine whether a product is worth launching or promoting at all)

Purpose is to help minimise the risk - a more accurate marketing plan can be designed and reduces the risk of failure

determining information needs

Useful if it:

• results in marketing strategies that meet the needs of a business’ target market

• assists the business to achieve its marketing objectives

  • used to increase sales and profit

    Information must be relevant; “Effective decisions are generally 90% information and 10% inspiration”

Marketing data

the information - usually expressed as facts or figures - relevant to the defined marketing problem. Uses primary and secondary data.

Primary data advantages

can be directed at solving a specific marketing problem and to find out exactly what customers are thinking

Primary data disadvantages

time consuming, potentially expensive and can be seen as intrusive

Secondary data advantages

quick and easy to gather, a large abundance in comparison to primary data

Secondary data disadvantages

May not be specific to your marketing problem, may need to ask for permission to use

Collecting primary data - the survey method

Gathering data by asking questions or interviewing people (personal interviews, focus groups, electronic methods of collection, questionnaires). Gathers customers first-hand opinions and information however becoming more difficult due to respondent rates declining

Gathering primary data - the observation method

Recording customer behaviours (personal - researcher poses as customer in a store, or mechanical observation - cameras, video, voice recorders, counting patterns), and direct contact with respondents is avoided (no interviews). Ethical issue of privacy is raised

Gathering primary data - the experimentation method

Gathering data by altering factors under tightly controlled conditions to evaluate the cause and effect (carried out in laboratory or field, and is used to determine whether changing a factor will alter the behaviour of what is being studied - typically customers)

Secondary data

Two types: Internal data (from within the business such as financial statistics, annual management reports, research reports, customer feedback), and external data (published data from outside business, such as reports from the Australian Bureau of Statistics - ABS)

Analysing and interpreting data - statistical interpretation analysis

Process of focusing on the data that represents average, typical or deviations from typical patterns (tabulate data first - electronic spreadsheets simplifies this task)

Analysing and interpreting data - cross tabulation

allows comparisons to be made between individual categories, and should involve a number of people to interpret data to avoid personal bias

Market segmentation

when the total market is subdivided into groups who share one or more common characteristics. This occurs as businesses can’t target an entire market due to its size, so it’s divided into distinct segments.

Market dimensions - geographic

division of market according to location (urban, suburban, rural, regional, global, climate, landform)

Market dimensions - psychographic

characteristics and traits of consumers (lifestyle, socio-economic groups, values, motives, personality, consumer opinions and interests)

Market dimensions - demographic

general characteristics of population (age, gender, occupation, income, education, religion, family size, ethnicity)

market dimensions - behavioural

Grouping consumers according to their knowledge on the product, their attitude and responses towards it, and the way they use and benefit from it (regular user, first time user, bran loyalty, benefits sought, usage rate)

Target market

group of customers with similar characteristics who currently purchase the product or may do so in the future

target market selection advantages

• more efficient use of marketing strategies

• more relevant promotional material

• better understanding of target market behaviour

• more efficient data collection and comparisons

• refined marketing strategies

Primary target market

market segment at which most of the marketing resources are directed - generates more revenue

secondary target market

usually a smaller and less important market segment - provides an alternative if primary customers are lost

Niche market

A narrowly defined market segment, or ‘micro-market’. Larger business tend to overlook them as it’s not profitable to tailor their marketing mix towards them

Consumer trends - health concerns

Media frequently states the negative health impacts of modern lifestyles, which drive consumers to seek healthier options

Consumer trends - health trends

Offer dairy-free products, lifestyle services such as yoga and personal training are gaining in popularity

consumer trends - environmental and economic changes

Global warming, oil price spikes, sustainability, green energy, increasing cost of living, inflation

consumer trends - online shopping

Business should make an online presence, and advertise on search engines such as Google to help reach more customers

Consumer buying behaviour

the decisions and actions of consumers when they purchase a product/service. Businesses try to influence these.

Market research asks “who are our customers?” and “what and when do they buy and how often?”, whereas this asks “why do they buy?”

Psychological factors on consumer behaviour - perception

individuals act on this and not reality. Marketers must create a positive perception of a product, as customers avoid products they perceive as poor

Psychological factors on consumer behaviour - motives

Key elements of this include comfort, health, safety, ambition, taste, pleasure, fear, amusement, cleanliness, and approval. Advertising aims to influence these

Psychological factors on consumer behaviour - attitude

This element of a customer towards a business or product affects the success of their marketing strategies severely

Psychological factors on consumer behaviour - personality

Affects the types and brands of products a person buys

Sociocultural influences - family and roles

Can influence buying behaviour, as different purposes within a household/community can affect them. Despite changing roles, women often make decisions related to healthcare, food and laundry products

Sociocultural influences - peer groups

buying behaviour may align with the beliefs/attitudes of one’s ___ ____

Sociocultural influences - social class

factors like education, occupation, and income classify this, affecting the type, quality and quantity of products purchased

Sociocultural influences - culture

Shapes everyday behaviour, including what people wear, eat and where they live.

Economic influences

Have an enormous impact on consumers’ willingness and ability to spend money. During a boom, consumers will spend because they feel secure and their jobs and their source of income. During recession, consumer spending falls to very low levels

Government influences

They use a number of economic policy measures to influence the level of economic activity. These policies directly or indirectly influence consumer’s spending habits. Also have laws and regulations (laws dealing with misleading or deceptive conduct - protects consumers and influences business practices)

7P’s of marketing - product ff

a good, service, experience, idea or information that can be offered in exchange for the purpose of satisfying a need or want. Can be tangible or intangible

marketing mix

the combination of 7 elements: product, price, place, promotion, people, physical evidence, and process which all make up the marketing strategy

tangible product

Something that can be touched and owned such as food, clothing, etc.

intangible service

Can buy this but it’s not for ownership, can include financial advice and tickets to a sporting event

Tangible and Intangible

Dinner at a restaurant: offers food and drinks, as well as live music and a pleasant atmosphere

Total product concept

When customers buy both tangible and intangible benefits. A business uses this to differentiate products from competitors.

Product development

the creation of a product with new or different characteristics that offer new or additional benefits to customers. Can involve modifying an existing product or the way it’s presented, or creating an entirely new product.

product positioning

the development of a product image compared with the image of competing products (business attempts to create an image that differentiates its product from others)

Product image

Includes the name, price, packaging, style, promotion, and channel of distribution of a product

Brand name

part of the brand that can be spoken

brand symbol/logo

graphic representation that identifies a business and their product

packaging

the development of a container and the graphic design for a product. (Can help to develop positive impression of product, presents, informs, protects and promotes the product, can increase awareness of environmental pollution)

7P’s of marketing - price

The amount of money a customer pays to enjoy a product

Pricing strategy - Recommended retail price (RRP)

The price recommended by either a wholesaler or the manufacturer of the goods being sold by a retailer business. These are recommendations only - illegal for supplier to dictate the price the product is sold for. It can provide useful guidance to owner of business

Pricing strategy - percentage mark-ups

The cost price is increased by a fixed percentage to give the selling price. Allows business to cover costs and make a profit.

Pricing strategy - price leadership and competition

To follow the prices set by another is to acknowledge that business as a price leader. A business’ price can be adjusted to gain a competitive advantage, using the price leaders as a pricing guide

Pricing strategy - what the market will bear

Basing the price off of what customers would accept. Approach commonly seen at auction (peole bidding for an item to determine its value).

Pricing strategy - qutoes

An estimate of the costs involved with an individual job/product, plus a certain amount so the business makes a profit.

Pricing strategy - price skimming

placing a high price on a new item, knowing that devoted customers and early purchasers will be willing to pay it. The price is then lowered after initial sales to attract more customers

Pricing strategy - penetration pricing

when a new, unfamiliar product is introduced to the market, a low price is offered to attract new customers

Pricing strategy - premium pricing

setting an artificially high price to increase the prestige or perceived value of the product (suggest product is of higher quality than its competitors)

Pricing strategy - price bundling

business sells a package of goods/services for a lower total price than the individual price of each component

Pricing strategy - psychological pricing

making the price look less than it actually is ($19.99 rather than $20).

7P’s of marketing - place

making the product availble to the customer, wherever they choose to purchase it. (Can refer to a physical or online location, or the business’ ability to perforom a service at the customer’s home)

distribution channels

routes taken to get the product from the factory to the customer

Product, agent, wholesaler, retailer, consumer

The levels of distribution channels a business can take

non-store retailing

retailing activity conducted away from the traditional store (door-door selling)

e-marketing

The practice of using the internet to perform marketing activities (retailers and wholesalers are bypassed as customers deal directly with producers/manufacturers)

market coverage

the number of outlets a business chooses for its product

intensive distribution

occurs when a business wishes to saturate the market with its product - customers can shop at local outlets to purchase the product (e.g. milk and bread)

selective distribution

using only a moderate proportion of all possible outlets - customers have to be prepared to travel and seek a specific retail outlet that stocks the product

exclusive distribution

the use of only one retail outlet for a product in a large geographic area - commonly used for exclusive, expensive products

7P’s of marketing - promotion

methods used by a business to inform, persuade and remind a target market about a business’ products - it isn’t just advertising

promotion - Personal selling

the activities of a sales representative directed to a customer in an attempt to make a sale - businesses use this if they offer expensive, complex and highly individual products, as it aims to familiarise the customer with the product. The message can be modified to suit the individual customer’s circumstances

promotion - opinion leader

a person who influences others and are respected and sought out for advice. (celebrity endorsement - athletes, actors musicians, models in order to open up a huge following)