Marketing Principles

mid sem study set

What is marketing?

an activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offers that have value for customers.

What is marketing?

It is a medium used to influence the needs and wants of a consumer.

The development of Marketing

50s \= consumer goods marketing
60s \= industrial marketing
70s \= societal marketing
80s \= services marketing
90s \= global and direct marketing
00s\= Digital Marketing

What is a Market?

Actual Buyer + potential Buyers \= A market. (These buyers must share a particular need or want that can be satisfied through exchange relationships)

Marketplace **

Any location or medium used to conduct an exchange

Need **

A need is a state of felt deprivation. Marketers encourage needs rather than creating them.

Want **

A form of human need shaped by their individual culture and personality. Marketers provide want-satisfying goods and services

Demand

The demand is human wants backed up by buying power. The reason behind demand is because consumer wants are driven by products they perceive as bundles of benefits that services both economic and utility value.

Market Offering **

a Market offering is a product that is a combo of goods and services

Exchange

The act of obtaining a product by offering something else in return

Transaction

Two products of value are involved here - the classic is a monetary transaction

Relationship

The act of retaining customers after either an exchange or transaction is made - by this, marketers need to interact with their market and product on a personal level in order to build a long term relationship.

Customer value (two differences \= perceived value)

The difference between the values the customer gains by using a product and the costs of obtaining the product - This value is perceived value

The Value Proposition **

The value proposition is the set of benefits or values that it promises to deliver to customers to satisfy their needs. It should differentiate brands and position them in the marketplace.

Managing customer Demand (Demand management ready-reckoner)

1) Negative demand (dental work)
2) No Demand (target consumers may be unaware of or uninterested in the product)
3) Latent demand (consumers share a strong need that cannot be satisfied by any existing product e.g. safer communities)
4) Declining demand (marketing task is to reverse the declining demand)
5) Irregular demand (varies on seasonal basis etc)
6) Full demand (organisations face this when they are satisfied with their volume of business)
7) Overfull demand (facing a demand level that is higher than they can handle)
8) Unwholesome demand (discourage consumption)

How value is created (4 steps) **

1) Understanding consumer needs and wants
2) The design of a customer driven marketing strategy
3) The construction of an integrated marketing programme
4) Building of profitable relationships

Designing a customer driven marketing strategy: The Role of Marketing Managment **

choosing target markets and building profitable relationships with them

Designing a customer driven marketing strategy: Selecting marketers to serve

These are not always involved with seeking increased demand, but may also be associated with reducing demand. An example of this is de-marketing \= many service firms and not-for-profit organisations need to engage in de-marketing.

Designing a marketing strategy, the marketing manager must ask two questions

1) what customers will we serve? (target audience)
2) How can we serve these customers best? (the value proposition)

Summary of designing a marketing strategy (The four Ps)

Searching for buyers,
Identifying their needs,
Designing PRODUCTS,
setting PRICES,
PROMOTING them,
PLACING (delivering) them,

THE FOUR PS OF MARKETING: these constitute the controllable variables that the marketer can manipulate in order to serve a market

Marketing management orientations

1) Production Concept: old concept, an idea surrounded around mass production, done in a situation where demand exceeds supply
2) Product Concept: opposite of the Production concept, aim to create the best product possible making consumers naturally want it, lack of foresight when judging if the market actually wants the product // they become short-sighted in their production
3) Selling Concept: Aggressive promotion of mass produced product // not tailored to the market specifically // ineffective in the long run
4) Marketing concept: Ideal concept whereby the focus is on the consumer // INDENTIFY CONSUMER NEEDS + PROVIDE PRODUCTS TO SATISFY THOSE NEEDS \= LONG TERM PROFITABILITY
5) Societal Concept: similar to the Marketing concept but promotes the idea of being a good corporate citizen // giving back to society

An integrated marketing programme (two factors) **

1) Consists of the firm's marketing mix, the set of tools it uses to implement the marketing strategy,

2) Transforms the marketing strategy into action - building relationships

Business planning **

making decisions that guide the company in the short term and long haul

marketing plan (a document that describes the... 4 things) **

The marketing plan is a document that describes the:
1) marketing environment,
2) marketing objectives,
3) strategy,
4) Staff responsible,

Three levels of business planning

1) Operational: undertaken by supervisory managers
2) Functional: undertaken by top functional staff
3) Strategic: undertaken by top level management

Functional Planning **

coming up with the actual strategy:
1) perform situation analysis,
2) set marketing objectives,
3) develop marketing strategies,
4) Implement marketing strategies,
5) Monitor and control the marketing strategies

Operational planning: this is day to day **

1) Develop action plans to implement the marketing plan
2) use marketing metrics to monitor how the plan is working

This focuses on developing plans that carry out the functional plans

Strategic Planning **

Process of developing and maintaining a STRATEGIC FIT between the organisations goals and its capabilities (in the light of changing marketing opportunities)

Strategic planning relies on developing a clear: **

1) Company Mission
2) Objectives
3) Sound business portfolio
4) Coordinated functional strategies

The steps of strategic planning: done at a higher level then implemented across lower levels **

1) Define the company mission
2) evaluate the internal and external environment
3) SBU objectives
4) Establish the business portfolio
5) Develop growth strategies

Strategic planning VS marketing strategy **

Strategic planning \= considers all aspects of the firm's operations

Marketing strategy \= is a critical subset of strategic planning

Whereas strategic planning considers all aspects of the firm's operations, a marketing strategy is a subset of strategic planning. E.g. Facebook: the product orientated definition \= we are an online social network. Whilst the market orientated definition \= We give people the power to share and make the world more open and connected

The Mission Statement **

The mission statement can give a sense of direction for a company. It is the WHO ARE WE?

It should be meaningful, specific, and motivating.

It should NOT be stated in sales or profits and it is used in order to emphasize the company's strengths in the marketplace.

A mission statement should NOT be centralized around the product as this is a volatile thing that can change and evolve.

A business Portfolio **

A business portfolio is the collection of current businesses and products that make up the company

A Strategic Business Unit (SBU) **

An SBU is a unit of the company that has a separate mission and can be planned independently from other company business.

An SBU can be a company division, a product line within a division, or even a single product.

The Current Business Portfolio - The Boston Consulting Grid (BCG)

The BCG consists of 4 divisions that are used to establish the position of a company's product:
1) Stars: High market share AND High growth rate
2) Cash Cow: Market share is good and the business is a strong performer and their product generates cash from the market. However, the market has reached a saturation point, and is not growing anymore.
3) Question Mark: NEW to the market so cash generated is low but there is a lot of potential and growth
4) Dogs: Market share is low AND the market is not growing - underperforming in both.

Goals of strategy **

Short term focus \= to improve profitability
Long term goal \= To improve strength and competitive position

Aspects of Strategic planning **

1) marketing strategy
2) HR strategy
3) Finance
4) Technology
5) Strategic alliances
6) IT strategy
7) Marketing strategy

Different types of strategy: corporate strategy

Sharehoulder value

Different types of strategy: Business Strategy

Business Value (SBU level)

Different types of strategy: Marketing Strategy

Customer value - functional level // It focuses on ways in which the corporation can differentiate itself from competitors, capitalising on its distinctive strengths to deliver better value // This is perceived value

What is Marketing strategy? **

Marketing strategies focus on ways in which the corporation can DIFFERENTIATE itself effectively from its competitors, capitalising on its distinctive STRENGTHS to deliver better VALUE to customers

The Marketing Strategy: The strategy

Consists of a pattern of decisions that set the goals that lead to a long run of competitive advantages for a firm.

Marketing objectives \** (6)

1) increase sales
2) increase market share
3) introduce X number of products into the market
4) Open X number of stores
5) Enter new markets
6) Create awareness

The Competitive Arena

The competitive environment in which a business operates

Core Competencies

Are unique areas of advantage where a firm can differentiate from competitors.

Three characteristics of core competencies **

1) It is a SOURCE OF COMPETITIVE ADVANTAGE and makes a significant contribution to perceived customer benefits
2) it has applications in a WIDE VARIETY OF MARKETS
3) it is DIFFICULT FOR COMPETITORS TO IMITATE

Goal of competitive advantage (PUS)

Profitable, Unique, Sustainable (PUS)

Strategy selection

Environmental changes/trends?
Corporations strengths and capabilities? - customers needs?

Competition? differentiate

The Strategic 3Cs **

What value can the CORPORATION provide the CUSTOMER that is different to existing offerings of our COMPETITION

Growth Strategies (Remember that these will always be brand specific)

The object is to grow the business // It's an offensive marketing strategy whereby the focus is either market, consumer or product

Growth Strategy: Market Penetration **

Seek to increase the usage of existing products in existing markets (increasing the volume of product)

Growth Strategy: Market development **

Same Product, New Markets. Looking for segments in the market or convert uses of other products to your own (geographical outsourcing)

Growth Strategy: Product development **

new product, same market (e.g. new packaging)

Diversification

Entirely new products AND new markets

Companies adopt different strategies dependent upon their industry position

1) Market Leader
2) Market Challenger (direct competitor of leader)
3) Market Follower (very little innovation, just emulates the bigger players)
4) Market Nicher: Targets much smaller markets that are of little interest to the big players

Strategic Alliances - Four market categories of marketing strategic alliances **

1) Product of service alliance
2) Promotional alliances (disney and Maccas)
3) Logistics Alliances: AusPost branched out
4) Pricing Collaborations: one or more companies join

The Four Generic Strategies by Michal Porter **

1) Cost Strategy: work to under-price competitors
2) Differentiation: achieve superior performance on something that makes you unique (on a basis of service/quality/product)
3) Focus: a Niche Strategy - focusing on smaller segments
4) Cost Leadership: this is only possible for very large firms

First Mover Strategy

First to do something, therefore making them seem unique and different. As a result of this consumers will associate you with high creditability

Second Mover Theory

This can often take over first mover

Barista's Economy

A services economy referencing to an economy that spends the majority of household income on services

Environmental Analysis

is the basis of the beginning of the market plan. It is part of the SWOT analysis and consists of two parts \-- Environmental Scanning (process of collecting) and Environmental Analysis (process of assessing and interpreting)

Possible strategy choices **

Superior locations
Unique product range
cost leadership
Strong brand and loyalty
Specialist

Red and Blue ocean strategy **

Red: compete in existing market space
Blue: Create uncontested market space
Red: Beat the competition
Blue: Make the competition irrelevant
Red: Exploit existing demand
Blue: Break the value-cost trade-off
Red: Align the whole system of a firms activities with its strategic choice of differentiations OR low cost
Blue: Align the whole system of a firm's activities in pursuit of differentiation AND low cost

RED \= DEFEND CURRENT POSITION PERSPECTIVE

BLUE \= INNOVATE AND PURSUE NEW OPPORTUNITIES

S.W.O.T

strengths + weaknesses (internal to the firm)
Opportunities + threats (external to the firm)

Analysing market opportunities requires... (3) **

1) Requires research to gather info about the marketing environment (macro and micro)

2) Requires understanding of consumer markets through research

3) Requires close attention to competitors through research

How to differentiate **

1) Product
2) Services
3) Personnel
4) Channel (location, availability)
5) A strong brand name/image
6) Gaining speed and first mover advantage

The three environments **

The Macro environment - outisde the industry - has varying effects on a broad range of industries

The Micro environment - inside the industry - affects most/all players in the industry

The Internal environment - inside the firm - relates only to the firm

The Micro Environment

The Micro environment is inside the industry and has various effects on a broad range of industries // It consists of actors close to the company that affect its ability to serve customers.

The Micro environment consists of actors close to the company that affect its ability to serve its customers. These actors consist of : Suppliers

- Suppliers are the main channel of distribution,
- They provide resources
- Equal to partners in ensuring customer satisfaction

The Micro environment consists of actors close to the company that affect its ability to serve its customers. These actors consist of : The Firm **

- The Firm is associated with designing marketing plans and marketing management - forming the INTERNAL ENVIRONMENT
- Marketing managers have an integral relationship with their marketing intermediaries (the company's delivery network, that help the company promote, sell and distribute its final products)
- PHYSICAL DISTRIBUTION FIRMS: help with stocking and moving goods to their final destination
- MARKETING SERVICES AGENCIES: helping to promote to the target audience
- FINANCIAL INTERMEDIARIES: Partnering with marketing intermediaries is a vital component to optimise their performance in the industry (banking transactions, risk insurance)

The Micro Environment: Competition

1) To be successful a company must provide more consumer utility than its competitors
2) Types of competition: Price, Quality, Time, and Location (PQTL)
3) Sources of competition: Exciting, new, innovative potential, and substitute competitiors

The Micro Environment: Three levels of competition **

1) Product Form: Brands in the same product category targeting the same segment with similar attributes
2) Product Category: Products or services with similar features
3) Generic: Products or services fulfilling the same needs

The Micro Environment: Public (any part who holds an interest in the company) (7 groups) **

A Public is any group that has potential interest or some impact on the company's ability to achieve its objectives. These include the following:
1) Financial Publics: Influences the ability to obtain sufficient funds
2) Media Publics: Carries news and editorial opinion (a facilitating agency)
3) Government Publics: Legal advice and compliance by the law
4) Citizen action Publics: is where marketing decisions can be questioned by consumer organisations (associated with PR)
5) Local Publics: This public consists of local residents and consumer organisations
6) General Public: is where marketers need to be concerned with the general consensus and attitude of their company
7) Internal Publics: is the internal environment e.g. workers and managers

Types of marketing intermediaries

1) Resellers (Find and Sell to customers)
2) Physical distribution firms (move goods)
3) Marketing service agencies (research, advertising)
4) Financial intermediaries (insurance against risk e.g. banks)

The Macro Environment

The major external and uncontrollable factors that influence an organization's decision making. The Macro environment consists of all FADS , TRENDS, and MEGATRENDS

PEST analysis: analysis of the external factors that can affect an organisation

POLITICAL (stability, attitude towards business)
ECONOMIC (Growth)
NATURAL (Limited resources/protect environment)
TECHNOLOGY (use of internet )
SOCIOCULTURAL (current trends and demographics)

The Macro Environment: Demographic environment (4 possible changes in demographic)

changes in demographic can include:
1) Ageing Generation
2) Changing Role in Women
3) Urbanisation
3) Higher education standards \= increased white collar population
4) Technological changes \= occupational and geographical mobility

The Macro Environment: The Natural Environment

The natural environment involves the natural resources that are needed as inputs by markets OR that are affected by marketing activities
- The concept of GREEN MARKETING: associated with the increasing environmental awareness. Sometimes utilized simply as a PR statement

The Macro Environment: The Economic Environment **

Key economic concerns for marketers are:
1) Changes in income
2) Changes in consumer spending patterns
3) Economic development

The Macro Environment: The Political Environment (3 examples that influence organisations)

Legislation affecting business: increasing legislation AND emphasis on ethics: social responsibility
1) ACCC
2) OH&S
3) Trade Practices Act

The Macro Environment: The Socio-Cultural Environment **

- Culture is pervasive, influencing consumers in a profound way
- CORE BELIEFS: generational beliefs that are reinforced by society and aren't challenged. Traditional and conservative.
- SECONDARY VALUES: Subject to change - can be modified by contemporary values
- LIFESTYLE: huge element that influences the consumption of a variety of products and services
- CULTURAL ENVIRONMENTS: Can be broken down into people's views of themselves, others, organisations, society, and the universe.
- Cultural environment is influenced at the slowest level - many attributes of cultural realm are ingrained within generations before
- Even large brands cannot counter cultural values

Responding to the marketing environment (two approaches)

1) The reactive approach
assumptions: the environment is largely uncontrollable
Strategies: Research , Understand, react, and adapt

2) Proactive approach
Assumptions: the environment is partially controllable
Strategies:
- Hire lobbyists to influence legislations
- Stage media events to gain press coverage
- Instigate legal actions and regulatory complaints to keep competitors in line
- Form contractual agreements to better control distribution channels

A model of consumer behaviour **

The environment (including marketing stimuli)

Buyer's Black Box (their characteristics and decision processes)

Buyer responses (Buying attitudes and preferences, purchase behaviour, brand and company relationship behaviour)

The Buyer: The Five Step Decision Process **

1) Recognition of their need
2) Information search: they do this to decide what product will give them the most utility. Can be Internal or External
3) Evaluation of alternatives
4) Purchase decision
5) Post Purchase Behaviour: involves heuristic process

THIS MODEL ASSUMES THAT THE CONSUMER IS RATIONAL AND HAS A HIGH LEVEL OF INVOLVEMENT IN THE PURCHASE OF THE PRODUCT

Variations to the buyer decision process

- Low involvement purchases are often purchased out of habit or a simple dislike/liking to something

-Purchases based on:
1) Impulse
2) Emotions
3) Symbolism
4) Status and social class

The Buyer: Various models in the decision making process (4 models) **

1) THE MARSHALLIAN ECONOMIC MODEL: rational decision making process
2) THE PAVLOVIAN LEARNING MODEL: Buying decisions are 'learned'
3) THE FREUDIAN MODEL: Buying decisions are the result of unconscious and conscious decisions
4) THE VEBLENIAN MODEL: buying decisions are conditioned by norms in social groups

The Buyer: Two different types of consumption (aims to represent wealth and create envy)

Conspicuous consumption: explicit products that represent status and wealth,

Invidious consumption: Purchases designed to create envy

The Buyer: Types of Buying decisions (4) **

1) Complex buying behaviour: high involvement with significant differences between brands
2) Variety seeking behaviour: Low involvement with purchase - these are brand-switches who are mainly brand-driven
3) Dissonance - high involvement with low differentiation
4) Habitual Buying behaviour: Low involvement with low differentiation between brands (e.g. milk being price-driven)

The buyer decision process for new products

1) awareness
2) interest
3) evaluation
4) trial
5) adoption

The Process and Rate of Adoption - awareness, interest, evaluation, trial, adoption

-The adoption process places the adopters into categories and explores how the earlier adopters influence the later adopters.

External factors that will influence the consumer:

CULTURAL INFLUENCES:
-social class... emerging middle class \= increasing demand for products
-upper class consists of conspicuous and insidious consumption
- Social class determines the norm within a society

SOCIAL INFLUENCES: have a direct or indirect influence on behaviour
- Family and friends (direct and most influential)
- Reference groups (direct or indirect e.g. professional groups that consumers belong to like work clothes)
-Group influence: strongest influence for conspicuous influences - Public Luxuries, Private luxuries, and Public necessities and private necessities

Internal Factors that influence the consumer **

PERSONAL FACTORS:
-age, lifestyle, occupation, education - all demographic
- Personality
- Lifestyle: expressed in AIOs (Activities, Interests, and Opinions)
-Psychographics: the study of lifestyle research that involves the major AIO dimensions

PSYCHOLOGICAL FACTORS:
- Motivation: inner state that moves consumers towards a particular kind of behaviour
- Maslow: personal needs are organised in a hierarchy whereby self-actualisation is 1st, then self esteem is 2nd, social needs is 3rd, safety is 4th and physiological needs are 5th

Perception: the complex processes in which people select organise and interpret sensory stimulation (Selective exposure, selective distortion, and selective retention)

Learning: Classical conditioning (repetition, e.g. company song),
Problem solving
operant conditioning (reward or punishment),
Beliefs and attitude: influence their buying power

Tri-component (ABC) model **

Affective (i enjoy studying at USYD)

Behaviour (I always go to lectures)

Cognitive (USYD is the oldest uni in australia and ranks well)

Young Optimism

a pattern of thinking associated with young professionals whose thoughts are focused on achieving a good career and generally improving their prospects in life.

Three stages of marketing **

MASS MARKETING: the seller mass produces, mass distributes and mass promotes one product to all buyers

PRODUCT VARIETY MARKETING: The seller produces two or more products that have different features, styles, quality etc

TARGET MARKETING: The seller identifies market segments, selects one or more, and develops products and marketing mixes tailored to each.

Three major steps in marketing

1) Marketing segmentation: dividing a market into distinct groups of buyers with different needs/characteristic/or behaviour who might require separate products or marketing mixes

2) Market targeting: evaluating each segments attractiveness and selecting one or more of the segments to enter

3) Market positioning: setting the competitive positioning for the product and creating a detailed marketing mix

What is Marketing Segmentation?

It is the process of dividing a market into groups of consumers with common needs - for the purpose of selecting one or more segments to target with a distinct marketing strategy

Reason to segment: **

To help identify best strategic fit

To identify opportunities in the market

To help develop new products

To better understand the market

To avoid competition or to structure our own race

To our offering to meet better needs

Steps in segmentation: **

1) The market is broken down
2) and grouped into meaningful market segments
3) so that a target market can be chosen

How to segment a market?

There is no single way - a marketer has to to try different segmentation variables, along and in combination, to find the best way to view the market structure