Management Processes - Marketing

MARKETING

  • Marketing is a system of interacting activities:
    • Designed to plan, price, promote, and distribute products to present and potential customers.
    • Vital for a business's existence, focusing on identifying and satisfying customer needs.
    • Without marketing, customers might not be aware of a product, leading to failure.
      • 70% of new products fail in the first year due to poor marketing.

Identification of the Target Market

  • A target market is a group of customers with similar characteristics who may purchase a product.
  • Three approaches to selecting a target market:
    • Mass marketing approach.
    • Market segmentation approach.
    • Niche market approach.

Mass Marketing

  • Mass marketing involves mass-producing, mass-distributing, and mass-promoting one product to all buyers.
    • Example: The Model T Ford.
  • Seeks a large range of customers.
  • Develops a single marketing mix aimed at the entire market.
    • One product type with minimal variation.
    • Single promotional program, price, and distribution system.
  • Few products are marketed to the masses due to greater choice and individual preferences; exceptions include basic necessities.

Market Segmentation

  • Market segmentation subdivides the total market into groups sharing characteristics based on:
    • Demographic.
    • Geographic.
    • Psychographic.
    • Behavioral.
  • Demographic:
    • Population characteristics like age, gender, education, family size, income, occupation, social class, religion, and ethnicity.
  • Geographic:
    • Location-based factors like urban, suburban, rural areas, region, city size, climate, and landforms.
  • Psychographic:
    • Personality characteristics, lifestyle, motives, socioeconomic group, consumer opinions, and interests.
  • Behavioral:
    • Factors such as purchase occasion, benefits sought, loyalty, use rate, and price sensitivity.

Types of Segmentation

  • Demographic segmentation: Dividing a market based on customer age and gender.
    • Example: Coca-Cola targets 15-35 year old males with the energy drink Mother and health-conscious adults with Diet Coke and Deep Springs natural Mineral Water.
  • Geographic segmentation: Dividing a market based on geographic locations.
    • Example: Consumers in Jindabyne need snow chains, while those in Port Macquarie need lightweight clothing.
  • Psychographic segmentation: Dividing a market based on personality, motives, opinions and lifestyle.
    • Researching consumer brand preferences, music, radio, TV programs, reading habits, and values.
  • Behavioral segmentation: Dividing a market based on knowledge, attitudes, and product use.
    • Purchase occasion: Segmenting based on when customers are likely to purchase.
    • Usage rate: Segmenting based on how often customers use a service.
      • Example: Internet providers offering different packages based on usage.
    • User loyalty: Segmenting to develop a loyal customer base.
      • Example: Woolworths Everyday Rewards cards.

Purpose of Market Segmentation

  • Direct marketing strategies to specific customer groups.
  • Increase sales and profits by understanding customer desires.
  • Select one segment as the target market.
    • Example: An exclusive women’s fashion boutique targeting female, 25-45 year old, city-based professionals with high incomes.
  • Allows businesses to:
    • Use marketing resources efficiently.
    • Understand consumer buying behavior.
    • Collect data effectively.
    • Refine marketing strategies.
  • Businesses may identify primary and secondary target markets.
    • Example: Sportsgirl Fashion identified a primary target market of 18-25 year old females and a secondary market of 26-40 year old females.

Niche Markets

  • A niche market is a narrowly selected target market segment.
    • Like a ‘micro market’.
    • Example: Gluten-free products.

Marketing Mix

  • Marketing strategies are actions to achieve business goals through the marketing mix.
  • The marketing mix includes the four Ps: product, price, promotion, and place (distribution).
  • Businesses control these elements to reach their target market.

Product

  • Involves more than just selecting a product, including:
    • Quality.
    • Design.
    • Name.
    • Warranty and guarantee.
    • Packaging and labelling.
    • Exclusive features.
  • Customer service is crucial.
    • Ongoing service maintains customer relationships.

Product Packaging

  • Packaging involves designing a product's container to preserve, inform, protect and promote.
  • Well-designed packaging creates a positive impression and encourages purchases.
  • Aesthetically pleasing packaging attracts attention and increases sales.
  • Tasteful packaging can create an image of luxury and exclusiveness.
  • Businesses are increasingly aware of environmental concerns related to packaging.

Product Labelling

  • Labelling is the presentation of information on a product or package.
  • All labels must be truthful.
  • Australian laws specify required information on labels to protect consumers from misleading claims.

Product Branding

  • A brand is a name, term, symbol, or design identifying a product and distinguishing it from competitors.
  • A brand logo is a graphic representation identifying a business or product.
  • Combined, they are a powerful marketing tool.
  • Customers associate brands with reliability, styling, and value.
  • Well-recognized brands have a carry-over effect for new products.

Price

  • Setting the ‘right price’ is crucial.
    • Too high = loss of sales.
    • Too low = impression of poor quality.
  • Three pricing methods:
    • Cost-based pricing: Calculating total production cost and adding a markup for profit.
      • Example: A fashion store with a 100% markup purchases a dress for 100 and sells it for 200.
    • Market-based pricing: Setting prices based on supply and demand.
    • Competition-based pricing: Pricing relative to competitors.

Pricing Strategies

  • Price skimming: Charging the highest possible price during the introduction stage.
    • Objective is to recover research and development costs quickly.
    • Example: Apple initially priced its 8GB iPhone high but later dropped the price, causing backlash.
  • Price penetration: Charging the lowest possible price to gain market share.
    • Aims to discourage competitors.
    • Difficult to raise prices later without product modification.
  • Loss leader: Selling a product at or below cost price to attract customers.
    • Consumers buy other products, recovering the loss.
    • Used to reduce excess stock or build a low-price reputation.
  • Price points (Price lining): Retailers separate goods into cost categories to create different quality levels in the mind of consumers.

Promotion

  • The role of promotion is to inform, persuade, and remind consumers.
    • Attract new customers.
    • Increase brand loyalty.
    • Encourage existing customers to purchase more.
  • Four main elements:
    • Personal selling and relationship marketing.
    • Sales promotion.
    • Publicity and public relations.
    • Advertising.

Elements of Promotion

  • Personal selling: Sales representatives interact with customers to make a sale.
    • Used for expensive products.
    • Advantages:
      • Modifiable message.
      • Long-term relationships.
      • After-sales service.
  • Relationship marketing: Developing long-term relationships with customers.
    • Example: Coffee stamps at a cafe.
  • Publicity and public relations:
    • Publicity: Free news stories about a business’s products.
    • Public relations: Activities to maintain favorable relations between a business and its customers.
  • Sales promotion: Activities to attract interest and support.
    • Examples:
      • Coupons.
      • Refunds/reimbursements.
      • Samples.
      • Point-of-purchase displays.
  • Advertising: Paid, non-personal message communicated through mass media.
    • Purposes: inform, persuade, and remind.
    • Main advertising media:
      • Mass marketing.
      • Direct marketing catalogues.
      • Telemarketing.
      • E-marketing.
      • Social media advertising.
      • Billboards.

Place (Distribution)

  • Place makes products available when and where customers want them.
  • A distribution channel is how a product reaches a customer.
  • Types of distribution channels:
    • Producer to customer: No intermediaries.
      • Used for services.
    • Producer to retailer to customer: Retailer buys from producer and resells.
      • Used for bulky or perishable products.
    • Producer to wholesaler to retailer to customer: Wholesaler buys in bulk and sells to retailers.
      • Common for consumer goods.

Channel Choice

  • Channel choice refers to how a business delivers its product to customers.
    • Intensive Distribution: Saturating the market.
      • Example: Coca-Cola.
    • Selective Distribution: Using a moderate proportion of outlets.
      • Example: Clothing outlets, electronic appliances.
    • Exclusive Distribution: Using only one retail outlet in a large area.
      • Example: Versace handbags.