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24108 Marketing Foundations UTS

How to study Marketing Foundations?- Read the textbook.- Go to every lecture and tutorial- Do the Group/ Individual Assignment- use the chapter summaries found at the end of each chapter in the textbook- Write the textbook chapter summaries into your notebook.- Use the tutorial/ textbook questions as the framework to form your notes.- Work three weeks ahead of the class.- Use the notes below and don’t be afraid to add your own notes to my notes.- Do every textbook, tutorial, I study and past paper questions- Use the I Study (USB with extra resources such as interactive quizzes provided with the

Elliott / Waller Marketing Textbook).- Skim read every page of my notes; there are some very good Product Notes- Electronic

Marketing Notes near the end of my notes.- Make summaries of my summaries (make my notes shorter and add your notes).

Chapter One - INTRODUCTION TO MARKETING

Marketing – set of institutions and processes for creating, communicating, delivering and exchanging products of value for customers, clients, partners and society at large. Firms with a market orientation perform better than firms without a market orientation. They have better profits, sales volumes, return on investment and market share. Marketers must learn about the needs and wants of customers. This is an ongoing process as customer preferences are continually evolving. The best marketers are able to offer something that is unique or special to customers e.g. I pad.

An example of marketing in action is Apple Ltd creating customer delight via market orientation i.e. a focus on the customer. Moreover, with a clear focus on New Product Analysis coupled by market research the company is able to achieve this objective. Apple has better profits, sales volume return on investment and market share. The marketer has adopted marketing thinking via mutually beneficial exchange with value creation for all parties, both parties expectations being met and both parties benefit from the transaction.

Ethics is a set of moral principles that guide attitudes and behaviour. Corporate Social Responsibility is the material fact that businesses have a duty to act in the best interests of the society that sustains them. They are obliged to act ethically, within the law and fulfil requirements such as philanthropy, protecting the natural environment, providing products that benefit society and generating employment and wealth. Qantas’s corporate social responsibility (‘the spirit of Australia’) is used as leverage to earn more cash money via support of community organisations such as Clean up Australia, Land Care and the Prime Minister’s Disability Awards. The marketing organisation has not fulfilled its obligations to all stakeholders if it merely acts within the law. The organisation must act in the best interests of most stakeholders such as shareholders, employees, customers, partners and government.

1 | M A R K E T I N G F O U N D A T I O N S

Marketing can be used by not for profit organisations such as the Salvation Army that aims to advance the welfare of the less fortunate and needy. This can be via Integrated Marketing Communications or promotion in online news media to generate donations to help the needy.

A contemporary product that demonstrates how marketers stimulate demand is I phone. The product’s augmentation such as special features that differentiates I phone from competing products e.g. a digital high definition camera which allows users to take pictures when they want.

Advertisements that are product focused include BMW ‘the ultimate driving machine’, while advertisements that are customer focused include NAB ‘more give less take.’.

The Marketing ProcessThe marketing process involves answering two questions. The first question is what customers we serve (market segmentation and targeting). The second question is how we best serve targeted customers (differentiation and positioning).

1. Understand the marketplace and customer needs and wants2. Design a customer-driven marketing strategy3. Construct an integrated marketing program that delivers superior value4. Build profitable relationships and create customer delight5. Capture value from customers to create profits and customer equity

Simple Marketing Concepts- Needs, wants and demands – products as bundles of benefits, look for best value for money

Needs – things that are vital for survival e.g. housing, food and water. Wants – a non-necessary desire e.g. designer clothes and perfume. Demands – wants backed by buying power

- Products – offered to market to satisfy need or want (e.g. goods, experiences, place, information)

- Value, satisfaction and quality Value – customer’s overall perception of the utility of a product based on what is

received and what is given. Utility is the usefulness of a product. V = Quality/ Price = Benefits expected/ benefits received Customer satisfaction – extent to which perceived performance meets expectations Quality – how well products satisfies want

- Exchange, transactions and relationships Exchange – the mutually beneficial transfer of products of value between buyer

and seller. It involves:1. value creation for all parties2. both parties benefit from the transaction3. Both parties expectations must be met e.g. quality and price.

An example of an exchange is the Cancer Council Australia runs Television advertisements encouraging people to protect their skin from sun damage. People become aware that they should wear


protective clothing when in the sun. The Cancer Council meets its objectives because more people are wearing protective clothing when in the sun. Long term benefits will arise for society as the rate of skin cancer drops for the Australian population.

Transaction – marketing’s unit of measurement; trade of value Relationship marketing – creating, maintaining and enhancing strong value-laden relationships with customers and other stakeholders.

A market is a group of customers with heterogeneous needs and wants e.g. Geographic markets (China, Australia and the UK), Demographic markets (Baby boomers, Gen X and Gen Y) and Product markets (water bottle and pain killer).

Designing Customer-Driven Marketing Strategy6. Marketing management – “analysis, planning, implementation and control of programs

designed to create, communicate and deliver value to customers and facilitate managing customer relationships in ways that enable the organisation to meet its objects and those of its stakeholders

Selective Customer to ServeDemand management – understand and monitor nature of consumer demand; build profitable relationships, cost of attracting new customer is five times higher than keeping existing oneCreating excitement

The Marketing Evolution

1. Trade (bartering and exchange of products).2. Production orientation – what could be made? Henry Ford said that “you can have any car that you want as long as it’s black (because black was the cheapest car to produce)”3. Sales orientation – consumers won’t buy unless organisations undertake large-scale

promotional efforts (e.g. life insurance). “Hey come and buy the blue car, we know you can get black but blue is better” says the used car salesman.

4. Marketing orientation – focus on the customer and finding out what they need and want.5. Societal market orientation- used as a selling point and leverage to target socially aware

customers i.e. Corporate Social Responsibility and Ethics.Selling and Marketing Concepts

Concept Starting Point Focus Means EndsSelling Factory Existing products Selling and

promotingProfits through sales volume

Marketing Market Customer Needs Integrated Marketing

Profits through customer satisfaction

Philosophies

7. Social marketing concept – balance between ideas of SOCIETAL (HUMAN WELFARE) + COMPANY (PROFITS) + CONSUMERS (SATISFACTION)

Preparing an Integrated Marketing Program


8. Outlines which customers the company will serve and how it will create value9. Developed to deliver value to target customers10. Builds relationships; consists of marketing mix

Managing the Marketing MixPRODUCT – good, service or idea offered to the market for exchange.

PRICE – the amount of money a business demands in exchange for its products.11. PROMOTION – advertising, personal selling, online marketing12. PLACEMENT – channel management13. Physical evidence – used to measure satisfaction i.e. as services are intangible14. Process – in ‘high-contact’ services, customers involved in creating and enjoying experiences15. People – many service experiences involve interacting with people; relationships

Customer Relationship Management (CRM)16. Overall process of building and maintaining profitable customer relationships by delivering

superior value and satisfaction17. Deals with all aspects of acquiring, keeping and growing customers

Relationship Building Blocks: Customer Value and Satisfaction18. Customer perceived value – evaluation of difference between benefits and costs19. Customer satisfaction – product’s perceived performance and buyer’s expectations

Capturing Value from Customers20. Creating customer loyalty and retention – delighted customers remain loyal and will tell others

about their positive experience with brand; losing a customer is losing more than a sale21. Growing share of customer – through variety and cross-selling e.g. restaurants want ‘share of

stomach’ whilst banks want ‘share of wallet’22. Building customer equity - the combined discounted customer lifetime value of all a company’s

current and potential customers


Chapter Two – MARKETING ENVIRONMENT

The Marketing Environment is all the internal and external forces that affect a marketer’s ability to create communicate and deliver products of value. Marketers must influence their environment. They use environmental analysis to break the marketing environment into smaller bits to make it easier to understand. The internal environment is the people and processes within an organisation that affect a marketer’s ability to create, communicate and deliver products of value e.g. marketing information system and sales force.

The Micro environment is the forces within an organisation’s industry. It is not directly controllable by the organisation. It consists of customers, clients, competitors and partners.

Partners include (LFWARS) Logistic firms (storage and transport), financiers (banking and insurance), wholesalers (B2B), advertising agencies, retailers (B2C) and suppliers. Marketers must ensure their products provide their target market with greater value than their competitors’ products.

The Macro environment is the forces outside of an organisation’s industry. It includes Political, Economic, Socio cultural, Technological and Legal forces.

Political forces include lobbying for favourable treatment at the hands of government and lobbying for favourable regulation.

Economic forces are how much money individuals and organisations have to spend and how they choose to spend it. They include prices, income and availability of credit.

Socio cultural factors affect people’s attitudes, beliefs, behaviours, preferences, customs and lifestyles. Social Cultural factors include demographics such as statistics about a population: age, gender, ethnicity, educational attainment and marital status. Furthermore, the natural environment is an example of a social cultural theme that has recently emerged.

Technological forces allow a better way of doing things. Technology changes expectations and behaviours of customers and clients and have huge effects on how suppliers work.


Legal factors include legislation enacted by elected officials. Laws and regulations fall under the following categories: privacy, fair trading, consumer safety, prices, contract terms and intellectual property.

Situational Analysis involves assessing an organisation’s current position in the market place. A marketing plan communicates how marketers plan to get from the current situation to where senior management thinks the organisation should be.

Marketing metrics are used to measure the current performance and the outcomes of past activities. It includes Return on Investment, Customer satisfaction, Market share and Brand Equity.

-Return on investment – Cost and benefit analysis which takes into account sales volume, marketing investment (cost, share of voice) and bottom line (profit, share of industry profit).

-Customer satisfaction- churns (the percentage of customers lost) and number of complaints received/ resolved.

-Market share is defined as the percentage share of total industry profits including the percentage improvement in the market share growth/ decline.

-Brand equity- awareness (the percentage of the total target market) and loyalty (repeat purchase behaviour).

A SWOT analysis is used to identify strengths (those attributes of the organisation that help to achieve its objectives), weaknesses (those attributes of the organisation that hinder it in trying to achieve its objectives); opportunities (factors that are helpful to achieve the organisation’s objectives) and threats (factors that are harmful to achieving the organisation’s objectives). Strengths and weaknesses are internal; opportunities and threats are external..

SWOT Analysis of Qantas

Strengths

- highest safety standard- employees strong commitment to the Qantas Group- Named one of the world’s top airlines in the prestigious Skytrax World Airline Awards.-Weaknesses - operations deemed as inferior to competitors- strikes

Opportunities - transitioning the business from cost centres to profit centres


Threats - Security concerns- Increased competition- The federal government’s Workplace Relations policy - Rising fuel prices

-

Respond to the Marketing EnvironmentSome companies view marketing environment as uncontrollable, others take on environmental management perspective.Marketing management should aim to be proactive rather than reactive wherever possible

Chapter Three –MARKET RESEARCHMarket Research (MR) is gathering information and knowledge about the market. For example, a business that makes bird houses involves understanding, creating (production and operations), communicating (promotion e.g. on Channel Nine on TV on a show such as The Voice Australia) and delivering (e.g. a store such as Kmart or Target because older people are not as tech savvy). The above stated market research process is interlinked and ongoing. Moreover, if a business creates what it perceives to be a profitable product but if there are hardly any customers, then the firm needs to do market research to find out why the consumers are not buying. The results of market research are fed into a Marketing Information System (MIS), which holds and organises all of the organisation’s marketing information. The MIS is in house (internal environment).Market research involves five major components:

- defining the research problem (profit or sales related clause)- designing the research methodology (design) e.g. dropping prices by 5 per cent increases

sales by twenty per cent i.e. actionable results- collecting data- analysing data and drawing conclusions- presenting the results and making recommendations.

What the research is intended to answer is known as the research problem e.g. 1) why is the sale of sultanas down at the Pymble Woolworths? 2) Why is Apple’s brand image taking a hit? As the research project proceeds the research problem may need to be redefined. A market research brief should be prepared to guide the project. A market research brief specifies the research problem, the info required, the time frame and the budget. A planned methodology to answer the research problem is known as the research design. Types of MR include exploratory, descriptive or causal research. Exploratory research gathers more information about a loosely defined problem e.g. a focus group. Descriptive research is used to solve well defined problem by clarifying more about certain phenomena e.g. healthy product range for MC Donald’s Quick Service Restaurants (food done fast) . Causal research tests if a variable affects an outcome e.g. effect of coupons on pizza sales at Pizza Hut.


MR draws on two types of data. Secondary data is data already exists. Primary data gathers specifically for the current research project. Research methods can be quantitative or qualitative research. Quantitative research collects data that can be represented numerically and analysed statistically. Experimentation, neuroscience and observation are quantitative research methods e.g. the survey. Qualitative research obtains rich and detailed info that underlie observable behaviour. Interviews and focus groups are the most qualitative research methods.

MR tries to find out about the population by studying a small part of it and generalising the results (sample).

Probability sampling ensures every member of a population has a known chance of being selected in the sample. Non Probability sampling provides no way of knowing the chance of a member being selected in the sample.

Once a research project has been designed, it must be implemented in compliance with the design via project management. Data must be carefully collected and organised so that it can be efficiently analysed. Quantitative data can be statistically manipulated to identify trends and patterns in the data. Qualitative data can be reduced to allow statistical analysis but much of the rich detail can be lost. Qualitative data analysis can lead to further research in the form of quantitative research. Data analysis allows conclusions to be drawn and recommendations formulated. The findings and recommendations of the market research project should be presented in a concise and clear manner.

Two types of probability sampling methods are random sampling and stratified sampling. In a random sample each member of the population has an equal opportunity of being for the sample. In a stratified sample the population is divided into different groups based on some characteristic e.g. age and gender and then from each groups a random sample is chosen.

Two types of non probability sampling methods are quota sampling and convenience sampling. A quota sample divides the population into groups based on a number of characteristics. In a convenience sample, participants are selected based on convenience e.g. interviewing your friends and family for a project.

Unethical market research examplesSugging – selling under the guise of market research.Frugging- fund raising under the guise of market research.

Chapter Thirteen – International MarketingGlobalisation is the process via international individuals, organisations and government become interconnected and similar. Barriers have diminished facilitating greater interconnections between different countries and their people. This has resulted in close interdependence in terms of trade, finance, living standards and security.


Chapter 4 – Consumer Behaviour (CB)

Factors influencing consumer behaviour Summary

Situational factors include physical, social, time, motivational and mood factors.Group factors- cultural (sub cultural and social class) and social (reference groups, family, roles and status).Individual factors- personal (demographics e.g. age, occupation and income; lifestyle, personality and self concept) and psychological (motivation, perception, beliefs and attitudes and learning).

Case Study: New business ventures built on understanding consumer behaviour (Wotif.com)Consumer behaviour involves getting inside the heads of consumers and understanding their psychological values. Wotif.com has clear target market i.e. International business travellers and has built a business by selling last minute cheap hotels. If you see a target market not being served, create a product and make cash money. Consumer behaviour is the study of the behaviour of individuals and households who buy products for personal consumption. It provides an understanding of the reasons behind the decisions consumers make which is central to creating an effective marketing mix. Consumer behaviour is influenced by situational, group and individual factors. Situational factors are the circumstances in which consumers make purchasing decisions. They relate to physical, social, time, motivation and mood factors. Group factors comprise cultural and social influences. Cultural influences affect the behaviours of society: culture, sub culture and social class. Culture is the system of knowledge, values and beliefs by which society defines it. National cultures can be described according to Hofstede’s cultural dimensions: power distance, uncertainty avoidance, individualism, masculinity and long term orientation.

-Power distance- the degree of inequality among people that is acceptable within a culture. Western societies tend to score low on power distance manifesting their relatively egalitarian cultures, whereas Asian societies score high in power distance, reflecting greater social inequality. Less social inequality (20 per cent) New Zealand, Australia (38 per cent), United


States of America (40 per cent); more social inequality Japan (55 per cent), Singapore (75 per cent) and India ( 79 per cent).

-Uncertainty avoidance- the extent to which people in a culture feel threatened by uncertainty and relies on mechanisms to reduce it.

-Individualism is the extent to which people focus on their goals over those of the group. Western societies are generally individualistic, whereas Asian societies are more collectivist.

- Masculinity is the extent to which traditional masculine values (e.g. status, assertiveness and success) are valued over traditional feminine values (solidarity, quality of life).

A sub culture is a group of individuals who share common attitudes, values and behaviours that distinguish them from the broader culture in which they are immersed. A social class is a group of individuals who share common rank within the social hierarchy. Social influences are those that influence an individual to conform to group norms. A reference group is any group to which an individual looks for guidance including membership, aspirational and dissociative reference group. An opinion leader is any reference group member who provides influential advice to other group members. Innovators introduce innovations, early adopters including opinion leaders drive adoption by early majority, late majority and laggards. Family influences are a vital influence on consumer behaviour with many purchasing decisions made by certain members or combinations of members of the household. Personal and psychological factors influence consumer behaviour independently of social circumstances. Personal characteristics include demographic, lifestyle and personality. Psychological characteristics include motivation which is the internal drive to satisfy unfulfilled needs or achieve goals. According to Maslow’s hierarchy of needs individuals try to satisfy lower order biogenic needs such as food and sleep ahead of higher order psychogenic needs such as learning? Another psychological characteristic is perception, how an individual manages meaning to external stimuli including marketing communications. Beliefs and attitudes are a vital influence on consumer behaviour as they determine the context in which product evaluations are made. Effective marketing needs to appeal to the cognitive, affective and behavioural components of consumer attitudes. The consumer decision making process comprises of need/want recognition, information search, evaluation of options, purchase and post purchase evaluation. Consumer decisions involve different levels of involvement:

- Habitual decision making involves low involvement such as buying bread and milk.- Limited decision making involve limited information to evaluate options e.g. buying

appliances and clothing.- Extended decision making involve high involvement and is usually for once in a life time

purchase e.g. a car, wedding ring, house or wedding dress. Cognitive dissonance is second thoughts about the wisdom of a purchase (post purchase evaluation/ regret).



Roles in the Buying Process

Chapter 5- Business Buying Behaviour The business market can be divided into reseller, producer, government and institutional markets. Reseller markets comprise marketing intermediaries that buy products in order to sell and lease them to another party for profit. Producer markets comprise businesses and professionals that buy products in order to produce other products, or in their daily business operations. Govt markets comprise federal, state and local govt’s that buy products in order to provide services to citizens. Institutional markets comprise non public and not for profit organisations that buy and sell products.

There are vital differences in the reflection of business markets and consumer markets. Business markets involve high value purchases (lots of money), high volumes (lots of money) and regular repeat purchases. Price and other conditions of the sale are open to negotiation. There are far fewer buyers and sellers in business markets. Products alternatives are subject to extensive formal evaluation with decisions made by committees. The relationships between buyers and sellers tend to be long term and involve extensive after sales support. Demand in business markets tends to fluctuate much more than demand in consumer markets.

Many business products are used in the production of another product. This creates a situation of joint demand, where demand for one product is related to demand for another product. Because business products are one of many used in the production of other products, demand for them tends to be relatively unresponsive to changes in price. This is known as inelastic demand. Demand tends to be relatively inelastic within an industry but can be elastic in relation to individual companies. Business purchases take the form of a straight rebuy, modified rebuy or new task purchase, each of which leads to different levels of engagement in the purchase


decision making process. The group of people who make business purchasing decisions is the buying centre.

Chapter 6 – MARKET SEGMENTATION, TARGETING AND POSITIONING

Sellers can take three approaches to a market. Mass marketing is the decision to mass produce and mass distribute product and attract all kinds of buyers. One to one marketing is providing a customised product to meet individual customer needs. Target marketing is creating a group of customers with homogeneous needs and wants. The target marketing process involves market segmentation, market targeting, market positioning. Market segmentation involves creating sub groups within the total market that are homogenous. Segmentation variables used in consumer markets include geographic, demographic, psychographic and behavioural.

In business markets, organisation size, product use and geography are used as segmentation variables.

Market Segments- Segmentation involves dividing a market into direct group of buys who might require separate

products or marking mixes; classifying customers into groups with different needs, characteristics or behaviour

- Geographic – geographical units such as nations, regions, neighbourhood- Demographic – variables such as age, gender, life cycle, income occupation, religion- Psychographic – socioeconomic status, lifestyle, personality characteristics- Behavioural – occasions, benefits sought, user status (non-user, first=time, regular), usage rate

(light, moderate, heavy), loyalty status, buyer-readiness, attitude- Business Markets – personal characteristics, demographics, operating variables, purchasing

approaches, situational factors

Evaluate Market Segments- Size and growth – analyse data on current and projected sales growth rates; large companies

may want large current sales and high growth rates, whereas smaller companies may find it too competitive

- Structural attractiveness – competitors, power of buyers, substitute products, power of suppliers

- Company objectives and resources – evaluate whether segment fits with company’s goals and objects; whether the company has resources to go into the segment

Targeting Strategies- Undifferentiated marketing – one homogenous market; one marketing mix- Differentiated marketing – several markets; several marketing mixes (different product

offerings)


- Concentrated marketing – one target market though market is heterogeneous; one marketing mix

Differentiation and Positioning- Product position – way the product is defined by consumers on important attributes- Positioning strategies – product attributes, benefits, usage occasions, against/away from

competitors, product classes

Choosing and Implementing Positioning Strategy- Identify value differences – perceptual mapping, analyse position of brand in mind of

consumers, rating brands against each other- Identify competitive advantage – understand needs and buying processes; deliver more value

Differentiation- Product - performance, style, design, durability, reliability, consistency- Services - delivery, installation, repair, customer service, consulting service- Personnel - hiring and training better employees than competitors- Image - brand, symbols and logos, sponsorship

Selecting Overall Positioning Strategy (Positioning Statement)

Brand’s Value Proposition Quality of Product/Service

Cost

More for more Most upscale Higher priceMore for the same (attack competitor’s positioning)

Comparable quality; more product/service

Lower price

Same for less (powerfully value proposition)

Same quality Lower price

Less for much less Less quality Lower priceMore for less (winning value proposition; hard to maintain)

More quality; more product/service

Lower price

Communicating and Delivering the Chosen Proposition- Marketing mix efforts must support the positioning strategy- Position must be monitors and adapted over time to match changes in consumer needs and

competitors’ strategies


Chapter 7 – PRODUCTS

A product is a good, service or idea offered to the market for exchange. It can be tangible, intangible or both. Marketers analyse products using the total product concept: core, expected, augmented and potential products.

Total Product Concept-Core Product – basic benefit bought; eg. for a car it is transportation from A to B. For coffee it is caffeine hit). For mobile phones it is communication.

-Expected Product – product’s characteristics (quality level, features, styling, brand image and packaging).-Augmented Product – bundle of benefits that differentiates the product (e.g. warranties, delivery)e.g. for a washing machine it could be warranties, a delay function and delivery. For a mobile phone it could be a camera.

-Potential Product- features that are being developed and prototyped. e.g. retina recognition security for a credit card.

A product can be tangible and intangible give examples of each.

A product that is tangible and can be delivered to the consumer is a good it includes commodities like coffee, tea, sugar, salt and minerals.

A product that is intangible and does not involve ownership is a service like a hair cut, insurance and air plane travel.

Products can be divided into consumer products (purchased by individuals and households) and business products (purchased by an organisation to be used in its operations or in the production of other products).

The concept of product life cycle says that a product passes via five stages: new product development, introduction, growth, maturity and decline.


New Product development has eight stages: idea generation, screening (eliminating unviable ideas), concept evaluation, marketing strategy, business analysis (how the new product will affect costs, sales and profits), product development, test marketing and commercialisation.

The product adoption process describes the stages via which a potential customer passes, first becoming aware of the new product, then deciding to adopt/ buy the product. In this process the consumer who accepts a new product passes via five stages: awareness, interest, evaluation, trial and adoption.

Product differentiation is the creation of products and attributes that distinguish one product from one and another. Most of the differentiation occurs in the augmented product layer of the total product concept. The design, brand image. Style, quality and features are the key product attributes that can be used to differentiate products from competitors products.

Brand is the collection of symbols (e.g. name, logo and slogan) intended to create a differentiated image in the customer’s mind. Brands play a major role in the consumer’s choice of a product, namely high involvement products, as well a highly popular brand with a good reputation will more likely be chosen rather than a cheaper and unknown brand.

Consumer Product Classifications and Market Considerations

Definition Customer Buying Behaviour

Price Distribution Promotion

Convenience Products(Staple, impulse and emergency products)E.g. toothpaste, household items, breakfast cereals

Bought frequently, with little engagement in the purchasing decision making process.

Frequent purchase, little planning or comparison, low involvement

Low price

Widespread distribution, convenient locations

Mass promotion by producer

Shopping ProductsE.g. major appliances, electronics, clothes

Moderate to high engagement based on quality, price and features.

Less frequent, much planning and shopping effort, comparison of brands on price, quality and style

Higher price

Selective distribution in fewer outlets

Advertising and personal selling by both producer and resellers

Specialty ProductsE.g. luxury goods

Unique characteristics, unique brand identification, willing to make special purchase effort

Strong brand preference and loyalty, little comparison of brands, low price sensitivity

High price

Exclusive distribution in one or few outlets per market area

Carefully targeted promotion by both producer and resellers

Unsought ProductsE.g. life insurance, blood

Know about products or doesn’t normally think of buying

Little product awareness, little product knowledge, little

Varies Varies – easy access helpful (online

Aggressive advertising and personal selling


donation, Pest control and Crimsafe

or even negative interest

distribution advantageous)

Product Relationships-Product item- a particular version of a product-Product line – set of product items related by characteristics such as end use, target market, technologies and raw materials-Product mix– set of all products that an organisation makes available to customers.

Packaging23. Designing and producing the container or wrapper for product24. Altering packaging, secondary-use packaging, category consistent packaging, innovative

packaging, multiple packaging, handling-improved packaging

Labelling25. Part of packaging, consist of printed information appearing on or with the package

Branding26. Add value to product, powerful brands have consumer franchise – command strong consumer

loyalty27. Brand equity – value of brand based on extent to which it has high brand loyalty, name

awareness, perceived quality, strong brand associations and other assets such as patents, trademarks and channel relationships

28. Brand meanings – attributes (brand brings to mind attributes such as prestige); benefits (customers by functional and emotional benefits); values (brand says something about buyers’ value); personality (brand projects personality)

29. Brand sponsor decision – manufacturers’ brand, private brand, licensing, co-branding30. Brand strategy – line extension, brand extension, multibrands, new brands31. Brand repositioning – need to change product and image, change attitudes and perceptions

towards brands, need huge promotions


LECTURE 7B – NEW PRODUCTS

What is a New Product32. New to the world (e.g. inventions)33. New category entry (i.e. taking company to new category)34. Additions to product line35. Product improvements36. Repositioning (e.g. retargeted for new use or application e.g. Dettol hand wash + cleaning

agent)37. Variations of the above (e.g. new to a country, new to channel, packaging improvement)

New Product Success and Failure38. New customer packaged goods rail 80% of time, 33% of industrial products fail at launch39. Products may fail due to negative perception, wrong timing, poor market research, poor

commnctn


Overview of branding decisions

New Product Development (NPD) Process

1. Idea Generation40. Systematic search for new product ideas41. Internal idea sources formal research and development, company scientists, engineers,

brainstorming42. External idea sources competitors, customers, distributors/suppliers, marketing

intermediaries43. Others e.g. trade magazines, shows and seminars, advertising agencies, marketing research

firms

2. Idea Screening44. Reduce number of ideas generated by spotting good ideas and dropping poor ideas45. Criteria may include company objectives, production capabilities, feasibility of target market

3. Concept Development and Testing46. Product idea – idea for possible product company can see itself offering to market47. Product concept – detailed version of idea stated in terms meaningful to customers48. Product image – way consumers perceive an actual or potential product49. Concept testing – process of testing product concepts with a group of target customers

4. Marketing Strategy Developments50. Designing of initial marketing strategy for new product

1. Describe target market, planned product positioning, sales, market share, profit goals

2. Outline product’s planned price, distribution and marketing budget3. Describe planned long-run sales, profit goals and marketing-mix strategy

5. Business Analysis51. Review of sales, costs and profit projections to find out whether they satisfy company objectives52. Assessment of financial budgets, potential markets and growth rate

6. Product Development53. R&D or engineering develops product concept into physical product (prototype or test run)54. Development activities prototype, feasibility testing, preliminary market strategies55. Large investments56. This stage will show whether product idea can be turned into workable product


7. Test Marketing57. Introduction of product and marketing program into more realistic market settings58. Consumer markets standard test markets (free samples); controlled test markets (leaving

products in certain places); simulated test markets (try selling at particular environment)59. Business markets product use-test

8. Commercialisation60. Introducing new product into market61. Full scale production, full scale marketing62. Integration into the firm63. Company launching product must decide WHEN, WHERE, TO WHOM and HOW

The Product Life Cycle (PLC)

Marketing LawThe law imposes a number of duties on the marketer. Each element of the marketing mix is controlled in some way by the law, be it common law or by statute. They include:

- SOG legislation- Consumer protection legislation- Consumer credit legislation


- Debt collection- Restrictive trade practices legislation- Principal and agency law- IP law- Law of contract- Law of torts

Chapter fourteen- Marketing PlanningStrategic Planning – process of developing and maintaining a strategic fit between organisations goals and capabilities in light of changing marketing opportunities

Marketing Plan vs. Business Plan-Business plan incorporates plans of all business functions-Marketing plan focuses on:

a. Customer acquisition, retention and required resourcesb. Resources required to implement specific marketing functionsc. Covers one year (markets keep changing)d. Varies in lengthe. Shortcomings may include lack of realism, insufficient market, short-run focus

Contents of Marketing Plan1. Executive Summary – brief summary, aimed at senior management, no longer than a page2. Current marketing situation – background data on target market, product, competition,

distribution and macro-environment3. SWOT and Issue Analysis – strengths + weaknesses (internal), opportunities + threats (external)4. Objectives – financial and marketing objectives, Smart Measurable Achievable Realistic

Timeframe5. Marketing Strategy – specific strategies for target markets, marketing mix, marketing

expenditure level, often comes after positioning strategy statement6. Action Programs – implementation, what will be done, when, who will do it and how much

spent?7. Projected Profit-and-Loss Statement – budget with revenue showing sales, expenses showing

cost of production, distribution and marketing8. Controls – monitoring plans progress; contingency plan


– PRICING, CONSIDERATIONS & APPROACHESPrice is the amount of money charged for a product or service. Is the only element in the marketing mix that produces revenue, all other elements represent cost. It is used as a competitive weapon.

Importance of Pricing: Pricing is getting more and more important due to better informed customers (e.g.

through new media) and mistakes in companies’ communication Pricing has a huge impact on competitors:

Competitors can expect effects from a price change that are twice as high as those from a change in another marketing variable

Internal Factors Affecting Pricing:Marketing Objectives:

survival current profit maximization (short run) market-share leadership (long run) product-quality leadership (high prices)

Companies often have more than one objective, which may lead to a conflict of interests!

Company Resources: size of the company resources.

Pricing will be a function of costs: fixed cost variable cost total cost experience cost curves, costs decline over time as a result of accumulated production

experience

Marketing Mix Strategy:Product:

how important is the product? is it part of a range or accessory? quality?

Promotion: who does the promotion? is price a major selling point?

Place: wholesale and retail margins store image


External Factors Affecting Pricing Decisions:The Market and Demand:

Pricing in different types of markets Consumer Perceptions of Price and Value Price and Demand Relationship Price Elasticity of Demand (sensitivity) Competitor’s Prices and Offers Other External Factors Government regulations Loyalty programs

Pricing for Different Types of MarketsPure competition

Market consists of many buyers and sellers with each having little influence on market price

Trading of uniform commodity

Monopolistic competition Market consists of many buyers and sellers Range of prices occurs

Oligopolistic competition Market consists of a few sellers Sellers are highly sensitive to each other’s pricing and marketing strategies Difficult for new sellers to enter the market

A pure monopoly Consists of one seller Pricing is handled differently in each case

Demand:Price and Demand Relationship

mapped on a demand curve

Price Elasticity of Demand how sensitive will demand be in relation to changes in price for your product?

General Pricing Approaches:


Cost-based pricing: cost-plus pricing breakeven analysis and target profit pricing sets the floor for the price that the company can charge for its product

Competitor Based Pricing: economic value pricing going-rate pricing sealed-bid pricing

Relationship Pricing special relationship enrichment shared risk and reward

Break Even Analysis and Target, Profit Pricing: determine the price at which it will break even

Target pricing uses concept of a breakeven chart which shows total costs and total revenue expected at

different sales volume levels setting the price to break even on the costs of making and marketing a product, or to

make the desired profit

Value-Based Pricing: buyers’ perceptions of value are the key to pricing use non-price variables to build up perceived value in the buyers’ minds price is set to match the perceived value

Cost vs. Value-Based Pricing:Cost-Based Pricing:Product, design a new productCost, total the costs of making the productPrice, sets a price that covers cost plus target profitValue, convince buyers that at the products value at that price justifies its purchaseCustomers, purchase the products

Value-Based Pricing:Reverse of Cost-Based Pricing

Customer


ValuePriceCostProduct

Competition-Based Pricing:Economic Value PricingThe price set by a company is lower than customers’ perceived value and lower than that of its competitors.

Going-Rate PricingPrice based largely on competitors’ prices, with less attention paid to its own costs or demand.

Sealed-bid/TenderCompany bases its price on how it thinks competitors will price (e.g., job offers, governmental tenders).

New Product Pricing:Market-skimming pricingSetting a high price for a new productAppropriate if:

Sales are less sensitive to price in early stages Capacity constraints exist. E.g. Apple used for the Ipod a skimming strategy

Market–penetration pricingSetting a low price for a new productAppropriate if:

Sales are very sensitive to price Product faces strong potential competition. E.g. Microsoft used a penetration strategy for

Office XP in 2001

What is Price?- Amount charge for a product or service, or sum of values consumers exchange for the benefits

of having or using the product or service- Only element of marketing mix that produces revenue- Comprised of different components (e.g. price of production, royalties, shipping, labour)- Price is adjusted across different products, times and customers (e.g. new products attract

higher costs, discounts for children and pensioners)


Factors to Consider when Setting Prices

Internal Factors Affecting Pricing- Marketing objective survival, current profit maximisation, market-share, product-quality- Company resources, size of company- Function of costs – fixed costs, variable costs, total costs, experience cost curves- Marketing mix strategy – product, promotion, place

External Factors Affecting Pricing Decisions- Pricing in different types of markets- Consumer perceptions of price and value- Price and demand relationship- Price elasticity (how sensitive buyers are to price)- Competitors prices and offers

Pricing in Different Markets- Pure competition – markets with buyers and sellers with little influence on market price (e.g.

petrol)- Monopolistic competition – many buys and sellers, different products and prices- Oligopolistic competition – few sellers, sellers highly sensitive to each other’s pricing and

marketing strategies, difficult for new sellers to enter market- Pure monopoly – one seller, pricing handled differently in each case (e.g. Australia Post)

Demand- Price and demand relationship can be mapped on demand curve- Price elasticity shows how sensitive demand is in relation to changes in price


General Pricing Approaches- Cost-based – cost-plus pricing; break even analysis and target pricing- Value based – buyers’ perceptions of value; non-price variables build up perceived value in

buyers’- Competitor based – economic value (cost lower than competitors and lower than perceived

value); going-rate (prices close to competitors); sealed-bid/tender (how it thinks competitors will price)

- Relationship pricing – used when there are few customers; shared risk and reward

New Product Pricing- Market skimming – high price for new/innovative product, sales less sensitive to price,

appropriate if capacity constraints exist, consumers may wait for prices to fall- Market penetration – low price for new product, sell large quantities, sales sensitive to price,

product faces strong potential competition, difficult to raise prices as product perceived as low quality

Price Adjustment Strategies- Discount pricing and allowances – generate more sales volume- Segmented/discriminatory pricing – concessions for students, cheaper times of day- Psychological pricing - $1.99 instead of $2.00, using the ‘lucky’ number 8 in China


- Promotional pricing – create awareness of product- Value pricing – according to delivered value (e.g. planes first, business and economy classes- Geographic pricing – transportation costs increasing cost of goods- International pricing – certain products more popular in different countries

LECTURE 6 – SERVICES MARKETING

What are Services?- “Acts, performances, and experiences”; “deeds, processes and performances”; “activities,

benefits, and satisfactions, which are offered for sale or are provided in connection with the sale of goods”

- Service Industry – core product is service e.g. airlines (T&G)- Service Products – intangible product offerings e.g. Hewlett-Packard consultancy- Customer Service – supports the company’s core products, often free- Service as a process when there is: people processing, possession processing, mental stimulus

processing or information processing

IHIP Framework – Intangibility- Cannot be stored, demand difficult to manage- Not protected by patents; can be copied- Not easy to display or communicate; quality difficult to assess- Difficult to price- Solutions – tangible cues; physical evidence; personal sources of information; create strong

reputation/organisational image (T&G create strong reputation for quality; making customers feel ‘a million dollars’ and passing on word of mouth to others)

IHIP Framework – Heterogeneity- People are not machines; no two services will be exactly alike (hair dressers cut differently

depending on person and their mood)- Difficult to measure and control service quality- Solutions – customisation to maximise profits; standardisation for faster, cheaper, more

consistent service; staff trained in service recovery (teaching standard techniques which can be put together differently to offer a customised haircut)

IHIP Framework – Inseparability- Customer and service representative at the same place and time (customers highly involved in

haircuts, need to cooperate e.g. turning head to one side)- Mass production of services is difficult, if at all possible- Other customers may be involved in the production process (e.g. cinemas)- Service quality depends on what happens in real time- Solutions – careful selection and rigorous training of service personnel; strategies to manage

consumers (T&G Creative Academy, apprenticeships)

IHIP Framework – Perishability- Services cannot be inventoried (at T&G each hair dresser can do 10 haircuts a day)- Cannot be returned – service recovery is more difficult


- Managing supply and demand a challenge (no bookings mean that time is gone, cannot get it back)

- Solutions – keeping customers ‘in stock’ (reserve bookings if another customer cancels booking) ; development of service recovery strategies; creative management of supply and demand

The 7Ps - Product- Service products are the core of service marketing strategy (the haircut itself)- Supplementary elements are value-added enhancements (e.g. label.M hair-care range)

The 7Ps – Place (and Time)- Service distribution can take place through physical and non-physical channels- Some firms can use electronic channels to deliver all or some of their service elements (e.g.

information based services can be delivered almost instantaneously electronically)- Delivery decisions – when, where, how- Convenience of place and time of great importance as customers are physically present (e.g.

salons in convenient places)

The 7Ps – Price- Generates income for the firm; key part of costs to obtain wanted benefits for consumers- Firms need to minimise non-monetary costs to customers (e.g. time waiting, finding parking

spot, unwanted physical effort of getting to salon)

The 7Ps – Promotion- Provides information and advice (promotions at hair expo’s)- Persuades the target customers of merit of service product or brand (e.g. advertising in

magazines)

- Encourages customer to take action at specific time (discount coupons in magazines, 10% discounts to students)

- Customers may be involved in co-production and taught how to move effectively through service process and shape customers’ roles and manage their behaviour

The 7Ps – Process- Actual procedure, mechanisms and flow of activities through which service is delivered- Length: number of steps- Duration: time it takes- Logistical effectiveness: smoothness in delivery- Service delivery may follow standardised procedure that comprises a number of activities- Activities may occur frontstage (in view of customer) or backstage (not seen) e.g. frontstage at

T&G is the process of the wash, haircut and blow-dry; backstage is washing the towels

The 7Ps – Physical Evidence


- Setting where service is delivered; tangible components- Servicescapes – physical environment where the customer and provider interact (the salon)- Any tangible components that facilitate performance or communication of the service (the

shampoos used, the scissors and other tools)- The intangibility of service offerings makes tangible cues an essential part of the service process

The 7Ps – People- All humans who play a role in service delivery who influence the perceptions of customers- Service delivery employees (front-line staff) the hairdressers themselves- General staff of the service company (the receptionist when making a booking)- The customer- Other customers present in the servuction (service-production) and delivery process

Service as a Process: Implications- People processing – customers must physically enter the ‘service factory’ and cooperate with

service operation; managers must think about process and output from customers’ perspective- Possession processing – customers less physically involved; production and consumption are

separable- Mental stimulus processing – ethical standards required as customers can be manipulated;

physical presence not required; core content of service is information based; can be inventoried- Information processing – most intangible service output; transformed into enduring forms of

service output; link between information processing and mental stimulus processing can be blurred

Using 7Ps for Services Strategy- Overall strategic assessment – how effective is a firm’s services marketing mix; is the mix well

aligned with overall vision and strategy; what are strengths/weaknesses in terms of 7Ps?- Specific service implementation – who is customer; what is the service; how effectively does the

services marketing mix for a service communicate its benefits and quality; what changes needed?


Services Marketing: Key Challenges- How can service quality be defined and improved- Designing and testing new services to take into account intangibility- Communication and consistency of image- Dealing with demand fluctuation- Strategic and tactical decision making when inter-functional coordination is required- Balance between customisation and standardisation- Sustainable competitive advantage- Communicating the value and quality of something intangible to customers- Delivering service quality when employees and customers contribute to it themselves

LECTURE 8 - PLACEMENT

Marketing Logistics Network64. Traditionally physical distribution; today includes logistics, marketing logistics, integrated

logistics management, supply-chain management and materials management and physical distribution

65. Includes procuring inputs (e.g. raw materials, equipment, capital) and conversion to finished products and conveying them to end users

66. Network players suppliers, purchasing agents, manufacturer, marketers, transport agencies, end-consumer

67. Other P’s Product – variation (colour, size, features) may impose burden on distribution

facilities Promotion – campaigns must reflect logistics delivery Pricing – source of differential advantage based on superior logistical service, need

to compare the price end-user will pay for each channel

Marketing Channels68. Distribution channels are the pathways that companies use to sell their products to end-users69. Network of interdependent organisations making product/service available for

use/consumption70. Intermediaries are organisations linking producers to other intermediaries or to the customer

through contractual arrangements to purchase and resale products

Why Marketing Intermediaries are Used71. Cost – manufacturer is paid immediately regardless of whether products are eventually sold72. Increased coverage73. Consumer convenience – consumers go to once place 74. Customised approaches to customer needs75. Greater efficiency and effectiveness


76. Improved marketing effort77. Reduction of number of channel transactions

Marketing Channels adding Value78. Information – gathering and distributing marketing research and intelligence79. Promotion – developing and spreading communications about an offer80. Contact – finding and communicating with prospective buyers81. Matching – shaping and fitting the offer to the buyer’s needs82. Negotiation – reach an agreement on price and other terms of the offer so that ownership or

possession can be transferred83. Physical distribution – transporting and storing goods84. Financing – acquiring and using funds to cover the cost of the channel work85. Risk taking – assuming the risks of carrying out the channel work

Channel Organisation – Vertical Marketing Networks (VNM)86. Information – gathering and distributing marketing research and

intelligence87. Consists of suppliers, wholesalers, retailers acting as unified network88. Network can be nominated by either the supplier, wholesaler or

retailer

89. Types of VMN include corporate, contractual or administered

Choosing a Distribution Model


Consumer Marketing Channels

90. New products – needs to be introduced by demonstration and explanation, retailers not appropriate; new tools and equipment need direct marketing through commission agents (B↔B)

91. Small customer bases – readily accessible customers have wholesalers or distributors target customers for direct sales through commission agents; direct sales can help maximise profits and create good customer relationships

92. Personalised service – local dealer network or reseller program to provide service93. Buying online – e-commerce website to sell direct; sell to online retailer or distributor94. Own specialised sales team – look for sales prospects and close deals directly with customers

Retailing95. Retailing – activities involved in selling goods or services directly to final consumers for their

personal, non-business use96. Retailers – businesses whose sales come primarily from retailing; classified through:

Retailer Marketing Decisions (Strategy) – Target Market and Positioning97. Product (and service assortment) – decide on product variables of product assortment, services

mix and store atmosphere98. Price – price policy must fit target market and positioning, product and service assortment and

competition; either high mark-ups on lower volume or low mark-ups on higher volumes99. Promotion – use any or all of promotion tools (advertising, personal selling, sales promotion,

public relations and direct marketing); websites offering information and selling direct100. Placement – CBD, shopping centres (regional and strip), clusters of retailers in

commercial buildings or near hotels, ‘do it yourself’ retail parks, entertainment centres, arcades and conversion of historical buildings


Wholesaling101. All activities involved in

selling goods and services to those buying for resale or business use

102. Wholesalers perform one or more functions: selling and promoting, buying and assortment building, bulk breaking, warehousing, transportation, financing, risk bearing, market information, management services and advice

Types of Wholesalers103. Merchant wholesalers –

independently owned business that take title to the merchandise they handle; largest single group of wholesalers


104. Full service wholesalers – provide full set of services (e.g. carrying stock, using sales-force, offering credit, making deliveries and providing management assistance)

105. Limited service wholesalers – cash and carry wholesalers, trust wholesalers, drop shippers rack jobbers, producers’ cooperatives, mail order wholesalers

106. Brokers – brings buyers and seller together and assists negotiation; paid by parties hiring them; do not carry inventory or get involved in financing nor assume risk

107. Agents – represent buyers or sellers on a more permanent basis; there are (1) manufacturer’s agent (2) selling agent (3) purchasing agent (4) commission merchant

No lecture 9 – Labour Day holiday

LECTURE 10 – INTEGRATED MARKETING COMMUNICATION: ADVERTISING

What is promotion? How do marketing communication activities assist the other elements of the marketing mix in an organisation's marketing strategy?

Promotion is the marketing communication that makes potential customers, partners and society aware and attracted to the benefits of a business's products. It comprises of a strategic mix of advertising, public relations, sales promotion and personal selling. Promotion sends messages about other parts of the marketing mix mix: product, pricing and distribution.Integrated Marketing Communication

- Coordination of organisation’s promotional efforts- Use major communication elements such as advertising, sales promotion, public

relations, direct and online marketing, personal selling.- Meets objectives such a to inform, persuade and remind customers

How does the model of communication help in explaining how an advertisement works? Analyse a current advertising campaign in your answer.

The communication process: a message is encoded and sent by a sender via a message channel to a target audience who decodes the message and responds by some form of feedback. Anything that gets in the way of the effective communication process is known as noise. The AAMI


advertisement where Rhonda is on the beach with Ketut is very effective in communicating that with AAMI you save so much that you can go on a holiday.

Definition Benefits Limitations

Advertising

Paid, non-personal presentation and promotion of ideas, goods or services by an identified sponsor

- Cost efficient- Repeats message- Can control message- Create favourable

images

- Hard to measure effectiveness

- Delayed feedback- Credibility problems- Clutter in media

Sales Promotion

Short-term incentives, encourage purchase; alters price-value relationship

- Appeal to price-sensitive- Generate extra interest- Can measure effect

- Short-term impact- Doesn’t contribute to

brand image- Promotional wars

Public Relations

Non-personal communication in news story form through medium for free

- More credible- Low cost

- Lack of control- Can be negative

Elements in the Communication Process

Lecture 9:Marketing Logistics Networks:Managing the network of players providing customer fulfillment, ranging from:

suppliers (raw materials, components and capital equipment) purchasing agents manufacturer marketers transport agencies end-consumer (managing their expectations)


Marketing Logistics Network and the Other P’sProduct:

variations (colour, size, features, styles) may impose a burden on distribution facilities

Promotion: campaigns must reflect logistics delivery

Pricing: a source of differential advantage based on superior logistical service if you use multiple channels, compare the price that the end-user will pay; if a customer

can buy from one channel at a lower price than another, your partners will rightfully have concerns.

Marketing Channels:A set of interdependent organisations involved in the process of making a product or service available to users.

Distribution channels are the pathways that companies use to sell their products to end-users.

Network of interdependent organisations (or intermediaries) making product or service available for use or consumption Intermediaries are organisations linking producers to other intermediaries or to the

customer through contractual arrangements to purchase and resale products (i.e. transport companies, Dan Murphy’s)

How Marketing Channels Add Value: Information—gathering and distributing marketing research and intelligence. Promotion—developing and spreading communications about an offer. Contact—finding and communicating with prospective buyers. Matching—shaping and fitting the offer to the buyer’s needs, including such activities as

manufacturing, grading, assembling and packaging. Negotiation—reaching an agreement on price and other terms of the offer so that

ownership or possession can be transferred. Physical distribution—transporting and storing goods. Financing—acquiring and using funds to cover the costs of the channel work. Risk taking—assuming the risks of carrying out the channel work.

Levels and Channel Conflict:Channel level is a layer of intermediaries who perform some work in bringing the product and its ownership closer to the final buyer.

Channel 1, manufacturer Consumer (no intermediary levels) Channel 2, manufacturer Retailer Consumer Channel 3, manufacturer Wholesaler Retailer Consumer

Channel conflict is the disagreement among marketing channel level members on goals and roles, on who should do what and for what rewards.

Channel Organisation:Vertical Marketing Networks (VMN) are a distribution channel structure in which producers, wholesalers and retailers act as a unified network, one channel member owns the others.


Vertical Marketing Networks (VMN) consists of: suppliers wholesalers retailers acting as a unified network

The vertical marketing network can be dominated by the suppliers, wholesaler or retailer.Types of VMN:

corporate, combines successive stages of production and distribution under single ownership

contractual, independent firms at different levels join together to obtain economies of scale wholesaler-sponsored voluntary chain, wholesalers organise voluntary chains of independent retailers to help them compete with large corporate chain organisations retailer cooperatives, retailers organise a new, jointly owned wholesale business franchise organisation, a channel member called a franchisor links several stages in the production-distribution process

administered, coordinates successive stages of production and distribution, not through common ownership but through the power of one of the parties

RetailingAll activities involved in selling goods or services directly to final consumers for their personal, no-business use.

Retailing Classification:Retail stores can be classified four ways:Amount of Service:

self service retailer, provides few or no services to shoppers, shoppers perform their own locate-compare-select process, e.g. discount stores

limited service retailer, provides only a limited number of services to shoppers, e.g. smaller hardware chains

full service retailer, provides a full range of services to shoppers, e.g. first class department stores

Product Line

specialty store, carries a narrow product line with a deep assortment within that line combination store, a combined grocery and general merchandise store department store, carries a wide range of product lines, each line is operated as a separate

department managed by specialist buyers or merchandisers supermarket, a large, low cost, low margin, high volume, self service store that carries a

wide variety of food, laundry and household products convenience store, a small store located near a residential area, open long hours seven

days a week, carrying a limited line of high turnover convenience goods superstore, twice the size of a supermarket carrying a large assortment of routinely

purchased food and no food items and services such as dry cleaning service business, the product line is a service, e.g. hotels, airlines and restaurants

Relative Prices


discount stores, sells at lower prices, accepting lower margins and selling at higher volume

off price retailer, buys at less than regular wholesale prices and sells at less than retail DFO, carries the manufacturer’s surplus, discontinued or irregular goods independent off-price retailer, owned and run by an entrepreneur warehouse club, sells a limited selection of brand name grocery items, appliance and clothing at discounts to members who pay an annual membership fee

Organisational Approach chain store, two or more outlets that are commonly owned and controlled and employ

central buying and merchandising voluntary chain, a wholesaler sponsored group of independent retailers that engages in

group buying and common merchandising a contractual association between a manufacturer, wholesaler or service organisation and

independent business people who buy the right to own and operate a franchise system.

Retailer Marketing Decisions:Target Market and Positioning Decision

must define their target markets and then decide how to position themselves. until they define and profile their markets, retailers cannot make consistent decisions

about product assortment

Product and Service Assortment DecisionRetailers must decide on three main product variables:

product assortment services mix store atmosphere

Price Decision a retailer’s price policy must fit its target market and positioning, product and service

assortment, and competition. most retailers seek either high markups on lower volumes or low mark-ups on higher

volumes.

Promotion Decision use any or all of the promotion tools advertising, personal selling, sales promotion, public

relations and direct marketing to reach consumers. most retailers have also set up websites offering customer information and other features

and often sell merchandise directly.

Placement Decision Central Business District (CBD) Shopping Centres

regional shopping centres.strip shopping centres.

Other types of store clusters include:clusters of retailers in commercial buildings or surrounding major hotels.‘Do it yourself’ retails parks.entertainment centres.


arcades and the conversion of historical buildings.

WholesalingWholesaling includes all activities involved in selling goods and services to those buying for resale or business use. Wholesalers are performing one or more of the following functions:

selling and promoting buying and assortment building bulk breaking warehousing transportation financing risk bearing market information management services and advice

Types of Wholesalers:Merchant Wholesalers

independently owned businesses that take title to the merchandise they handle. The largest single group of wholesalers.

Full Service Wholesalers Provide a full set of services, such as carrying stock, using a sales-force, offering credit,

making deliveries and providing management assistance.Limited Service Wholesalers

cash-and-carry wholesalers, truck wholesalers, drop shippers rack jobbers, producers’ cooperatives, mail order wholesalers.

Limited services to supplies and customersBrokers

brings buyers and sellers together and assists in negotiation. Brokers are paid by the parties hiring them. They do not carry inventory, get involved in financing or assume risk.

Agents Represent buyers or sellers on a more permanent basis. Types of agents:1. manufacturer’s agent2. selling agent3. purchasing agent4. commission merchant


Lecture 10:Integrated Marketing Communication (IMC):The concept under which a company carefully integrates and coordinates its many communications channels to deliver a clear, consistent and compelling message about its products

Co-ordination of the organisation’s promotional efforts Uses major communication elements such as: advertising, sales promotion, public relations, direct and online marketing personal selling. Meets objectives such as to inform, persuade, and remind consumers

Advertising:Any paid form of non-personal presentation and promotion of ideas, goods or services by an identified sponsor.Benefits:

cost efficient in reaching a large audience (unlike personal selling) lets the advertiser repeat the message several times and in several different media (unlike

personal selling) ability to control message (unlike publicity) able to create favourable images (unlike some sales promotions like price discounts, buy

one get one free)Limitations:

difficult to determine or measure its effectiveness in terms of sales, for example (unlike sales promotion – eg coupons)

delayed feedback from customers in terms of intention to buy, for example (unlike personal selling)

credibility problems(unlike publicity) clutter in many media (billboards, TV etc)

Sales Promotion: Short-term incentives (activity or material) to encourage purchase of a good or service. (Attempts to alter the price-value relationship of a product in the prospect’s mind, usually

for a limited time.)Benefits:

a way to appeal to price-sensitive consumers can generate extra interest in ads easier to measure effects of sales promotion (such as coupons, price discounts) on sales,

for example


Limitations: often has short-term impact only often does not contribute to brand image (unlike advertising) can lead to promotional wars among competitors

Public Relations:A broad set of communication tools or methods used to create and maintain favourable relationships between an organisation and its stakeholders (employees, customers, shareholders, government officials, society at large etc). Example of PR Tools: Publicity Sponsorship, (even advertising!)

Publicity, a tool of Public Relations:It is non-personal communication in a news story form about an organisation/product transmitted through a medium for “free”.

Benefits: Publicity via news items (editorial in print/blogs/TV broadcasts etc) is more credible than

advertising in mass media. Low cost way to communicate

Limitations: Lack of control (unlike advertising) Can be negative

Decisions in Developing IMC:Identifying the Target AudienceAudience may be:

potential buyers or current users, those who make the buying decision, those who influence it

Identify Response Sought:Buyer Readiness States:Awareness Knowledge Liking Preference Conviction Purchase

Selecting a Message:Ideally the message should:

Get Attention Hold Interest Arouse Desire Obtain Action

(A framework known as the AIDA model)

Message Content:Rational Appeals

relate to the audience’s self interest


show how the product will produce the benefitsEmotional Appeals

stir up positive or negative emotions that can motivate purchaseMoral Appeals

directed to the audience’s sense of what is right and proper

Message Structure-there are three message structure issues: whether to draw a conclusion or leave it to the audience? whether to present a one-sided or two-sided argument? whether to present the strongest argument first or last?

Message Format communicator needs a strong format for the message. in print ads, the communicator decides on the headline, copy, illustration and colour. for radio, the communicator chooses words, sounds and voices. for TV, all elements plus body language have to be planned. May be expensive now but

you save in the long run

Setting the IMC Budget and Mix: affordable method, setting the promotion budget at what management thinks the

company can afford percentage of sales method, setting the promotion budget at a certain percentage of

current forecast sales, or as a percentage of the sales price competitive-parity method, setting the promotion budget to match competitors outlays objective and task method, developing promotion budget by defining objectives,

determining the tasks that must be performed to achieve these objectives and estimating the costs of these is the proposed promotion budget

Considerations in Developing Integrated Marketing Communication:Companies consider many factors when developing their IMC program:

type of product and market ‘push versus pull’ strategy buyer-readiness state product life cycle stage

A push strategy is a promotion strategy that calls for using the sales force and trade promotion to push the product through marketing channels to final consumers

A pull strategy is a promotion strategy that calls for spending a lot on advertising and consumer promotion to build up consumer demand

Advertising: An advertising objective is a specific communication task to be accomplished with a

specific target audience during a specific period of time. Advertising objectives can be classified by purpose: whether their aim is to inform,

persuade or remind. Resulting in: informative advertising persuasive advertising comparison

advertising reminder advertising


Advertising Media:Newspapers (versus Magazines):Advantages:

Flexibility – ads for newspapers can be produced in a matter of hours, and deadline for receiving ads is usually 24 hours before publication (unlike magazines)

Geographic selectivity – local, regional, national newspapers (like magazines)

Disadvantages: Poor reproduction quality (unlike magazines) Lack of demographic (eg gender) or lifestyle selectivity (eg gardening enthusiasts)

(unlike magazines) Small pass-along audience (unlike magazines) Short life span (unlike magazines)

Television (versus Radio)Advantages:

Greater creativity and impact (than radio) Greater attention (than radio)

Disadvantages: Less demographic/geographic selectivity (than radio)…few local TV stations than local

radio stations Higher cost (than radio)

Lecture 11:Public Relations:Major mass-communication tool.Aims at building good relations with the company’s various publics using different tools:

news speeches special events written materials audiovisual materials corporate identity materials community service activities

Sales PromotionInfluencing customer perception and behaviour to:

build market share,


increase sales and reinforce brand image

Used to: Attract new triers (Non-users, loyal users of another brand, and brand switchers) Reward and retain brand-loyal customers Reduce time between purchases Turn light users into medium or heavy users Regain past purchasers Evaluation of performance

Sales Promotion Tools Contests and games of skill and chance, give consumers the chance to win something of

value by luck Samples, free or discounted goods provided at store level through the media Redeemable coupons, a coupon carried on pack or in other media that when forwarded to

a marketer will be redeemed for a product or service Cash-back offers, a cash discount Cents-off deals or Price Packs, a reduced price that is marked by the producer directly on

the label or package Premiums, goods offered free of charge or at reduced price as an incentive to buy a

product Advertising Specialties, a article imprinted with an advertisers name, given as a gift to

consumers Patronage Rewards, a cash, merchandise or service reward offered to consumers who

make continual use of a company[s product or service, e.g. frequent flyer plans Point-of-Purchase, an offer ranging from a theme promotion in store to a specially

arranged selling area

Role of Personal SellingPersonal selling involves two-way, personal communication between salespeople and individual customers

face-to-face by telephone through video conferences or by other means Sales people are concerned with producing sales but should also be concerned with

customer satisfaction and profit

Major Steps in Effective Selling:Selling Process:The steps that the salesperson follows when selling. These are:

Prospecting, salesperson identifies qualified potential customers Preapproach, salesperson learns as much as possible about a prospective customer before

making a call Presentation, salesperson tells the product story to the buyer, showing how the product

will save them money Handling objections, salesperson seeks out, clarifies and overcomes customers objections

to buying Closing, salesperson asks the customer to an order


Follow-up, salesperson follows up after the sale to ensure customer satisfaction and repeat business

Personal Selling and Relationship Marketing:Relationship marketing:

process of creating, maintaining and enhancing strong, value-laden relationships with customers and other stakeholders

stresses profitable long-term relationships with customers by creating superior customer value and satisfaction

Winning and keeping accounts requires more than making good products and closing lots of sales

Direct and Digital Marketing:This is an interactive system of marketing which uses one or more advertising media to affect a measurable response or transaction to any location.

Internet is a public network. Intranet:,secure websites accessed by company employees only. Extranet, websites accessed by both employees and known customers.

Customer relationship management (CRM): one-to-one marketing (OnetoOne) direct marketing or direct-order marketing E-marketing interactive marketing

Forms of Online and Direct Marketing: Sales Promotion Direct print and reproduction, involves mail outs of letter, product lists and catalogues to

a list of known database of customers Direct-response, TV and Radio, use of mass promotion media combined with a direct

response offer, usually involving telemarketing Telemarketing, use of telephone operators to attract new customers or contact existing

customers Integrated database marketing, Telesales, routine order taking by telephone operators Electronic shopping, purchasing via an electronic bulletin board or Telstra’s Discovery,

or via interactive cable television Direct selling, selling directly to consumers or businesses rather than using a reseller,

such as a retailer or agent Electronic dispensing & kiosks, a machine that dispenses products or services usually by

inserting cash or a transaction

Direct and Digital Database Use:Direct and online database marketing

development and maintenance of electronic databases to interact with past, present and/or potential customers and others in the marketing channel

maintain value-ladden relationships

How Are Direct and Digital Marketing Databases Used?


Marketing organisations use their databases in a number of ways:1. identifying prospects2. deciding which customers should receive1. a particular offer2. deepening customer loyalty3. reactivating customers4. data mining

Lecture 12:Social and Ethical Issues in Marketing:

A number of social and ethical issues arise from marketing practice and emerge as areas of attention for marketing scientists and regulators.

These matters generate considerable criticism of marketing practice, some of which is justified but much of which is not.

The Impact of Marketing on Individual Consumers:Consumer worries include:

high prices poor-quality dangerous products misleading advertising claims deceptive practices breaches of privacy high-pressure selling planned obsolescence poor service to disadvantaged consumers

The Impact of Marketing on Society:The marketing system has been accused of adding to several ‘evils’ in society:

false wants and over concern with materialism. too few social goods. cultural pollution. too much political power.

Marketing’s Impact on Other Businesses:There are three major problems involved:

acquisition of competitors marketing practices that create barriers to entry


unfair competitive marketing practices

Private and Public Actions to Regulate Marketing:There are movements that attempt too ensure that:

ethical business practices are adopted particularly at times when executive salaries seem to be disproportionately high or when

fraud and misappropriation of company monies are uncovered (e.g. Enron)

The two major movements are: Consumerism, an organised movement of citizens and government agencies whose aim is

to improve the rights and power of buyers in relation to sellers Environmentalism, an organised movement of concerned citizens, businesses and

government agencies seeking to protect and improve people’s living environment

Consumerism:Consumerism is an organised movement of citizens and government agencies to improve the rights and power of buyers in relation to sellersWhy the push for consumerism groups?

consumers have become better educated, products have become more complex and hazardous, marketing organisations have raised consumers’ expectations

Environmentalism: False Wants and Too Much Materialism Too Much Political Power Too Few Social Goods Cultural Pollution Eco-Systems Pollution Long-Term

Ethical Marketing: approach by which organisations recognize that the task of marketing is to be both

enlightened to society’s views and ethical in the organisations’ approach to society as a whole and to customers.

most organisations respond positively to consumerism and environmentalism. develop corporate marketing ethics policies.

Adopting Ethical Marketing:Societal marketing is a principle of enlightened marketing which holds that an organisation should make marketing decisions by considering consumers wants, the organisations requirements and the long term interests of consumers and society.

Makes marketing decisions by considering: consumer’s wants and interests, the company’s requirements and society’s long term interests.

Products may be classified according to their degree of immediate customer satisfaction and long-term consumer benefit:


deficient products, products such as bad tasting and ineffective medicine that have neither immediate appeal nor long term benefits

pleasing products, products that give high immediate appeal nor long term benefits salutary products, products that give high immediate satisfaction, but they may hurt

consumers and society in the long run desirable products, products that give both high immediate satisfaction and high long

term benefitsPART THREE: DEVELOPING THE MARKETING MIX

CHAPTER NINE: NEW PRODUCTS

1. Identify the challenges companies face in creating a new-product development strategy.

A new product is a product that is new in any way for the company concerned. It can be;

1. New to the world – innovations

2. New category entries

3. Additions to product lines- eg vehicles

4. Product improvements

5. Repositioning- products re-targeted for new use, application or to a new user

6. Variations of the above-variations such as new to the country or new to the channel are not commonly accepted as new products

Organisations must develop new products. Their current products face limited life spans and must be replaced by newer products. But new products can fail—95% never reach the market, <3% of those that survive last for 5 years-the risks of innovation are as great as the rewards. The key to successful innovation lies in a total company effort, strong planning and a systematic new-product development process. A new product can be obtained through acquisition or internal new-product development process.

New product success is based on; Reasons for product failure;

Product superiority/quality

Economic advantage to the user-value for money

Overall company/project fit

Technological capability

Familiarity with the company

Market needs, growth, size

Competitive situation-ease of entry into the market

Defined opportunity

Bad timing

Insignificant point of difference

Poor quality

Poor marketing execution markets too small or inaccessible

Lack of top management commitment

Must have an adequate budget to meet sales goals


Project definition-how well defined the product & project are internally

New-product development- the dev of original products, product improvements, product modifications and new brands through the company’s own R&D efforts.

Common reasons for new product failure include the inability of potential consumers to see the product concept or how it might apply to them, no perceived need or perceived inferior product, wrong timing, poor market research and poor marketing implementation as well as inadequate promotional budget and lack of support.

To create successful new products, a company must understand its consumers, markets and competitors and develop products that deliver superior value to customers. M orgs also need to understand how leading-edge users and opinion leaders are involved in spreading positive word of mouth in the diffusion process.

Challenges:

Keen competition Meeting growing social and gov constraints

Many companies cannot afford or raise the funds needed for new product development

High degree of complexity and a multitude of decisions

Conflicting set of mgt demands that product innovators must comply with

The new-product development process consists of 8 stages:

1. ideas generation, 2. ideas screening,

3. concept development and testing,

4. marketing strategy development,

5. business analysis,

6. product development,

7. test marketing and

8. commercialisation.

2. List different sources for ideas generation and discuss how an idea moves ahead through ideas screening, concept development and concept testing.

Ideas generation - the systematic search for new product ideas.

Sources of new ideas include;

Internal sources – sales force


Customers

Competitors

Distributors

Retailers

Wholesalers

Suppliers

Ideas screening - Screening new product ideas in order to spot good ideas and drop poor ones as soon as possible. It aims to reduce the number of ideas as product development costs rise greatly in later stages. The company only wants to go ahead with the product ideas that will turn into profitable products.

Screening criteria includes;

Company objectives

Production capacity

Production capability

Marketing capability

Product risk

Product fit

Concept development & testing involves testing new product concepts with a group of target consumers to find out if the concepts have strong consumer appeal. It considers:

1. Product idea –An idea for a possible product that the company can see itself offering to the market.

2. Product concept- a detailed version of the idea stated in terms that are meaningful to customers. The idea that consumers favour products that offer the most quality, performance and features and that the organisation should therefore devote its energy to making continuous product improvements.

3. Product image- the way consumers perceive an actual or potential product.

4. Concept testing- process of testing product concepts with a group of target consumers.

Example: ‘The Hydro Car’Concept 1—an inexpensive small sized vehicle designed as a second family car to be used around town (ideal for loading groceries and hauling children, and easy to enter).Concept 2—a medium-cost, medium-sized car designed as an all-purpose family car.Concept 3—a medium-cost sporty compact appealing to young people.Concept 4—an inexpensive sub-compact appealing to conscientious people who want basictransportation, low fuel cost and low pollution.


3. Outline how a potential product advances from a concept to a product through marketing strategy development, business analysis and product development.

Marketing strategy development - Designing an initial marketing strategy for a new product based on the product concept, i.e. the process of designing an initial marketing strategy for a new product. It consists of 3 parts:

1. Describe target market, planned product positioning, and the sales, market share and profit goals for the first few years

2. Outline product’s planned price, distribution and marketing budget for the first year.

3. Describe planned long-run sales, profit goals and marketing-mix strategy.

Business analysis- A review of the sales, costs and profit projections for a new product to find out whether these factors satisfy the company’s objectives. If they do, the product can move to the product-development stage. It involves the assessment of financial budgets, potential market and growth rate.

Product development- so far the product only exists on paper. R & D or engineering develops the product concept into a physical product. It is a strategy for promoting company growth by offering modified or new products to current market segments; developing the product concept into a physical product to ensure that the product idea can be turned into a workable product. Development activities incl. prototype, feasibility testing, preliminary market strategies. This step involves large investments.

4. Explain the purpose of test marketing and distinguish between standard, controlled and simulated test markets.

Test marketing –the stage of new-product development in which the product and marketing program are introduced into more realistic market settings.

It gives the marketer experience with marketing the product, finding potential problems and learning where more information is needed before going to the great expense of full introduction.

The basic purpose is to test the product itself in real market situations.

It also allows the company to learn how consumers and dealers will react to handling, using and repurchasing the product.

Thus a good test market can provide a wealth of information about the potential success of the product and its marketing program.

Consumer markets ;

o Standard test markets- test the new consumer product in situations like those it would face in a full-scale launch. The results are used to forecast national sales and profits, to discover potential product problems and to fine-tune the marketing program.


o Controlled test markets- several research firms keep controlled panels of stores that have agreed to carry new products for a fee. The company with the new product specifies the # of stores and the geo locations it wants. The research firm delivers the product to participating stores and controls shelf location, amount of shelf space, displays and point-of-purchase promotions and pricing, according to specified plans. Sales results are tracked to determine the impact of these factors on demand. Take less time than standard test markets & usually cost less.

o Simulated test markets- Company or research firm shows a sample of consumers the ads and promos for a variety of products, incl the new product being tested. The consumers are given a small amount of money & are invited into a real or lab store where they may keep the money or use it to buy items. The company notes how many consumers buy the new product and competing brands. This provides a measure of trial purchase and assesses the commercial’s effectiveness against competing commercials. Consumers are then asked the reasons for their purchase or non-purchase. Some weeks later they are interviewed to determine product attitudes, usage, satisfaction & repurchase intentions.

Business markets ; product-use tests.

5. Evaluate the product life-cycle theory, detailing the extent to which you accept the sequence of the introduction, growth, maturity and decline stages.

Product life cycle- The course of a product’s sales and profits during its lifetime. Each product has a life cycle marked by a changing set of problems and opportunities. Management’s goal is to maximise lifetime and sales. Company needs to recover all R&D costs. The sales of the typical product follow an S-shaped curve made up of 5 stages. Exact shape and length is not known in advance.

1. The cycle begins with the product development stage when the company finds and develops a new product idea.

2. The introduction stage is marked by slow growth and low profits as the product is being pushed into distribution. The new product is first distributed and made available for purchase.

3. If successful, the product enters a growth stage marked by rapid sales growth and increasing profits. During this stage the company tries to improve the product, enter new market segments and distribution channels and reduce its prices slightly.

4. Then comes a maturity stage in which sales growth slows down and profits stabilise. The company seeks strategies to renew sales growth, including market, product and marketing-mix modification.

5. Finally, the product enters a decline stage in which sales and profits dwindle. The company’s task during this stage is to identify the declining product and decide whether it should be maintained, harvested or dropped. If dropped, the product can be sold to another firm or liquidated for salvage value.

Marketers apply it to describe how products and markets work;

Forecasting product performance or for developing m strategies presents some practical problems

Managers may have trouble identifying which stage of the PLC the product is in


Difficult to forecast the sales level at each PLC stage, the length of each stage and shape of the PLC curve

Yet when used carefully, the PLC concept can help in developing good m strategies for diff stages of the PLC.

Stage ApplicationIntroduction Starts when the new product is first launched

Profits are negative or low bc of low sales and high dist and promotion expenses

Goals: inform consumers of the new product & get them to try it

Focus selling on those buyers who are the readiest to buy- usually the higher-income groups

Strategy 1: Mgt might launch the new product with a high price and low promotion spending. High price helps to recover as much gross profit per unit as possible and low promo spending keeps m spending down.

-Used when: the m is ltd in size, when most consumers in the m know about the product and are willing to pay a high price and when there is little immediate potential competition.

Strategy 2: introduce its new product with a low price and heavy promo spending. This promises to bring the fastest m penetration and highest m share.

-Used when: m is large, potential buyers are price sensitive and unaware of the product, potential comp is strong and the co’s unit manufacturing costs fall with the scale of production and accumulated manufacturing experience.

Growth Early adopters will cont to buy and later buyers will follow their lead, esp if they hear favourable word of mouth

Attracted by the opportunities for profit, new competitors will enter the m

They’ll introduce new product features and the m will expand

↑ in comps = ↑ # dist outlets and sales jump just to build reseller inventories

Prices remain where they are or fall only slightly

Companies keep their promo spending at the same or a slightly higher level; educating the m remains a goal but now the co must also meet the comp

In high-tech m, the early growth stage is typified by niche strategies with customer-tailored solutions e.g. spreadsheet packages were first targeted at financial professions only. .

During rapid growth, strategies change towards more mass-market solutions involving a common standard infrastructure. E.g. enormous growth in laser


and ink jet printers to multi-billion dollar industry led by Hewlett Packard reflects this. HP geared up for huge production and extended dist channels and kept driving for lower price points.

Profits increase during this growth stage as promo costs are spread over a large volume and unit manufacturing costs fall.

The co uses several strategies to sustain rapid m growth as long as possible:

-improves product quality and adds new product features and models.

-enters new m segments and new dist channels.

-shifts some advertising from building product awareness to building production conviction and purchase

-lowers prices at the right time to attract more buyers.

Co faces trade-off bw high m share and high current profit: by spending a lot on product improvement, promo and distribution, it can capture a dominant position but it gives up the max current profit in the hope of making this up in the next stage.

Maturity This stage lasts longer than previous stages and poses strong challenges to marketing management

Most products are in the maturity stage of the PLC

High-tech products require a change in strategy towards more customised solutions that focus on specific adaptations of the infrastructure for added value through mass customisation.

M extension occurs through more targeted niche-based strategies e.g. most marketers of printers target home users with a low-cost ink-jet printer that automatically connects to a digital camera and even displays digital photos. Companies such as Brother and HP conduce niche campaigns promoting their compact, portable printers to appeal to those with ltd space, multifunction devices for those who do not have a fax, and higher-performance colour printers for people wanting to create their own promotional material.

Slowdown in sales growth results when many producers have many products to sell = this overcapacity leads to > competition

Competitors mark down prices, increase their advertising and sales promos and push up R&D budgets to find better versions of the product. These = drop in profit.

Some of weaker competitors drop out & eventually the industry contains only well established competitors

Attack is the best defence so product managers should consider modifying the market, product and the marketing mix.


1. Market modification:

-co tries to increase consumption of the current product by looking for new users and new m segments. E.g. Johnson & Johnson targeted the adult m with its baby powder and shampoo.

-Also look for ways to increase usage among present customers. E.g. Golden Circle offers recipes and convinces customers that ‘canned fruit is good and easy to use.’

-May also want to reposition the brand to appeal to a larger or faster growing segment. E.g. Nescafe appealed to the beach-going segment by offering trials of iced coffee as a cool and refreshing drink, aiming to increase its usage beyond rinks at coffee lounges and in cooler weather.

2. Product modification : change a product’s characteristics- quality, features of style to attract new users and more usage.

3. M Mix modification : prices can be cut to attract new users and competitors’ customers, a better advertising campaign can be launched, aggressive sales promotion (trade deals, contests etc) can be used, the co can move into larger m channels using mass merchandisers if these channels are growing and/or it can offer new or improved services to buyers.

Decline Decline may be slow e.g. canned foods across the globe or rapid as for VCR games

Reasons: technological advances, shifts in consumer tastes and increased competition.

As sales and profit decline, some co’s withdraw from the m. Those remaining might reduce the # of their product offerings, drop the smaller m segments and marginal trade channels or cut the promo budget and reduce their prices further.

Carrying a weak product can be very costly to the firm- profit as well as hidden costs: it may take up too much of mgt’s time, it often requires frequent price and inventory adjustments, it requires advertising and salesforce attention that might be better used to make ‘healthy’ products more profitable, its failing reputation can cause customer concerns about the co and its other products.

Biggest cost may lie in the future- keeping weak products delays the search for replacements, creates a lopsided product mix, hurts current profits and weakens the co’s foothold on the future.

1st task: for co’s is to identify those products in the decline stage by regularly reviewing sales, m shares, cost and profit trends

2nd: for each declining product mgt must decide whether to maintain, harvest or drop it.

-Maintain= brand w/out change in hope that competitors will leave the


industry. Or mgt may decide to reposition the brand in the belief that it will move back into the growth stage

-harvest= reducing various costs (plant and equipment, maintenance, R&D, advertising, salesforce) and hoping that sales hold up. If successful, it will ↑ the co’s profits in te short run.

Drop= the product from the line. It can sell it to another firm or simply liquidate it at salvage value.

T a b l e 9 . 6 Summary of product life-cycle characteristics, objectives and strategies Introduction Growth Maturity DeclineCharacteristicsSales Low sales Rapidly rising sales Peak sales Declining salesCosts High cost per customer Average cost per

customerLow cost per customer Low cost per customer

Profits Negative Rising profits High profits Declining profitsCustomers Innovators Early adopters Middle majority LaggardsCompetitors Few Growing number Stable number,

beginning to declineDeclining number

Marketing objectives Create product

awareness and trialMaximise market share Maximise profit while

defending market shareReduce expenditure and milk the brand

StrategiesProduct Offer a basic product Offer product

extensions, service, warranty

Diversify brand and models

Phase out weak items

Price Use cost-plus Price to penetrate market

Price to match or best competitors

Cut price

Distribution Build selective Build intensive Build more intensive Go selective: phase out


distribution distribution distribution unprofitable outletsAdvertising Build product

awareness among early adopters and dealers

Build awareness and interest in the mass market

Stress brand differences and benefits

Reduce to level needed to retain hard-core loyals

Sales promotion Use heavy sales promotion to entice trial

Reduce to take advantage of heavy consumer demand

Increase to encourage brand switching

Reduce to minimal level

Fads- Fashions that enter quickly, are adopted with great zeal, peak early and decline fast. Tend to attract only a limited following. Often have a novel or quirky nature.

Fashion- A currently accepted or popular style in a given field. Fashions pass through many stages;

1. A small # of consumers taken in interest in something new to set themselves apart

2. Other consumers become interested out of a desire to copy the fashion leaders

3. The fashion becomes popular and is adopted by the mass market.

Style- A basic and distinctive mode of expression. A style has a cycle showing several periods of renewed interest.

6. Explain the differences experienced by technology products in the technology adoption cycle.

A variation of the classic life-cycle model is the technology adoption cycle. This refers to the adopted acceptance pattern of a technology innovation identifying different stages of adoption with different adopter groups. It highlights the challenge of crossing the chasm from attracting innovators to attracting early adopters.

1. The early market – a time of excitement, customers are technology enthusiasts and visionaries

2. The chasm-a time of despair, early market’s interest disappears, mainstream m still not accepting the immaturity of the solutions available

3. The bowling alley-a period of niche based adoption in advance of the general marketplace, driven by


compelling customer needs and willingness of suppliers to design niche-specific whole products.

4. The Tornado-period of mass m adoption, general marketplace switches over to new technology.

5. Main Street- period of further dev, base technology infrastructure has been deployed and goal now is to extend its potential.

6. End of life- often come very soon with high tech innovations, bc price and performance are driven to unheard-of levels

8. Commercialisation

Introducing a new product into the market. It involves;

Full scale production

Full scale marketing

Integration into the firm

The company launching a new product must make 4 decisions: when (seasons, gift-giving times, a lot of products launched at xmas time), where (local area), to whom (women, mothers, opinion leaders) and how.

New product development

The dev of original products, product improvements, product modifications and new brands through the company’s own R&D efforts.

Speeding up new product development through;

1. Sequential product development- A new product dev approach in which one company department works individually to complete its stage of the process before passing the new product along to the next department and stage.

2. Simultaneous product development - An approach to dev new products in which various company departments work closely together, overlapping the steps in the product dev process to save time and increase effectiveness.


CHAPTER TEN: PRICING CONSIDERATIONS AND APPROACHES

1. Discuss how marketing objectives, marketing-mix strategy and costs and other company factors affect pricing decisions

Price- the amount of money charged for a product or service, or the sum of the values consumers exchange for the benefits of having or using the product or service.

It is the only element of the m mix that produces revenue, all other elements represent costs

Pricing structure usually covers different items in a firm’s product line

Adjustments of product prices to reflect changing costs and demand and to account for variations in buyers and situations

the price the co charges will be between 1 that is too low to produce a profit and 1 that is too high to produce any DD

Marketing objectives Some of the most common objectives are: Survival- low price hoping to increase DD Current profit maximisation- set a price that will max profits Market-share leadership- maintaining dominance= undercut

competition by setting prices as low as possible Product-quality leadership- charge a premium (high price to cover

high quality and high cost of R&D) Other objectives- prices can be set to keep customer loyalty or avoid

gov intervention, can be temporarily reduced to create excitement for a product or to draw customers into a retail store.

Marketing-mix strategy Price decisions must be coordinated with product design, distribution and promotion decisions to form a consistent and effective m program

Decisions made for other m mix variables may affect pricing decisions e.g. producers who use many resellers who are then expected to support and promote their products may have to build larger reseller margins into their prices

Sometimes the intended price determines what product features can be offered and what production costs can be incurred. E.g. Yamaha, a traditional marketer of high-quality specialised music equipment, designed a mini stereo system to compete with Sony and Phillips. It had discovered a m segment for affordable stereos and designed models to sell within the price range the segment was willing to pay. Here, price was a crucial product-positioning factor that defined the


product’s market, competition and design

Some firms use ‘target costing’- starts with a target cost and works back

Often the best strategy is not to charge the lowest price, but rather to differentiate the m offer to make it worth a higher price

If the product is positioned on non-price factors then decisions about quality, promotion and distribution will strongly affect price

If price is a critical positioning factor then price will strongly affect decisions made about other m mix elements

Costs Costs set the floor for the price that the co can charge for its product

The co wants to charge a price that covers all its costs for producing, distributing and selling the product, and also delivers a fair rate of return for its effort and risk

Types of costs-

-fixed costs: don’t vary with production or sales levels

-variable costs: vary directly with the level of production

-total costs: sum of fixed and variable costs for any given level of production

-production level costs

-costs as a function of production experience: average cost tends to fall with accumulated production experience (experience curve: the drop in the average per-unit production cost that comes with acc production experience)

-organisational considerations: mgt must decide who within the org should set prices

2. List and discuss factors outside the company that affect pricing decisions &

3. Explain how price setting depends on consumer perceptions of price and on the price-demand relationship

1. THE MARKET AND DEMAND

Pricing in diff types of markets: o Pure comp- m consists of many buyers and sellers with having little influence on m price.

Trading of uniform commodity. E.g. wheat, vegetables, fin securities. o Monopolistic comp- many buyers and sellers, range of prices occurs bc sellers can

differentiate their offers to buyers.


o Oligopolistic comp- few sellers who are highly sensitive to each other’s pricing and m strategies. Product can be uniform (aluminium, acid) or non-uniform (food processors, cars). It is difficult for new sellers to enter the m.

o Pure monopoly- a single seller. E.g gov monopoly- Aus Post. Pricing is handled differently in each case.

Consumer perceptions of price and value: o In the end, the consumers will decide whether a product’ price is right o Effective buyer-oriented pricing involves understanding how much value consumers place

on the benefits they receive from the product and then setting a price that fits this value o Bc consumers vary in the values they assign to different product features, marketers often

vary their pricing strategies for different price segments. They offer diff sets of product features at different prices.

Analysing the price demand relationship: o Each price charged by a co will lead to a diff level of DD o DD curve- shows the # of units the m will buy in a given time period, at diff prices that might

be charged o Normally, DD and price are inversely related= higher price=lower DD. o Luxury goods DD curve slopes upwards (direct rship) o Impact of non-price factors on DD are shown through shifts in the DD curve rather than

movements along it E.g. Dairy Farmers Thick and Creamy Yoghurt- increased product quality

Price elasticity of DD: o Price elasticity- a measure of the sensitivity of DD to changes in price

Formula- % change in quantity demanded % change in price

o Inelastic DD- DD hardly changes with a small change in price the less elastic the DD, the more it pays for the seller to raise the price

o Elastic DD- DD changes greatly with a change in price If DD is elastic, sellers will consider lowering their price A lower price will produce more total revenue

o buyers are less price sensitive when: the product they are buying is unique or when it is high in quality, prestige or

exclusiveness e.g. antique car, art, first class airlines. substitute products are hard to find or when they cant easily compare the quality of

substitutes e.g insurance policies, mobile phone plans. the total expenditure for a product is low relative to their income or when the cost

is shared by another party


2. COMPETITOR’S PRICES AND OFFERS

the co’s pricing strategy may affect the nature of the comp it faces e.g. if Timex follows a high-price, high-margin strategy, it may attract comp.

the co needs to learn the price and quality of each comp’s offer

4. OTHER EXTERNAL FACTORS Economic conditions- economic factors- inflation, boom or recession and IR affect pricing decisions

bc they affect the costs of producing a product and consumer perceptions of the product’s price and value

Gov- laws affecting price. o Trade Practices Act- prohibits price fixing, resale price maintenance and forms of price

discrimination as well as predatory pricing by monopolistically positioned competitors and deceptive pricing

o ACCC- plays a major role in investigating possible breaches 5. Compare the four general pricing approaches

I. Cost-based pricing (product-driven)

Cost-plus pricing: adding a standard markup to the cost of the product (simplest method). E.g. construction companies.

o Mark-ups are smallest on staple goods and high on products such as fresh chicken, seasonable items and perishables, specialty items, slower moving items, items with high storage and handling costs and items with inelastic DD.

o Mark-up pricing only works if that price actually brings in the expected level of sales.

o Key reasons for popularity: increased certainty, minimise price comp & perceived fairness

Breakeven analysis and target profit pricing: setting price to breakeven on the costs of making and marketing a product or to make the desired profit.

o Used by many Aus importers; and by public utilities which are constrained to make a fair return on their I.

o Uses the concept of a breakeven chart which shows the total cost and total revenue expected at diff sales vol levels.

o As price increases, breakeven vol drops. It is imp to consider the analysis in a competitive context.


o Breakeven volume = fixed cost / (unit sell price – unit variable cost)

II. Value-based pricing

Setting price based on buyers’ perceptions of value rather than on the seller’s costs

E.g. various prices diff restaurants charge for the same items due to the value added by the atmosphere and service

Co uses non-price variables in the m mix to build up perceived value in the buyer’s mind

III. Competition-based pricing

Economic value pricing: costs perceived by customers extend well beyond trhe price charged (eg may incl installation costs). Equip purchases are evaluated over their economic lives and comparisons bw competitors go beyond straight price assessment. Thus, moving away from price comparisons to differentiating products on the basis of economic value to customers. E.g. aircraft tyre manufacturer prices its tyres on basis of cost per one hundred landings instead of cost per tyre.

Going-rate pricing: setting price based largely on following competitors’ prices rather than on co costs or DD. In oligopolistic industries that sell a commodity such as steel co’s normally charge the same price. Is quite popular.

Sealed-bid/tenders: setting price based on how the firm thinks competitors will price rather than its own costs or DD- used when a co bids for jobs.

IV. Relationship Pricing (not important!)

Concerned with managing customer expectations and the rship so that a continuous stream of transactions results and the lifetime value of each customer is optimised.

6. Describe the major strategies for pricing new products

1. Market skimming pricing: setting a high price for a new product to skim max revenue from the segments willing to pay the high price; the co makes fewer but more profitable sales. E.g. Apple adopted this with the release of its iPod MP3 player. It is effective when:

o The product’s quality and image are consistent with a high price


o There are enough buyers to purchase the product at that price

o the costs of producing a small vol are not so high that there is an inadequate margin

o when the firm has a new product that is patent-protected like many new ethical drugs or contains design benefits that aren’t easily emulated by competitors

2. Market penetration pricing: setting a low price for a new product in order to attract a large number of buyers and a large market share. E..g Microsoft, warehouse stores and discount retailers use it. Several conditions favour setting a low price:

o M must be sensitive to diff price levels so that a low price produces more rapid m trial and more m growth

o Production and dist costs fall as sales vol increases

o Low price may help to keep out or delay comp

o Adopted for many FMCG bc they are e.g. of continuous innovation

Pricing for an imitative new product is rather difficult: position on quality or price?

7. Comprehend the way in which companies establish a set of prices that maximises the profits from the total product mix

The strategy for setting a price on an offer has to be changed when the product is part of a mix. Pricing is difficult bc the various g/s have related DD and costs and face different degrees of comp.

Strategy DescriptionProduct/service line pricing Setting the price steps bw various products in a product line,

based on cost differences bw the products, customer evaluations of different features and competitors’ prices.

Optional produce/service pricing

Pricing of optional or accessory products along with a main product. E.g. car companies must decide which items to build into the base price and which to offer as options.

Captive product/service pricing

Pricing of products that must be used along with a main product such as blades for a razor or film for a camera. Also ink (consumables) for inkjet printers (captive products).


Two-part pricing: a strategy for pricing services in which price is broken into a fixed fee plus a variable usage rate.

By-product pricing Setting a price for by-products in order to make the main product’s price more competitive. E.g. in the production of processed meats, petroleum products, chemicals and other products, there are often by products. The manufacturer will seek a market for these by products and should accept any price that covers more than the cost of storing and delivering them. This allows the seller to reduce the main product’s price to make it more competitive.

Product-bundle pricing Combining several products and offering the bundle at a reduced price. E.g. sport teams sell season tickets.

8. Explain how companies adjust their prices to take into account different types of customers and situations

Companies apply a variety of price-adjustment strategies to account for differences in consumer segments and situations;

Discount pricing allowances- co est cash discounts, quantity discounts, functional discounts, seasonal discounts and allowances.

Segmented pricing- co sets different prices for different customers, product forms, places or times. E.g. toothpaste tubes vs. pumps, train fares for seniors, students, children, Happy Hour.

Psychological pricing- co adjusts the price to communicate more effectively a product’s intended position.

Promotional pricing- co decides on loss-leader pricing (supermarkets), special event pricing and psychological discounting.

Value pricing- co offers just the right combination of quality and good service at a fair price.

Geographic pricing- co decides how to price to distant customers, choosing from such alternatives as FOB pricing, uniform delivered pricing, zone pricing, basing-point pricing and freight-absorption pricing.

International pricing- co adjusts its price to meet diff conditions and expectations in diff world markets.


CHAPTER ELEVEN: PLACEMENT

Placement – covers many concepts including physical distribution, location, channels of distribution and logistics management. The appropriate assortment of products must be in the right place, at the right time and in the right condition to maximise customer satisfaction. Logistics is an area of potentially high cost savings and improved customer satisfaction.

Traditionally, management focused on the physical distribution of goods. Now it focuses on the logistics of making and distributing products.

1. Describe the nature of marketing logistics network management

Marketing logistics network - system of efficiently and effectively making and getting products and services to end-users. It involves coordinating the activities of the entire chain to deliver maximum value to customers. It begins earlier than physical distribution and includes; Procuring inputs (raw materials, K equipment)

Conversion of these to finished products &

Conveying them to end users

No such network can both maximise customer service and minimise logistics costs. Instead, the goal of marketing logistics management is to provide a targeted level of service at an affordable cost, where the customer perceives value. Marketing logistics networks management also entails managing marketing distribution channels; the major functions include effective and efficient conversion operations, order processing, warehousing, inventory management and transportation.

Marketing Logistics Decisions includes making trade-offs to meet customer’s service requirements; 1. Cycle time reductions

2. Conversion operations location

3. Purchasing decisions

4. Manufacturing and operations process decisions

5. Order processing and costs

6. Warehouse numbers and costs

7. Inventory levels and costs

8. Transport type and costs

9. Restructure the marketing channels

There is a critical interaction bw logistics & each of the firm’s marketing functions & this requires careful coordination. Product variations may impose a burden on distribution facilities Promo campaigns must realistically coordinate with potential logistics delivery Pricing may be the firm’s differential advantage based on superior logistical service

2. Describe the nature of marketing channels and explain why marketing intermediaries are used


Marketing channels refer to a network of interdependent organisations (or intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or industrial user. The functions of marketing channels are:

1. Information; gathering and distributing marketing research and intelligence 2. Promotion; developing and spreading communications about an offer 3. Contact; finding and communicating with prospective buyers 4. Matching; shaping & fitting the offer to the buyer’s needs, incl such activities as manufacturing,

grading, assembling and packaging5. Negotiation; reaching an agreement on price and other terms of the offer6. Physical distribution; transporting and storing goods 7. Financing; acquiring & using funds to cover the costs of the channel work 8. Risk taking; assuming the risks of carrying out the channel work

Intermediaries are organisations linking producers to other intermediaries or to the customer through contractual arrangements to purchase and resale products. They are used because of: Cost Increased coverage Consumer convenience Customized approaches to customer needs > efficiency Improved marketing effort

Marketing intermediaries can reduce the overall costs of market exchanges by efficiently performing certain functions.

3. Explain the organisation and behaviour of marketing channels

Marketing channels are complex behavioural networks in which people and companies interact to accomplish individual, company and channel goals. Some channel networks consist only of informal interactions among loosely organized firms; others consist of formal interactions guided by strong organisational structures. Channel networks do not stand still, new types of intermediaries surface and whole new channel networks evolve.

Marketing distribution channel decisions are among the most complex and challenging decisions facing the firm. Each channel network creates a different level of sales and costs. Once a marketing channel has been chosen, the firm must usually stick with it for a long time. The chosen channel strongly affects, and is affected by, the other elements in the marketing mix.

A marketing channel consists of dissimilar firms that have banded together for their common good. Ideally, because the success of individual channel members depends on overall channel success, all channel firms should work together smoothly. By cooperating, they can more effectively sense, serve and satisfy the target market. Although channel members are dependent on one another, they sometimes act alone in trying to meet their own short-run best interests.

This may result in channel conflict - a disagreement among marketing channel members on goals and roles- who should do what and for what rewards.

Horizontal conflict- conflict between firms at the same level of the channel (ie communication difficulties inhibit coordination) e.g. Franchisees of large fast food chains might complain about the pricing practices of other franchisees in the same image chain.


Vertical conflict- even more common and refers to conflicts between different levels of the same channel. E.g. when Kmart started in Australia, some paint manufacturers were wary about supplying them with the manufacturer’s branded product because of the potential backlash that would occur from other retailers who stocked the brand.

Some conflict may be in the form of healthy competition.

Marketing channels in the services context; Experiences aren’t shipped or moved but in this context consider

o Physical facilities for deliveryo Location o Direct distribution vs. channelso Web-based delivery, contact centres, etc.

The channel will perform better if it contains a company, agency or mechanism that has the power to assign roles and manage conflict. In recent years, new types of channel organisations have appeared that provide stronger leadership and improved performance.

Conventional marketing channel: consists of one or more independent producers or suppliers, wholesalers or retailers where each is a separate business seeking to maximize its own profits, even at the expense of profits for the network as a whole.

Vertical marketing networks (VMN):

Horizontal marketing networks

Hybrid marketing channel networks (aka multichannel

networks)A distribution channel structure in which producers, wholesalers and retailers act as a unified network- one channel member owns the others, has contracts with them or wields so much power that they all cooperate.

Can be dominated by the retailers, wholesaler or producers.

They achieve economies through size, bargaining power and elimination of duplicated services.

3 major types:1. Corporate VMNs-combines

successive stages of production & distribution under single ownership.

2. Contractual VMNs- consists of independent firms at different levels of production & distribution

A channel arrangement in which 2 or more companies at one level join together to follow a new marketing opportunity.

Companies might join forces with competitors and non-competitors.

Usually formed to move into new markets (esp. global markets)

Multichannel distribution systems in which a single firm sets up 2 or more marketing channels to reach one or more marketing segments.

Benefit - > sales as multi-consumer segments are reached

Risks - may offend existing channel members who cry ‘unfair competition,’ channel members are sometimes compensated by exclusive or special allowances.

E.g. Inghams sells dressed chicken portions to KFC as well as to a myriad of independent take-away food shops and also sells breaded portion-controlled chicken products to every part of the food services industry, incl McDonald’s and KFC.


who join together through contracts to obtain more economies or sales impact than they could achieve alone. 3 types of contractual include; wholesaler-sponsored voluntary chains (networks in which wholesalers organize voluntary chains of independent retailers to help them compete with large orgs), Retailer cooperatives (networks in which retailers organize a new, jointly owned business to carry on wholesaling and possibly production) & franchise organisations (a channel member called a ‘frachisor’ links several stages in the production-distribution process. It includes manufacturer-sponsored retailer franchise networks, manufacturer-sponsored wholesaler franchise networks & service-firm-sponsored retailer franchise networks).

3. Administered VMNs- coordinates successive stages of production & distribution through the size and power of one of the parties.

It has been argued that the Web will revolutionise the distribution of marketing channels by; Rebuilding the supply chain Transforming or obliterating channels Speedily conveying and receiving information Improving communication with channel members Allowing firms to reach distant parts of the world Providing customers with the option of worldwide vendors Providing services instantaneously across international borders Offering web-enhanced services for each distribution function Cheaper channels Establishing LT relationships


4. Discuss traditional & online store retailing and the different ways of classifying stores: by amount of service provided, breadth and depth of the product line, relative price levels, control of outlets and

type of store cluster.

Retailing includes all activities involved in selling g/s directly to final consumers for their personal, non-business use. Retailers can be classified as store retailers and non-store retailers.

Although most g/s are sold through ‘bricks and mortar' stores, direct and online forms of retailing have seen rapid growth. This was followed by a falling away as mistakes were made due to initial stock market support for, and then a retreat from, flawed business models for online intermediaries.

Retailing classifications: 1. Amount of service Diff products needs diff amounts of service and customer service

preferences vary. Three levels of potential service;

o Self service retailer o Limited service retailer o Full service retailer

Self Service Technologies (SSTs): technological interfaces that allow customers to create services themselves, without direct assistance from service personnel. E.g. automated hotel check-in and check-out facilities, ATMs, self-service kiosks, retail self scanners & internet-based tools such as self-booking services (flights). Adv – cost reduction, offer consistent service & don’t have to I money and time in training. Dis- v impersonal.

2. Product line(s) sold Retailers can be classified by the length and breadth of their product assortments: Specialty stores Department stores e.g. David Jones Combination stores e.g. Woolies and Liquorland Supermarkets Convenience stores Mass merchants e.g. Bunnings Hypermarkets Service businesses

3. Relative prices Discount stores – sells standard merchandise at lower prices by accepting lower margins & selling at higher volume.

Off price retailers – retailers that buy at < retail, usually carry a changing


and unstable collection of higher-quality merchandise, often left over goods, overruns and irregulars obtained from manufacturers at reduced prices. E.g. factory outlets.

Catalogue showrooms – a retail operation that sells a wide selection of high mark-up, fast-moving brand name goods at discount prices.

4. Control of outlet Corporate chains – 2 or more outlets that are commonly owned & controlled, employ central buying and merchandising & sell similar lines of merchandise.

Retailer cooperatives – a group of independent retailers that band together to set up a jointly owned central wholesale operation and conduct joint merchandising and promotion efforts.

Voluntary chains- a wholesaler-sponsored group of independent retailers that engages in group-buying and common merchandising.

Franchise organisations – a contractual association between a manufacturer, wholesaler or service organisation (the franchisor) and independent business people (franchisees) who buy the right to own and operate 1 or more units in the franchise system.

Merchandising conglomerates- companies that combine several different retailing forms under central ownership and share some distribution and management functions.

5. Type of store cluster

Most stores cluster to increase their customer pulling power & to give consumers the convenience of one-stop shopping. Main types are; CBD – the area of business at the heart of a city or town Shopping centre- a group of retail businesses planned, developed,

owned and managed as a unit. Community shopping centre- a centre containing 15-50 retail stores & even a branch of a discount department or variety store, a supermarket, specialty stores, professional offices & sometimes a bank. Strip community centre- a group of retail businesses located along an arterial road.

5. Compare the different types of wholesalers, including full-service and limited-service merchant wholesalers, brokers & agents, & manufacturers’ sales branches.

Wholesaling includes all the activities involved in selling goods or services to those who are buying for the purpose of resale or for business use. Wholesalers perform many functions, including;

1. selling and promoting2. buying and assortment building3. bulk breaking, warehousing4. transporting5. financing6. risk bearing7. supplying market information8. Providing management services and advice.


Types of wholesalers:1. Merchant

wholesalers Ind owned businesses that take title to the merchandise they

handle Largest single group of wholesalers Include:

o Full service wholesalers- provide a full set of services o Limited service wholesalers- cash & carry wholesalers

(fish markets), truck wholesalers (food vans that go to hospitals), drop shippers (at wharf sites inv dropped in), rack jobbers (serve grocery and pharmaceutical retailers), producers’ cooperatives (assemble farm produce to sell in local markets) & mail order wholesalers.

2. Brokers and agents

Broker A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation. Are paid by the parties hiring them Do not carry inv, get involved in financing or assume risk

AgentA wholesaler who represents buyers or sellers on a more permanent basis, performs only a few functions and does not take title to the goods. Types of agents include;

o Manfacturer’s agent o Selling agent o Purchasing agento Commission merchant

They are paid a commission for aiding buying and selling.3. Manufacturers’

sales branches & offices

Wholesaling by sellers or buyers themselves rather than through independent wholesalers. Manufacturer’s often set up their own sales branches and

offices to improve inv control, selling & promotion Sales branches carry inv & are found in such industries as

timber and car equipment & parts Some large retailers set up purchasing offices in major market

centres elsewhere in the world. These purchasing offices perform a role similar to that of brokers or agents but are part of the buyer’s org.

6. Explain the wholesaler marketing decisions of target market and positioning and marketing-mix decisions, and describe trends in wholesaling.

Trends in wholesaling;

Consolidation will reduce the # of firms in the industry The remaining wholesalers will grow

Distributors will need to learn how to compete effectively over wider and more diverse areas

The increased use of technology will help management

The distinction between large retailers and wholesalers will continue to blur

Wholesalers will continue to increase their services to retailers: pricing, advertising, information etc.

CHAPTER TWELVE: IMC 1: ADVERTISING & PUBLIC RELATIONS

1. Describe integrated marketing communication (IMC) and classify IMC media, tools and technologies.

IMC- the concept under which a company carefully integrates and coordinates its many communication channels to deliver a clear, consistent and compelling message about the org and its products. It aims to most effectively meet objectives such as to inform, persuade and remind consumers as well as to reinforce their attitudes and perceptions.

It entails coordinating the org’s promotional efforts using major communication elements such as Advertising Sales promotion PR Direct and online marketing Personal selling

T a b l e 1 2 . 1 A classification of integrated marketing communication media, tools and technologies

Integrated marketing communication category

Media, tools and technologies

Mass communication Advertising via FTA-TV; radio; newspapers; magazines; outdoor; cinema; cooperative advertising; motion pictures. With or without sales promotion incentives.-to a large diverse market

Targeted communication Pay-TV (satellite, cable and narrowcast microwave TV with no back-channel); home shopping (FTA-TV or pay-TV); public relations; door-to-door selling; catalogues; telephone directories (Yellow Pages); events (Formula One championship); sponsorships; mobile and static trade exhibitions; automatic vending machines. With or without sales promotion incentives.-to more specific groups.

In-store communication Retail counter selling; merchandising; location-TV and radio (narrowcast or closed); aisle displays; electronic aisle messaging; point-of-purchase media (e.g. trolley advertising); packaging. With or without sales promotion incentives.-at point of purchase, throughout store, at end of aisles

One-to-one communication Database marketing in all its forms: direct mail; interactive TV; telemarketing (telephone or fax); telesales; electronic dispensing and kiosks; direct selling (home and office); online value transformation. With or without sales promotion incentives.

2. Outline the steps in developing IMC including identifying the target audience, and determining the response sought.

1. Sender-Party sending the message to another party2. Encoding-Process of putting thought into symbolic form3. Message-Set of symbols that the sender transmits-the actual advertisement4. Media- Communication channels through which the message moves from sender to receiver5. Decoding-Process by which the receiver assigns meaning to the symbols encoded by the sender-a consumer watches the ad and interprets the words and illustrations it contains6. Receiver-Party receiving the message sent by another party-the consumer who watches the ad.7. Response-Reactions of the receiver after being exposed to the message-any of hundreds of possible responses.8. Feedback-Part of the receiver's response communicated back to the sender.9. Noise- Unplanned static or distortion during the communication process that results in the receiver getting a different message from the one which the sender sent

Identifying the Target audience: M communicator starts with a clear target audience in mind. Audience may be potential buyers or current users, those who make the buying decision or those who influence it. Audience may be ind, groups, special publics or the general public

Determining response sought:The m communicator needs to know where the target audience now stands and to what state it needs to be moved. The target audience may be in any of 6 buyer-readiness states: 1. Awareness-of the product or org. May be through simple name recognition. This process

can begin with simple messages repeating the name. 2. Knowledge- effective communicators need to learn how many people in their t audience

have little, some or much knowledge about the product or org. 3. Liking- if the audience looks unfavourably on the org or its products, the communicator

must learn why and then dev a m communication campaign to create favourable feelings.

4. Preference- communicators must try to build consumer preference, promoting the product’s quality, value, performance and other features.

5. Conviction- the communicator’s job is to build conviction that taking the next step and buying the brand is the right thing to do.

6. Purchase- communicator must lead consumers to take the final step. Actions might incl offering the product at a low price, offering a premium or letting consumers try it on a limited basis.

3. Describe the communication process: selecting a message, selecting the media, selecting a message source and collecting feedback.

Selecting a message: Ideally the message should (AIDA model):

o Get ATTENTIONo Hold INTERESTo Arouse DESIRESo Obtain ACTION

Message content- the communicator has to work out an appeal or theme that will produce the desired response:

o Rational appeals- relate to the audience’s self-interest. Show that the product will produce the desired benefits. E.g. car ads- price, features

o Emotional appeals- attempt to stir up either – or + emotions that can motivate purchase. E.g. fear, guilt, shame.

o Moral appeals- directed to the audience’s sense of what is right and proper. E.g. social causes, “save the world.”

Message structure- communicator must decideo Whether to draw a conclusion or leave it to the audience (principle of closure) o Whether to present a one-sided or two-sided argument (one-sided usually more

effective)o Whether to present the strongest arguments first or last

Message format- need a strong format to effectively deliver the message. This varies in print, radio and TV mediums.

Selecting the media:There are two broad types of communication channels the communicator can select from: Personal communication channels – channels, through which two or more people

communicate directly with each other, including face-to-face, person-to-audience, over the telephone or through the mail. Also, word-of-mouth and opinion leaders.

Non-personal communication channels – media that carry messages without personal contact or feedback, including media (print media, broadcast media and display media), atmosphere (designed environments that create or reinforce the buyers leanings towards buying a product) and events (occurrences staged to communicate messages to target audiences).

Selecting the message source: Message’s impact on the audience is also affected by how the audience views the sender Messages delivered by highly credible sources are more persuasive E.g. marketers hire well-known actors and athletes to deliver their messages Three factors most found in a credible source are expertise, trustworthiness and

likeableness

Collecting Feedback: After sending the message the communicator must gauge its effect on the target

audience This involves asking the target audience whether they remember the message, how

many times they saw it, what points they recall, how they felt about the message, and their past and present attitudes towards the product and company.

The communicator would also like to measure behaviour resulting from the message

4. Define the ways of setting an integrated marketing communication budget: affordable, percentage-of-sales, competitive parity and objective-and-task methods.

Method used to set total

advertising budget

Definition Advantages Disadvantages

1. Affordable method

Setting the promotion budget at what management thinks the company can afford. They begin with the total revenues, deduct operating expenses and capital outlays, and then devote some portion of the remaining funds to the IMC element in question.

ignores the effect of marketing communication on sales volume, leading to an uncertain annual IMC budget, which makes long range market planning difficult.

often results in underspending.

2. % of sales method

Setting the promotion budget at a certain % of current or forecast sales or of the sales price. E.g. car companies usually budget a fixed % for IMC based on the planned car price.

Spending is likely to vary with what the company can afford

Helps management to think about the relationship between marketing communication spending, selling price and profit per unit

It supposedly creates competitive stability because competing firms tend to spend about the same % of their sales on IMC

It wrongly views sales as the cause of IMC rather than the intended result.

The budget is based on availability of funds rather than on opportunities.

It may prevent the increased spending sometimes needed to turn around falling sales.

Because the budget varies with year to year sales, long range planning is difficult.

It does not provide any basis for

nominating a specific %, except what has been done in the past or what competitors are doing.

3. Competitive Parity Method

Setting the promotion budget to match competitors’ outlays. Two arguments support this method: 1. Competitors

budgets represent the collective wisdom of the industry

2. Spending what competitors spend helps prevent promotion wars

Neither argument is valid.

4. Objective and task method

Developing the promotion budget by1. Defining specific

objectives2. Determining the

tasks that must be performed to achieve those objectives

3. Estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget

makes mgt spell out its assumptions about the relationship between dollars spent and IMC results

is the most difficult method to use.

5. Explain IMC media, tools and technologies – advertising, PR, direct and online marketing, sales promotion and personal selling – and the factors involved when

setting the IMC program; type of product and market, push vs pull strategies, buyer-readiness states and lifecycle stage.

IMC media, tools and technologiesOrgs need to divide budget among major marketing communication categories, specific media, tools and technologies. Mix of marketing communication needed to achieve marketing objectives defers greatly between companies, even those within the same industry.

Tool Adv DisAdvertising Advertising’s public nature suggests

that the advertised product is standard and legitimate.

it is impersonal and can’t be as persuasive as a company sales person.

Is asynchronous communication (able

Lets the seller repeat a message many times and it lets the buyer receiving compare the messages of various competitors.

Very expressive, letting the company dramatise its products through the artful use of print, sound and colour.

Can be used to build up a long term image of a product and also to trigger quick sales.

Can reach masses of geographically spread out buyers at a low cost per exposure.

to carry on only a one-way communication with the audience).

Can be very costly.

PR Believability is higher to readers than ads

Can reach many prospects who avoid sales people and ads

Like advertising PR can dramatise a company or product

Direct and Online Marketing

E.g. scattergram dropped in post office boxes, mailouts left in household letterboxes addressed to the householders by name

There is a very large privacy issue when we look into the means by which direct marketers gain their database info, who they sell it to and how it is used SMEs make up 90% of business firms in

Australia and given their lower costs of direct marketing, this aspect of promotion has been keenly adopted

Sales Promotion

Attracts consumer attention and provides info that may lead the consumer to buy the product

The offer strong incentives to purchase with inducements or contributions that give additional value to consumers

They invite and reward quick response Can be used to dramatise product

offers and boost sagging sales

Sales promotion efforts are usually short-lived and may not be effective in building long run brand preference

Personal Selling

oral presentation in a conversation with one or more prospective purchasers for the purpose of making sales.

Requires a longer term commitment than advertising

Is the companies most expensive IMC tool Involves personal interaction between

2 or > people so each person can observe the other’s needs and characteristics and make quick adjustments

Also lets relationships spring up The buyer usually feels a > need to

respond and listen

Factors involved when setting the IMC program

Type of product and market Consumer goods companies spend most on advertising then sales promo, then

personal selling, followed by PR B2B of industrial goods spend most on personal selling, followed by sales promo,

advertising and PR Personal selling is more heavily used with expensive and risky goods and in markets

with fewer and large sellers

Push versus pull strategy Push strategy is a promotion strategy that calls for using the salesforce and trade

promo to push the product through channels; the producer promotes the product to wholesalers, the wholesalers promote to retailers and the retailers promote to consumers

Pull strategy is a promo strategy that calls for spending a lot on advertising and consumer promo to build up consumer demand; if successful, consumers will ask their retailers for the product, retailers will ask the wholesalers and wholesalers will ask the producers

Most large companies use a combination of both. Recently, consumer goods companies have been decreasing the pull portions of their IMC mixes

Buyer-readiness state Advertising and PR play major roles in awareness and knowledge states Customer liking, preference and conviction are more affected by personal selling

and advertising Closing the sale is mostly done with direct marketing, sales calls and sales promo

Product lifecycle stage Intro – advertising, direct marketing, online marketing and PR are good for

producing high awareness. Early trial – sales promo is useful. Personal selling must be used to get the trade to carry the product. Growth stage – advertising, direct marketing, online marketing and PR continue to

be powerful but sales promo can be reduced. Mature stage – sales promo becomes more important relative to advertising. Decline stage – advertising kept at a reminder level, PR is dropped and sales people

give the product only a little attention. Sales promo might continue to be strong.

6. Describe the nature of media advertising, including the major decisions involved: advertising budget, setting strategy, creative execution, media selection and

evaluation in terms of communication and sales outcomes.

Setting Objectives Advertising objectives should be based on past decisions about the target market,

positioning and marketing mix. The marketing positioning and mix strategies define the job that advertising must do in the total marketing program.

Advertising objective- a specific communication task to be accomplished with a specific target audience during a specific period of time

Different types of advertisingo Informative advertising- used when introducing a new product category,

objective is to build primary demando Persuasive advertising- more important as comp increases, objective to build

selective demand. Some has become comparative advertising which compares one brand with one or more other brands

o Reminder advertising- important for mature products, keeps consumers thinking about the product

Setting the Advertising Budget Factors that should be considered when setting a budget are

o Stage in product lifecycleo Market shareo Competition and cluttero Advertising frequencyo Product differentiation

Budget to be set for each product Role of advertising is to affect demand for a product. Company wants to spend the

amount needed to achieve the sales goal.

Advertising Strategy Consists of creating advertising messages and selecting advertising media Large advertising budget doesn’t guarantee a successful advertising campaign Typical message execution styles

o Slice of life- shows people using product in a normal settingo Lifestyle- shows how a product fits in with a lifestyleo Fantasy- creates a fantasy around the product or its useo Mood or image- builds one around the producto Musical- shows people or cartoon characters singing a song about the producto Personality symbol- creates a character that represents the producto Technical expertise- shows companies expertise in making the producto Scientific evidence- presents scientific evidence that the brand is better or

better liked than anothero Testimonial evidence- features believable or likeable source endorsing the

product

Media Selection: Four major steps in media selection are

o Deciding on reach, frequency and impacto Selecting major media types

o Selecting specific media vehicleso Deciding on media timing

Advertising Evaluation: Communication effects

o Measuring the communication effect tells whether an ad is communicating well. Called copy testing, it can be done before or after an ad is printed or broadcast.

o Three major methods of advertising pre-testing are direct rating, portfolio tests and lab tests.

o Two popular methods of post testing advertisements are recall tests and recognition tests.

Sales effects o One way to measure is to compare past sales with past advertising

expenditures.

7. Define public relations and outline the more common forms of this IMC tool.

PR – building good relations with the companies various publics by obtaining favourable publicity, building up a good corporate image and handling or heading off unfavourable rumours, stories and events. It is a form of major mass communication tool. Major PR tools include press relations, product publicity, corporate communication, lobbying and counselling.

News- some occur naturally or PR person can suggest events/activities that would create news

Speeches-create product and company publicity Special events- news conferences, press tours, grand openings and fireworks to laser

shows that will reach and interest target publics Written materials- annual reports, brochures, articles and company newsletters and

magazines Audiovisual materials- slide shows, films Corporate identity materials- logos, stationary, brochures, signs, business cards,

uniforms, company cars Community service activities- to improve public goodwill

8. Explain the need for socially responsible marketing communication and how this is achieved.

Advertising: Companies must avoid false or deceptive advertising Sellers must avoid bait-and-switch advertising that attracts buyers under false

pretences

Personal Selling: Companies must ensure their sales people follow the rule of fair competition

Direct and Online Marketing: Marketers and customers usually enjoy mutually rewarding relationships Unfairness, deception and fraud are the dark side that may emerge Growing concerns about invasion of privacy issues.

CHAPTER THIRTEEN: IMC 2: SALES PROMOTION AND PERSONAL SELLING

1. Describe sales promotion tools and techniques that may be used to create immediacy and close sales, as well as reward loyal customers

Sales promotion- short term incentives to encourage purchase of a product or service; act of influencing customer perception and behaviour to build market share and sales which reinforces brand image. They are value-adding tools used to prompt an immediate sale by adding urgency. May take many forms depending on the objectives to be met, type of market and product and the budget available and has its origins in Fast Moving Consumer Goods (FMCG). Sales promotion is used to: Attract new triers (non-users, loyal users of another brand and brand switchers)

Reward and retain brand-loyal customers

Turn light users into medium or heavy users

Regain past purchasers who have ceased buying

Sales promotion objectives- are as varied as the methods used. Sellers may use consumer promotions to increase ST sales or to help build LT market share. The objectives may be one of the following: Entice customers to try a new product/brand Lure consumers away from competitor’s products/brands Get consumers to ‘load up’ on a mature product Hold and reward loyal customers

In general terms, sales promo should promote the product’s positioning and include a selling message along with the deal. Ideally, the objective is to build positive consumer attitudes, stronger brand equity, > market share and increased profitability rather than to prompt temporary brand switching. If properly designed, every sales promo tool has consumer franchise-building potential, even where a price cut is included.

Sales promotion tools-1. Consumer promotion tools

TOOL DEFINITION EXAMPLE/APPLICATIONSamples Free or discounted goods provided at store

level or through the media designed to facilitate product trial. Offers of a trial of a product. Expensive but effective way to create awareness of and trial a new product.

Often low-priced categories and FMCG.

Redeemable coupons

Coupons carried on-pack or in another media that can be forwarded to a marketer or appointed agent and will be redeemed for a product or service, even a discount on the

On back of shopping dockets

next purchase. Cash-back offers (rebates)

Cash discounts usually received by forwarding a proof-of-purchase where state legislation permits.

Cents-off deals or price packs

Price deals, usually offered at retail level but also by direct marketers. Most common form of promotion at store level in Australia.

2 for 1 deals & in those lines where they complement each other well

Premium offers Goods offered free of charge or at reduced price as an incentive to buy a product. Part of the augmented product.

Pack itself may be a reusable commemorative mug

Advertising specialties

Useful articles imprinted with an advertiser’s name, given as gifts to consumers.

Pens, key rings and other novelty items. Found a lot at hotels

Patronage rewards

Cash, merchandise or service rewards offered to consumers who make continual use of a company’s product or service.

Loyalty programs e.g. Qantas Frequent Flyer programs

Point-of-purchase (POP) promotions

Offers ranging from theme promotions in-store to specially arranged selling areas.

1. Displays- at cash register2. Demos- e.g. cooking in

supermarkets (food draws us in by our senses)

Contests and games of chance and skill

Promotional events that give consumers the chance to win something of value by luck or skill. It creates interest and involvement.

2.Trade promo tools Many sales promos aimed at consumers are accompanied by trade promos whereby the

various dpt managers at store level can win prizes for the best merchandising display or the highest sales levels during a promo

Manufacturers also pay allowances to retailers for such activities as advertising, displays and physical distribution

In some industries push money (cash or incentives) is paid to dealers or their sales force to ‘push’ the manufacturer’s goods.

3. Business-to-business promo tools Industrial markets also use promos to gain awareness for new products or to increase

penetration of a particular industry by increasing business leads for their sales force. Concentrate on conventions and trade shows and sales contests

Conventions and tradeshows- used by vendors to find new sales leads, contact customers, introduce new products, meet customers, sell more to existing customers and educate customers with publications and audiovisual presentations

Sales contest- organised by business marketing to other businesses is an attempt to give incentive to a firm’s sales force, a distributor’s sales force or a dealer network to increase their sales performance during a specified period.

Decisions to be made in order to develop a sales promotion program include Size of the incentive-not too large (can you cover costs, decreases brand image e.g.

luxury products) How to promote and distribute the program (other medias, sales staff, PR campaign) Length of the promotion

Sales promotion budgeting (% of total budget or the marketer can choose the promos and estimate their total cost)

2. Discuss the role of a company’s salespeople in creating value for customers and building customer relationships

Salespeople- are involved in two-way personal communication with customers with whom they build LT relationships. Personal selling is the interpersonal arm of the promotion mix. This personal communication may be through face to face, telephone, video conferences

or by other means. They represent the co to the customers and vice versa and serve as a critical link

between a co and its customers. Salespeople should not only be concerned about producing sales but also producing

customer satisfaction and company profit. Salespeople can probe customers to learn more about their problems. They can adjust

the marketing offer to fit the special needs of each customer and can negotiate terms of sale.

They can build LT personal relationships with key decision makers.

4. Identify the 6 major salesforce management steps

Salesforce management- the analysis, planning, implementation and control of salesforce activities.

Major salesforce management steps are; 1. Designing salesforce strategy and structure2. Recruiting and selecting salespeople 3. Training salespeople 4. Compensating salespeople 5. Supervising salespeople6. Evaluating salespeople

5. Explain how companies recruit, select and train salespeople

Recruiting salespeopleThe company must first decide which traits its salespeople need to possess. Among the most common of these traits are: Commitment to sales and job Strong consumer orientation and linking skills Enthusiasm Persistence Initiative Self-confidence Independence Self-motivation Listening skills

Recruiting procedures After deciding on needed traits, management must recruit.

The personnel dpt looks for applicants by getting names from current salespeople, using employment agencies, placing job ads and contacting university students.

Selecting salespeople Recruiting will attract many applicants from which the company must select the best. The selection procedure can vary from a single informal interview to lengthy testing

and interviewing. Many companies give formal tests to sales applicants. Tests typically measure sales

aptitude, analytical and organisational skills, personality traits and other characteristics. Key areas of concern in recruiting and selecting are importance, quality, selection and

procedures.

Training salespeople The average training period is 4 months The initial period might focus on selling skills, product knowledge, the company and the

distributors that sell the company’s products. Among other things, they learn that distributors have dozens of salespeople calling on

them all the time. After the initial training, companies often bring their salesforce back to company HQ for

follow-up training The goals of training programs are

o Help salespeople to know and identify with the company = describe company’s history and objectives, its org, its financial structure and facilities, and its chief products and markets

o Salespeople need to be familiar with the company’s products = sales trainees are shown how products are produced and how they work

o Need to know customers’ and competitors’ characteristics = training program teaches them about competitor’s strategies and about different types of customers and their needs, buying motives and buying habits

o Need to know how to make effective presentations = trained in principles of selling

o Need to understand field procedures and responsibilities = learn how to divide their time between active and potential accounts, how to use an expense account, prepare reports and route communication effectively.

6. Describe how companies compensate and supervise salespeople, and how they evaluate salesforce effectiveness

Compensating salespeople To attract needed salespeople, a company must have an attractive compensation plan. These plans vary greatly both by industry and by companies within the same industry. The level of compo must be close to the ‘going rate’ for the type of sales job and needed skills. Compensation consists of;

a fixed amount-usually a salary; gives the person a stable y a variable amount- commissions or bonuses based on sales performance; rewards

the salesperson for > effort expense allowances- repay salespeople for job-related expenses; allow them to

undertake needed and desirable selling efforts fringe benefits- paid holidays, sickness or accident benefits, life insurance and

childcare; provide job security and satisfaction.

Different combinations of fixed and variable compensation give rise to 4 basic types of compensation plans- straight salary, straight commission, salary plus bonus and salary plus commissions. This plan can be designed to motivate salespeople and to direct their activities. E.g. if

sales mgt wants salespeople to emphasise new account dev, it might pay a bonus for opening new accounts.

The compo plan should direct the salesforce towards activities that are consistent with overall marketing objectives.

More and more companies are moving away from high-commission plans that may drive salespeople to make ST grabs for business rather than building LT, value-laden relationships.

Supervising salespeople Through supervision, the company directs and motivates the salesforce to do a better job. Most companies classify customers based on sales volume, profit and growth potential

and then they set call norms accordingly. Companies often specify how much time their salesforces should spend prospecting for

new accounts. One tool to help salespeople use their time efficiently is the annual call schedule which

shows which customers and prospects to call on in which months and which activities to carry out. Another tool is time and duty analysis.

Advances in technological developments have allowed dramatic improvements in salesforce productivity.

Motivating salespeople Mgt can boost salesforce morale and performance through its organisational climate,

sales quotas and positive incentives. o Org climate- describes the feeling that salespeople have about their

opportunities, value and rewards for good performance within the company. If they are held in high esteem, there is less turnover and better performance.

o Sales quotas- standards set for salespeople stating the amount they should sell and how sales should be divided among the company’s products.

o Positive incentives- sales meetings, sponsoring sales contests, honours, merchandise and cash awards, trips and profit-sharing plans.

Evaluating salespeople Sources of information about its salespeople are obtained from: Expense reports Sales reports Work plan Annual territory marketing plan Call reports

Formal evaluation produces three benefits:I. Mgt must develop and communicate clear standards for judging performance

II. Mgt must gather well rounded information about each salespersonIII. Salespeople know they will have to sit down one morning with the sales manager and

explain their performance

The formal evaluation process may involves

Comparing salespeople’s performance – can be misleading due to differences such as territory potential, workload, level of comp and company promo effort

Comparing current sales with past sales Qualitative evaluation of salespeople-usually looks at their knowledge of the co, its

products, customers, competitors, territory and tasks and may also rate personal traits.

7. Discuss the personal selling process, distinguishing between transaction-oriented marketing and relationship marketing

The selling process consists of several steps that the salesperson must master. These steps focus on the goal of getting new customers and obtaining orders from them. However, most salespeople spend much of their time maintaining existing accounts and building LT customer relationships.

1. Prospecting and qualifying

Prospecting - salesperson identifies qualified potential customers.

This may involve asking current customers for names of prospects, building referral sources such as suppliers and bankers, joining organisations to which prospects belong or can engage in speaking and writing activities that will draw attention, searching for names in newspapers or directories and using the phone/mail to track down leads.

Qualifying - identify the good leads and screen the poor ones. Prospects can be qualified by looking at their financial ability,

volume of business, special needs, location and possibilities for growth.

2. Preapproach Salesperson learns as much as possible about a prospective customer before making a sales call.

Salesperson should set call objectives, decide on the best approach and give thought to an overall sales strategy for the account.

3. Approach Salesperson meets and greets the buyer to get the rship off to a good start

Involves salesperson’s appearance, opening lines and follow-up remarks

4. Presentation and demonstration

Presentation - salesperson tells the product ‘story’ to the buyer, showing how the product will make or save money

Concentrate on customer benefits Companies can use 3 styles of sales presentation- canned

approach (memorised/scripted talk), formula approach (id buyer’s needs, attitudes and buying style; shows how the product will satisfy buyer’s needs-follows a general plan) and need-satisfaction approach (search for customer’s needs by getting customer to do most of talking)

Any presentation can be improved with demonstration aids e.g. booklets, flip charts, slides, videotapes and product samples.

5. Handling objectives

Salesperson seeks out, clarifies and overcomes customer objections to buying

Must be able to foresee these questions: is it hard to install? Any after sales service?

6. Closing Salesperson asks the customer for an order Salespeople should know how to recognise closing signals from

the buyer, including physical actions, comments and questions Closing techniques- asks for the order, review points of

agreement, offer to help write up the order, ask whether the buyer wants this model or that one or note that the buyer will lose out if the order is not placed now. They may offer the buyer special reasons to close, such as a lower price or an extra quantity at no charge.

7. Follow-up Salesperson follows up after the sale to ensure customer satisfaction and repeat business

This visit would reveal any problems, assure the buyer of the saleperson’s interest and reduce any buyer concern that might have arisen the sale

The principles of personal selling as just described are transaction oriented- their aim is to help salespeople close a specific sale with a customer.

Relationship marketing: the process of creating, maintaining and enhancing strong, value-laden rships with customers and other stakeholders. It emphasises building and maintaining LT rships with customers by creating superior

customer value and satisfaction. More companies are recognising that winning and keeping accounts requires more than

making good products and directing the salesforce to close lots of sales. Winning and keeping accounts requires more than making good products and closing

lots of sales.

CHAPTER FOURNTEEN: DIRECT AND ONLINE MARKETING

1. Explain the nature of direct and online marketing

Direct and online marketing- integrates marketing communication techniques, using traditional and new media, with traditional and electronic fulfilment approaches and sophisticated customer rship mgt techniques (CRM). It is both a form of one to one communication and also a step beyond marketing

product, or info about delivery or even how to install the product or overcome a problem.

Another feature of direct and online marketing is ‘accessible memory’- m orgs use a database to accumulate what they learn from customers.

A company’s knowledge base- database of frequently asked questions or solutions to problems maintained by a company to assist customers.

Direct marketing- an interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location. refers to those activities that embrace ‘targeted media’ which may serve to attract

potential and current customers but which permit transactions such as those already described, and which enable interaction via one-to-one media.

They key point is that there is continuous interaction and not simply episodic one-way communication and purchase activity.

T a b l e 1 4 . 1 Forms of direct and online marketing Direct print and reproduction Making a tailored offer using printed or reproduced materials such as a

mailing, a printed catalogue or CD-ROM version delivered to a list or database. Synchronous if the customer responds in real time when the offer is received.

Direct-response television and radio Interactive marketing, using FTA-TV, pay-TV, narrowcast TV and radio, as well as interactive TV and radio. In some cases, there will be a back-channel for order placement; in other cases, the telephone or mail is used to order.

Telemarketing Inbound or outbound personal selling or automated voice response unit selling to a list or database. May be interactive in situations where a donation is made or a vote is cast, or where orders are taken immediately the offer is made.

Telesales Outbound calls, usually order-taking with prompts, from a known and stable database of customers; usually involves calls to intermediaries.

Electronic dispensing and kiosks A range of technologies used in receiving orders and payments as well as delivering products and services; now includes the use of ‘smart’ card technologies and digital cash, to a known database of customers or to potential customers.

Direct selling Personal selling into the home or office to potential customers or a known clientele (database).

Electronic shopping (also referred to as e-commerce/e-business. See ‘What is online marketing?’ later in this chapter)

Recording responses, including taking orders, from inbound electronic signals or messages, in response to communications via any number of media: FTA-TV, broadband interactive TV, pay-TV, narrowcast TV, the Internet (email, secure transaction websites, and fax), quick response direct marketing where same-day or fast-track fulfilment is involved, e.g. gifts ordered from Wishlist.com.au.

Direct and online database marketing (see the section on this topic later in the chapter)

The development and maintenance of electronic databases to interact with past, present and/or potential customers and others in the marketing channel, on a one-to-one basis, often in real time, and where the databases are used to maintain value-laden relationships and to generate a measurable response

and/or transactions through the integrated use of electronic network tools and technologies.5

T a b l e 1 4 . 2 Mass marketing versus one-to-one marketing Mass marketing One-to-one marketingAverage customer Individual customer

Customer anonymity Customer profileStandard product Customised market offeringMass production Customised productionMass distribution Individualised distributionMass advertising Individualised messageMass promotion Individualised incentives

One-way message Two-way messagesEconomies of scale Economies of scope

Share of market Share of customerAll customers Profitable customers

Customer attraction Customer retention

Online marketing- this type of marketing entails interaction with known customers and others in the marketing channel, on a one-to-one basis, often in real time, to maintain value-laden rships and to generate a measurable response and/or transactions using electronic network tools and technologies. M orgs around the world have changed both in form and value as a result of

globalisation, deregulation and digitisation. Terms used to describe online marketing

o Intranet- secure websites accessed by company employees only o Extranet- websites accessed by both employees and known customers o Customer rship marketing (CRM)- one to one marketing, direct order marketing,

direct marketing, eMarketing and interactive marketing.

2. Discuss the benefits of direct and online marketing to both marketing organisations and their customers and identify the reasons for the rapid growth in this area of IMC

http://myphlip.pearsoncmg.com/altcc/student/ab2page.cfm?vbcid=9563&vid=14399

Quadrant 1- m orgs are best suited to using a mass m approach including mass media advertising, to position their brands in consumers’ minds and to ensure they have merchandising space in traditional retail outlets.

Quadrant 2- may find niche marketing most appropriate strategy to adopt. Quadrant 3- FMCG manufacturers have large segments of customers who all want the

same product however it is their supermarket customers who account for the bulk of their sales.

Quadrant 4- m orgs that have customers with a wide range of requirements and some customers are worth much more than others.

Figure above: customers have highly differentiated needs and diff customers rep diff valuations to the business. Comp A and B are more able to meet customers’ requirements. The co must realign its m strategy by taking adv of the situation and being capable of customising its order and interacting on a OnetoOne basis with customers. The firm would be wise to realign by adopting an online OnetoOne m strategy that incorporates the use of the Web in interactive m communication and to enhance rships.

However it isn’t enough to simply mount a ‘vanity’ website that remains locked into a one way mass-m communication paradigm, completely overlooking the fact that customers today are learning customers more so than ever before and that the use of the Web coupled with database technology means that businesses have become learning organisations.

Learning organisation- an org defined by its ability to innovate, adopt and change in line with its changing env.

while widespread use of the Net is yet to reach its full potential, due partly to the more realistic valuations being placed on new and existing businesses that employ Net technologies by world K markets, more sophisticated online OnetoOne m continues to dev in Australasia in 3 areas of m: m communication, m channel and CRM.

Direct and online database marketing Entails the dev and maintenance of electronic databases to interact with past, present

and/or potential customers and others in the m channel. One a one-to-one basis Often in real time Used to maintain value-laden rships To generate a measurable response and/or transactions through the integrated use of

electronic network tools and technologies.

M orgs use their databases in a number of ways:Goal Description 1. Identifying prospects Many co’s generate sales leads by advertising

their products or offers. Ads generally have a response feature such as a

toll free phone number The database is built from these responses Co sorts through the database to id the best

prospects then reaches them by mail etc in an attempt to convert them to customers

2. Deciding which customers should receive a particular offer

Co’s id the profile of an ideal customer and search their databases for ind most closely resembling this ideal type

By tracking ind responses the co can improve its targeting precision over time

3. Deepening customer loyalty Co’s can build customers’ interest and enthusiasm by remembering their preferences and sending appropriate information, gifts or other materials

4. Reactivating customers The database can help a co to make attractive offers of product replacements, upgrades or complementary products just when customers might be ready to act

5. Data mining Checking databases for patterns and trends that might exist or to find new connections bw data items

3. Discuss the various direct marketing techniques and their applicationDirect print and reproduction

Involves mail-outs of letters, product lists, samples and paper-based and digital catalogues to a list or known database of customers, or to a targeted group that the marketer wishes to convert to a database entry.

Direct mail Printed materials sent by mail and conveying offers to customers, whether targeted to the recipient by name, or to the business or householder by a broader targeting method.

Catalogues A printed listing of products, often featuring high-quality illustrations of the items on sale. Different types include; full-line merchandise catalogues e.g. Ikea, B2B catalogues e.g. Officeworks, specialty consumer catalogues e.g. Radio Parts

Group. Direct-response television, radio and print

Use of mass promotion media combined with a direct response offer, usually involving telemarketing.

Telemarketing Use of telephone operators to attract new customers, contact existing customers to ascertain satisfaction levels or take orders. Major use relates to customer service. Outbound and inbound (people ring in and out).

Telesales Routine order taking by telephone operators. Are used by marketing firms of all persuasions, not just by direct marketers. Diff bw this and telemarketing is that in telesales the calls are routinely made to regular customers such as retailers. Outbound calls to facilitate orders on products.

Electronic vending

Electronic dispensing machines- machines that dispense products and services (cash) usually by inserting cash, transaction or stored value card

EFTPOS (Electronic funds transfer at point of sale)- retailer cash register electronically linked to bank accounts; consumers pay directly using a cashcard or credit card, and funds may also be credited to an account if goods are returned.

Kiosks- electronically networked mini-offices, staffed or unstaffed, capable of dispensing information, products and services and of receiving payments by instalment or in full.

Direct selling Selling directly to consumers or businesses rather than using a reseller, such as a retailer or agent. E.g. door to door selling by Tupperware, Avon, Nutrimetics.

Electronic shopping

Purchasing via an electronic bulletin board or Telstra’s Discovery, or via interactive cable tv.

4. Explain how direct and online marketing campaigns are developed, pretested, implemented and evaluated

Evaluation- the most common assessment is to compare sales before, during and after a sales promotion or other direct and online marketing program or campaign. The profitability of such offers and the return on I are even more important. Evaluating direct marketing

o Performance has multiple dimensionso Direct and online m orgs set up programs to allow later monitoring of such

factors as; Sales lead generation Database generation Fulfilment response* Product inquiries Sales response Profitability Return on the I made in programs and campaigns Lifetime customer value

*fulfilment response-order processing, delivery response times and accuracy of delivery must be considered when responding to product orders.

Evaluating online marketing- by considering its 3 major aspects:Online m communication Those orgs using the Net/Web in IMC seek to measure both

effectiveness (did they reach the target market) and efficiency (how cost-effectively did they reach the target market).

Only sure way to track ind behaviour at a website is to allow only subscriber access to the site. This works well in the case of extranet usage by B2B and B2G subscribers but would be unrealistic for home users to subscribe to its particular site.

3 categories of measures are involved: 1. Web-centric measures- evaluating success of websites in m

communication began with use of web centric measures such as analysis of;

o Hits- # of files requested by guests to a web pg. o Log files- a record maintained by all host servers of the IP

address of the guest’s computer and of every file sent out.o Pg impressions- # of web pages viewed by a single visitor

to a site. 2. Audience-centric measures- are now favoured by many orgs. 3rd

party research companies such as ACNielsen provide these measures using Web-user panels. A quasi-solution to est web use identity is the use of cookies.

Cookies- short identifier pieces of text, deposited on a visitor’s computer by a website. On subsequent visits, the website software records the cookie response and thus measures repeat guest visits. 3. Network-centric measures- many m orgs use services of

Hitwise.com, to ascertain their performance in their own right or to est on which navigation sites to buy banner ad space. The measures provided incl the # of pg downloads and dwell-time duration on consecutive pages visited. Hitwise also provides info on clickstream (the path followed by website visitors).

Online m channel performance

The web is an online m channel or it may be used to supplement traditional m channels.

Online m channels are judged in the same way that more traditional direct m is judged- fulfilment response, in terms of product inquiries, sales response and profitability.

Rship mgt and customer lifetime value

With all forms of direct and online m, it is possible to calculate in advance what response rate will be required to break even, as well as other vital response rates such as average purchase levels.

Customer lifetime value- the amount by which revenues from a customer over time will exceed the company’s costs of attracting, selling and servicing that customer. it is ‘more valuable to a business to achieve qualified customers upfront and focus on retaining them than it is to constantly search out new customers’ (p 526)

5. Discuss the public policy and ethical issues facing direct and online marketers

Privacy concerns- A major direct and online m issue in most countries is PRIVACY.

Cross referencing of data When an ind’s personal info such as health status and work attendance level is interconnected and used without permission.

Unwanted post and email

One solution is to ask people which product categories- if any- they would like to receive information about.

Spamming- sending unsolicited email, usually to large #s of people, with a view to making a sale.

Concerns also exist about the means used to build the database and the possibilities of database abuse, particularly in online m where spamming threatens many commercial uses of the Net. Privacy guidelines are now in place.

Direct and online database marketing- entails dev and maintenance of electronic databases to interact with past, present and/or potential customers and others in marketing channel.

Uses of databases1. Identifying prospects

Ads generally have a response feature, such as a business reply card or toll-free phone number

Database is built from these responses 2. Deciding which customers should receive a particular offer

Companies identify the profile of an ideal customer for an offer Search of databases for individuals most closely resembling the ideal type By tracking individual responses, the company can improve its targeting precision

over time 3. Deepening customer loyalty

Create customised information, gifts or other materials Customised to individual customers preferences

4. Reactivating Customers Create attractive offers of product replacements, upgrades or complementary products Deciding on right timing of offering 5.Data mining Entails checking databases for patterns and trends that are hypothesised to exist Entails finidng new connections between data item

Evaluating database performance Profitable use of a database requires customer relationship mgt and keeping track of sales so as to be able to predict future sales levels more accurately. Three criteria to use are: Recency of purchase Frequency of purchase Monetary value of purchase

PART FOUR: RESPONSIBLE MARKETING CHAPTER FIFTEEN: ETHICS AND MARKETING COMPLIANCE

1. Discuss social criticisms of marketing’s impact on individual consumers

Consumers hold mixed or even slightly unfavourable attitudes toward m practices. Consumers are worried about high prices, poor quality and dangerous products, misleading advertising claims and several other marketing related problems incl planned obsolescence.

2. Identify and define criticisms of marketing’s impact on society as a whole

Advertising has been a special target. Criticisms of marketing’s impact on society are:

False wants and too much materialism- m urges too much interest in material possessions. People are judged by what they own rather than by who they are.

Too much political power- advertisers are accused of holding too much power over the mass media, limiting their freedom to report independently and objectively. All industries promote and protect their interests.

Too few social goods- business has been accused of overselling private goods at the expense of public goods. E..g increase in car ownership (private good) requires more highways, traffic control, parking spaces and police services (public goods). Overselling private goods results in social costs e.g. traffic congestions, air pollution, deaths and injuries from accidents.

Cultural pollution- our senses are being assaulted constantly by advertising.

Marketing’s impact on other businesses:

Critics claim that an org’s m practices can harm other companies and reduce competition 3 major problems are:

1. Acquisition of competitors

2. M practices that create barriers to entry- large m companies can use patents and heavy promotion spending and tie up suppliers or dealers to keep out or drive out competitors

3. Unfair competitive m practices- setting prices below costs, threatening to cut off business with suppliers, or discouraging the buying of a competitor’s products.

3. Outline citizen and public actions to regulate marketing – consumerism, environmentalism and regulation- and the way they affect marketing strategies

Consumerism

=An organised movement of citizens and gov agencies whose aim is to improve the rights and power of buyers in relation to sellers

Regulation

E.g. Choice magazine- no bias, no advertising

Traditional seller’s rights;

o Right to introduce any product

o Right to charge any price

o Right to spend any amount to promote the product

o Right to use any product message

o Right to use any buying incentive schemes

Traditional buyer’s rights;

o Right not to buy a product

o Right to expect product to be safe

o Right to expect the product to perform as claimed

Additional rights that consumer advocates have won are such matters as;

o knowing the true IR and total costs of consumer credit

o true cost per unit of a brand

o ingredients in a product

o nutritional value of foodstuffs

o product freshness

o True benefits of a product (truth in advertising).

Environmentalism

= An organised movement of concerned citizens, businesses and gov agencies seeking to protect and improve people’s living environment.

Concerned with

o Ecosystems

o Pollution

o LT effects e.g. LT health

o Growth issues

The marketing system’s goal should to be to maximise QOL.

Want env costs included in both producer and consumer decision making

Hit some industries hard such as steel industry

Companies have responded with ‘green marketing’ – developing ecologically safer products, recyclable and biodegradable packaging, better pollution controls and more energy-efficient operations.

o E.g. Virgin Blue- you can choose for your flight to be carbon neutral

Sustainable development

4. Explain the business actions towards socially responsible marketing that can foster marketing ethics and lead to different philosophies of enlightened marketing

Ethical marketing- an approach by orgs whereby they recognise that the task of marketing is to be both enlightened to society’s views and ethical in the org’s approach to society as a whole and to customers.

Most m orgs have responded positively to consumerism and environmentalism in order to serve customers’ needs better

In adopting socially and ethically responsible marketing, m orgs often take philosophical positions which they instil in their employees

Companies need to develop ‘corporate marketing ethics policies’ as not all managers have fine moral sensitivity

Societal marketing- a principle of enlightened marketing that holds that an org should make m decisions by considering consumers’ wants the org’s requirements, consumers’ long run interest and society’s long run interests.

Under the societal marketing concept, each manager must look beyond what is legal and allowed and develop standards based on personal integrity, corporate conscience and long-run consumer welfare.

Ethics and social responsibility require a total corporate commitment. They must be a component of the corporate culture

5. Discuss the need for and value of legal compliance programs in marketing and the issues involved in implementing them

One of the best ways to ensure that an org acts ethically and legally is to have a culture of good ethical practice and a legal compliance program.

Legal compliance program- a system designed to identify, manage and reduce the risk of breaking the law.

a compliance program can also be a competitive advantage in the m place by ensuring ethical practice, high quality performance and the positives created by such behaviour.

Australian Standards guide business in many ways

Australian Standard AS306 is useful in guiding the implementation of a compliance program in marketing as it draws together comments from courts, opinions of legal practitioners and best practice. It est requirements for

o + commitment to compliance at board and CEO level communicated to staff

o + promotion of compliance by all managers

o Continuous monitoring and improvement of all compliance procedures

o Integration of all compliance procedures into the org’s day to day operating procedures, systems and documents

o Adequate #s of senior staff with high status and sufficient ‘clout’ to take responsibility for compliance

o Ongoing education and training for all staff

Legal education

Legal education programs tend to cover 4 sets of rships that need to be monitored in a compliance program:

o Rships with competitors- to avoid m rigging, group boycotts and price fixing

o Rships with suppliers – to avoid resale rice maintenance and such vertical restraints as may serve to reduce competition

o Rships with other parties such as patent licensees- to avoid infringing intellectual property rights and patents an licence agreements generally

o Rship with the industry itself- to avoid using trade associations or groupings of firms that might violate sections of the legislation prohibiting arrangements or understandings that substantially lessen competition.

Coverage of a legal compliance program Competition law main source of Australian comp law is Part IV of the Trade

Practices Act and case decisions interpreting this legislationContract and consumer law

Laws governing the sale of g/s deal with the matter differently in different countries although the intent of legislation is much the same. In Australia, the laws governing the sale of g/s come from a three-tiered scheme that includes common law (reported decisions of courts), state legislation (e.g. Sale of Goods Act and Fair Trading Act in each state) and Commonwealth legislation (Trade Practices Act 1974).

Standards Movement to standardise legal requirements bw countries (eg WTO) and trading partners (e.g. Aus and NZ CERTA) continues.

Product liability Class actions more likely in Aus with the introduction of legislation in 92 which liberalised the ability of plaintiffs to engage in representative or class actions.

M communication

Sales and after sales finance

the details of any credit sale must be spelt out

Franchising Is an area where specialised legal knowledge is required bc of the exclusive rights and obligations granted under a franchise agreement. 98 Franchising Code of Conduct falls under Part IVB of the Trade Practices Act and requires a comprehensive set of disclosures and provides a dispute resolution procedure for franchise disputes. The Code is enforced by the ACCC.

Intellectual property (IP)

IP law involves such areas as copyright, trade mark, patents, designs, trade, secrets and domain names.

Documents

24108 Marketing Foundations - Bored of Studiescommunity.boredofstudies.org/attachments/117/university... · Web viewRetailers can be classified as store retailers and non-store retailers