MARKETING

MARKETINGMARKETINGThe process of getting goods and services from the producer to the consumer.What was involved in that process? Advertising, financing, order taking, buying, selling, transporting, pricing, risk taking, using marketing information, and many other activities were involved in this one purchaseGoods are tangible items that can be seen, touched, or tasted. Goods can be subdivided into two broad categories durable goods and nondurable goods. Durable goods are goods that are made to last several years. Examples of durable goods include: appliances, automobiles, furniture, jewelry, and homes.Nondurable goods are goods that tend to last a short timelike the pizza. Other examples of nondurable goods include cleaning supplies, cosmetics, newspapers, and so on.Services are intangible activities that we pay others to provide, such as a haircut, a manicure, a root canal, a tune-up, a concert, or a shoeshine. The service industry is the fastest-growing area of marketing. In our fast-paced world, we rely on others to provide services to make our lives less hectic. A producer is one who makes, grows, extracts, or provides a good or service. A consumer is the person who uses a good or service. Consumer should not be confused with customer. A consumer uses a product or service, and a customer is the person who buys a product or service. Often, the customer and the consumer are one and the same. If you pay for the product and you consume it, you are both the customer and the consumer. For example, if you buy an iPod and you use it to listen to your music, you are both the customer and the consumer. Sometimes, however, the customer and the consumer are different people. Examples of customers who are not consumers would be your parents buying you a car for graduation (they pay for it, but you use the car), or you buying mice for your pet snake (you pay for them, but the snake consumes the mice).Evolution of marketingMarketing has evolved gradually over time. Marketing activities can be traced to peoples earliest use of the exchange process. Most experts agree that marketing began when early humans started to trade and exchange with one another. Exchange is the key element, or the heart, of marketing. When something of value is transferred between two or more parties, marketing has occurred.In early times, marketing consisted of bartering or tradingexchanging items for other items. Later, money became the medium of exchange.

People with things to sell began to put up signs showing what products or services they had to offer. Businesses began to spring up.merchants traveled around the globe in search of products they could sell. Peddlers wandered the countryside selling.companies began to send out catalogs showing the products they had available. Orders were placed by mail and usually took weeks to arrive. General stores became common. By the beginning of the twentieth century, most businesses were production-oriented. The main goal was to produce a high-quality product at the lowest possible price.After the Great Depression, a buyers market emerged, which gave customers more power and forced companies to switch their emphasis. A buyers market occurs when there is a market with an abundance of goods and services. Marketing conceptThe marketing concept is the practice of meeting the needs of the customer while making a profit.

SALES CONCEPTSales concept: trying to sell something before knowing what the customer wants.

CUSTOMER CONCEPTCustomer concept: doing what the customer wants, not what the business wants; or in other words, ensuring customer satisfaction.

Total company effort means that all parts of the business work together.Total company effort involves doing whatever is necessary to make customers want to return to the store or buy the product or service again.Profit is the difference between the income from sales and the cost of running the business.By following the marketing concept, a business finds out what the customer wants or needs and then tries to meet those wants or needs while still making a profit.Over the last sixty years, the marketing concept has evolved to the point of becoming part of the attitude that exists in todays successful businesses. Some results of the marketing concept that are now found in almost every business are customer service centers, money-back guarantees, customer surveys, credit plans, toll-free numbers, and warranties. Customers needs and wants now drive our market economy.Seven Marketing FunctionsThe seven functions are buying, selling, transporting, storing, financing, market research, and risk bearing. Buying is the act of selecting and obtaining the kind, quality, and quantity of goods and services that are needed or wanted.Selling involves seeking out customers and making goods or services available to those customers. Transporting is the movement of goods from where they are produced or stored to where they are sold. Storing means stocking goods for future use.Financing is granting credit to customers so they can buy the companys goods or services.Consumer credit allows people to get goods or services now and pay for them later.Trade credit is credit extended from one business to another.Market research is the process of gathering and analyzing data to help make marketing decisionsA common method that businesses use to gather data is focus groups. A focus group is a group of people who are brought together to talk about a product or service that is being provided by a business. Risk bearing is a means of being prepared for the loss that a business may incur.

The Four Ps of the Marketing MixA specific group of customers that a company wants to serve is called its target market.The four Ps are product, price, place, and promotion. These four Ps make up the marketing mix.

productThe product includes all the decisions involved in making the right product for the companys target market. It includes more than just the production or physical creation of the product. It includes packaging, design and research, branding, trademarks, warranties, product life cycles, labeling, and new product development. pricePrice involves all the decisions and methods used to determine profitable and justifiable prices for goods and services. It involves sensitivity to the abundance of laws and regulations that affect price decisions. It includes determining discounts, allowances, terms, costs, and markups.placePlace involves all the decisions and activities involved in getting the right product to the right destination.

PromotionPromotion includes all of a companys communication with its various target markets.Promotion includes advertising, sales promotion, personal selling, public relations, and publicity. Competitive EnvironmentThe competitive environment is the interaction that occurs in the marketplace. Pure competition exists when many companies in an industry make the same or very similar products and no company commands a very large market share.Homogeneous product is a good that the consumer sees as basically the same no matter who produces it and so they seek out the lowest price.Monopolistic competition occurs when a company with many potential competitors attempts to develop a different marketing strategy to establish its own market share.

A heterogeneous product is a good the consumer sees as different from other goods.An oligopoly is when only the largest companies sell the majority of a particular good. A monopoly is when only one company controls a market or industry.

Economic EnvironmentEconomics is the study of how a society uses its scarce resources to meet the needs of it members.Prosperity occurs when unemployment rates are very low and income for the average person is high.Recession is a drop in productivity that lasts for a period of six months or longer.Depression is more severe than a recession and lasts for a longer period of time.Recovery occurs when the economy is moving from a recession to prosperity.Inflation is a period of generally rising prices.Stagflation is when the economy simultaneously has high unemployment rates and rising price levels.

Channels of DistributionTo understand the different channels of distribution, you must understand the types of goods that are distributed. Consumer goods are goods used for personal use, not goods used by businesses. Consumer goods are divided into three categories: convenience, shopping, and specialty. Convenience goods are low-priced items that are bought on a regular basis with little effort on the part of the customer. Common convenience goods are items such as toothbrushes, pens, and paper. Shopping goods are higher-priced items that customers will spend more time and effort before making the purchase, such as a car, an engagement ring, or plane tickets. Specialty goods are items that have unique characteristics for which the customer will go to considerable lengths to purchase. These goods are often very expensive, such as houses. The channel of distribution is the path that a product or service follows from the manufacturer or the producer to the consumer.Distribution channels help move goods to consumers who are located in all parts of the world. Within the channels of distribution, many individuals play vital roles. These individuals are called middlemen or intermediaries, and include retailers, wholesalers, and agents.ROLESMiddleman or intermediary is any person or organization operating between a producer and the consumer. Intermediaries are often able to perform the marketing functions more efficiently than the manufacturer or producer. All retailers, wholesalers, agents, and distributors are classified as middlemen. A retailer is any person or organization that sells products to or performs services for the consumer; an example of a retailer would be 7-Eleven. A wholesaler is any person or organization that sells products or services to retailers or manufacturers, but not to the consumer; Aloha Outfitters is an example of a wholesaler. The products purchased from a wholesaler are resold to another channel member. Agents are middlemen who help goods move through the channel of distribution. Agents never actually own the goodsthey get parties to together and help make the buying-selling transaction. Consumer goods are usually marketed through one of the five channels of distribution. FIVE CHANNELS OF DISTRIBUTIONProducer to consumer: The shortest channel of distribution for consumer goods is directly from the manufacturer (or producer) to the consumer.Consumer goods that move through this channel include magazine subscriptions, cosmetics, custom-made clothing, plants and trees from nurseries, farm produce at roadside stands, and pizza from the pizza parlor. Almost all service businessesfor example, lawyers, doctors, plumbers, or hairstylistsuse this channel.

FIVE CHANNELS OF DISTRIBUTIONProducer to retailer to consumer: The channel from producer to retailer to consumer is used for many kinds of consumer goodsclothing, appliances, automobiles, petroleum, and many other products with a relatively high unit value. This channel is often used when retailers can buy goods in large quantities. The retailer is one of the most important middlemen in the distribution channel and sells most products and services that are used for personal consumption.

FIVE CHANNELS OF DISTRIBUTIONProducer to wholesaler to retailer to consumerThe channel from producer to wholesaler to retailer to consumer is the most traditional and most frequently used channel in marketing. This marketing channel takes longer but is most common for homogeneous or convenience goods that require wide distribution.

FIVE CHANNELS OF DISTRIBUTIONProducer to agent to retailer to consumerSome producers sell their products through agents who help them reach large retailers, such as national and regional supermarket chains. Agents are middlemen who actively assist in the sale of products without taking title to the products. In other words, the agents never really own the products; they simply coordinate business between buyers and sellers. Although agents usually work for producers, they sometimes work for retailers.

FIVE CHANNELS OF DISTRIBUTIONProducer to agent to wholesaler to retailer to consumerThe channel from producer to agent to wholesaler to retailer to consumer is the longest channel of distribution because it involves three middlemen. Products that require a wide geographic distribution and are carried by many small retailers are marketed through this channel. The need to distribute the product over a wide area to many endpoints makes the use of an extra channel member desirable.

Intensive distribution is when a product is distributed through as many outlets as possible. This distribution is very common with convenience goods like bread, gum, soft drinks, newspapers, and milk. Selective distribution is when the product is distributed through a few outlets in a given area. The given area must meet the producers needs. Selective distribution is the most common method for distributing shopping goods.Exclusive distribution is when only one outlet has exclusive rights for a product in a given area. This is common for specialty goods and for products that are purchased infrequently.RetailersRetailing involves all activities used in the sale of products and services to the ultimate consumer for personal, nonbusiness use.Ownership is one way of classifying retail businesses and can be subdivided into four types: independent stores, chain stores, franchise stores, and manufacturer-owned stores.Most independent stores are small businesses operated by the owner or owners. These types of stores account for almost three-fourths of all the retailers in the United States.When a person or organization owns more than one store that sells the same products or services, the stores are called chain stores. Examples of chain stores are Albertsons, Sears, and Old Navy. A franchise is an agreement between a parent company and a person or group that gives rights to the person or group to operate using the parent companys name. Some popular franchise businesses include the following: Subway, McDonalds, Curves for Women, 7-Eleven, Super 8 Motels, Inc., and Jackson Hewitt Tax Service.A manufacturer-owned store is a retail store owned by a manufacturer. With this kind of store, a company can completely control the channel of distribution. These stores are often referred to as factory outlets, like the adjacent picture shows. L.L. Bean and Benetton are good examples of manufacturer-owned stores.Most consumer products are sold in one of the following types of stores: specialty shops, department stores, supermarkets, convenience stores, superstores, or discount stores.A specialty shop is a store that specializes in one or a few main types of products or services but has deep product lines. A store that has deep product lines is one that has a large collection or selection of one or more products. Examples of specialty stores include the following: Big O Tires, KAY Jewelers, Media Play, Midas Muffler and Brake, and Banana Republic.A department store is a store that is organized into departments which focus on a particular type of merchandise. A department store would be like combining a number of specialty shops under one roof. Examples of department stores would be Sears, JC Penney, Macys, Dillards, and Nordstrom.A supermarket is a very large retail store that specializes in food and nonfood items. Like department stores, supermarkets tend to be divided into sections by productscanned goods, fruits, vegetables, dairy products, butcher shop, bakery, frozen foods, and nonfood items. Examples of these stores would be Albertsons, Winn-Dixie, A & P, and Safeway.A convenience store is a small store that is conveniently located, carries a limited supply of fast-moving food and nonfood items, and offers longer store hours. Often these stores are open twenty-four hours a day. Examples of convenience stores are 7-Eleven, Circle K, and Maverick stores.A superstore is a very large store that carries not only food items but also other types of goods that consumers purchase routinely. Of all the types of retail stores, superstores carry the widest selections of goods and often sell goods in bulk. A discount store is a store that offers a wide variety of low-priced goods. They usually offer hard goods like cameras, televisions, and small appliances, and soft goods like clothing, school supplies, and health products, as well as some food items.WholesalersWholesaling includes all the marketing activities that involve selling goods to businesses for resale or for nonpersonal use. Wholesaling functions include all the activities wholesalers provide for other channel membersoffer product storage, reduce marketing costs, provide market information, offer financial aid, reduce business risk, and promote the products.Storage is one of the most important functions wholesalers provide.A wholesaler can buy in very large quantities and pass the savings along to the retailers because they sell to so many retailers. These savings actually lower the cost of doing business.As an informed buyer and seller who is close to the market, the wholesaler can reduce the manufacturers need for market research by providing information on how products are being received and any problems that are occurring in the market. Wholesalers will often allow buyers to purchase on consignment, which means that the retailer does not have to pay for the goods if they do not sell them.By providing credit to customers, the wholesaler often takes the loss if customers do not pay. Another function provided by some wholesalers is promotional assistance. Displays and promotional events are supplied by some wholesalers.Types of WholesalersMerchant wholesalers take title to the goods they distributemeaning they actually own the goods and sell them to retailers or manufacturers. Agent wholesalers do not take title to the goods they distribute. They work to get the buying and selling parties together. Modes of TransportationPhysical distribution consists of all the activities involved in efficiently moving goods from the producer to the consumer. Physical distribution includes the transportation and storage of goods within individual companies as well as the movement of goods between companies or middlemen. Almost half of the cost of marketing is spent on physical distribution. It does not do any good for a company to produce something if the company cannot get the product to the consumer.Transporting Goods

Marketers can choose from five basic modes of transportation of goods: air, motor, railroad, water, and pipeline. Each form of transportation can be ranked in relation to others based on speed, cost, reliability, availability, and capability.Speed refers to the average time it takes a product to travel from its origin to its final destination.Cost refers to the relative level of expenditure that is required to move the product from its origin to its destination.Reliability refers to the consistency of the transit times and speed of service given. In very reliable service, the transit time is consistent (for example, it always takes two days for goods to reach their destinations). In unreliable service, the time it takes for goods to reach their destinations varies: on average it might take three days, but the time fluctuates between one day and five days.Availability refers to a companys access to a particular mode of transportation. For example, not every company is located near an ocean or river to transport their products by water.

Capability refers to the ability to handle shipments of various weights, sizes, and dimensions. For example, an ocean vessel can accommodate much larger and heavier products than an airplane.

Advantages/Disadvantages of Modes of TransportationAdvantagesDisadvantagesAir transportationfast, reliablehigh cost, limited weight capacity, low availabilityMotortransportationfast, reliable, transports a variety of products, reaches remote areasslower than airRailroad transportationhauls the most tons of freight, low costlow availability, third fastest, average reliabilityWater transportationexport/import goods to/from other countries, hauls huge quantities over long distanceslow availability, very slow, unreliablePipeline transportationreliable, carries a lot of tonslimited capability, limited speed, limited availability, high start-up costStorage FacilitiesThe second element of physical distribution is the use of warehouses. Warehouses provide the function of holding and storing goods. They provide time utility. Storing goods is necessary because production does not always match consumption.Private warehouses are owned and operated by a company for the purpose of distributing its own products. These facilities may be a distinct and separate operation of the company, or they may be integrated with other activities. The largest users of private warehouses are retail chain stores such as JC Penney, Wal-Mart, and Sears. Public warehouses are business organizations whose primary activity is to provide storage and related activities on a rental basis to other companies. Put simply, public warehouses rent space to other companies who need to store their goods. Distribution centers are special warehouses designed to store products for short periods of time to speed up the flow of products. They provide an important function for manufacturers; they perform the task called bulk breaking. Bulk breaking is the receiving of large shipments from a manufacturer and breaking the shipment into small lots that are then sold to wholesalers or retailers. Distribution warehouses are like miniature manufacturing plants because they serve as a place to assemble products before distributing them. The main objective of distribution warehouses is to facilitate rapid movement of products to the purchasers rather than to serve as storage facilities.Support functionsSupport functions in the area of physical distribution include inventory control, material handling, product packaging, and order processing.Inventory control, involves those activities that aid in developing and maintaining adequate assortments or products for the target market.The just-in-time inventory system minimizes inventory at each production facility.Material handling deals with the physical handling and moving of products within the manufacturing plant and warehouses and to, from, and on transportation modes. The main goal of material handling is to minimize breakage, spoilage, and theft during delivery, receiving, transfer, and shipping.To minimize damage to goods that are moving through a channel of distribution, the goods should be packaged appropriately for shipping and storage.

PromotionThe role of promotion is to communicate with individuals, groups, or organizations to directly or indirectly encourage exchange by influencing them to accept the product or service. Promotion includes persuasive information about a companys products, services, or image. Promotion adds information utility; it does not force people to buyit only informs people of things they may need or want.Personal selling is a sellers promotional presentation conducted on a person-to-person basis with the buyer. It includes salespeople working in retail stores, door-to-door salespeople, and telephone sales calls to homes and companies. Sales promotion consists of activities that supplement advertising and personal selling. Sales promotion is a form of sponsored communicationpart of a planned strategy to put the name of a product or company in front of the consumer.Public relations is the process of improving the customers, employees, suppliers, and the general publics image of a business. Public relations is not about selling products or services, but about polishing the companys image. It is about making the company look better. Public relations is so important that many companies hire professionals to plan public relations activities.Publicity is unpaid advertising. When a company participates in an activity that benefits the community or citizens in the community, and the effort is reported by the media, the company is getting free publicity and improving its image. Visual merchandising is the display of products or services at or near the point of purchase. Window displays, interior displays, signs, inviting surroundingsall of these are part of visual merchandising.

ADVERTISING MEDIAAdvertising is simply the way a business talks to potential customers about products, services, or ideas it has to offer.

Newspaper Advertising 19 percent of total advertising expenditures AdvantagesDisadvantagesreaches a very large group of peopledifficulty targeting a specific audiencecan be aimed at national, regional, or local marketsshort lifeinexpensivepoor qualitynot much lead time is requiredclutteredcoupons and ads can be cut out Magazine Advertising 5 percent of total advertising expenditures AdvantagesDisadvantageseasy targetingmore national in scopegood qualitynot for local marketspeople keep magazines longer than papersexpensiveRadio Advertising 8 percent of total advertising expenditures AdvantagesDisadvantageslarge audienceshort life spanshort lead timecannot refer backflexiblepeople do not pay close attention to itinexpensiveclutter effecteasy targetingTelevision Advertising 23 percent of total advertising expenditures AdvantagesDisadvantagesvisuallong lead timeeasy targetingexpensiveDirect Mail Advertising 19 percent of total advertising expenditures AdvantagesDisadvantageseasy to target potential customersper-reader cost is highinexpensivepostal rates increasingflexibility short lead time color coupons can be used Yellow Pages Advertising 6 percent of total advertising expenditures AdvantagesDisadvantageseasy to find productsad cannot be changed quicklycan refer back toadvertisements are relatively smallgood for local coveragecompeting businesses are listed nearbylow costdifficult targetingOutdoor Advertising 2 percent of total advertising expenditures AdvantagesDisadvantagesinexpensivelack of flexibilitycolorfullong lead timecan be strategically placed near the business being advertiseddifficulty targeting a specific audience losing some popularity negative impact on the environment can present a driving hazardInternet Advertising 2.5 percent of total advertising expenditures AdvantagesDisadvantagesglobal marketmust be computer literatelow cost easy to target

PROMOTIONAL MIXA promotional mix is the combination of promotional elements used by a company to promote its goods or services.

Target MarketsA target market is the potential customers for a companys goods or services.Marketers design goods and services to meet the demands of many different types of target markets. POPULATION: Marketing managers are interested in population numbers and trends.AGE: Marketing managers are also interested in the number of people in different age groups and the changing trends in the age mixThe fastest-growing age group is the over-sixty-five category. GENDER: an obvious basis for consumer markets. Many products are made for only one gender.

Households: a person or group of people, related or unrelated, occupying the same housing unit.Geographic LocationMarket SegmentationMarket segmentation is dividing the total market into smaller groups of people who have common characteristics.Demographic segmentation is segmenting by population, age, gender, household, location, income, family life cycle, race, and education.Psychographic segmentation includes lifestyles, activities, interests, opinions, personalities, and psychological influences. Behavioral segmentation includes segmenting by motives, needs, wants, attitudes, and perceptions. INCOMEAnother area closely related to target markets is peoples purchasing power. Even though people may want products and services, they need cash or credit to be able to purchase these products and services. Personal income is the total amount of money a person earns from salary or wages. Personal income is often referred to as gross income.Disposable income is the income a person has left after taxes and other deductions are taken out of the gross income.Discretionary income is what a person has left over from disposable income after all the necessities of life are paid.Five classifications (young single, young married without children, young married with young children, older married with older children, and senior citizens without children at home) show the change in a persons buying patterns.PricingPricing is a major marketing strategy. Many experts believe that with all the changes in the marketplace, pricing is the most critical marketing factor.Supply is the amount of goods and services that companies are able to provide at a given time at a given price. Demand is the amount of goods and services that people are willing and able to buy at a given price during a given time.The point at which the amount supplied is equal to the amount demanded is the equilibrium price or the market price.

Competition, or the rivalry between businesses for potential customers, is a second factor that has a serious impact on pricing.Price fixing is an agreement between companies to sell the same products or services at the same prices.The government, in an attempt to prevent prices from rising too much or too quickly, may adopt a fiscal or monetary policy restricting the amount of money in circulation.

PRICING METHODSCost-plus pricing is setting the price of one unit of a product equal to the units total cost plus the desired profit on the unit. Balancing Supply and Demand Method: method of price setting involves balancing supply with demand.Competitive Market Conditions Method: This method has a company set its prices based on the prices of the primary or general competition. This method is often used to maintain the status quo or market share.

PRICING STRATEGYSkimming pricing is setting the initial price of a good or service high.Penetration pricing is when the initial price is set relatively low and is then raised as demand increases. Introductory-price pricing strategy: a temporary price cut to attract customers. This temporary price cut speeds the product into the market. This strategy is used for two to six months, while the penetration strategy will usually last for a year or more.Competitive pricing is when a company prices its new products at the level of comparable products. DISCOUNTS AND ALLOWANCESQuantity discounts are price reductions based on amounts purchased.The opportunity cost of an item is what you give up to have that item. For example, if you chose to play basketball instead of doing your homework, the opportunity cost of the decision was getting your homework done and maybe even a good grade on a test or in the class.Cumulative discounts are based on the total volume purchased over a period of time.Trade discounts are price reductions given to certain buyer groups to compensate them for performing certain middleman marketing functions.Cash discounts are discounts offered to buyers who pay their bill within a specified period of time. Seasonal discounts are offered for buying goods during the off-season. Cooperative advertising is when the retailer advertises a branded product locally, and the manufacturer returns some of the advertising cost to the retailer.trade-in allowances: money given for old models of products when a new model is purchased.Rebates are special consumer discounts that are usually offered by manufacturers.Forward dating is a variation of both seasonal and cash discounts.Push money is money, prizes, or discounts given to retail sales clerks to encourage them to emphasize certain products.