Marketing

Nature and roles of markets and marketing

Marketing The process of planning and executing the conception, pricing, promotion and distribution of goods and services to create exchanges that satisfy individual + organizational objectives A total system of interacting activities designed to plan, price, promote and distribute products to present and potential customers. Successful marketing identifies consumer needs and then attempts to plan, price, promote and distribute products + services to promote these needs. Marketing attempts to: o Analyse all factors influencing consumer choices. o Help biz produce according to consumer needs o Convince potential consumers one product is more desirable than another. Marketing facilitates: o Efficient decision making by consumers give them necessary information. o Discovery of what consumers want & how to satisfy those wants.

The Role of Marketing in the Firm and in Society

The Firm Gives a biz direction and helps manage a changing environment Helps to coordinate how a biz can best use its resources to satisfy customers and achieve profit (through mkting plan) Connects the business with its target market and helps achieve its goals. The mkting plans role is important: o It outlines the strategies to be used to bring the buyer and seller together o As the core function of marketing is to satisfy existing customers wants, this should lead to repeat sales o Mkting = revenue generating activity of the biz as nothing is achieved until a sale is made Society: 30% of Australias workforce is employed in marketing related jobs. Provides a range of goods and services Contributes to high living standards and improved quality of life Marketing = reason for the high level of materialism Creates false needs/ wants Creates an abundance of waste

Types of markets
Resource markets Individuals/ groups that are engaged in all forms of primary production including mining, agriculture, forestry, fishing In Aus. This group = 118,000 enterprises Industrial markets

Industries/ bizs that purchase products to use in the production of other products or in their daily operations In Aus. This group = 930,000 Intermediate markets Consists of wholesalers/ retailers who purchase finished products and resell them to make profit In Aus. This group = 160,000 retailers and 40,000 wholesalers Consumer markets Consist of individuals who plan to use or consume the products they buy Mass markets The seller mass produces, mass promotes and mass distributes a standard product to all buyers Niche markets When the mass market is divided into smaller markets consisting of buyers who have more specific needs or lifestyles

Production, selling and market orientation Approaches to marketing

Production approach (1820s 1920s) Bizs were production orientated Bizs concentrated their efforts on the production of goods and services Marketing consisted of simply taking orders and delivering products Sales approach (1920s 1960s) As customers basic needs were satisfied a new sales orientated approach was developed Bizs increased their advertising, making use of newly developed electronic communications systems Mkting department took a more dominant role in the biz Marketing approach (1960s now) Producers had to learn how to satisfy wants/ needs More was needed if products were to sell as they had previously Families had more disposable income

The marketing concept

Marketing Concept: Idea that customer satisfaction is the key goal of business operations. The business should direct all of its policies, plans and operations to achieving customer satisfaction to ensure the maximisation of its sales, profits and success. The marketing concept needs to become integrated into all aspects of the business. Customer Satisfaction By knowing what consumers want & focusing production & marketing towards consumers, maximizing sales. Customer Orientation Biz focuses on maximizing the satisfaction consumers gain from a product and dealing with the business.

Here, the customer is king and the customer relationship does not end with the sale; it begins there. The business must obtain as much information as possible about the market, its attributes and its desires, and use this to produce according to what it believes the customer wants. Consumers gauge satisfaction comparing expected benefits (before purchase) with their perceived benefits (after consumption) These companies will also strive continuously to not simply meet but exceed customer expectations. Relationship Marketing Focuses on encouraging repeat purchases and loyalty to business by managing customer relations, during and after initial purchase Building personal, long-term bonds. Focus on developing strategies to keep old customers and develop long-lasting relationships. It is harder for businesses to attract new customers than to maintain existing ones. Customer loyalty o A measure of how often a customer buys a product from the same business when they have a choice of who to buy from.

Marketing planning process

Marketing plan A written marketing strategy that includes objectives, market research and specific details of what and how the strategies will be implemented. Marketing planning process The process of identifying the businesss marketing objectives and planning, organising, developing and implementing the appropriate marketing strategies to achieve marketing objectives. Combines all marketing tools in a complementary and effective way its a key determinant of business
success

The 5 steps of the marketing planning process: Situational analysis

What is the present state of the biz?

Establishing market objectives

What do we want the biz to acheive?

Identify the target market

To whom does the biz presently sell? To whom could the biz sell?

Develop marketing strategies

How is the biz going to acheive these objectives?

Implementing, monitoring and controlling

Developing a financial forecast (how much will the mkting plan cost?) Compare actual and planned costs (is the biz achieving what we thought it would?) Revising the mkting strategy (is the plan working? Does it need changing?)

Elements of the marketing plan Situational analysis

When a biz analyses its mkting program by looking at how it has performed and how it will perform in the future Four parts mkting analysis, product analysis, competitor analysis & SWOT analysis Market analysis Examining the external and internal environments to predict how the will affect the bizs ability to make, promote and distribute goods and services Product analysis/ product life cycle When a product is studied by looking at aspects such as the products position in its own life cycle Stages in a product life cycle and strategies to combat these stages: Stage Introduction Characteristics Sales grow slowly Negative profits Little competition Sales grow rapidly Profits rise quickly Competition increasing Appropriate marketing mix Set price to attract tgt mkt Promote heavily Encourage association with brand name Encourage brand loyalty Strengthen product position Develop new mkt segments Increase product variation. Emphasis on customer services. Redesign packaging Offer reduced prices/ incentives Develop new promotion strategies Increased personal selling

Growth

Maturity

Decline

Rate of sales slows down profits fall Competitors fighting for sales Repeat purchases dominate revenue Sales fall Negative profits Less competition

Lower price = reduces inventory Narrow distribution channels Reduce promotion effort

Competitor analysis Competitors are a key focus of a marketing plan A biz needs to understand how competitors think by: o Analysing their strategies o Assessing their strengths/ weaknesses o Predicting what they might do in the future SWOT analysis Internal: Strengths o The areas that a biz holds a competitive advantage over its competition Weaknesses

o The areas within a biz that exhibit problems or disadvantages when compared to its competition External: Opportunities o The characteristics of the external biz environment that, if exploited, could provide the business with positive outcomes. Threats o Aspects of the external biz environment that could affect the biz.

Establishing marketing objectives

Marketing objectives are the clear set of goals that state what is to be achieved through the marketing activities and helps the business plan its marketing campaign. They need to closely align to the overall business objectives. Common objectives include: Increasing mkt share Mkt share = The bizs share of the total industry sales for a particular mkt Mkting plans aim to achieve a particular market share Expanding product range Product mix = total range of products offered by a biz Increased product mix = increased profits in the long run To develop an ideal product range a biz must understand its customers changing needs/ wants Expanding existing markets The demand for some products varies greatly from one geographic region to another To be near their customer bizs place factories and offices in a number of diff areas This consolidates a bizs current mkt by expanding if current mkt = saturated Maximising customer service Customer service = responding to the needs and problems of the customer High levels = customer satisfaction/ positive reaction towards the product Establishes a sound customer base = repeat purchases In the long run profit increases

Identifying target markets

Bizs identify their tgt mkts through mkt segmentation Mkt segmentation = dividing the total mkt into groups of people who share common characteristics There are 4 basic mkt segmentations: Demographic Factors = defining the personal attributes of customers. Psychographic Factors = concerned with lifestyle characteristics. Geographic Factors = classifying where customers make purchase decisions. Behavioural Factors = identifying the motivation behind customer purchase decision & how they make those decisions Target market strategies

Undifferentiated marketing o When a business provides one standard product for the whole market (mass market approach). o Same marketing mix for all customers (e.g. water, electricity and gas). Differentiated marketing o When a business groups their customers according to different characteristics; age, income, family size, etc. o Different products designed for each of these groups and marketing programs are specific to each group. Concentrated marketing o When a business selects just one part of the total market. Niche marketing o Identify a small part of the total market that is not really being catered for, and provide a good or service that satisfies these customers. o Can avoid direct competition with large businesses in the marketplace. Mass customisation o Taking products traditionally mass marketed and making them appear to be targeted at the individual.

Developing marketing strategies

Marketing strategies state what actions are undertaken to achieve the businesss marketing objectives. The marketing mix is the combination of the four elements of marketing, the four Ps, that make up the marketing strategy. A biz can control the 4 Ps and other organisational resources such as info, finances and employees A biz cannot control external influences/ forces such as the competition, political, economic, legal, societal changes and technological changes Product Developing a product that consumers want and that will sell, including; o Brand name, packaging, quality, positioning and warranties Price Setting a price for the product that is consistent with the market demand and supply, including; o Discounts, list price, credit terms and payment period o Price quality interaction = indicates to a customer the type/ quality of a product Promotion Informing, persuading and reminding the target market about the product and motivating them to purchase it, including; o advertising, sales promotion and publicity Place Getting the product to its target market, the distribution, including; o Location of markets, warehousing, distribution, transport and inventory.

Implementation, monitoring and controlling

Implementation: The process of turning plans into action, and involves all the activities that put the marketing plan to work. Depends on how well the business blends its people, organisational structure and corporate culture into a cohesive program that supports the marketing plan. Monitoring o o o Checking and observing the actual progress of the marketing plan. Marketing department personnel gathers information and report on any important changes, problems or opportunities that arise during the life of the marketing plan. Developing a financial forecast Financial forecast: prediction of expected costs and revenue for a specified planning period. Costs of marketing plan estimated, then compared with estimates of revenue expected to be achieved. By measuring revenue forecasts for each strategy and comparing this with the anticipated expenditures, a business is in the best position to decide how to allocate its marketing resources.

Controlling: Controlling: actual performance compared with expected performance. By using performance standards, such as sales analysis, market share analysis and profitability analysis, management can assess the effectiveness of the marketing plan. Sales analysis: o Breaks down total sales by different products, market segments, individual sales people and sales territories. Strengths and weaknesses identified in each area. o If sales figures were lower than expected, it suggests that the management strategy was ineffective in motivating further sales o However, this poor result may have been due to unforeseen circumstances in the external environment, in which case management can do little. Market share analysis: o Compares sales performance with that of its competitors. o Assess competitive position, identifies strengths/ weaknesses of the marketing plan. o Market share information removes the possibly adverse results due to external factors such as economic downturn, as this would affect all businesses in the market. Marketing profitability analysis: o Profitability of products, sales territories, market segments and sales people. o If expenditure was higher than predicted, management must assess how this occurred and will usually tighten internal costs Revising marketing strategy

Once the results of the sales, market share and profitability analysis have been calculated, the marketer is now in a position to assess which objectives are being met and which are not. Based on this information, the marketing plan can be modified which involves; Changes in the mkting mix o Product: offering new products, change packaging of existing products, stop selling some products. o Price: discounts to increase sales. o Promotion: recruit new sales representatives, new advertising program. o Place: find new outlets (transport/ warehousing systems).

New product development: o The product life cycle tells us that all products have a certain life span. o Therefore, firm must continually introduce new products to achieve long-term growth. Production deletion: o To maintain an effective product mix, a business will have to eliminate some lines of products. o Out dated products may create an unfavourable image and this negativity may rub off on other products sold by the business. o Most businesses find it difficult to delete a product, especially if it has been successful for a long time. o However, when a product is in the decline stage, a decision will eventually have to be made to either delete or redevelop the product.

Market research process

Market research is the process of gathering information in order to allow for effective marketing decisions. Market research asks who, what, when and how individuals or groups buy the product. Market research process is particularly useful for: o Determining characteristics of specific markets o Evaluating the effectiveness of the (new) marketing strategies. Determining information needs The problem is clearly and accurately stated to determine what needs to be measured and the issues involved. Collecting data from primary and secondary sources Data collection is the activity of collecting all relevant data using either primary or secondary collection techniques. Marketing data refers to the information, usually expressed as facts and figures, relevant to the defined marketing problem. Market researchers use two types of data: primary and secondary data. Primary data o Refers to the facts and figures collected from original sources for the purpose of the specific research problem.

o The main advantage of primary data is that their collection is directed at solving a specific marketing problem. o Their main function is to find out exactly what the customer is thinking. o There are three main methods used to gather primary data: Survey, Observation, Experimentation Secondary data o Refers to information which has already been collected. o There is an abundance of secondary data available to market researchers on the internet o Two types of secondary data are: Internal data, which is information that has already been collected from the business and external data, which is published data from sources outside the business. Data analysis and interpretation Data analysis o The process of analysing the primary or secondary research. o Data is transformed into results that accurately and effectively communicate the findings of the research (trends or information to assist in the design of marketing strategies). Data interpretation o Refers to the user being able to effectively and efficiently read the findings without bias. o This interpretation will largely be based on the marketers judgment, experience and intuition. o For this reason, it is preferable to gain a wider perspective and therefore avoid the error of personal bias. The analysis and interpretation of data allows the researcher to offer specific recommendations to overcome the marketing problem being addressed.

Customer and buyer behaviour

Businesses need to categorise its customers, and analyse their needs, wants and other characteristics to effectively service them. Marketing managers are better able to predict how customers may react to particular marketing strategies if they are aware of the factors that influence the buying behaviour of different types of customers.

Types of Customers:
Individual and household: Personal spending refers to consumer purchases by individuals. Household spending refers to the combined purchases by family. These two groups together make up the total consumer market. It contributes directly to the level of economic activity, which, in turn, affects business profits, unemployment levels, rate of inflation and interest rate levels. Many of the more visible marketing strategies, especially print and electronic advertising, are directed at this large buying group.

Children as customers: o Despite inconsistent buying patterns, this subset segment interest marketers because of their surprising purchasing power and the influence they exert over many household purchase decisions.

Firms: The firms market consists of all those organisations that purchase goods and services for further processing or for use in their production process. Some firms also purchase services such as maintenance, all of which will add to the value chain of their products. Has fewer customers than the individuals and households market, but has a larger volume in terms of dollars spent and products purchased. Most firms, especially large businesses, have a number of experienced, well-trained buyers. Their purchasing is more professionally and formally conducted than that of ordinary customers. Education institutions: These institutions purchase products to provide goods, services and ideas to facilitate their prime function of education to students. Since they are non-profit organisations and hence operate only through funding from governments and as such, they have limited budgets and specific objectives. Clubs and societies: They purchase products to allow the provision of services to their members. The purchasing power of the club or society will depend largely whether it has a profit motive or not. Government customers: Governments at local, state, and federal level offer profitable opportunities for many firms. Since government agencies spend public funds to buy the products needed to provide services, they are accountable to the public. Therefore, this accountability requires a much more formalised set of buying procedures. Governments as customers are so big and complex that many businesses often make little or no effort to sell to them. Complying with the rules is often thought to be too difficult and time-consuming. Purchases are made through tendering (bidding) and under contract Religious organisations: Not large purchases of products as they operate mainly on funds from donations.

The buying process

A consumer usually undertakes a number of procedures when deciding on a purchase. However, consumers buying behaviours differ when they buy different types of products. o When buying low-cost, frequently purchased items, most consumers carry out a routine response involving very little research of decision-making effort. o When expensive items are purchased, the consumer usually undertakes extensive decision making, including price, product, warranty, after-sales service and delivery costs comparisons.

Buying process:

1. Need recognition:
o o The customer recognises their need/want for a product. The strength of the need/want will justify how much time and effort the customer will spend on the decision. Internal search the customer considers what they already know (e.g. perception of brands or products/product features). External search involves searching for information (e.g. brand name, product characteristics, warranty, service and price) Form a preference on various alternatives based on the available information. Cost and benefit analysis. Particular choice made. Product bought. Information and opinions gained by the customer will feed back into the next buying cycle when an internal information search occurs. Evaluation of satisfaction depends on the products performance and any pre-purchase expectations.

2. Search for information:

o o

3. Evaluate alternatives:
o o o o o o

4. Purchase: 5. Evaluate after purchase:

Consumer purchases A buyer is the individual or group who purchases the product. A user is the individual or group who actually uses the product being purchased. In the vast majority of consumer purchases, the individual is both the buyer and the user. Organisational purchases Purchasing agents select suppliers and negotiate the terms of purchase. The users are the individuals in the organisation who actually use the product being purchased. While they may have commenced the purchasing process, they usually do not act as the buyer. It is important that they buyer has a clear understanding of the needs of the user so that appropriate products are bought.

Factors influencing customer choice

Psychological Internal influences within an individual that affect their buyer behaviour The four main psychological factors influencing customer choice:
Perception The process through which people select, organise and interpret information to create meaning. Influenced by sensations received through taste, sight, sound, smell and touch. Individuals often act on their perception of reality rather than reality itself. Must create a positive perception about their product in the mind of the customer. A motive is the reason that makes an individual do something. Main motives include; comfort, health, safety, ambition, taste, pleasure, fear, amusement, cleanliness and the approval of others. Advertising attempts to influence an individuals motives to buy the product. Motivational research is used to analyse the main motives that influence buying

Motives

Attitudes

Personality

An attitude is a persons overall feeling about an object or activity. Customer attitudes to a business and its products generally influence the businesss marketing strategy. Negative attitudes to a business or its product often force the business to change its strategies. An individuals personality is the collection of all the behaviours and characteristics that make up that person. The types and brands of product a person buys reflect his/her personality

Socio-cultural External forces exerted by other people and groups that affect customer behaviour Everyone occupies different positions within groups, organisations and institutions. Each positions requires an individual to adopt certain roles and these roles influence buying process. The four main socio-cultural factors influencing customer choice:
Family Peer group Social class Purchase decisions can be heavily influenced by their family status A peer group is a group of people with whom a person closely identifies, adopting their attitudes, values and beliefs. A customers buying behaviour may change to match the rest of the groups beliefs and attitudes. In our society, the predominant factor used to classify people is income. People within social classes have similar buying behaviour which influences the type, quality, and quantity of products a customer buys. Culture is all the learned values, beliefs, behaviours and traditions shared by a society. Influences buying behaviour because it permeates all that we do in our everyday life. For example, in response to the greater desire for nutritious and healthy foods, many lowfat, sugar-free and fibre-enriched processed food products have been produced.

Culture

Economic External influences which affect a businesss capacity to compete and a customers willingness and ability to spend. The four phases that influence the marketing environment include: Downswing & recession o Less confidence in mkt o Decreased spending from both business and consumer o Rising unemployment levels Upswing & boom o Growing confidence in mkt o Increased spending o High employment and income o Increased demand for goods and services o Businesses attempt to increase their market share by intensifying their promotional efforts o Marketing potential is large with sales responding to all forms of promotion.

Government Govt. influences decisions through regulations, distribution channels, incomes & economy as whole. Depending on the prevailing economic conditions, the government will put in place policies that expand or contract the level of economic activity. These government activities directly or indirectly influence customers spending habits and as such will influence the marketing plan. Product Price Promotion Place Make certain products illegal, determining which products available to public Taxes artificially influence prices. Regulations on advertising influences what public is exposed to Local govt. zoning regulations restrict publics access to some products.

Developing marketing strategies Market segmentation and product/ service differentiation

Market segmentation refers to the process of identifying particular markets within a mass market because mass market is too big for business to target. Once the market has been segmented, the marketer selects one of these segments to become the target market so it can direct its marketing strategies to specific groups of customers. Benefits the biz as it is able to: Use its marketing resources more efficiently Understand the buying behaviour of the target market better Collect data more effectively and make comparisons within the target market over time Refine the marketing strategies used to influence customer choice. The total market Can be segmented into one of two very broad types: customer (household) markets and organisation/business markets. Each of these broad segments can be further segmented according to: Demographic factors: o Defining the personal attributes of customers such as age, sex, or income. Geographic factors: o Determining where customers make purchase decisions and the characteristics of such locations, defined by variables such as location (urban, rural) and climate. Psychological/ lifestyle factors: o Understanding why a customer buys different products and services, this is concerned with lifestyle characteristics, including their interest, aspirations and perceived social class. Behavioural factors: o Identifying the purchase situation and purchase characteristics of the market segment with variables such as purchase occasion and usage rates.

Identifying and choosing target market The chosen target market will influence the entire marketing mix. Sometimes a business may be able to identify a primary and a secondary target market. Primary tgt mkt = the market segment at which most of the marketing resources are directed. Secondary tgt mkt = usually a smaller and less important market segment. Businesses can choose one of three approaches to selecting a target market through mass marketing, concentrated or niche marketing, or differentiated marketing. Product differentiation The existence of tgt mkts has caused bizs to implement a marketing strategy of product differentiation. Product differentiation is the process of developing and promoting differences between the businesss products and those of its competitors. The differences are highlighted by the business using different marketing strategies such as product features and advertising. The aim is to help customers perceive the product as being superior to all similar products and also to tailor a product to penetrate a range of markets and increase their chance of success.

Product
A product is a good or service and an idea or any combination of these which can be offered by a business to its customers. Customers are becoming more sophisticated and discerning and will seek out those products that offer higher levels of service, safety, warranty, prestige and delivery. When customers purchase products, they buy both the tangible and intangible benefits a total product concept. Positioning Product positioning refers to how customers view the businesss product, compared to its competitors. Due to highly competitive markets, a business will try to create an image that differentiates its product from others. Product positioning also involves identifying a product & matching it with the appropriate market segment. Creating positioning strategies involve: o Determining the image that the current product conjures up in the mind of customers from market research. o From market objectives, determining the image of a product that the business wants to create in the mind of consumers. o Using other elements of the marketing mix to shape and maintain this image (e.g. warranty, quality, features). This differentiation strategy will elevate consumers current perceptions to the desired perception to secure sales in highly competitive markets. . Branding

A brand is a name, logo, symbol, design or any combination of these that identifies a specific product and distinguishes it from its competition. Brands serve as an assurance of quality for customers and simplify consumer choice. If customers associate a certain level of quality with a brand, it not only increases brand loyalty but also encourages repeat purchases. Brands can also establish a price premium by attracting a certain cult status. To guard against other businesses using its brand name/ symbol, a business can register its name, to protect it against infringement = Trademark There are 3 main types of brand strategies: o Manufacturers brand: when manufacturer owns the brand e.g. Kraft foods, Mambo clothing, to show quality & reliability o House brand: when retailer/ wholesaler owns the brand, e.g. Myer sells its own label products including Blaq, Miss C o Generic brands: products with no brand e.g. No Frills (Franklins), Home Brand (Woolworths). Used when the business wants to position the product as low cost Packaging Packaging refers to the development of a package that is both functional, desirable and in line with branding and positioning. Packaging plays 2 main roles It has a functional role: o Packaging protects and stores the product while it is transported. o It informs the customer of the basic product details and any other required information such as ingredients. It has a branding role: o The packaging is the first thing consumers see when they purchase the product. o The packaging is used to create an image in the consumers mind, or communicate a brands attributes. o The packaging of a product is sometimes as important as the product itself to assist sales. Therefore, well-designed packaging gives a positive impression of the product and encourages first-time customers. Factors to consider when developing new packaging: o Product differentiation. o Product identification. o Packaging costs. o Socially responsible packaging. o Consumer market requirements (e.g. size, shelf life) o Governmental requirements (e.g. ingredient disclosure). o Ability to incorporate into brand identity.

Price including pricing methods

The amount of $ a customer is prepared to offer in exchange for a product.

 Choosing the right price for a product is important. If price too high, sales will be slow. If price
too low, seller may not break even. There are three main pricing methods: Cost plus margin/fixed profit amount: o This is the simplest method where the business determines the total cost of production and then adds an amount for profit. o The weakness of the cost-based method is that it fails to account for market demand, competitors. o Therefore, the business may effectively be pricing itself out of the market, hence decrease in product demand. Market: o Pricing method where business alters it product price according to market demand. o Business will continually alter its prices in an attempt to find the current market price. o If demand increases, then producers will set out of their stock and will need to produce more a signal to increase prices and vice versa. Competition-based: o This method is often used when there is a high degree of competition from businesses producing similar products. o A business set prices according to the prices of competitors products (either slightly higher or lower). o This strategy will often be combined with a high degree of product differentiation. o This strategy allows a business to increase profits by increasing market share. Pricing strategies/ tactics A number of strategies can be used by a business when determining the price of the product: Price skimming: o Used to generate highest financial return o Generally reserved for new, unique and innovative products. o Setting a products price at a relatively high level and then reducing it over time. o This technique is only effective when there is little or no competition within the market. Price penetration: o Used to gain large amounts of market share and sales by offering very low prices compared with competitors. o However, customer can get used to the low price and it could create a backlash if the business later increases prices to market rates. o The low prices could also create an incorrect perception of low quality. o This strategy is often used after price skimming strategy. Loss leader: o For a special promotion, some retail businesses deliberately sell a product at extremely low cost price to attract customers to the store. o While the business makes a loss on this product, it hopes that the customers will buy other products as well to make up for their loss.

o Creating large loss leaders in the market is known as predatory pricing which is deemed uncompetitive by ACCC this can incur heavy fines. Price points: o Used in a highly competitive market o Uses one base product to reach numerous target markets. o Using price points, a business will start a base product at a particular price and then create a number of slightly differentiated versions of the product (usually by adding features), upping the price with each new version. o This can create a range of products with different prices, all revolving round the one base product. Price and quality interaction Consumers often perceive price as a measure of the products overall quality. This perceived price-quality relationship helps determine the image that customers have of products. Consumers may attribute the low price to lower quality inputs and production techniques and thus become reluctant to purchase it. Conversely, the price is set artificially high to imply a prestigious image when in reality the quality may not be much superior to cheaper alternatives. Usually, high priced and infrequently purchased items such as cars, homes and furniture displays a stronger price-quality relationship than frequently purchased products. However, consumers may believe that high prices reflect either expensive packaging or market exploitation. This may lead to a reduction in sales because the consumer perceives there to be little actual difference between the quality of a low and high priced item. The relationship between price & quality must be consistent with its positioning and overall marketing strategy (i.e. a No Frills chocolate bar cannot be priced as $30)

Promotion
Promotion is one of the marketing functions to communicate with a target market to inform and remind about its products to increase brand loyalty and to influence their buying behaviour. A promotion mix is the various promotion methods a business uses in its promotional campaign. Elements of promotional mix Personal selling: o This involves the activities of a sales representative in an attempt to make a sale. o It allows salesperson the flexibility of adapting the marketing mix to the customers requirements, as they learn more about the customers needs. o Complex and technical products in particular require the personal contact of a sales representative to familiarise the customer with the product. o Because of the extensive time and resources involved in visiting individual customers, this strategy is the most expensive of all promotion methods.

o However, this method can be highly effective because salesperson can establish a relationship with the customer to forge repeat purchases. o The success of this method depends on the competency of the business sales force. Advertising: o This is a paid, non-personal message communicated through a mass medium. o Advertising is an essential tool for successful marketing to make customers aware of the product.
Disadvantages: - High cost. - Channel hopping. - Short life span. Disadvantages: - Radio noise uncritical listening. - Usually small area coverage. - Short life span

Television Advantages: - Large audience reach. - Select time spot to reach specific audience. Radio Advantages: - Specific programs to reach selected audience. - Accessible medium. - Cheaper than TV. Newspapers Advantages: - Reasonable cost depending on circulation. - Local and national coverage. Magazines Advantages: - Specific target markets. - Colour. - More prestigious than newspapers. - Longer life span.

Disadvantages: - Short life span. - Hard to target specific market. - Possibility of lack of colour. Disadvantages: - High cost. - Lack immediacy.

o It can also include outdoor advertisements (e.g. billboards), Yellow Pages and the Internet. Below the line o Are promotional activities for which the business does not make use of an advertising agency. o These promotional activities are developed by the business and they include exhibitions, point-of-sale material, demonstrations and direct marketing. o These days, direct-mail catalogues and telemarketing are increasing in popularity however, they need to be more personalised from getting too mechanical in nature. Public relations o Are those activities aimed at creating and maintaining favourable relations between a business and its customers. o It is the role of the public relations personnel to design, implement and manage the publicity events of the business. o PR serves two purposes: Free marketing tool.

Damage control PR can be used to ensure the right information is released to avoid confusion and to improve business image. The communication process Marketers must be able to communicate clearly, efficiently and succinctly to their target markets. If the communication process becomes distorted then the message becomes distorted. The resulting miscommunication means lost sales. Communication process: o Marketers decide what information needs to be released. o They decide how they want the information to reach the target market determining what to say and translating their message into words or symbols. o Promotional methods are used to release the information. o The intended receivers of the marketing information will receive the information by viewing/hearing the message they will then absorb the information and interpret it. o There are responses from the consumer about the marketing message such as purchasing the product or complaining about the message. Noise o Refers to any distraction that reduces the effectiveness of the communications message. o Example = people having refreshments during commercial break. o They need to be minimised to maximise success. o Feedback can be used to form strategies to overcome the noise. Opinion leader o A person who has the ability to drive or influence others decisions. o They are the source of information to each social class and reference groups they belong. Often, customers may be more willing to purchase a product if the message comes via a respected and trusted channel such as the opinion leader. o Marketers use opinion leaders (e.g. actors, swimmers, models) as information and advice outlets for new products or to endorse their products. Word of mouth o When people influence each other during conversations, it is called word-of-mouth communication. o Consumers tend to trust word-of-mouth communication more than business-sponsored commercials, especially if the message is being communicated through a friend. o This is because the receiver places more trust in someone they know as opposed to a business. o The word-of-mouth method of promotion is one which the marketer can use by operating effectively in all aspects of its operation to bring satisfaction to its customers.

Place/ distribution
Place not only refers to the locations where the customers make their purchase decisions but also how the product gets to these locations.

Distribution channels are the routes taken to get the product from the factory to the customer. This process usually involves a number of intermediaries such as the wholesaler, broker, agent or retailers. An inappropriate distribution channel could result in lost sales and reduced profits. Therefore, businesses need to choose specific distribution methods carefully. Distribution channels
Distribution channel 1). Producer customer (no intermediaries) 2). Producer retailer customer Description Producer (manufacturer) gains all profits directly Provides producer with direct point of contact with consumer, allowing a better understanding of consumers needs Retailer buys from producers & resells them to customers Often used for bulky/ perishable items (e.g. furniture, fruit) Use of retailer encourages greater distribution & access to product Most common method Wholesaler buys in bulk from the producer, then sells them in smaller quantities to retailers the use of wholesaler allows producer to hold less amounts of stock marketing & sales responsibility of retailer, saving costs Agent distributes products to wholesalers, never owning product Agents paid commission by producer Agents used for mainly inexpensive frequently used product

3). Producer wholesaler retailer customer

4). Producer agent wholesaler retailer customer

Reasons for intermediaries

Many markets are too small for business to deal directly with customers (e.g. a tissue box store) Intermediaries play an important role in matching supply & demand provide customer with variety of products from different producers Intermediaries cost less than direct distribution

Intermediaries provide functions such as: o Increasing the efficiency of the market by reducing the number of transactions and hassles that a manufacturing business must incur (e.g. 3 manufacturers and 3 consumers = 9 transactions when 3 manufacturers, 3 consumers with intermediary = 6 transactions). o Giving financial services to retailers, such as credit terms on inventory purchases. o Increasing the ease with which consumers can make purchases. o Facilitating the distribution of products to the market. o Moving functions of distribution away from manufacturers, allowing them to concentrate on their core purpose Channel choice
How a business chooses the channel of distribution depends largely on the location of the business or its market coverage (the no. of outlets a business chooses to sell its product). Market coverage refers to the number of outlets a firm chooses for its products. A business can choose to cover the market in one of the 3 ways (differing in the intensity of coverage): A biz can decide to cover the market in one of three ways as follows: (differ in the intensity of coverage Intensive distribution:

This occurs when the business wishes to saturate the market with its product. This uses all possible intermediaries at the stage. An intensive channel choice is usually used if the product is a low margin, high volume product and the business needs to maximise sales by maximising market exposure. Many convenience goods, such as milk, lollies are distributed this way. Selective distribution: There are restrictions placed on the numbers of intermediaries at different stages. Selective channel choices give management more control over the quality of service, and other factors such as safety of the products. Clothing, furniture and electrical appliances are often distributed this way. Exclusive distribution: This severely restricts the intermediaries (e.g. one retail outlet for a product in a large geographic area) involved in the distribution of the product, most commonly at the retail level. This channel choice is vital in the creation of a prestige-related product. This method of distribution is commonly used for exclusive, expensive products (e.g. Ferrari).

Physical distribution issues

Physical distribution is all those activities concerned with the movement of the products through the channels of distribution from producer to consumer. PD is an integral part of the overall marketing exercise: their aim is to deliver the right goods to the right people in the right quantities at the right time, and at the cheapest cost possible. Physical distribution is a combination of several interrelated functions including: Transport: The method of transportation a business uses will largely depend on the type of product and the degree of service the business wishes to provide. Transportation costs can be expensive and therefore the marketer needs to consider great deal of factors (e.g. driver, insurance cost) and choose the right method. The four most common methods of transportation are rail, road, sea and air. Warehousing: This is a set of activities involved in receiving, identifying, storing and selecting goods. Efficient warehousing is important, as the demand for goods can fluctuate severely throughout the year. Different goods will be needed at different times and a business must be able to get to the necessary goods with minimal effort in order to minimise transport costs. Inventory: Distribution channels must be flexible enough to adapt to changes in the level of demand for inventory. If a business carries too much stock on its inventory, it will experience high storage costs. However, too little stock results in lost sales/market share. To avoid this, businesses may implement an inventory control system. The goal of inventory is to find the correct balance between these two situations (i.e. as low as necessary).

Environmental effects on distribution

Changes in the business environment have a sig impact on distribution activities. A business must be aware of the external forces that will directly influence the distribution of their products, especially technology and local government regulations. Technology Technology has had a pos impact on distribution. Goods can now be accessed quickly, with the growth of the internet and telemarketing.

Security increasing on internet with ppl less reluctant to give credit card details online. Technology is allowing customers to purchase products via phone or internet. Computers are now being used to help in controlling inventory; errors are reduced & orders are filled quickly reduces the need for human labour The growth of the Internet has therefore removed the need for many intermediaries to exist, as stores are increasingly replaced by websites which can turn indirect distribution channels into direct channels. This has really shortened the length of many distribution channels. Therefore, technological advances esp. in computers can increase the efficiency and cost effectiveness of distribution channels Physical distribution has been eased with technology. Local government Licenses, permits, approvals and authorities are some of the legal obligations that business must fulfil. The most important function of local councils relates to their control of most land zoning regulations and building codes. Land zoning refers to practice of designating permitted uses of land based on mapped zones which separate one set of land uses from another. Building codes refer to set of rules which regulate how the workplace is to be constructed. These regulations by local council will have a direct impact on the distribution channels.

Ethical and legal aspects

Businesses are expected to act both legally and ethically. Dishonest/ unethical marketing managers ultimately drive customers away. Green marketing refers to development, pricing, promotion and distribution of products that do not harm or have minimal impact upon the environment. By altering production methods, businesses may be able to reduce resource use and move towards a green marketing approach. Saving resources is beneficial for both the business and the environment Consumers and governments have become increasingly concerned about environmental issues. In response, businesses are creating new ranges of products that are environmentally safe and friendly. Instead of depleting natural resources such as oil and gas, there are movements towards using renewable sources of power that are environmentally friendly. Businesses are also increasingly creating products that are more environmentally friendly to use and dispose. For example, they are using recycled inputs and creating packaging that is biodegradable. This can have negative consequences for some businesses in terms of costs but these environmental constrains can also be perceived as opportunities to attract customers.

Environmentally responsible products

Other issues
Creation of needs Materialism is an individuals desire to constantly acquire possessions. Critics of marketing argue that most businesses use sophisticated and powerful promotional strategies to persuade and manipulate customers to buy their products. They argue that marketing creates artificial sense of needs by playing upon an individuals emotions. Impacts of retail developments Along with retail developments, there has been increased competition between retailers. The pressure to survive in this intensely competitive environment may result in some retailers using questionable marketing practices. For example, store advertises special sale items to attract customers to the store, in the knowledge that stocks are low and will quickly sell out.

The growth of retail shopping centres has come at the expense of smaller businesses. Retail developments can harm smaller businesses due to increased competition. Retail developments have also created increased traffic congestion & noise in surrounding
areas. Sugging Sugging, selling under the guise of a survey, is a sales technique disguised as market research. While this technique is not illegal, it is unethical, as consumers are not aware that they are being encouraged to buy the product. This technique raises several ethical issues including invasion of privacy and deception.

Roles of consumer laws

Trade Practices Act 1974: o Protects consumers against business malpractices, such as misrepresenting the contents of products. o Regulates certain trade practices that restrict competition. Deceptive and misleading advertising The Trade Practices Act makes misleading advertising illegal. Therefore, its a breach of the law to suggest that a product has a particular characteristic that it does not have. Fine print, before and after advertisements, tests and surveys, packaging, special offer are the common advertising strategies used by companies. The information presented in the advertisements must hold true. Price discrimination Price discrimination is the setting of different prices for a product in separate (e.g. geographically or demographics) markets. Trade Practices Act prohibits price discrimination if the discrimination could substantially reduce competition. Implied conditions

Implied conditions of sale are conditions that are not explicitly stated but rather conveyed and understood at the point of sale. These conditions are assumed to exist regardless of whether they were mentioned or written into a contract. The two most important implied terms relating to customer purchases refer to the merchantable quality and fitness of purpose of the product. o Merchantable quality means that the product is of a standard a reasonable person would expect for the price. Merchantable quality applies to most consumer contracts. o Fitness of purpose means that the product is suitable for the purpose for which it is being sold i.e. it will perform as the instructions or advertisements imply. Warranties All businesses have an obligation to provide a warranty which is a promise by the business to repair or replace any faulty products. Misleading statements concerning the existence, exclusion of certain conditions of the warranty are prohibited under the Trade Practices Act. In particular the legislation clearly outlines the rights of consumers with regard to refunds and exchanges. Resale price maintenance Resale price maintenance occurs where the manufacturer or supplier insists that a retailer sell the product at a certain price. This is usually accompanied by a threat to stop supply if the retailer disobeys their request. Retailers have the right to set their own prices and offer discounts. This is a very rigidly enforced provision of the Trade Practices Act.