What is marketing?

Marketing 

• Marketing is the management process responsible for identifying, anticipating and satisfying consumers’ requirements profitably. 

• Marketing is the process of planning and undertaking the conception, pricing, promotion and distribution of goods and services to create and maintain relationships that will satisfy individual and organisational objectives.

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Related concepts 

1. Markets 

   1. It is where a group of consumers purchase goods and services. This may or may not be a physical space and area

2. Human needs and wants 

   1. Needs are basic requirements that a person needs in order to survive. 

   2. Wants are items which are not necessary for survival but satisfy certain requirements 

3. Value and satisfaction 

   1. Value is not equal to cheapness

   2. A product is considered of good value if it provides satisfaction to consumers and is of a reasonable price 

   3. A business must aim to increase satisfaction and value of a product/service to maintain good long-term customer relations

Marketing objectives and corporate objectives 

• Marketing objective may include – 

  • Increase market share

    • Increase number of items purchased per customer visit 

    • Increase loyalty 

    • Increase the number of times a customer shops 

    • Increase customer satisfaction 

    • Brand identity 

    • Increase new customers 

  • In order to be success, marketing objectives must be:

    • In line with the corporate and long-term goals of the business 

    • Determined by senior managers 

    • Must fit into the SMART criteria 

• Importance of marketing objectives:

  • Provide a sense of direction 

  • Allow progress to be monitored 

  • Easily broken down into individual targets (motivation by objectives)

  • Form basis of marketing strategies

Coordination of marketing with other departments 

• Marketing department has a central role in coordinating the work of other departments 

• Marketing and finance – know the marketing budget and help make cash flow forecasts 

• Marketing and HR – devise a workforce plan and help in recruitment and selection of suitable employees

• Marketing and operations – new product development and plan for the spare capacity and raw materials needed in the future

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Market orientation

• They put customers first. They produce what a consumer wants rather than trying to sell them a product they already developed

• Necessary in these fast-changing, volatile consumer markets

• Benefits –

  • Lower risks

  • Ability to survive longer

  • Constant feedback from consumers

Product orientation

• They invent a product and believe that consumers will want to purchase it. They believe that if a product is innovative and of good quality, then consumers will purchase it

Market and product-oriented businesses – an evaluation 

• If a business tries to change and adapt to every consumer trend it will over stretch it resources

• Trying to offer choice and range is expensive. But, researching and then developing a product reduces risks 

• Many companies use ASSET-LED MARKETING 

• It is where businesses base the product development on market research but limit it to their own strengths and weaknesses. They try to take advantage of their resources 

• Market orientation does not guarantee success. It depends on the whole marketing process

Societal marketing

• It is an approach where the business considers and focuses on other stakeholders like customers, employees, environment, etc.

• It was founded by Kotler in 1972

• It is not the cheapest but meets the society’s long-term interests.

• Implications:

  • Attempt to balance 3 concerns – company profits, consumer wants, society interest

  • Difference between short-term consumer wants (low prices) and long-term social welfare may arise

  • Gives a competitive advantage (USP)

  • Allows the firm to charge higher prices

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Demand

• It is the quantity consumers are willing to and able to buy at different prices

Factors affecting demand

• Changes in consumer income

• Changes in prices of related goods

• Changes in age and population structure

• Fashion, tastes and attitudes 

• Advertising and promotion

Supply

• Supply is the willingness and ability of a firm to sell/produce a produc

• t.

Factors affecting supply

1. Costs

2. Taxes

3. Subsidies

4. Weather conditions

5. Advances in technology

Equilibrium

• It is the price level where demand = supply

• There is no shortage (demand higher than supply) or surplus (supply higher than demand)

• Disequilibrium is when demand is not equal to supply (there’s either a surplus or short

• age)

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Features of markets

1. Market location –

   1. Businesses may operate locally, regionally, nationally or internationally

   2. Local markets have limited sales. International markets have the greatest sales potential but it is a huge strategic step, differences in tastes, cultures, laws must be considered

2. Market size –

   1. Can be measured by volume of sales or value of goods sold

   2. Reasons to know the size –

      1. Market is worth entering or not

      2. Calculate firm’s market share

      3. Growing or declining market

3. Market growth –

   1. If markets are growing rapidly, competition may increase, market share may fall and profits may be negatively affected

   2. The growth pace depends on –

      1. General economic growth

      2. Changes in income

      3. Changes in tastes and preferences

      4. Technological changes

4. Market share – •

   1. Can be measure by volume or value of sales

   2. If market share is increasing, it indicates that the marketing strategies are effective

   3. Benefits of high market share –

      1. Higher sales

      2. Retailers may not charger higher profit margins to stock up goods

      3. Producers may provide higher discounts

      4. Market leader maybe used in ads, USP

5. Competitors –

   1. Direct competition is when 2 companies provide similar products

   2. Indirect competition is the substitute of the good itself \

   3. Businesses must be able to respond efficiently to both direct and indirect competition

Important marketing concepts

1. Creating/adding value

   1. Added value is the difference between the selling price and the cost of bought in raw materials

   2. Higher the added value, higher the profits

   3. Added value can be increased by –

      1. Create an exclusive and luxurious retail environment

      2. High quality packaging

      3. Promote and brand the product

      4. Create a unique selling point (USP) and differentiate the product

2. Mass and niche marketing

   1. Niche marketing is identifying and exploiting a small segment of a larger market

   2. Mass marketing is selling the same products to the whole market

   3. Niche marketing – advantages –

      1. May survive as are producing customised products

      2. Ability to charge high prices and increase profits

      3. Improves brand image and loyalty

   4. Mass marketing – advantages –

      1. Wider choice for customers

      2. Economies of scale

      3. Fewer risks

3. Market segmentation

   1. Also known as differentiated marketing

   2. Instead of trying to sell one product to the whole market, businesses identify different consumer segments are research each of them separately.

Market segmentation – identifying different consumer groups

• Businesses create consumer profiles which includes age groups, income levels, gender and social class

• Advantages –

  • Easy to target marketing strategies to specific consumer groups

  • Enables identification of gaps in the market

  • Differentiated marketing strategies can be focused on target market groups

  • Price discrimination may be used to increase revenue and profits

  • Allows specialisation

• Disadvantages –

  • High research and development costs

  • High promotional costs

  • May not be able to enjoy marketing economies

  • High stock-holding and production costs

  • May lead to over-specialisation

  • Extensive market research may be needed

Market research

• Process of Collecting, Recording and Analysing data regarding Customers, Competitors and Markets.
  Need for market research

1. To reduce risks associated with new product launches

   1. Market research helps investigate the potential demand for a product.

   2. It allows firms to check the market conditions before launching a product

   3. It identifies consumer needs and tastes, helps test the product idea, packaging design with potential customers, pre test the brand positioning and advertising. It even aids during product launch and after launch periods.

2. To predict future demand changes

   1. Allows businesses to predict future economical/social changes which might affect demand

   2. It gives businesses time to plan and implement effective strategies to tackle the future demand changes

3. To explain patterns in sales of existing products and market trends

   1. Conducting market research for existing products helps firms understand the potential changes in consumer tastes, preferences, incomes, etc in the future and helps identify demand changes.

4. To assess the effectiveness of the marketing strategies used

   1. Conducting market research after implementing few marketing strategies like changed promotion, etc will allow a business to understand the effectiveness of these strategies in achieving the long-term marketing goal

   2. It helps identify whether or not the business requires to change its strategies and tactics to remain successful

5. Know consumer feedback

   1. Investing in market research will allow a firm to know customer feedback regarding the perceived strengths, weaknesses, packaging preferences, sales and distribution methods, etc

6. Identify competitors, their USP and differentiate the product

   1. Market research helps identify competitors, their product differentiation strategies. It allows the business to adapt and modify their USP accordingly

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The market research process

1. Identify problem and define objective

   1. Identify the purpose of the research to ensure unnecessary data is not collected.

   2. After identifying the problem, research objectives are set. These are always in form of questions.

2. Determine research design

   1. Deciding whether to use primary research or secondary research or a mix of both

3. Design and prepare research instrument

   1. Identifying the most suitable method of data collection in terms of cost and time.

4. Sampling and collecting data

   1. Choosing a sample size and method

5. Analyse data

6. Visualise and communicate results

   1. Representing the data in forms of bar graphs, pie charts, line graphs, etc.

Primary research

• Also known as field research

• It is when businesses collect first-hand data for their own needs

• Benefits –

  • Up-to-date information

  • Relevant information

  • Confidential

• Drawbacks –

  • Expensive

  • Time-consuming

  • Doubts over accuracy and validity (due to sample size)

• Types –
  Quantitative methods – numerical results that can be statistically analysed

• Observations and recording – marker researchers observe and record how consumers behave. It doesn’t give the opportunity to understand the reasons/ask for explanations for the behaviour/trend.

• Test marketing – when businesses produce a limited quantity before launching the product to the entire market. They promote and sell the product in a limited area, record customer reactions and opinions. They then make changes and reduce risks involved before launching it into the market.

• Consumer surveys – involves directly asking consumers for their opinions and feedback. Both qualitative and quantitative.

Qualitative method –

• Focus groups –

  • They are discussion groups where participants are encouraged to actively discuss and give their feedback/opinions on new products/adverts/etc

  • They are more accurate and realistic that questionnaires and interviews

  • There are researches stimulating the discussion so that there is no biased decision made

  • It is cost effective and quick

  • Flexible but it is expensive

  • Subjective and chances of polarizing

  • Skilled moderator needed

  • Less control

  • Not the representative of the entire population

Secondary research

• Collection of data from second-hand sources

• It is also known as desk research

• It is gathering data which has already been collected

• Advantages –

  • Cheap

  • Assists planning of primary research

  • Less time consuming

  • Allows comparison between different sources

• Drawbacks –

  • Maybe outdated

  • Not available for new products

  • May not be accurate

  • May not be suitable to the business
    Types –

1. Government publications

2. Local libraries and government offices

3. Trade organisations

4. Market intelligence reports

5. Newspapers and specialist magazines and publications

6. Internal company records

7. The internet

Every business, first, carries out secondary research and only if the data which exists is not relevant or no data exists like for newly developed products, primary research should be conducted.

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Sample size

• It is impossible to survey every member of the target population

• This is because the market is too extensive and it is impractical to contact every member in terms of time and money                 

• Therefore, businesses choose a sample size and choose people accordingly to act as a representative of that sample

• Usually, larger the sample size, more confidence the business has in their results as they are likely to be more accurately

• Major constrains in selecting the sample size – time and money

Sampling methods

• Probability sampling

  • Selection of a sample based on the principle of random choice

  • It is complex, time-consuming and costly

  • Methods:

    • Simple random sampling –

      • Each member of the target market has an equal chance of being selected

      • Every member of the target market is given a number and then a computer is used to generate a random set of numbers

    • Systematic sampling –

      • Sample selected by taking every nth term from the population

    • Stratified sampling –

      • The target population will include people with different tastes, opinions, preferences, etc.

      • Each of these groups are divided into different levels and the are known as strata

      • Random sampling is used to select different people from each stratum

    • Quota sampling –

      • The interviewer selects different number of people from each stratum of the target population

    • Cluster sampling –

      • Take a sample from one/few groups

      • For example: one town or region

• Non-probability sampling

  • Convenience sampling –

    • People chosen on the basis of ease of access.

    • Ex. sampling friends and family

  • Snowball sampling –

    • First respondent refers a friend and the process continues

    • It is cheap but the sample might be biased as all respondents might have similar lifestyles and preferences

  • Judgemental sampling –

    • Researcher chooses sample based on who they think are appropriate

    • Experienced researcher required

  • Ad hoc quotas –

    • Quota is established and researchers choose from within it

Accuracy of primary research (evaluation points)

1. Sampling bias

   1. Time and cost constrain make it impossible to question the entire target market which leads to biased answers

   2. Higher the sample size, more accurate the results are likely to be

2. Questionnaire bias

   1. This may occur when there are many leading, misunderstood questions asked. This may lead the respondent to answer in a certain way, leading to inaccurate results

3. Other forms of bias

   1. The respondent may not be truthful

The Marketing Mix: Product

Marketing Mix

• The 4P’s include:

  • Product – existing product/newly developed product. Includes packaging, quality, features of the product

  • Price – amount customers pay

  • Place – how the product is distributed

  • Promotion – informing customers about the product and persuading them to buy it

• Important for the 4 P’s to be integrated in order to achieve the aims

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The 4C’s

• Customer solution – what a firm needs to produce to meet consumer needs

• Cost to customer – total cost of the product to consumers

• Convenience to customer – how easily accessible is the product to consumers

• Communication with customer – providing 2-way communication channels

Customer relationship management

• It involves using the 4 C’s and the ideology of putting customers first in order to maintain customer relations and loyalty.

• It has been proven that maintaining existing relations is cheaper than attracting new ones

• CRM’s main policy is customer information. It believes in gaining as much information about the target market as possible and then adapting the 4P’s to it

• Developing long-term relations with customers can be achieved by:

  • Targeted marketing – providing customers with products they prefer (according to market research/previous purchase)

  • Customer service and support – providing feedback channels and using them to change the 4P’s

  • Using social media – businesses can use social media to identify various trends in the market which allows them to make their products more accurate for customers

Why is product a key part of the marketing mix?

• In order to be able to build relations and establish brand loyalty, the product must be right.

• This includes the quality, durability, performance and appearance

• Customer expectations must be met in terms of these factors

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What is meant by ‘product’?

• This includes both consumer and industrial goods and services

• The dynamic market makes the New Product Development (NPD) process a crucial part of the business’s success

• NPD is based on market research in attempt to satisfy customer needs

• It is expensive and may not be successful

Unique selling point

• Features that differentiate a product from its competitors

• Benefits of having a USP –

  • Effective promotion

  • Free publicity

  • Chance to charge high prices

  • Higher sales

  • Brand loyalty

Products and brands

• Product is a general term used to describe what is being sold

• Brand is a distinguishing name given to the product, helping establish a USP

• It can help create a powerful perception in consumer minds – positive or negative

Tangible and intangible attributes

• Meeting the intangible expectations/needs of a customer is achieved through effective branding

• These are subjective to customer opinions and can’t be measured or compared

Product positioning

• Before launching a product, the firm will try to analyse its relationship with other competitor products in the market – product positioning

• One method – market mapping

  • Identify features that consumers deem important

  • Plotting it on a comparison chart

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Product life cycle

• The stages a product goes through from its development to its decline

• Product portfolio analysis involves making decisions about how to allocate resources effectively between the range of products. PLC is one form to do so.

Stages of PLC

• Introduction

  • Low sales

  • Increase slowly

• Growth

  • Significant growth in sales

  • Few competitors start entering the market

• Maturity/saturation

  • Sales remain constant

  • Many competitors are in the market

• Decline

  • Sales fall rapidly

  • May occur due to changes in technology, tastes, etc

Extension strategies

• Strategies used to extend the maturity stage of the PLC

• Examples –

  • Selling in new markets

  • Repackaging and relaunching

  • Finding new uses

  • Sales promotion techniques

  • Adding new features

Uses of PLC

• Assisting with marketing mix decisions

  • Knowing the stage of PLC helps decide the marketing mix of a product (all 4P’s)

  • Every marketing aspect is changed with a change in the stage of PLC

  • But the final decisions even depend on competitor actions, economic state, marketing objectives

• Identifying how cash flow might depend on PLC

  • Every business requires cash flow in order to be successful

  • At the development and decline stage, cash flow is likely to be negative

  • This may even continue into the introduction stage as promotional expenses will be huge

  • But, in the growth and maturity stage, cash flow is likely to improve and become positive

  • Therefore, knowing about the PLC stages of different products, allows a business to plan for its next project and see its effect on cash flow

• Identifying the need for a balanced product portfolio

  • As one product is in the decline stage, the next product is ready to be launched.

  • This allows cash flow to remain balanced throughout as positive cash flows of products in the growth and maturity stage may offset the negative losses by products in decline and development phases.

PLC – evaluation

• PLC is an important part of the marketing audit and helps in assessing the marketing departments position

• But it is based on past and present data, which may not be necessarily true for future predictions

• Plus, there might be a rapid and quick change in sales, not giving enough time for the marketing department to implement a strategy to offset such a change

• In order to be effective, PLC analysis must be used in relation with sales forecasts and management experiences.

Product portfolio analysis – evaluation

• Having a balanced and managed portfolio allows marketing objectives to be met easily

• But product is only one part of the marketing mix, and the other 3 P’s – price, place and promotion are also essential in achieving success of the business

• But without a well-managed product portfolio, the other 3 P’s may not be in use and the objectives may not, ever, be met

The Marketing Mix: Price

Why is price a key part of the marketing mix

• Price is the amount paid by customers

• Its impacts:

  • The demand

  • Degree of value added by the business

  • Influence on revenue and profits earned

  • Reflect on marketing objectives and their success

  • Establish psychological image of the business

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Price elasticity of demand

• It is a numerical measure of responsiveness of demand to a change in price

• PED = % change in demand / % change in price

• PED is always negative indicating the inverse relation between demand and price

Types of PED

1. Elastic - % change in demand > % change in price (PED>1)

2. Inelastic - % change in demand < % change in price (PED<1)

3. Unitary - % change in demand = % change in price (PED=1)

4. Perfectly inelastic – demand is the same, irrespective of price (PED=0)

5. Perfectly elastic – demand is infinite at a particular price, and 0 at all others (PED=infinite)

Factors determining PED

• Necessity or not – necessity = inelastic, luxury = elastic

• Number of substitutes – many substitutes = elastic, no/few substitutes = inelastic

• Level of customer loyalty – high degree of loyalty = inelastic, low level of loyalty = elastic

• Proportion of income – high proportion = elastic, small proportion = inelastic

PED – application

• Helps make accurate sales forecasts

• Assists in pricing decisions
  PED – evaluation

• PED assumes nothing else changes (ceteris paribus)

• Maybe outdated very quickly

• Uses past information, may not be accurate considering the dynamic nature of the markets

Factors affecting pricing decisions

1. Costs of production

   1. A price must cover both variable and fixed costs of a business

2. Competitive conditions

   1. Monopoly – more freedom in deciding prices

   2. Perfect competition – fix similar prices

3. Competitors prices

   1. Difficult to set prices too different from competitors unless true USP is shown

4. Business and marketing objectives

   1. Price must reflect all aspects of the marketing mix and should keep in mind the main goals of the business

5. Price elasticity of demand

   1. Elastic – low prices

   2. Inelastic – increase prices

6. New or existing product

   1. New products – price skimming or penetration pricing

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Pricing methods

Cost based pricing

• Mark-up pricing

  • When a percentage of fixed mark-up is added to the cost of the product

  • The mark-up size depends on the strength of demand, number of substitutes, stage of PLC, etc

• Target pricing

  • It involves setting a price to achieve a required rate of return

  • This ensures a specific sales revenue is earned

• Full-cost (or absorption-cost) pricing 

  • It involves setting a price by calculating the unit cost and adding a fixed profit margin

  • This ensures all costs are met

  • Easy to calculate

  • Suitable for firms with high market shares

  • But, doesn’t take into account external factors like economic conditions

  • Inflexible method

• Contribution-cost (or marginal-cost) pricing

  • Prices are set based on the variable costs and a contribution amount for fixed costs and profits is added

  • Contribution per unit = selling price – variable cost per unit

  • Break even point = fixed costs/ contribution

  • Ensures variable costs are covered

  • Flexible method

  • Fixed costs may not be covered

  • If prices are varied too much, consumers maybe discouraged and business will face menu costs

• Competition-based pricing

  • Price is based on that of competitors

  • Scenarios where it is suitable:

    • Following the market leader

    • Avoid a price war

    • Destroyer pricing – force others out of the market

    • Based on study of conditions

Market-oriented pricing

• Perceived-value pricing

  • Also known as customer-value pricing

  • Prices are set based on the value customers place on the product

  • Used for products with inelastic demand

• Price discrimination

  • It involves charging different prices to different consumer groups for the same product

• Dynamic pricing

  • Changing prices, frequently, to respond to changes in demand

  • It is based on demand level and ability of consumers to pay

Pricing strategies for new products

1. Penetration pricing

   1. Involves selling at a low price to attract more customers

   2. Used by firms in the mass market with a aim to capture a large market share

2. Price skimming

   1. Setting a high price to differentiate it from competitors

   2. Usually for products with inelastic demand (luxury goods)

   3. It creates an exclusive image for the product

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Pricing decisions – some additional issues

1. Level of competition

   1. It depends on the type of market

      1. Perfect competition

         1. Consumers have complete knowledge

         2. All producers are identical products

         3. Freedom of entry and exit

         4. Equal market share

         5. Here, only competitive pricing will work

      2. Monopoly

         1. Single seller with 100% market share

         2. They are price makers

         3. High barriers to entry and exit

      3. Oligopoly

         1. Price wars to gain market share

         2. Non price competition – competitive promotional campaigns, product differentiation

         3. Collusion – it is illegal and may lead to fines and court cases

2. Loss leaders

   1. It involves setting relatively low prices for some products, expecting consumers to buy it. • They hope, the profits earned from other products will cover the losses for the other product

   2. Usually used for complementary goods

3. Psychological pricing

   1. It involves setting prices just below the whole number

   2. It even involves using market research to avoid setting prices consumers believe is inappropriate

Pricing decisions – evaluation 

• A firm will not use the same strategy for all products as there are differences in external market conditions

• Prices have a huge influence on consumer purchasing behaviours so market research must be carried out to identify consumers ability to pay before setting prices

• Low price may not always be considered the best strategy. It may even discourage consumers if they believe the product is on high value

• Price is only one factor. The complete brand image is more important

The Marketing Mix: Promotion

Why is promotion an important part of the marketing mix?

• Promotion involves communicating with potential customers 

• It helps increase awareness and create an image in consumer minds 

• The combination of all promotion techniques used (advertising, direct selling, sales promotion) is known as promotion mix 

• The promotional budget is a key factor when making promotion mix decisions

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Promotion objectives 

• Aims of having promotional objectives:

• Increase sales by new customers

• Raise customer awareness 

• Remind customers about the USP/product 

• Increase purchases by existing customers

• Demonstrate USP and product differentiation strategies 

• Correct misleading reports/image 

• Develop a public image 

• Encourage retailers to stock and promote their product

Advertising 

• Known as ‘above-the-line’ promotion 

• Communicating information about the product through TV, radio, magazine, etc

• Effectiveness depends on selecting the appropriate target market and suitable media 

• Helps increase awareness and long-term brand loyalty and image 

Types of advertising 

1. Persuasive – involves creating a distinct image for the product and encouraging repeat purchases. 

2. Informative – give information about the product’s features, USP, qualities, etc. usually used for new products. Used to attract new customers

Advertising agencies 

• They are firms who advertise businesses in the most effective way possible. 

• They are expensive but are specialists and will provide the entire promotional plan for a business 

• Stages in creation of a promotional plan:

  • Research the market 

  • Identify and advise on the most cost-effective forms of media to use 

  • Use creative designers to devise ads

  • Print out the adverts 

  • Monitor public reactions to improve future ads

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Advertising decisions – which media to use?

• Greater the promotional budget, wider media choices available 

• Factors to consider when choosing the media to use:

  • Cost – TV, radio and cinemas are very expensive whereas newspapers emails and leaflets are cheaper forms 

  • Size of audience – it will allow the cost per person to be calculated. Larger the size, wider reach media must be used like national or international newspaper 

  • Consumer profile of target audience – this will help in designing the advert and identifying which media to use.

  • Message to communicate – written forms are most effective as their hard copy can be stored

  • Other aspects of marketing mix – all marketing mix aspects must be kept in mind to ensure they are integrated as closely as possible

  • Legal and other constraints – there maybe constraints as to what ads can contain in different countries, so these should be kept in mind in order to avoid legal barriers

Sales promotion 

• Also known as below-the-line promotion 

• It aims to achieve a short-term rise in sales 

Methods of sales promotion

1. Price reductions –

   1. A temporary reduction in price 

   2. Also known as price discounting 

   3. Reduce the profit margin on each product 

   4. May have a negative impact on reputation

2. Money-off coupons –

   1. They are focused on offering a price discount. These coupons maybe present in newspapers, leaflets 

   2. Retailers may not have enough stock, leading to customer disappointment 

   3. Effectiveness depends on size of coupon 

3. Customer loyalty schemes –

   1. Focused on encouraging repeat purchases. They usually involve loyalty cards reduces profit margin on each product 

   2. High administration costs 

4. Money refunds –

   1. Offered when receipt is returned to the manufacturer 

   2. Involve customers filling in forms which maybe a disincentive 

   3. Delay in refund may affect brand image 

5. BOGOF –

   1. Buy one get one free 

   2. Substantial fall in profit margin

   3. If used to sell of stock, may impact brand image 

   4. Current sales may increase, but future sales may fall  

6. Point-of-sales-display –

   1. Placing products in attractive and informative places

   2. Only offered to market leaders 

   3. New products may struggle

Personal selling 

• It involves having a sales staff communicate and sell to each customer individually 

• Expensive 

• Requires skilled sales staff 

• Used for expensive, luxury items 

• High success rates 

Direct mail 

• Information is directly sent to potential customers, identified by market research 

• May provide detailed information 

• Well focused on potential customers

• Cost effective 

• Maybe missed 

Trade fairs and exhibitions 

• Used to market to other businesses (retailers and wholesalers)

• Used to make contacts and identify potential customers 

Sponsorship 

• Involves associating with an event/team

• Leads to free publicity

• Expensive 

• Very effective 

Public relations (PR)

• It is used to gain free publicity provided by the media

• Tries to arrange positive TV and press coverage 

• Maybe used to put forward the company’s views on specific incidents 

• Used to improve reputation

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Branding 

• It is a distinguishing name given to a product

• Aims –

  • Customer recognition 

  • Product differentiation 

  • Giving the product an identity 

• Benefits of branding –

  • Increases chances of consumer recall 

  • Product differentiation 

  • Reduces PED 

  • Increases consumer loyalty 

Brand extension 

• Using the same brand name for new/modified products will help make a family of costs.

• It will make the brand image even stronger and make advertising easier as the brand can be advertised as one unit which will improve sales of all products associated with it.

Marketing or promotion expenditure budgets 

1. Percentage of sales 

   1. Marketing budget varies with sales

   2. Higher sales, higher budget and vice-versa

   3. But, during low sales, promotion budget reduces which is when higher promotion is needed to persuade customers to buy the product 

2. Objective-based budgeting 

   1. Involves analysing the level of sales required to meet aims and then identifying the amount of expenditure in order to gain that sales level. 

3. Competitor-based budget

   1. Two firms with the same size may try to match each other promotional budgets.

   2. May lead to spiralling promotional costs 

   3. It doesn’t mean both companies promotion is equally effective. 

4. What the business can afford 

   1. People tend to see marketing and promotion as a luxury

   2. So, in such cases, the budget will only be set after all other expenses have been accounted for 

   3. This method fails to take into account market conditions and marketing objectives when deciding marketing budget.

5. Incremental budgeting 

   1. This involves adding a percentage to the last year’s budget, to account for inflation and price changes 

   2. But, it doesn’t require managers to justify the total market budget for each year so it maybe used inefficiently

Is the marketing budget well spent?

1. Viewpoint of society and customer 

   1. Many people may observe marketing and promotion as a wasteful expenditure and money could’ve been used more effectively, elsewhere 

   2. Some consumers may even believe that the society has to bear the burden of the unreasonable, excessive advertising each year

2. Viewpoint of business 

   1. Advertising and promotion may aim to build brand loyalty in the long-run rather than increasing sales in the short-run 

   2. In such cases, the benefits will be spread across the years

   3. Ways to assess the effectiveness of marketing –

      1. Sales performance before and after the promotion campaign – compare sales and calculate the promotional elasticity of demand 

      2. Consumer awareness data – identify how well consumers are able to recall the data and advertisements through a series of questions 

      3. Consumer panels – focus groups may help gain qualitative data about the effectiveness of promotional strategies 

      4. Response rarest to advertisements – number of calls to gain further information, number of website check-ins, views on videos, etc

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Consumer markets and industrial markets

• Industrial products are the ones that are sold to businesses 

• Consumer products involves directly selling to the end consumer 

• Industrial markets may use trade promotion like trade fairs, specialist magazines

• Consumer markets may use consumer promotion like discounts, TV adverts

Promotion and the PLC \n

Packaging 

• The quality, design and colour of packaging play an important role in promotion 

• Cheap and nasty packaging may destroy the brand image 

• Also, wasteful expenditure on packaging will also lead to negative publicity. This will even reduce the product’s competitiveness 

• Packaging decisions must be blended in with the overall objectives of the business 

• Functions –

  • Protect the product 

  • Give important information 

  • Support the brand image

  • Aid customer recognition

The Marketing Mix: Place

Why are place decisions an important part of the marketing mix?

• Place is the process through which the product reaches the customer from the manufacturer. 

• A correct distribution channel is necessary – 

  • Consumers need the product to be convenient and accessible 

  • Manufacturers need their outlet to be in line with their brand image 

  • Every intermediary will add its profit margin, so it depends on the price the manufacturer wants

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Concept of distribution 

• The right product needs to reach the right consumer at the right time in the most convenient way possible 

• Supply chain refers to all the intermediaries involved in getting the product to the end consumer 

Customer service as objective of distribution 

• Distribution channels chosen may not always be the cheapest 

• Customer service is the main objective of distribution, therefore convenience to customers may also be a very important factor when deciding the distribution channel 

• Businesses even use internet and e-commerce facilities to make it more accessible to customers

Channels of distribution 

1. Manufacturer → Consumer 

   1. Direct selling to customers 

   2. No intermediaries adding their profit margins to products, lower prices and higher profits

   3. Has complete control of the marketing mix 

   4. Quicker 

   5. Fresher food available to consumers

   6. Direct contact with customers 

   7. Expensive – storage and stock costs 

   8. No retail outlets, limits promotion from physical shop/website 

   9. Not convenient for customers 

   10. No advertising done by intermediaries 

2. Manufacturer → Retailer → Consumer 

   1. Retailer pays for stock and storage costs 

   2. Retailer offers after sales service and has product displays 

   3. Available in many locations – convenient for customers 

   4. Producers can focus on production 

   5. Retailer promotes and advertises the product 

   6. Intermediary adds profit margin, more expensive to consumers 

   7. Producer loses SOME control over the marketing mix 

   8. No exclusive outlet, may sell competing products 

   9. Producer bares delivery costs 

3. Manufacturer → Wholesaler → Retailer → Consumer 

   1. Wholesaler buys in bulk, reducing storage costs for producer 

   2. Wholesaler bares transport costs to retailers 

   3. Wholesaler break bulk by selling small quantities to different retailers 

   4. More convenient for customers 

   5. Best way to enter foreign markets 

   6. Higher final prices as more intermediaries add profit margins 

   7. Producer further loses control over marketing mix 

   8. Slow distribution chain 

   9. No direct contact with customers

Factors influencing choice of distribution channel 

• Industrial product or consumer product 

• Geographical dispersion of target market 

• Level of service customers expect 

• Technical complexity of the product 

• Unit value of product 

• Number of potential customers 

• Competitors actions

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Internet and 4C’s

• Internet is transforming the ways in which businesses market their products and manage relationships with customers

• Selling goods directly to consumers (B2C) or to businesses (B2B) through e-commerce

• Online and mobile advertising (pop ups, social media, websites)

• Sales contacts are established by visitors leaving their details on sites

• Collecting market research data by encouraging visitors on the websites to answer questions

• Ability to use dynamic pricing

Advantages

Disadvantages

Relatively inexpensive

Poorer countries may not have internet access

Reaches a wider target market

Consumers can’t touch, smell, feel the product before – limiting their willingness to buy online

Consumers interact with websites and leave their information there, assists in market research

High product returns if customers dissatisfied

Easy and convenient for customers

High postal costs

Accurate records and quickly measured

Postal service may be unreliable, affecting company’s brand image

Lower fixed costs

Internet security worries

Increasing technological usage

Website must be kept up-to-date, expensive

Easier dynamic pricing

Viral marketing 

• It involves using social media sites to increase brand awareness or increase sales

• It encourages people to keep passing on marketing messages to others

• They maybe in the form of video clips, interactive flash games, e-books, text messages, social media

An integrated marketing mix 

• If the marketing mix is not integrated, it may confuse customers who will stay away from the product and find alternatives. This will lower long-term sales 

• The most effective marketing decisions will –

  • Based on the marketing objectives 

  • Affordable within the marketing budget

  • Integrated and consistent with each other 

  • Integrated with the 4 C’s of marketing