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Marketing
Marketing is the management process of identifying and anticipating human needs and producing products and services that satisfy them.
This means identifying opportunities in the market and then designing the right product, at the right price in the right place with the right promotion
Marketing lies at the heart of every successful business.
It begins with market research to find out what the customer wants.
The next stage is product development – producing a product that will make a profit and satisfy consumer needs.
The final stage is to develop a marketing strategy that will get the product to the market place at a competitive and profitable price.
The Marketing Concept
This is the ideas of being customer orientated and placing the customer at the centre of all decision making.
It is the managerial outlook that accepts that the customer is the most important person to the business and involves
Finding out what the customer wants
Producing and selling such requirements profitably and more effectively than competitors.
Advantages/benefits
• Increased profits as the business enjoys repeat sales and can charge higher prices.
• Better reputation creates goodwill for the business, again can lead to higher pricing.
• Fewer returns or repairs to fix so reduces costs.
Marketing Strategy is a written plan that outlines how the policies relating to product, price, place and promotion are to be carried out in order to achieve the business sales and profit margins.
It sets out how a business will identify and satisfy customer needs.
Steps in developing an effective Strategy involves:
1. Assessing and Researching the market to identify new business opportunity
• Research identified a gap in the market for a new soft drink
2. Select the target market or Segmenting the market to identify suitable target markets
• Health conscious young adults were the target market
3. Deciding on the product positioning for each product
• The new product was to be positioned as a high quality product compared to other brands
4. Devising a suitable marketing mix before launching the product
• A marketing mix was put together covering product design, including ingredients, packaging, brand name, pricing, distributing and promotion
Target Market
The target market is the specific group of people a product/service is being aimed at. Eg leaving cert revision books are aimed at leaving cert students and their teachers.
Target markets are often defined by gender, age, and income.
Market Research ( Already covered)
Definition
Primary
Secondary
Reasons/Advantages
Market segmentation
Within a target market for a product, it can be sub-divided into smaller segments, and each segment may have different needs. Segmentation involves dividing consumers into different categories e.g. young females, high income earners, sports enthusiasts.
In order to maximise profits a firm should attempt to satisfy the needs of each segment.
Business uses market research to identify the different types of consumers in the market and to identify groups whose needs may be overlooked.
Consider soft drinks….why are they sold in cans, plastic bottles, 2ltr multi packs, glass bottles ????
(VW cars: Polo, Golf, Touran, Toureg, Passat?
Cadburys Chocolate: Roses: for a gift, Snaps: when watching tv, , Snack (purple, pink, yellow): to have with tea.
Types of market segmentation:
Demographic segmentation analyses consumers in terms of
age, gender, family size
income, occupation, education
religion, race, nationality
Example the food and drinks industry provide goods for small and large family units. Clothing industry also provides gender specific clothes.
(Pepsi Max drinkers are young males under 25 spread across all geographic areas)
Geographic segmentation divided the market into different geographical areas according to
region of the country
urban or rural
A business makes money by satisfying local needs.
Example newspaper, radio ie) Tipp Fm, Galway Bay FM, The Connacht Tribune/The Galway City Tribune
Psychological segmentation analyses consumers according to
social class
lifestyle
personality type
Examples include cars, newspapers. The Irish Times, The Star, the BMW, The Honda Civic
Audi,VW, Seat, Skoda all designed and built by same company with similar parts. However the parent VW group used psychological segmentation to analyse the car buyer market and identifies 4 basic groups – prestige, adventurous, conservative and economy. Using careful design and promotion each of these brands in the VW Group is then positioned to target consumers in each of these different segments.
Advantages of Market Segmentation
• Increase sales and profits as supplies to a previously ignored market. ( Nivea products for men)
• Lower marketing costs/saves money as only designs campaigns for a specific segment( Louis Vuitton for premium clothes and shoes)
• Establishes a presence in the market and can then expand to other segments. ( Newstalk started in the Dublin market and then went nationwide.
A Niche market
• It is a specialist market with only a few suppliers catering for new or poorly served sectors.
• It is a narrowly defined group of potential customers within a market for a product/service.
• These customers are not satisfied with the mainstream product in the market because they have different needs to the rest of the market.
• Successful entrepreneurs and businesses are quick to identify and satisfy market niches for new products and services.
• A niche market is the opposite to a mass market.
(Once a niche has become identifies, the customers who will buy such a product, will become the target market.)
Examples of niche markets include:
Porche cars sell its cars to very high income earners.
Bridal shoe shops –brides-to-be
Lyric Fm
The Tie Shop
Product positioning means creating an image for a product in the mind of the consumers.
BMW cars are positioned at the luxury or executive end of the market while the Toyota Corolla is the economy family car.
Finches are positioned as a superior quality soft drink whereas club orange is positioned as a more fun product.
Bic Biro v’s AT Cross
(Once product positioning is set then the marketing mix can be put in place.)
The Marketing Mix
Consists of the 4 P’s
|Product |Price |Place |Promotion |
|Design brand name |Break even |Wholesaler |Sales promotion |
|Materials |Discounts |Retailer |Advertising |
|Quality | |Vending |Direct marketing |
|Packaging | |Internet selling |Personal selling |
1. Product:
This is the good/service provided to meet customer needs. Designing suitable product is the most important element of the mix. The key elements involved in designing a product for the market include
product design,
unique selling point
packaging,
branding
product life cycle.
Product design
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Core Product
The product must provide a primary function. This is the reason why a consumer buys the product. The product must comply with the Sale of Goods and Supply of Services Act 1980 and be of merchantable quality, fit for its purpose and match its description and sample. Example; a car’s core function is to transport people.
Form/ Augmented Product
In the next layer products may include extras which help them sell like car safety features, leather seats, sound system. The product must be aesthetically pleasing/appeals to the consumer in terms of shape, size, colour, image etc. (i phone looks well, modern cars are designed to look good) This would also include items such as brand name, guarantee, packaging, high standard of service.
These two aspects of the products design make up the quality of the product and they must fit its positioning and meet minimum legal standards.
USP: Unique selling point
This is what makes the product different from its rivals and each business will try to implant its uniqueness in the minds of consumers. Marketers will try to convince consumers that their product is better than competitors by highlighting the USP.
Examples:
The Body Shop-against animal testing
Toyota-Safe and reliable, Volvo- safety
Supermacs – 100% Irish
Importance of product design
Increases Sales: Consumers want well designed products, those that look good and are easy to use and maintain. Businesses that offer such products tend to achieve high sales. Apple is a great example of this.
Reduced Costs: Well-designed products work very well, rarely break down so companies spend less repairing damaged goods.
Saves Time: Good designs focuses on the manufacturing process from an early stage in the design and so helps produce products that take less time to make. This is also cost effective.
Protecting a product from imitation
Patent: this is a legal protection for a product or process which has been invented. Once the invention is registered with the Patents Office, the patent holder has the exclusive right to make or use this invention for 20 yrs. The patent holder can licence another person to use or make their invention for a fee called royalty.
Packaging
From a marketing point of view packaging is a very important factor. Some say it is the 5th P of Marketing. It deals with the container or wrapping in which the product is offered. It provides several functions:
Protection. It protects the product from damage in transport and storage. It arrives at the consumer intact. (Eggs in a cartoon, milk in a Tetra Pak carton)
Information. It provides details on the use of the product, details of ingredients for food products.
Presentation. If products look attractive it can increase sales. Coke once put peoples ‘names on packaging and this increased sales.
Identity. Some products are packaged in a distinctive way to give them a strong identity like the triangle shape of Toblerone, the classic curve bottle for Coke.
Convenience. Products can be put in different sizes for different uses, like 2L Coke bottles for families, 500ml for on the go. Heinz have large cans of beans and smaller individual packs that are microwavable.
Branding
Involves putting a brand name on a product to make it easily identifiable from similar products. Branded goods carry a copy right name registered with the ‘Controller of Patents, Design and Trade Marks’. The business which has a registered branded product is automatically protected because no competitor can use that brand name. The brand name enhances the value of the product and the firm that owns it. A brand name is given a commercial value and the big brands are ranked every year. (Think of international and Irish brands.)
Trade mark: is any sign capable of being represented graphically which can distinguish the goods / services of one business from those of another. It can be in the form of a name, slogan, logo, colour, or even sound as long as it can be represented graphically. E.g. A symbol like McDonalds Arch, Nike’s swish, or Coke’s red can.
Benefits of Branding
Makes a product identifiable/differentiates similar products
Business can charge a higher price and so increase profits. Kerrygold, Barrys Tea can charge higher prices than rivals.
Helps a business to increase sales as consumers feel safe buying the brand. Tourists are happy to use Starbucks when abroad or a well-known hotel chain.
Develops customer’s loyalty. If happy with brand consumers stay loyal to it. Barry’s Tea, Tayto
Easier to launch new products: An established brand will find it easier to launch a new product in a related market. Odlum’s recently launched porridge products. Kellogg’s went in to snack bar market.
It gives a business power over retail shops. Kerrygold gets good shelf space in stores and can demand good trade conditions like price. Coke could insist stores stock a new type of product.
Own brand products
• Own brands are brands name registered by retailers rather than manufacturers such as Dunnes Stores, St Bernard or M&S, St Michael, to put on particular products which are for sale exclusively in their shops.
Advantages of Own Brand
• For Retailers:
Large retailer buy in bulk from manufacturers and negotiate contracts/ insist on their own brand and logos being put on the products. The own brand name becomes exclusively associated with the product and is evidence that branding as a form of advertising helps increase sales.
Retailers can get a large discount from producers as they buy in bulk and do not spend money developing the brand.
Retailers get a competitive advantage as they are the only ones who stock the brand( M&S food products)
For Consumers:
They get cheaper products where quality is a certain standard
For Producers:
They get their products on shelves without any marketing costs. There are disadvantages for producers as they have a lower profit margin and they become dependent on supplying to one retailer.
Product life cycle
This refers to the theory that most products pass through distinct life stages. The duration of this life cycle differs for each product. Such have very long cycle others very short.
Draw Diagram Page 289
Stages in the product life cycle
Introduction
Growth
Maturity
Saturations
Decline
Stages
1. Introduction: the business first launches the product on the market. Sales usually grow very slowly at first because few people have heard about it. The business spends a lot of money on promotion and advertising to make it known. There is little or no competition as competitors are waiting to see if the product will succeed before they enter.
2. Growth: sales begin to increase rapidly. The product has proved successful among customers, as words spreads more people buy. Profits start to increase rapidly. New competition may enter market.
3. Maturity: The rate of sales growth slows down. Sales continue to rise but not as much during the growth stage and sales reach their highest level. The product has been accepted. Business is making a large profit. There is intense competition in the market now.
4. Saturation: Sales remain at their peak for some time but do not grow any further. Everyone who wants the product has it. Because sales remain so high, profits are being enjoyed by the business. There is little opportunity to increase sales any further. The mk is now full of similar products therefore the business will have to cut prices and/ bring in a ‘new and improved versions’. The business may also spend a lot of money on marketing to fight back against intense competition.
5. Decline: sales of the product fall off permanently. This may be because consumers’ tastes have changed or new technology makes the product obsolete. The firm may stop all spending on on promotion at this stage to minimise costs and to maximise profit. This is known as ‘product harvesting’. The product will be withdrawn from the market as soon as it is no longer profitable.
How to extend a Product’s Life Cycle.
This can be done by changing some of the marketing mix.
Product: Bring out new and improved versions of the product, adding extras can awaken interest in the product. Car makers do this by putting a lot of extras on a model before it’s replacement is launched.#
Price: drop the price during saturation stage as it can lead to more sales. Like older i phones models before a new one is launched.
Promotion: Promote the product in a different way, promote use in a different way, Lucozade as a sports drink instead of being a drink for sick people.
Place: Distribute the product in new ways, could be online or through a shopping channel. A movie is sent to video or a movie channel not long after its cinema release.
Price
• Is the amount charged for the product/service
• It earns a profit for the firm
• It is a major influence on the level of sales achieved- the lower the price the greater the sales
• It is part of the products image; price can reflect its positioning and target market as part of a marketing strategy.
Factors to consider by Marketing Manager before pricing a product
• Cost of production
• The break even point for the product
• The profit margin to be added
• The level of demand, more demand means higher price.
• Desired product positioning
• Competitors prices
• Stage in the product life cycle
• Government (a) Taxes such as VAT and Excise Duty when added on will increase final price to consumers so may have to allow for that.Cars and VRT is a case in point.
(b) Govt approval may be needed for price increases for some items like taxi or train fares.
(c) Govt can set a minimum or maximum price a business is allowed to charge for a product eg alcohol.
Pricing Strategies
Pricing may be decided in several ways
Mark up pricing/ cost plus pricing: this involves adding a certain percentage to production costs in order to satisfy the desired profit level.
Premium pricing: setting a high price to reflect the high quality of the product, for example designer clothes. The high price makes the product seem exclusive or desirable.
Price skimming: charging a high price for a new type of product, to capitalise on those consumers who must have it to show off and also to recoup the high costs of developing the new product. Eg new mobile phones and games consoles tend to be expensive when they are first launched.
Penetration pricing: charging a low price for a new product in the market where there is strong competition, to achieve a large share of the market quickly, that is to penetrate the market or to persuade their customers to switch. Eg when Bord Gais entered the electricity market they charges 10-14% less then ESB.
Predatory pricing: charging a very low price so as to drive competitors out of a crowded market. This usually leads to a ‘price war’ in which competitors retaliate by cutting their prices. As a result the weakest competitors are indeed driven from the market.
Price discrimination: charging different prices to different market segments for the same product. It does this because it knows different people can afford different amounts. E.g Airlines offer business and first class travel at vastly increased prices b/c they know that certain people will pay a lot more for the extra comfort and ‘exclusivity’ offered. Cinemas charge lower prices for students or people who go during the day.
Loss leaders: this involves selling one product below cost price i.e less than they paid for it. It sells so cheaply the business is making no money on it. The aim is to attract customers who like a bargain, into the store to take advantage of the good deal, in the hope that they would make other purchases/impulse buy when in there. This helps a business to increase sales and profits.
Place
Place refers to the channel of distribution which describes the paths which goods may follow from the producer to the consumer
Draw diagram from page 293
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Channel 1
Producer – Wholesaler – Retailer - Consumer
Wholesalers are businesses that buy in large quantities form producers and sell in smaller quantities to retailers. This method of distributing goods is known as ‘breaking the bulk’. In the past this was very popular method and today it is still used by small, independent retailers who need to stock a wide variety of goods from different manufacturers.
Voluntary groups/wholesalers are those who form an alliance with independent retailers such as Spar, Mace, Centra, and Londis. The wholesaler provides a brand name, management training, extra discounts, marketing assistance, and management services to the retailer. In return the retailer agrees to buy stock exclusively from the wholesaler. They were formed as a defensive reaction against the growth of large supermarkets that bypass wholesalers and buy directly from manufacturers.
Retailers are outlets at the end of the chain that sell directly to the consumer. They are useful to consumers and producers as they can provide advice and information on the quality and suitability of different products. They can also provide feedback to wholesalers on consumer attitudes and trends. Today some retailers operate through the internet and vending machines.
Channel 2
Producer – Retailers – Consumer
The growth of large retail chains like Penneys and Tesco has meant that they can now bypass wholesalers and buy large quantities directly form the manufacturers at a discount. This allows them to sell the goods to consumers at a cheaper price than small retailers that have to but through wholesalers. Own branded products are also produces for large retail chains. This channel also includes mail order businesses and online retailers that buy directly from producers.
Channel 3
Producers – Agent – Consumer
Agents are businesses/individuals contracted to sell gods on behalf of the producer in a particular area and in return they earn a commission on every sale. Avon Cosmetics, Tupperware, VW, Toyota, Clinique.
Channel 4
Producer – Consumer
This channel suits perishable or specialised products such as crafts, pottery, jewellery, furniture factories, market stalls.
Factors to consider when choosing a distribution channel
Producers want to make as much profit as possible by reaching as many of their target market as possible. They need to consider
• Target market-will the channel allow it to reach the target market. If product is low priced and mass produced then it is good to use a wide network like Cadburys would but bars in shops, supermarkets, cinemas, vending machines. If product is prestige then it may have limited distribution to promote the exclusivity of the product.Why is Chanel is not sold in supermarkets?
• Transport costs: The more stages in a channel the more expensive for the consumer as the wholesaler and retailer get a cut. To reduce costs some businesses cut out these people.eg Ryanair stooped selling tickets with travel agents. Lot of companies use e –Commerce to sell and post goods.
• Nature of the product: Bulky goods like airplanes are sent direct. Also perishable goods would have a short channel to ensure freshness., while fragile goods like pottery would also want less channels.
• Payment arrangements- small retailers may pay cash on delivery for their stock, while large retailers may look for two months credit which causes cash flow problems for the supplier.
Promotion
This refers to all the efforts made by the seller to communicate and influence the target market.
It includes the following
• Advertising
• Sales promotion
• Public relations
• Personal selling
• Sponsorship
• Merchandising
• Ecommerce and Business
When should a business use marketing promotions?
• Launching a new product on the market –
• Promoting brand name recognition of new/existing products - Kerrygold Butter
• Protecting or increasing sales – Coca Cola
• Creating an image for the business – Eir sponsoring music awards
• Informing customer about a product – Toyotas new model with new engine.
Advertising
This is the paid form of communication about a product/service through various media. It is designed to inform people about products or services and to persuade them to buy.
Types of Advertising
1. Informative advertising; To inform about an event or change.
2. Persuasive advertising: hard sell or soft cell
3. Generic advertising : for one industry e.g. milk
4. Competitive advertising; Supermarkets
5. Reminder advertising: to remind of existing brands, can be in late product cycle stages.
Functions of Advertising
1. To persuade
2. To inform
3. To remind
4. To increase sales
Advertising Media (see handout for more detail on these)
• TV, Radio, Internet, social media
• Newspaper, Magazines
• Billboards, Posters, Exhibitions
Factors to consider when selecting an advertising media (see handout)
1. Media habits of the target audience.
2. Nature of product, the product needs to be seen working, like washing powder.
3. The message. Is there technical data that’s needed to be shown?
4. The Cost. How much of a budget have you to spend. May be better to use local radio not national.
How to execute an advertising campaign
There are four steps involved.
Step 1 Analyse the market situation: use market research to find data and trends.
Step 2.Plan the advertising campaign.
Identify the market segment, set aims of advertisement, develop the message, decide on budget, and decide on best media mix.
Step 3 Implement the advertising campaign.
Produce the ad, could be film, photo or audio. Can decide to use an advertising agency for this. Book the airtime with the media channels or slots for publication. Try to get the best times to suit your target market.
Step 4 Monitor and review the campaign.
Check if sales increased as a result, measure if the campaign changed attitudes among the consumers. Carry out market search again to find this out. Make changes to improve the message or media mix.
How can the effectiveness of an advertising campaign be evaluated? AIDA
A good advertisement campaign must do these four things for a product or service.
• Draw Attention
• Create an Interest
• Instil Desire to have or own it
• Result in Action ( i.e. a sale)
Advertising regulations
Advertising Standards Authority of Ireland ASAI ( see handout also)
This agency was set up to regulate and to keep an eye on the advertising industry to ensure that consumers are protected from false, offensive and misleading advertising.
It is a voluntary organisation which means it has no legal powers to force any advertiser to do anything. However, because media are members of ASAI, they ensure that adverts in breach of the Code do not run again.
Its code of advertising standards states that all adverts should:
• Be legal, decent, honest and truthful
• Be prepared with responsibility to both consumers and society
• Obey the rules of fair competition
Advertisers respect and accept the rulings of the ASAI with regards complaints. However the onus is on the consumer to complain about advertisements before action is considered by the ASAI.
2. The Government: It may ban or limit advertising of certain products like tobacco. It may also restrict products like betting or advertising products before 6pm.
Sales Promotions
These are short term gimmicks/incentives offered to customers to attract their attention,
increase sales and encourage and reward customer loyalty.
Examples
Special offers-2 for the price of 1, 50%extra free.
Free samples
Loyalty tags
Draws
On line discounts
The main aim of sales promotion is to get consumers to switch, in the hope that they will stay with the brand they have switched to. Most sales promotions are temporary but some like McDonalds’ Happy Meal toys are now considered part of the product.
Sales promotion is different from advertising in that it offers the consumer an incentive to buy, while advertising just offers a reason to buy.
Sales promotion activities are also common when
• A new product is being introduced into the market, eg a new magazine has a free gift.
• An established product is at maturity, saturation or even in decline.
3 Merchandising
This displays refer to point of sale display designed to attract attention to a product and increase sales. It includes window displays, cardboard displays, positioning products attractively on shelves. Impulses buyers are easily persuaded to buy. Think of where sweets and fresh bread are positioned. Impulse shoppers!!
4. Personal selling
Means contacting existing and potential customers in person to generate sales. It includes sales representatives and telemarketing.
Telemarketing means communicating with customers using the telephone to generate sales. It is also used to deal with customer queries, complaints, and other needs. Many firms offer free phone numbers to encourage sales and they reduce the need for sale reps to meet customers personally which cuts the costs of travelling expenses.
5. Public relations
Means communicating with the media to create good publicity for a firm or its products. It is intended (its aim is) to enhance the reputation and good will/image of the business
In large organisations a PRO (Public Relations Officer) is employed or they can avail the services of a specialists PR agency.
It can involve arranging interviews with the press, organising publicity to launch a new product or open new premises, highlighting an achievement of staff or public service events-: ‘Tesco Computers for School’. It may also include making charitable donation and providing sponsorship.
Media relations: this involves presenting a positive image of the firm& its products in the media through
• Press releases: news items about the co sent to the media in the hope that they will be published
• Press conferences: meetings, arranged by the co, at which reporters can ask questions about specific co events, such as product launch.
Sponsorship is a type of PR where a company pays money towards the cost of a sporting team or other event. Recently companies get their name attached to a venue. In return the business name is associated with a successful team or event (hopefully!!)
|Team |Company |
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|Event |Company |
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|Venue |Company |
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Indirect PR includes answering the phone politely, dealing with queries and complaints well and having a good appearance in general.
Functions of Public Relations
1. Attracts publicity when launching a new product eg Michael O Leary dressed up as the pope when launching new routes to Rome.
2. Target certain customers eg Coca Cola sponsor the bike scheme in cities.
3. Builds a good image for the company eg McDonalds set up the Ronald McDonald Children’s charities.
4. Defends products that have encountered bad publicity: McDonalds had to defend ‘Super Size Me’
Exxon had to clean up a huge oil spill in USA and reduce the negative publicity.
Benefits of Public Relations
• Creates and maintains awareness of the co and its products. This is the first step in selling.
• Helps to create interest in the product, which is the second step in selling through the positive image it projects
• Builds brand loyalty, which leaves the firm less vulnerable to sales promotion tactics by competitors
• Motivates the sales force/team, who will feel more positive towards their selling job when the ground has been prepared for them by good PR.
• Builds good relationships in the community
• Improves employee motivation, making people feel more positive about working in a co which has good PR
The Marketing Mix for the Apple iphone.
Product
The Iphone is an electronic devise that allows you to phone, text
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USP
Form
Core
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