What is marketing?
• Marketing is a system of business activities designed to plan, price, promote and distribute
want-satisfying products, services and ideas to customers in order to achieve business
objectives.
• The process is customer-focused; it focuses on the needs and wants of customers, providing
goods and services at the right price, place and time.
Types of markets
Resource market
• Identified as being where the factors of production (land, labour, capital, enterprise) are sold
or exchanged.
• The resources are used by firms to produce goods and services, which are then sold to
customers.
• Land: all the natural resources that go into production of goods/ services (forests, mineral
deposits, water).
• Labour: all the human physical and mental talents used to make products.
• Capital: tools, machinery, equipment and factories, as well as storage and transportation
facilities.
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• Enterprise: initiates the combination of the other resources to produce a product, make
business policy decisions and bear any risk involved with the project.
Industrial market
• Made up of all the individuals and organisations who buy goods and services that go into the
production of other products.
• E.g. Ford buys components and parts from different suppliers and then assembles the car to
sell to others.
Intermediate market
• Businesses that buy goods for the purpose of reselling or renting them to others.
• Wholesalers act as a point of contact between manufacturers and small retailers,
distributing goods to a number of businesses.
Consumer market
• Made up of all the individuals and households who buy gods and services for personal use.
Mass market
• Refers to the market for goods and services that appeal to the vast majority of customers.
• E.g. power companies supplying electricity to households or businesses; product does not
have to be altered to cater for varying needs.
Niche market
• Small markets for more specialised goods and services that only a few people are interested
in or can afford.
• More expensive, as there are only relatively few buyers.
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• Customers’ needs and wants must be established, and then the business must coordinate its
activities so the product satisfies these needs more efficiently than their competitors’ products.
• Emphasises the importance of understanding the needs and wants of customers, and
offering products that meet those needs.
Marketing Create customer
Understand needs value through
and wants of concept
satisfaction and
customers quality
Operate more
effectively and
efficiently than
competitors
Customer orientation
• When a business centres its activities around the needs of the customer.
• Goal is to build customer satisfaction – the overall rating of the experience with a business
and its products.
• Important aspect is customer value – the difference between the perceived benefits of
owning and using the product, and the costs of obtaining the product.
• Satisfaction and value closely related to total quality management, which focuses on
continual improvement.
Relationship marketing
• Business sales come from new customers and old customers.
• Focus on developing strategies to keep old customers and develop long-lasting
relationships.
• The process of developing a strong relationship with customers and other stakeholders.
Promising and consistently delivering high-quality products, good services and fair prices.
• Customer loyalty is a measure of how often a customer buys a product from the same
business when they have a choice of who to buy from.
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• Business must be able to access the market through its normal marketing channels.
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• Financial projections: forecasts of expected costs and revenues.
• Controls: how plans will be monitored and adjusted for future performance.
Situation analysis
Market analysis
• Internal/ external factors can have a direct impact on customers and marketing
opportunities.
• Environmental factors influence the business’s ability to make, promote and distribute goods
and services, and the target market’s ability and desire to buy goods and services.
• Opportunity for one business may be a threat for another.
• Operations can be adjusted to take advantage of opportunities arising from environment
changes.
External influences
• Economic conditions/ overseas • Demographic patterns/ technological
influences change
• Government policy and regulations • Changing consumer attitudes and
values
Internal influences
• Financial resources • Production facilities
• Human resources • Location
Product analysis
Product lifecycle
1. Introduction stage: 3. Maturity stage:
Sales grow slowly Rate of sales slow down
Negative profits Profits fall
Little competition Competitors fighting for sales
2. Growth stage: 4. Decline stage:
Sales grow rapidly Safes fall
Profits rise quickly Negative profits
Competition increasing Less competition
Competitor analysis
• Business needs to understand how competitors think by analysing their strategies, assessing
their strengths and weaknesses, and predicting their future actions.
• To analyse competitors’ strategies, managers look at competitors’ target markets, and all
the individual marketing mix tactics.
• Aim: to predict their likely future strategies, and how they may react to the introduction of
new products, price cuts or aggressive advertising.
SWOT analysis
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Strengths • Poor competition?
• Sufficient financial resources to
operate freely? Weaknesses
• Good reputation with customers and • Outdated technology?
suppliers? • Poor reputation in marketplace?
• Competitive advantage in particular • Limited product/ service on offer?
areas? • Poor strategies?
• Well-developed management skills?
Threats
Opportunities • New competitors entering the market?
• Entering new market? • Changes in government regulation?
• Developing new products for growing • Increasing interest rates?
demand? • Cheaper substitute products?
• Improved economic conditions?
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• Different products designed for each of these groups and marketing programs are specific to
each group.
Concentrated marketing
• When a business selects just one part of the total market.
Niche marketing
• 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.
• Can avoid direct competition with large businesses in the marketplace.
• Micromarketing: smallest possible niche – the individual customer.
Mass customisation
• Taking products traditionally mass marketed and making them appear to be targeted at the
individual.
OBJECTIVE STRATEGY
Increase market share Develop new products, reduce price of existing
product, increase promotional activities
Develop new product/ Research/ development, use of new technology
service Encourage present customers to buy more,
Expand existing market persuade new customers to try the product
Change old products, develop new products,
Enter new markets exporting
• Implementation: the process of turning plans into action, and involves all the activities that
put the marketing plan to work.
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• Depends on how well the business blends its people, organisational structure and corporate
culture into a cohesive program that supports the marketing plan.
Process
• Determining information needs – problem identification.
• Data collection – primary and secondary.
• Data analysis and interpretation – analysis and presentation of results.
Data collection
Primary data
• Collected specifically for a particular problem.
Secondary data
• Internal sources:
Accounting (sales by customer, product, region)
Marketing (sales reports, customer complaints, distribution).
• External sources:
Media Research firms
Government Company reports
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Data analysis and interpretation
• Data is made up of facts and figures, whereas information is data that has been analysed
and put into a useful form.
• Conclusions must be drawn that are relevant to the problem.
Types of customers
• Businesses need to categorise its customers, and analyse their needs, wants and other
characteristics to effectively service them.
Businesses
• All the individuals and organisations that acquire goods/ services for the production of other
goods/ services.
Reseller markets
Government market
Institutional market
Government market
• Made up of federal, state and local government departments, agencies, boards, commission
and authorities.
• They rent or buy products in the course of their main functions.
Institutions
• Made up of art galleries, museums, schools, TAFE colleges, universities, hospitals, etc.
For businesses
Problem recognition Product specification
General need description Supplier search
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Proposal solicitation Order-routine specification
Supplier selection Performance review
Psychological factors
• Motivation – forces that drive us to satisfy a need.
• Perception – how we receive, organise and interpret information.
• Lifestyle – used to group people according to their activities, interests and opinions.
• Personality and self-concept
• Learning – experiences with products affect their buying decisions.
• Attitudes – formed by experience, can be positive, neutral or negative.
Sociocultural factors
• Culture – society’s values, beliefs, customs and patterns of behaviour; developing ‘world
culture’.
• Subculture – subset of people with shared values and beliefs; defined by things such as
age or religion.
• Socioeconomic status – division of society based on income, occupation or education;
each group have particular product and brand name preferences.
• Family – focus product design and promotion on males or females.
• Reference groups – influence our behaviour because we want to fit in with values of the
group.
Economic factors
• Economic situation influences sort of products people buy.
• Determined by income, savings and ability to borrow.
• Disposable income – money left after taxes are paid.
• Discretionary income – anything left of disposable income after spending on necessities.
• Ability to borrow; influenced by general interest rates, income and other commitments.
Government factors
• Taxation policies – impact on consumer spending (e.g. GST).
• Influence level of economic activity, inflation and interest rates.
• Legislation regulates what sort of goods and services are available.
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Developing marketing
strategies
Market segmentation
• To break the whole market down into parts and provide particular products for one or a
number of different segments.
• To suit target market – best price level, correct promotion, using appropriate distribution
channels.
Demographic
• Age, gender, family size, income, occupation, education or religion.
Psychographic
• Socioeconomic status – education, income and occupation.
• Lifestyle – personality, activities, interests.
Behavioural
• Purchase occasion.
• Benefits sought, usage rate and loyalty.
What is a product?
• Physical goods as well as services:
Core product – what is being bought and the benefits gained.
Actual product – all parts and features that combine to deliver the core product.
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Augmented product – extra consumer benefits and services.
Positioning
• Process of creating the image a product holds in the minds of consumers, relative to
competing products.
• Helps customers understand what is unique about the products when compared with the
competition.
Branding
• Distinguishing name or symbol which identifies products and differentiates them from
competing products.
• Sends strong message about what product represents; important part of total product.
• Famous/ trusted brand name promises quality, reliability and value for money.
• Trademarks – symbols or logos which provide instant recognition and credibility.
Strategies
Generic – ‘non brand’ name, very plain packaging.
Individual – specific name for each major product.
Family – all of business’s products grouped under one brand name.
Manufacturer’s – brand named after manufacturer.
Private – resellers place own names on products.
Hybrid – combination of two or more of above strategies.
Brand equity
• Value of a brand. There are four elements:
Brand awareness – degree of customer recognition.
Brand loyalty – when consumers regularly prefer one brand over another.
Perceived quality – degree of customer satisfaction.
Brand associations – attitudes and feelings.
Packaging
• Protects product during transportation, while it sits on shelf, and during use.
• Informs consumer about use of product.
• Promotes product and distinguishes it from competition.
• Protects against misuse and tampering.
• Labels – ensure informed consumers about ingredients, use and nutritional data.
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Price
• Important factor – it is the difference that pushes a customer to buy one product over
another.
• Determines amount of sales and profit per unit sold.
Pricing methods
Cost-based pricing
• Based on cost of production; adds a mark-up to the cost of the product.
1. Cost-plus pricing: adds a standard mark-up to the cost of the
product.
2. Break-even pricing: point where business makes neither a profit
nor a loss.
Market-based pricing
• Business sets price of its product only in relation to the competitive market price.
• Costs have no influence on price.
Competition-based pricing
1. Leader-follower pricing: smaller businesses charge prices based
on decisions made by the market leader.
2. Going-rate pricing: price set at same or similar level as its
competitors.
3. Discount or premium pricing: positions a product in relation to
price differences with its competitors, and premium pricing only tends to work if product is
distinctive or has some prestige value.
4. Sealed-bid pricing: businesses put in a tender for a job.
Value-based pricing
• Sets price based on buyers’ perceptions of value rather than on sellers’ costs.
• Perception of value – the product itself, services included, and the image customers
associate with it.
Penetration pricing
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• Price set below that of its competitors (to gain initial market share).
• Demand must meet expectations to generate enough revenue to make profits.
• Low price – little loyalty may be developed.
Loss leaders
• Products priced below their cost of production in order to attract customers.
• Usually heavily advertised brand or products with strong appeal.
Price points
• Psychological price references for consumers, and indicate relative quality.
• Marketers develop differences in quality, design or function to support price differences.
Discounts
Quantity discounts
Reduces price per product as more units are purchased.
Seasonal discounts
Demand for certain products and services fall at certain times of the year.
Cash discounts
Businesses prefer lowering prices for cash in the till rather than having credit sales, lay-bys
or any other delayed payment.
Promotion
Personal selling
• Sales people interacting directly with customers or potential customers.
• Mainly used when product can be changed to meet individual wants, or to show potential
customers.
• Sales representative can pick up on consumer needs, questions and uncertainties about the
product.
• Closer customer-business relationship, but expensive.
Advertising
• Television, radio, transport, billboards, newspapers and magazines.
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• Allows message to be repeated and capable of reaching many buyers at low cost per person.
Below-the-line promotion
• Above-the-line refers to mainstream advertising.
• Below-the-line promotions are activities including contests, coupons, free samples or
exhibitions.
• Attract customer attention and offer good incentives to buy the product.
Public relations
• Use of publicity and other non-paid forms of advertising to develop a good image.
• E.g. mentions in newspapers or magazines, product winning prize in design or quality, when
high-profile figures use the product or when the product is often talked about in news items.
Direct marketing
• Associated with letters mailed specifically to someone in the target market, or the
indiscriminate mailing of material to every household.
• Includes online shopping, telephone sales and home shopping channels on TV.
Place/ distribution
Distribution channels
• A business or group of businesses, involved in moving goods and services from the
manufacturer to the point of final use.
• Connects a manufacturer or service provider with consumers.
• Most common channel is manufacturer to retailer to consumer.
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• Intermediaries – independently owned businesses that move products from the
manufacturer to end user.
1. Distribution channels – businesses involved in moving products
from manufacturer to final user.
2. Physical distribution – activities involved in moving products
from manufacturer to final user.
Reasons for intermediaries
• Needed because producers are separated from customers.
• Many markets are too small to make it economically viable for businesses to deal directly
with customers.
• Intermediaries buy merchandise from manufacturers and sell in small lots at a local level.
• Important role in matching supply and demand by providing customers with a variety of
products from different producers.
• Using wholesalers result in greater cost efficiencies as they are smaller in size and closer to
customers. They serve retailers; it is more cost effective than manufacturers delivering directly
to numerous retailers.
• Tend to take up less of the company’s resources than direct distribution.
Channel choices
Number of channel levels
• Direct channels:
Producer distributes directly to the consumer.
Involve the business using its own employees and assets to distribute the product to the
market; own sales people, delivery vehicles and warehouses.
• Indirect channels:
Producer uses intermediaries to serve the market.
Intermediaries include wholesalers, retailers, brokers and agents who operate between the
manufacturer and the final consumer.
• Multiple channel system:
Use of more than one channel to access markets for same product.
Distribution intensity
• Intensive distribution – product available at every possible outlet.
• Selective distribution – manufacturer wants to widely distribute product, but does not want
to use intensive strategy.
• Exclusive distribution – products available at particular stores or outlets; usually expensive
product aiming to achieve a very elite image.
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• Costs (inventory, warehousing, order processing, transportation) need to be controlled to
maintain profits.
Order processing
• All activities used to handle and fill sales orders.
• Problems – delays, customers receiving goods they did not order, etc.
Warehousing
• Storing of goods while they wait to be moved or sold.
• Convenient location is important.
Material handling
• Deals with equipment used to physically handle the products.
• Ensure products are moved quickly, accurate and safely to the customer.
Inventory control
• Oversees quantity of a product that is available for sale at any point in time.
• Low stock levels – losing customers as they can buy it from a competitor instead.
• Excess stock – expensive.
• When to order, how much to order; must balance order-processing costs with inventory-
carrying costs.
Transportation
• Movement of products by air, rail, road, water, etc.
• Method depends on type of product, speed with which products need to be delivered,
distance to be covered.
Technology
• Online shopping – the internet has significantly changed the business-intermediary
relationship.
• Increased security; people less reluctant when handing over credit card details.
• Automated warehouses; materials-handling systems, direct machinery to collect and load
products, etc.
• Errors reduced and orders processed far more quickly.
• Influencing transportation; GPS systems.
• IT used to control inventory costs, order electronically from suppliers, communicates
between stores, etc.
Local government
• Regulations limit where business can be set up, what sorts of activities are allowed, hours of
operation and signs that can be put outside the building.
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Environmentally responsible products
• Growing concern about damage caused by industrial activity, rapid consummation of natural
resources, waste from packaging and pollution.
• Significant trends on consumer attitudes and values forced businesses to change.
• Responses – ecologically safer products, recyclable or biodegradable packaging, cleaner
product methods.
Higher costs
• Marketing activities create higher costs – high level of advertising, unnecessary packaging,
continual development of new products.
• These activities do not add any real value to the product, only psychological benefits.
• Range of intangible features encourages customers to buy products – marketing driving
consumer demand, not responding.
• The Australian Competition and Consumer Commission (ACCC) enforces the Trade Practices
Act 1974 (Cth).
• State legislation also affects marketing activities.
Price discrimination
• TPA tries to ensure that sellers offer products at the same price.
• E.g. retailers should face the same price from a manufacturer regardless of anything.
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Implied conditions and warranties
• TPA ensures all products have certain conditions that are implied.
• Implied conditions – unwritten guarantees that the product/ service will do the job it is
intended to do.
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