Transcript Marketing - Deans Community High School

Marketing
Market Segmentation
Extended response questions
1 Describe the following marketing terms
 Product orientation
 Industrial market
2 marks
2 The confectionary market is a highly competitive
market. Manufacturers seek ways to prolong the life
of each confectionary brand. Describe the ways in
which a confectionary manufacturer can prolong the
life of its product. Use a diagram to support your
answer. 6 marks
3 Explain the pricing strategies that a new
business might employ when introducing a
new product onto the market. 8 marks
Classification Tables
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These tables basically segment the population into
groups depending upon their occupation and so
their income.
We now know these as socio-economic groupings
but in the past they were grouped as social class.
Therefore A socio grouping is upper or upper middle
class.
These tables are used by the government to assist
in the provision of public services, but organisations
also find them useful to help them decided the
market for their products.
Taste, fashion and lifestyle
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These factors are becoming increasingly more
important – these factor influence consumer
behaviour.
Consumers are easily persuaded to buy what is in
fashion at that particular time.
Lifestyle is a behaviour pattern adopted by a
particular community – by identifying lifestyles
organisations can produce products to suit this
lifestyle and target these people eg environmentally
friendly groups or people involved in keep fit.
Age, gender etc
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The population can be split into age groups
and gender groups and allows organisations
to target those groupings effectively eg the
under 5s.
Products can be very effectively targeted
male or female – and putting gender and age
together is also a way of segmenting your
market.
Household status
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Increasing number of households made up of
people living on their own – this has led to an
increasing number of smaller houses being
demanded. Also increase in the number of
products designed for the single person eg
ready made meals for one.
Disposable Income
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Disposable Incomes have risen in the UK
over the past few years – so this has led to
increased spending on housing, furniture,
holidays etc. The percentage spent on
tobacco and jewellery has declined.
Age Distribution
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UK is seen to have an ageing population –
also the baby boomers in their late 40s and
50s make up a large percentage of the
population.
There is a decline in the numbers of under
25s.
So organisations will make products to target
the larger numbers in the population
Other factors which can
influence the market
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PESTEC FACTORS
So we can have political factors which affect the
market eg legislation eg the smoking ban
Economic factors – eg recession, boom etc
Social factors – changes in consumer tastes etc
Technological – any new technology advances
which may occur
Environmental – green issues eg more people
buying “green” products
Competitors – what products your competitors are
making, changes being made, prices being charged
etc can affect the market.
Branding - Task
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What are the advantages of branding a
product?
What are the disadvantages of branding a
product?
What is power branding?
Branding
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Research some successful brands
Find out why they have become successful –
what has the organisation done to make
these brands successful?
Has the brand expanded – eg power
branding – what is power branding – find
some examples.
What are the advantages and disadvantages
of branding and power branding.
What is branding?
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Almost every business has a trading name, from the smallest market
trader to the largest multi-national corporation. Only a minority of those
businesses however, have what could be classed as a ‘brand’ or a
‘brand name’.
There are many different definitions of a brand, the most effective
description however, is that a brand is a name or symbol that is
commonly known to identify a company or it’s products and separate
them from the competition.
A well-known brand is generally regarded as one that people will
recognise, often even if they do not know about the company or its
products/services. These are usually the businesses name or the name
of a product, although it can also include the name of a feature or style
of a product.
The overall ‘branding’ of a company or product can also stretch
to a logo, symbol, or even design features (e.g. Regularly used
colours or layouts, such as red and white for Coca Cola.) that
identify the company or its products/services.
Benefits of branding
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A strong brand name and logo/image helps to keep your
company image in the mind of your potential customers.
If a customer is happy with your products or services, a brand
helps to build customer loyalty across your business.
If your business sells products that are often bought on impulse,
a customer recognising your brand could mean the difference
between no-sale and a sale.
A strong brand projects an image of quality in your business,
many people see the brand as a part of a product or service that
helps to show its quality and value.
If your business has a strong brand, it allows you to link together
several different products or ranges
Disadvantages of branding
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If you wish to create and maintain a strong brand presence, it
can involve a lot of design and marketing costs, which can be
very costly.
Every brand has a certain image to potential customers, and part
of that image is about what products or services you sell. If you
are known for selling just one product, and you want to sell
another product, will you be able to do so effectively?
The process of creating a brand will usually take a long period of
time.
One bad piece of publicity about your one of your branded
products can affect your whole brand.
Success stories
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The Nike brand name is known throughout the
world, people can identify the name and logo even if
they have never bought any of their products.
However, not only is the company name a brand,
but the logo (The ‘tick’ symbol) is also a strong piece
of branding in its own right. The majority of people
that are aware of the company can also identify it (or
its products) from this symbol alone.
The clothing and running shoe company Adidas is
well known for using three stripes on its range of
products. This design feature branding allows
people to identify their products, even if the Adidas
brand name and logo is not present.
Not so successful
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The Sunny Delight drinks brand was one of
the biggest in the UK just a year after its
launch. However, constant bad publicity
about the quality of the product has severely
damaged the image of the brand, and sales
have dropped for each of the past several
years.
Power branding
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Sony sells televisions, music equipment,
consoles, camcorders, DVD players, video
players, and etc all under the Sony brand
name.
Multiple Brands
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Cadbury’s makes a range of confectionary
under many different sub-brand names such
as Dairy Milk, Boost, Flake, and Time Out. All
of these are sold under the product brand,
but all feature the Cadbury’s brand name on
the packaging.
The Marketing Mix
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The Marketing Mix is important – organisations must
get the elements of the Marketing Mix just right, as it
can contribute to the success or failure of the
product or organisation.
Made up of 4 elements – the 4Ps
Price
Product
Place
Promotion
Product
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Product has to meet customers needs –
otherwise they will not buy it.
The product can be changed or adapted to
meet customer needs.
Products are the means by which
organisations provide customers with benefits
– so if someone buys washing up liquid they
will benefit from clean dishes.
Core, actual and augmented
product
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The core product is the basic product or service – provides the
benefits for the customers.
Actual product – this is where a product is not necessarily
purchased for one single need, it might be bought to fulfil several
needs – this is called the product concept. This is as the name
suggests the product the business puts on sale. This is the
product that has been designed, has a brand name, distinctive
packaging, particular features.
Augmented Product – This is where organisations who are
operating in a highly competitive environment must make their
product more attractive to customers – to give themselves a
competitive edge. Things like guarantees, free delivery, aftersales service, interest free credit, improving style, packaging,
colour – anything to enhance the product’s image.
Examples
Product
Basic function
Augmented Feature
Shampoo
To clean hair
Nourishing formula,
image, designer
name, celebrity
endorsement
Trainers
Protect feet whilst playing
sport
Celebrity
endorsement,
guarantee, improved
grip/tread
Mobile
phone
To make telephone
calls
Camera, web
facilities, style,
guarantee, free
airtime etc
Product Portfolios
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Most organisations provide a variety of products on
the market.
Some of these products may have been on the
market for a long time eg Nestle – Kit Kat has been
around for about 70 years whereas some of their
other products may only have been on the market
for months and may only last for a few years.
Organisations have to maintain their product
portfolio and know each of their products and how
well they are doing, make decisions about keeping
them on the market, changing their appearance, or
take them off the market – all this contributes to the
success and the profits of the organisation.
Extension Strategies
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These are used by organisations to prolong
the life of a product. Organisations may put
extension strategies in place if they feel that
the product is good enough to continue and
they can “bring it back to life”. Usually
introduced at the maturity stage of the
produce life cycle, where the product is still
making sales but is beginning to wane.
Extension Strategies which
can be used.
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New advertising campaign – to raise awareness of
the product eg with celebrity endorsement.
Changing the target market and/or expanding their
target market eg males 25-35 to all males over 25.
Relaunch the product - promote
Change name
Change packaging
Adding accessories
Updating the product
New models or new versions, saying new and
improved.
Summary questions
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Explain what you understand by the term market
share.
Describe the difference between the core and
augmented product.
What are the benefits to an organisation of having a
range of products.
What are the extension strategies available to
organisations?
What are the benefits to an organisation of
developing an successful brand.
Price
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Organisations have to get the price right for their product.
The price to be charged can depend upon the stage the product
is at on its life cycle.
The price may also be decided by the costs of production – if the
costs of production are rising then the price of the product may
have to increase to maintain a profit.
Organisations have to consider what their competitors are doing
– are they lowering their prices – if so should we do so etc.
Just like the other elements of the marketing mix organisations
have to get the price right or the company may not be successful.
Importantly when customers are looking at price they are looking
for value for money – so the price of the product has to be right
for that product and the perception of customers.
Price can be dependent on
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The company’s objectives
Competitors’ prices
The position of the product in the life cycle
The cost of manufacturing
The time of year eg Winter sales
The level of advertising
The profit level expected
Suppliers’ prices
The place where the product is sold
The state of the economy eg recession, inflation
Government pressure eg prices of cars were reduced due to
government pressure
Over all it is how much customers are willing to pay for the
product.
Pricing Strategies
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Destroyer Pricing – used to eliminate the
competition – prices are lowered – this forces
competitors to lower their prices – the weaker
competitors will be forced out of the market –
when competitors are forced out prices will
rise again to normal level (or even higher) –
used by financially secure organisations who
can run at a loss for a short period of time –
in the end they have increased market share,
increased profits and increased sales.
Promotional Pricing
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Prices are reduced for a short period of time
to promote the product. Used by
organisations who wish to breathe new life
into the product or to get rid of stock quickly.
So could be used at the maturity stage to
extend the life of the product or when the
product is in decline to get rid of stock before
it is taken off the market.
Market Skimming
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Tends to happen at the launch stage of the product
life cycle – the product is introduced onto the market
at a high price – the products tend to be new and
innovative eg new technology products – the
product is aimed at those who are willing to pay a
high price for a new product – the company gets as
much money in as possible – this helps to recoup
some of the development costs. They then put the
product down in price over a period of time to
capture different market segments.
Price Discrimination
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Where organisations may charge different
prices for their product at certain times of day,
different market segments, etc. Examples
are cinema tickets, hairdressers charging
OAPs less on certain days, cheaper evening
and weekend calls on the telephone etc.
Place
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Distribution of goods and services – getting
them to right place at the right time.
Place can also contribute to the image of the
product – or the image the organisation
wants the product to have.
Getting the Place right is important – if you
are not selling in the right place – you won’t
get the sales.
What are? - Describe and give
examples
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Department Stores
Retailers
Co-operatives
Wholesalers
Independent Store
Chain Stores
Discount Stores
Supermarkets
Wholesalers
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Buys in bulk, relieves the manufacture of the cost of making a
large number of small deliveries, cuts the cost of transportation,
volume of paper work etc
Bears the risk of holding large quantities of stock – if there
weren’t wholesalers manufacturers would need to tie up capital in
holding stocks of their products and have further costs of storage
space
Breaks down the bulk supplies and offers a wide variety of goods
in relatively small quantities to the retailer. Sometimes they will
finish off the packaging and labelling of goods.
Provides advice to the manufacturer – by being in the middle
man wholesalers know what goods are selling well and they are
well placed to advise retailers on what to buy and what not to buy
and manufacturers on what to produce and not to produce.
Department Store
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Eg Jenners, Debenhams, Harvey Nichols,
Harrods. They have a large number of
departments and tend to employ more than
25 people. They tend to have an upmarket
image, charge higher prices, many of which
are exclusive and not for the mass market.
This type of store has been in decline in
recent years.
Retailers
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Break down bulk supplies of an assortment of
goods from a range of suppliers and offer
them for sale to the public
Provides information to the public through
advertising, displays, and trained sales staff
Stores goods and prepares them for sale,
marks prices on them and displays them on
the sales floor
Physically sells the goods to consumers.
Independent Stores
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Operate only one outlet, offers a personal
service, is in a convenient location and close
customer contact. Almost 80% of retailers
are independents eg hairdressers, dry
cleaners, furniture stores and corner shops.
Groups of independent retailers might join
together to benefit from bulk purchasing of
stock or advertising
Chain Stores
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A retail store which operates more than 10
outlets – some chains are specialist stores
concentrating on a narrow range of items eg
Top Shop, River Island sell clothes. Others
are variety chains and provide a range of
goods eg Marks and Spencers, Boots.
Supermarkets
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A supermarket is defined as having more
than 2,000 square feet of selling area and at
least 3 check out points. Supermarkets are a
key feature of shopping, they offer
consumers a wide range of food and other
products at low prices. They operate on a
low mark-up and rapid turnover.
Very large supermarkets are sometimes
called hypermarkets or superstores and they
sell an even wider range of goods.
Co-operatives
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Owned by “members” rather than
shareholders and profits are distributed to the
customers in the form of dividends instead of
being paid to shareholders.
Discount stores
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Offer a wide variety of products at discounted
prices eg Matalan. They sell large quantities
of a limited range of products at discount
prices.
Channel of Distribution
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3 main channels of distribution
Producer
Producer
Producer
Consumer
Retailer
Wholesaler
Consumer
Retailer
Consumer
Producer to consumer
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Catalogue (Mail Order), Online, Factory shop, Farm
Shop
Advantages – cheaper for the consumer, consumer
has direct contact with the producer. Producer
advantages – direct control of marketing and selling
of the product, build up good customer relationships,
get to know their market and what the customers
want from the products.
Disadvantages – producer has to have warehouse
to hold stock and so incur all the costs of holding
that stock, the producer has to make the customer
aware of their product
Producer to retailer to
consumer
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Advantages to producer are that they do not have to
have as much storage space – saves money,
retailer will take on some of the responsibility of
raising consumer awareness, it is the retailers
responsibility to sell the product – if the stock
doesn’t sell its not the manufacturers problem
Disadvantages – less control over the marketing and
pricing of the product, less of a profit because they
are having to sell at a price for retailers who will then
charge a higher price, higher distribution costs
delivering to lots of different retailers.
Producer to wholesaler to
retailer to consumer
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Advantages – producers can take advantage
of the services provided by the wholesaler,
cuts costs to the producer eg storage etc
Disadvantages – losing even more control
over the marketing of the product – can’t
guarantee that your product will be sold in the
right place to create the right image for your
product.
Questions on Marketing
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Describe the benefits of a business having a
range of products.
Identify the life cycle extension strategies
available to an organisation
Identify the various pricing strategies that a
business could use
What are the 3 main channels of distribution
– give an advantage and disadvantage of
each (to a producer)
Methods of Direct Selling
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Internet Selling – (e-Commerce) – many organisations now sell
their products on line – payment is made by debit or credit card.
They can collect customer information and so can target offers at
customers more effectively.
Attractive to customers as they can shop from home 24/7.
Some consumers are unsure of this method of shopping as they
fear putting their banking details into a website – so
organisations have to make sure they provide a secure facility to
do this.
Sometimes products are more expensive to buy over the internet
and there may be the added cost of postage – although a lot of
organisations offer free delivery.
Direct Selling …. Mail Order
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goods sold to customers through catalogues.
Large growth in mail order because of the convenience of
shopping from home. Most catalogues offer credit facilities – buy
now pay later.
Mail Order companies also save costs as they do not need as
much staff, sales floors, etc.
Some mail order products are exclusive only sold by that
company and most companies offer their products for sale on
their websites too.
Some customers do not like mail order as there is a lack of
personal contact and high delivery charges and the products can
be more expensive especially if using the company’s credit
facilities.
The companies may have high advertising costs and there is a
high instance of bad debts.
Direct Selling …. Direct Mail
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This involves posting promotional letters, brochures
or leaflets about their products through letter boxes.
The products can be ordered over the telephone or
by post. Eg Readers Digest.
Can target customers within a certain target market,
can reach customers in a wide geographical area.
Can generate personalised letters through mail
merges which can improve sales.
However customers do not like “junk mail” through
the door. Mailing lists can become out of date very
quickly so letters can go to the wrong people –
costing the company extra money.
Direct Mail ….
Newspapers/Magazines
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Companies place adverts in
newspapers/magazines describing and
showing their product for sale. Customers
respond directly to adverts by filling in
coupons to post or by telephone.
Direct Selling ….Personal
Selling
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Some companies employ sales staff who sell
products door-to-door or by telephone (telesales). Eg double glazing companies or
pharmaceutical reps who visit doctors.
Allows the product to be demonstrated,
technical details can be explained and
feedback can be received from potential
customers.
Retailing trends
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Increase in out-of-town shopping – shoppers prefer
these as there is usually easy parking, convenience
of having all the shops together, also have food
outlets, leisure facilities etc.
Extended opening hours to fit in with people’s work
and leisure times eg some supermarkets are open
24 hours.
Increased domination of supermarkets and large
supermarkets sell a variety of products not just food.
Increase in Internet shopping.
Promotion
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2 main types of promotion
Above the Line – where organisations use
independent media such as newspapers, TV
to reach large audiences. This means that
people who may have no interest in your
product will be finding out about your product
– you are not specifically hitting your target
market – but some of the people who have
no interest may require your product in the
future.
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Below the Line Promotion – directly
controlled by the organisation eg sales
promotions, direct mail, trade fairs and
personal selling. They target the specific
section of consumers who are interested in
the product.
Advertising
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What effect does advertising have on sales?
- Look at an organisation and its advertising
campaigns – Cadbury, Guinness etc
What types of above the line and below the
line promotion have they used?
Which media or medium do you think works
best for the organisation.
You could look at skillsspace.co.uk
Control of Advertising
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As advertising is seen as a powerful medium
it is recognised that there has to be some
control over adverts. There are certain
bodies which have been set up to ensure that
advertising meets the required standards.
Advertising Standards
Authority (ASA)
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This is a voluntary body set up to monitor
advertising in the UK. It is responsible for
making sure advertisers conform to the
British Code of advertising and sales
promotion practice.
Advertisements must be legal, honest,
truthful and not cause offence.
Independent Television
Commission (ITC)
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This is a body which controls advertising on
TB and radio. Some of their restrictions
include current newsreaders not being
allowed to endorse products. Also actors are
not allowed to appear in commercial breaks
during programmes in which they appear.
Pressure Groups
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As we know pressure groups become
interested in organisations at particular times.
This is the same with advertising if an advert
goes against the principles of certain
pressure groups then they will object eg
women’s groups protest against
advertisements they consider to be sexist.
Trades Description Act 1968
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This is a piece of legislation which has an
impact on the advertising of products.
It states that products must match the claims
made about them in adverts.
Eg Carlsberg Lager – note that their catch
phrase says “possibly the best lager in the
world” – they couldn’t say that it is definitely
the best lager in the world as it would break
the Trades Description Act
Advertising
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Advertising although powerful is not the only
way to sell goods and services – at best it
can only stimulate interest.
The interest has to be converted into a
buying decision by consumers – other
marketing tools such as merchandising,
distribution channels and packaging can help
in the selling of products
Advertising is not the only promotional
strategy – there are a number of others …
Sales Promotion
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These are the techniques which are designed to
encourage customers to make a purchase.
They usually complement advertising campaigns.
The essential feature of sales promotion is that it is
a short-term inducement to encourage customers to
act quickly and buy something, whereas advertising
is a more long term strategy and communication
process designed to build brand image and loyalty.
2 main types of sales
promotion
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Into the Pipeline – designed to enhance sales of a product to
trade outlets to help them sell the product to their customers.
Eg – Point of Sale (POS) material such as displays, posters,
promotional videos etc.
They may also have sale or return arrangements under which the
supplier agrees to take back unsold stock
Dealer loaders – eg retailer buys ten and gets one free.
Credit facilities – to encourage retailers to stock a product –
retailers will get stock in and pay for it at a later date
Staff training to retailers eg when a product requires technical
knowledge, demonstrations or explanations eg car
manufacturers offer training to car dealership staff
Types of sales promotion cont
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Out of the pipeline – this promotion helps
trade outlets to persuade their customers to
make a purchase.
Eg free trial packs, discount vouchers, bonus
packs, money off coupons, buy one get one
free, competitions, credit facilities, interest
free credit.
Some Marketing Terminology
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Niche Marketing – companies identifying a “gap” in a certain
market. A product is aimed at a small section of the market. An
example is Aston Martin cars who take advantage of a niche
market – providing luxury sports cars to people who can afford
them. Niche marketing allows businesses to:
Build up expertise in one type of product and customer
Avoid competition as niches are often not considered profitable
by larger organisations
But if a niche becomes popular and experiences market growth
then larger organisations may become interested and so it
becomes a competitive market
There is also a high risk of failure as the organisation relies on a
small market.
Differentiated marketing
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This involves an organisation providing
different products for different market
segments eg some car manufacturers
provide different types of car for different
types of customer eg estate cars for people
who perhaps have dogs, or 4x4s for people
who live in rural areas, small cars for
economy conscious people etc.
Undifferentiated
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Where products are aimed at the population
as a whole – product different products for
different market segment eg Heinz uses
undifferentiated marketing as most of its
products are targeted at the majority of the
population – it does not provide tins of beans
for AB customers and another for CD
customers.