Transcript Higher Business Management

Higher Business Management
Unit 2
Learning Outcome 2
Marketing
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Marketing
“The process involved in
identifying, anticipating
and satisfying consumer
requirements
profitably”.
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Marketing
Role and Importance of Marketing
 Identify
consumer’ requirements – find
out exactly what consumers want
 Anticipate
consumers’ requirements –
future needs
 Satisfy
consumers’ requirements –
service, quality + value for money?
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Marketing
Anticipating Consumers’ Requirements
What do they want today?
 What do they want in the future?
 Trends must be considered to anticipate
future needs
 Volatile markets - fashion, toys, technology
(mobile phones, computers, etc)

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Marketing
Identifying Consumers’ Requirements
What do they want? Consumers must buy
products and continue to do so
 Fierce competition and consumers’
expectations mean that products must be
constantly updated and altered to suit
 Other factors - price, quality, prompt delivery,
attractive packaging and after-sales service
 Advertising and promotion play a big part

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Marketing
Satisfying Consumers’ Requirements
“The customer is king!”
 Businesses must be customer-focused
 No customers
no business
 Must offer - good service, quality products,
value for money, prompt delivery, good
after-sales service (eg returns), well
presented and packaged goods, at the right
price and available at the right place

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Marketing
The essentials of marketing
“Marketing involves anticipating customers'
needs and finding the right product or service
to meet those needs, thereby encouraging high
sales levels. Vodafone goes further by looking
to impress on its customers not merely what its
products are i.e. features, but also what they
can increasingly do i.e, benefits. This involves
effective communication. “
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Marketing
Role and Importance of Marketing
All organisations need to carry out marketing activities to meet
their objectives:

Public Sector – may develop services if research
shows that is what the community wants

Private Sector – meet customers’ needs through
market research

Voluntary Sector – competition for donations,
therefore charities spend huge amount of money on
marketing.
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Marketing
Importance of Marketing
Poor marketing can lead to failure:

The American
industry
car
 The
British motor
cycle industry
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Marketing
Importance of Marketing
Good marketing can lead to success:


Swatch
Easyjet and
Ryanair
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Marketing
Marketing as a strategic activity
Using marketing, organisations hope to achieve a number of
objectives which are essential for success:
To increase sales revenue and profitability
 To increase or maintain market share
 To maintain or improve the image of the
business, its brand or its product
 To target a new market or a new segment of
the market
 To develop new and improved products.

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Marketing
Marketing – concerned with:

Inception/design

Price

Selling and promotion

Distribution

After-sales services
What
How
When
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Where
12
Marketing
Market – a
meeting place
for buyers
(consumers)
and sellers
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Marketing
Consumer Market
Consumer market are made up of individuals
who buy goods or services for their personal
or domestic use. The 3 classifications are:
Convenience goods – non-durable goods
 Shopping goods – durable goods
 Speciality goods – eg cosmetics, fashion items.

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Marketing
Industrial Market
Goods and services bought on the
industrial market can be similar to
those in the consumer markets, eg
consumers use banking services and so
do businesses. However, industrial
goods also include plant and machinery,
raw materials, consumable supplies and
business services.
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Marketing
Product-led - Product Orientated


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Putting a product on the market
without prior market research
Assumption of best available and
no real competition
Often new inventions like Dyson
vacuum cleaners or Playstation 2
A risky approach which can fail British motor bikes
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Marketing
Market-led - Customer Orientated



Considering what the
customers want before putting
a product on to the market
Competition has led to
companies focusing on the
needs of the customer
Also looks at the influences on
purchasing decisions
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Marketing
The Marketing Environment
Consumer trends and behaviour
Competition
Government
THE MARKET
The economy
Technology
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Marketing
Marketing Environment –
Government Influence on marketing






Trade Descriptions
Monopolies and Mergers Act
Fair Trading and Competition Acts
Consumer Protection Laws
Code of Advertising Practice
Advertising Standards
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Marketing
Marketing Environment –
Competition




Close substitutes
Markets – Some markets dominated by
a few big producers; other markets
have many producers.
Unique Selling Points (USP)
Emotional Selling Proposition (ESP)
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Marketing
Marketing Environment –
Technology




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Use latest technology to keep up with competition
Technological advances create new markets and
cause decline of others, eg video tapes and DVDs
Sophisticated production methods allow high
quality, faster and cheaper production
Improved communications and information Unique
Selling Points (USP)
Internet and saturation usage of mobile phones
allow businesses new ways to tap into new markets
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Marketing
Marketing Environment –
Economic forces



Interest rates – high rates, consumers
buy less; organisations reduce
borrowing and spending
Exchange rates affect - £ is low, UK
exports become cheaper
Economic growth high consumer
confidence and spending.
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Marketing
Marketing Environment –
Consumer trends & behaviour

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Changes in the age distribution of the population
Disposable income
Household status, eg rise in single households –
smaller ready meals
Social class
Location
Lifestyle taste and fashion, eg environmental
issues, healthy lifestyle
Political
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Marketing
The Marketing Mix
In order to market or sell its product
successfully, a business must develop a
strategy based on 4 key elements:
Product
Place
Price
Promotion
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Marketing
Product/Service

Core

Actual

Augmented



The basic product - eg
toothpaste cleans teeth
The way the product is
presented - design, brand
name, packaging, etc (Colgate
toothpaste - red packaging)
Additional features protection against decay,
fresh breath, attracting the
opposite sex, etc
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Marketing
The Product Life Cycle
£000
Costs/Sales
New
Idea Product
Launch/
Introduction
Growth
Maturity Saturation
Decline Death
Time
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Marketing
Product Innovation

Generating an idea

Analysing the idea

Producing a prototype

Test market


Adapt product to solve
problems
Launch the product
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Marketing
Extending the Product Life Cycle/Extension Strategies


Developing new markets for existing products, eg
computers
Providing line extensions - Mars: fun-sized,
yoghurt, ice cream, mini-sized, giant-sized

Finding new uses for existing products

Develop a wider range of products

Develop styling changes

Promoting more frequent use of the product –
mainly by reducing price
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Marketing
Extending the Product Life Cycle/Extension Strategies



Improve the product – think soap powder
Change the packaging – perhaps to appeal to
different market segment
Change the channel of distribution – internet
shopping

Change product prices

Change promotion method

Rebrand the name of the product – Marathon to
Snickers
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Marketing
The Product Mix/Portfolio – range of
products that a firm produces to spread risk.




Very few companies have only one product
Some companies have a range of related
products eg Proctor & Gamble
Some companies have totally unrelated
products in their product portfolios eg
Imperial Group
It is important that you have new products
being launched to replace products going
into decline in your “Product Mix”
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Marketing
The Product Mix/Portfolio
Boston Matrix – used by some firms to analyse their
product mix.
Market Share
High
Market
Growth
High
Low
Low
Star Problem Child
Cash Cow Dog
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Marketing
Branding

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
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Branding distinguishes a
product from its competitors
– product differentiation
Instantly recognisable by
consumers
Often linked to quality and
reliability
Can command a premium price
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Marketing
Brands
Benefits of branding:

Instant recognition, eg Cadbury

Brand loyalty, therefore repeat purchases



Charge higher prices because of brand
loyalty
Easy to intro new products using brand name,
eg Virgin
Strong brand has money value in Balance
Sheet
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Marketing
Brands
Drawbacks of branding:
 Time taken to establish brand
 Cost of promoting brand
 Bad publicity affects all products of same
brand
 Imitations/fakes difficult to combat
 Fashion brands can suffer when fashions
change
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Marketing
Own Brands



Products branded with
the name of the store
selling them
Most of the big
supermarkets (Tesco)
and chain stores (Boots)
have their own brands
Often cheaper
alternatives to branded
goods
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

Make a list of as
many “own
brands” you can
think of. Indicate
which branded
product they are
designed to rival
Eg “Wheat Bisks”
by Safeway to
rival “Weetabix”
35
Marketing
Unique Selling Point (USP)


This is a feature that allows a product to stand out
from its rivals.
Should offer the consumer some unique benefit that
may motivate them to switch brands
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Marketing
Unique Selling Point (USP)



Try to identify the USP
of each of the products
listed opposite
Think of how they are
presented to you in the
advertising you see daily
on TV, in newspapers and
magazines








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Coca Cola
Nike
Kit Kat
Sunny D
Skoda Cars
Mercedes Cars
Baxter’s Soups
Fairy Liquid
Finish
(dishwasher tablets)
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Marketing
Price of a Product?


The price of a product is one of the main
factors in buying that product. Too low a
price could give the impression of poor
quality and too high a price may not give
the feeling of value for money
Price is influenced by:- the product being
new, what competitors are charging, the
product’s stage in its life-cycle, the
selling location, the market segment and
many other factors
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Marketing
Long term pricing strategies:

Low-price strategy
in a market with strong
competition: price elasticity of
demand.

Market-price strategy
petrol – matching competitors

High-price strategy
up-market, exclusive image
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Marketing
Short-term pricing strategies




Skimming – high initial price for max
profit
Penetration pricing – low initial price for
new product
Destroyer – eliminating the competition
(‘Go’ and ‘EasyJet’/’Ryanair’)
Promotional – lowering prices for a
period to ‘promote’ more sales
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Marketing
Short-term pricing strategies




Price discrimination (aka Demandoriented) – charging different prices
according to the level of demand eg crosschannel ferry fares in summer
Premium pricing – high prices to create
exclusive image, eg Ferrari, Gucci
Loss leaders – use to entice customers
Competitive pricing – charge similar prices
to avoid price war, eg petrol stations.
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Marketing
Calculating a Selling Price
Cost-plus pricing
Contribution pricing
A manufacturer or retailer
A business will calculate
will calculate the cost
the direct costs of
of making or buying a
making or buying a
product and add a set
product (wages & raw
percentage profit to
materials).
arrive at their selling
A contribution toward the
price.
fixed costs of the
Different businesses use
business (rent, loan
different rates of
repayments) are added.
mark-up.
Any amount after covering
Method used by small
fixed costs is profit
businesses as it is the
for the business.
simplest.
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Marketing
Place
The nature of the product or service will
determine where a firm decides to sell
– referred to as DISTRIBUTION.
The Channel of Distribution is the route
taken by a product as it passes from
the producer to the consumer.
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Marketing
Place - Distribution Channels
Producer 1
Producer 2
Producer 3
Consumer
Retailer
Wholesaler
Consumer
Retailer
Consumer
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Marketing
The Channel of Distribution chosen depends on:
o
o
o
o
o
o
o
The nature of the product being sold
Finance available to the organisation
Reliability of companies in the chain
Desired image for the product
Government restrictions
Product’s life cycle
Manufacturer’s distribution capability
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Marketing
The Wholesaler Function





Buys in bulk from producers (low transport
costs) and sells to retailers in smaller
quantities
Bears stock-holding risk
Offers a wide variety of goods in small
quantities
Packages and labels goods
Offers advice to both producers and retailers
as to which goods are selling well
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Marketing
The Retailer Function




Breaks down bulk to quantities consumers
wish to buy and store at home
Provides information to consumers through
advertising, displays and trained staff
Stores a variety of goods, displays them
and marks on prices
Offers range of related services - credit,
HP, after-sales service and delivery
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Marketing
Types of Retailer

Independent - convenience stores, corner
shops

Multiple Chains - M&S, Dixons, Boots

Supermarkets - Tesco, Asda, Safeway, etc

Co-operatives

Department Stores - Harrods, Selfridges

Franchises - Benetton, Body Shop, McDonald’s

Discount Store – Matalan, Primark and TK
Maxx
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Marketing
Direct Selling

Internet selling – allows a business to reach a

Mail Order – goods sold to customers through

Direct mail – involves letters, brochures about

Newspaper/magazine selling-customers respond

global market. Customer info is easily collected to
target offers and promotions.
catalogues, Next, Kays. Credit facilities make this
popular.
products to homes, eg Reader’s Digest
directly to adverts.
Personal Selling – door-to-door or telephone, eg
sales reps visit GPs, double-glazing sales.
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Marketing
Promotion
Promotion is the way in which
customers are made aware
of a product or service and
is persuaded to purchase it.
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Marketing
Aims of Promotion



Persuading - to purchase the
products
Informing - telling
consumers about the
product
Reminding - that the
product still exists
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Marketing
Methods of Promotion







Advertising
Sales promotions
Public relations
Exhibitions and trade fairs
Merchandising
Direct mail
Personal selling
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Marketing
Types of Promotion are categorised as being:
Above the line:
 Use of independent media, eg TV and
newspapers to reach mass audience
 A lot of waste – not targeted
Below the line:
 Directly controlled by the business
 Sales promotion, direct mail, trade fairs targeted consumers who may be interested
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Marketing
Advertising

Informative advertising – new or

Persuasive advertising – where

Corporate advertising – promoting
improved products; Health info
consumers see little difference
between one product and another
whole company rather than single
product, eg BA, BP
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Marketing
Advertising

Generic advertising – promoting whole

Product endorsement – famous sports

Product placement – paying for
industry, eg Scottish Beef
or showbiz personalities are paid to wear
particular product, eg Adidas pay David
Beckham
products to be used in films or TV progs, eg
BMW and James Bond
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Marketing
Advertising Decisions

The effect on Sales?

The target market?


Why do the consumers NOT buy
the product?
Which is the best medium to use?
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Marketing
Advertising Decisions
Which is the best medium to use depends on:

Product

Market segment

Type of coverage – local, national

Advertising budget

How competitors advertise

How technical the product is

Size of the organisation

Legal restrictions, eg tobacco
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Marketing
Types of Advertising Media

Print - newspapers and
magazines, direct mail

Broadcast - TV, radio and cinema

Outdoor - billboards, posters, etc

Internet
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Marketing
Sales Promotion
Into the pipeline
Offered by
manufacturers to
retailers to
encourage them
to stock their
products.



Point of sale
displays
Sale or return
Dealer
competitions/bonu
ses

Staff training

Credit facilities
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Marketing
Sales Promotion








Free samples
Credit facilities
Demonstrations
Competitions
Buy one, get one
free
Bonus packs
Free offers
Coupons, vouchers
Out of the pipeline
Offered by the
retailer to final
customer to
encourage
purchases to be
made.
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Marketing
Public Relations (PR)
 Improving the image of the product
and organisation

Supporting and promoting a charity

Sponsoring sporting or cultural events

Product endorsement by celebrities

Press conferences and press releases
in times of difficulty or when good
publicity can be obtained
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Marketing
Target Markets
Undifferentiated (mass) marketing:
Marketing directed at all consumers, the whole market.
One product is sold to the entire market – high volume
sales, economies of scale. Eg milk, Mars Bars
Differentiated marketing:
Different products sold to different groups within total
market. Products altered to suit needs of different
consumers. Market is split into different groups who
have similar wants and needs – goods produced
specifically for these groups. Use market
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segmentation.
Marketing
Target Markets
Niche marketing
Niche marketing involves a business aiming a product at
a particular, often very small, segment of the market
(local or small national). Focus on needs of a market
ignored or overlooked by other firms – no
competition in short term.
Disadvantage – attract competition in long term.
Market too small for competition. Small number of
consumers – more frequent swings in consumer
spending than larger markets.
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Marketing
Market Segmentation
“Breaking down of markets into sub-groups that
can be targeted with a specific marketing mix.”
Advantages





Seller can meet buyers’ requirements
Advertising can be focused - less wasteful
Expertise developed for a specific market
Higher sales
Increased profits
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Marketing
Methods of Segmentation








Age – Smash Hits
Gender - Heat
Socio-economic grouping – Daily Record
Education level – SundayTimes
Income – Ski Monthly
Religion
Residential area
Lifestyle preferences - hobbies, politics
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Marketing
Methods of Segmentation
Socio-economic groupings:
Social classes are used by advertising and market
research industries:
A
Very senior managers or professionals, top civil
servants
B
Middle managers, owners of small businesses
C1
Junior managers, non-manual workers
C2
Skilled manual workers
D
Semi-skilled and un-skilled workers, apprentices
E
People on long term benefits, casual workers
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Marketing
Market share
Percentage of
total sales of
product/service
achieved by one
organisation.
Advantages:
•
•
•
•
Larger the market, larger the
profit
Purchasing economies of
scale – reduce costs
R & D with large profits
Costs – marketing, transport
– spread over larger output
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Marketing
Assessment of the Market

Where are the consumers of the product?

How many consumers are there?



What are their attitudes and
preferences?
How effective are the distribution
methods?
What are the strengths and weaknesses
of competitors?
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Marketing
Market Research -Definitions
“Market research is
the systematic
gathering, recording
and analysing of
data about problems
relating to the
marketing of goods
and services.”
“Market research is
the means by which
those who provide
goods and services
keep themselves in
touch with the needs
and wants of those
who buy these goods
and services.”
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Marketing
The Need for Market Research







Predict changes
required in its
product/service

Identify what is selling
Identify who is buying
the product/service

Explain what is
happening in the market 
Investigate possible

courses of action
Identify the size of the
market
Discover what
consumers think of the
product
Discover what
consumers are willing to
pay
Discover if a promotion
is appropriate
Discover if the
packaging is appropriate
Identify what
competition exists now and in the future
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Marketing
Methods of Research
PRIMARY RESEARCH
Information collected by the organisation
itself or by a paid market research agency.
SECONDARY RESEARCH
Information already collected for another
purpose, eg government statistics.
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Marketing
Methods of Research - PRIMARY
Primary data is gathered by field
research






By observation or asking people questions
Up-to-date
Collected for the exact purpose of the
organisation
Not easily available to competitors
Time-consuming
Expensive
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Marketing
Techniques of field research

Surveys


Personal interview, postal survey,
telephone survey, purchase survey
Sampling – who, how many, how to choose
 Random sampling, Stratified random
sampling, Quota sampling





Test marketing
Consumer panel
Hall tests
Questionnaire – see notes 48-50
Collection of customer data – observation,
loyalty cards, EPOS/bar codes, the internet
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Marketing
Market Research – SECONDARY
Secondary data is gathered by desk research
Internal Sources
External Sources
Government publications Sales figures
social and economic trends,
Stock figures
annual statistics, population
census
Accounting records
 Competitors’ data - annual
Customer comments
reports, promotions, price
Sales reps reports
lists, web sites
Market research data
 Newspapers, trade
gathered previously
magazines, Mintel (research
org), etc
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






Marketing
Market Research – SECONDARY





Value and reliability is limited because:
Much of the information is historic
Collected for another purpose
Available to competitors
Cannot normally go back to the initial source
to check accuracy or ask follow-up questions
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Marketing
ICT and Market Research

Databases compiled by research agencies

Electronic point of sale information (EPOS)

Supermarket loyalty cards


Stock control software gives sales
breakdown
Web sites - customers can e-mail comments
back to the company
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Marketing
Problems with Market Research



Sampling Bias - small sample can give a wrong
impression
Human Behaviour - opinions change rapidly
Interviewer Bias - leading questions
may be asked

Time taken for research - expensive

Difficult to access secondary – time wasted

Larger the sample, more reliable the
information.
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