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24108 Marketing Foundations

UTS
Chapter One - INTROUCTION TO M!R"#TIN$
Marketing set of institutions and processes for creating, communicating, delivering and
exchanging products of value for customers, clients, partners and society at large. Firms with a
market orientation perform better than firms without a market orientation. They have better
profits, sales volumes, return on investment and market share. Marketers must learn about the
needs and wants of customers. This is an ongoing process as customer preferences are
continually evolving. The best marketers are able to offer something that is unique or special to
customers e.g. pad.
!n example of marketing in action is !pple "td creating customer delight via market orientation
i.e. a focus on the customer. Moreover, with a clear focus on #ew $roduct !nalysis coupled by
market research the company is able to achieve this ob%ective. !pple has better profits, sales
volume return on investment and market share. The marketer has adopted marketing thinking via
mutually beneficial exchange with value creation for all parties, both parties expectations being
met and both parties benefit from the transaction.
&thics is a set of moral principles that guide attitudes and behaviour. 'orporate (ocial
)esponsibility is the material fact that businesses have a duty to act in the best interests of the
society that sustains them. They are obliged to act ethically, within the law and fulfil
requirements such as philanthropy, protecting the natural environment, providing products that
benefit society and generating employment and wealth. *antas+s corporate social responsibility
,-the spirit of !ustralia+. is used as leverage to earn more cash money via support of community
organisations such as 'lean up !ustralia, "and 'are and the $rime Minister+s /isability !wards.
The marketing organisation has not fulfilled its obligations to all stakeholders if it merely acts
within the law. The organisation must act in the best interests of most stakeholders such as
shareholders, employees, customers, partners and government.
Marketing can be used by not for profit organisations such as the (alvation !rmy that aims to
advance the welfare of the less fortunate and needy. This can be via ntegrated Marketing
'ommunications or promotion in online news media to generate donations to help the needy.
! contemporary product that demonstrates how marketers stimulate demand is phone. The
product+s augmentation such as special features that differentiates phone from competing
products e.g. a digital high definition camera which allows users to take pictures when they
want.
!dvertisements that are product focused include 0M1 -the ultimate driving machine+, while
advertisements that are customer focused include #!0 -more give less take.+
.
1 | M A R K E T I N G F O U N D A T I O N S
The Marketing %ro&ess
The marketing process involves answering two questions. The first question is what customers
we serve ,market segmentation and targeting.. The second question is how we best serve
targeted customers ,differentiation and positioning..
- Understand the marketplace and custmer needs and !ants
- Des"#n a custmer-dr"$en market"n# strate#%
- &nstruct an "nte#rated market"n# pr#ram that del"$ers super"r $alue
- 'u"ld pr(ta)le relat"nsh"ps and create custmer del"#ht
- &apture $alue *rm custmers t create pr(ts and custmer e+u"t%
Si'p(e Marketing Con&epts
- Needs, !ants and demands - prducts as )undles * )ene(ts, lk *r )est
$alue *r mne%
Needs - th"n#s that are $"tal *r sur$"$al e.#. hus"n#, *d and
!ater.
/ants - a nn-necessar% des"re e.#. des"#ner clthes and per*ume.
Demands - !ants )acked )% )u%"n# p!er
- 0rducts - 1ered t market t sat"s*% need r !ant 2e.#. #ds, e3per"ences,
place, "n*rmat"n4
- 5alue, sat"s*act"n and +ual"t%
5alue - custmer6s $erall percept"n * the ut"l"t% * a prduct
)ased n !hat "s rece"$ed and !hat "s #"$en. Ut"l"t% "s the
use*ulness * a prduct.
5 7 8ual"t%9 0r"ce
7 'ene(ts e3pected9 )ene(ts rece"$ed
&ustmer sat"s*act"n - e3tent t !h"ch perce"$ed per*rmance
meets e3pectat"ns
8ual"t% - h! !ell prducts sat"s(es !ant
- E3chan#e, transact"ns and relat"nsh"ps
E3chan#e - the mutuall% )ene(c"al trans*er * prducts * $alue
)et!een )u%er and seller. It "n$l$es:
1. $alue creat"n *r all part"es
;. )th part"es )ene(t *rm the transact"n
<. 'th part"es e3pectat"ns must )e met e.#. +ual"t% and
pr"ce.
An e3ample * an e3chan#e "s the &ancer &unc"l Austral"a runs Tele$"s"n
ad$ert"sements encura#"n# peple t prtect the"r sk"n *rm sun dama#e.
0eple )ecme a!are that the% shuld !ear prtect"$e clth"n# !hen "n the
sun. The &ancer &unc"l meets "ts )=ect"$es )ecause mre peple are
!ear"n# prtect"$e clth"n# !hen "n the sun. >n# term )ene(ts !"ll ar"se *r
sc"et% as the rate * sk"n cancer drps *r the Austral"an ppulat"n.
Transact"n - market"n#6s un"t * measurement? trade * $alue
; | M A R K E T I N G F O U N D A T I O N S
Relat"nsh"p market"n# - creat"n#, ma"nta"n"n# and enhanc"n#
strn# $alue-laden relat"nsh"ps !"th custmers and ther
stakehlders.
A market "s a #rup * custmers !"th heter#eneus needs and !ants e.#.
Ge#raph"c markets 2&h"na, Austral"a and the UK4, Dem#raph"c markets 2'a)%
)mers, Gen @ and Gen A4 and 0rduct markets 2!ater )ttle and pa"n k"ller4.
esigning Custo'er-ri)en Marketing Strateg*
- Market"n# mana#ement - Banal%s"s, plann"n#, "mplementat"n and cntrl *
pr#rams des"#ned t create, cmmun"cate and del"$er $alue t custmers
and *ac"l"tate mana#"n# custmer relat"nsh"ps "n !a%s that ena)le the
r#an"sat"n t meet "ts )=ects and thse * "ts stakehlders
Se(e&ti)e Custo'er to Ser)e
Demand mana#ement - understand and mn"tr nature * cnsumer demand?
)u"ld pr(ta)le relat"nsh"ps, cst * attract"n# ne! custmer "s ($e t"mes
h"#her than keep"n# e3"st"n# ne
&reat"n# e3c"tement
The Marketing #)o(ution
1. Trade 2)arter"n# and e3chan#e * prducts4.
;. 0rduct"n r"entat"n - !hat culd )e madeC Denr% Frd sa"d that B%u can
ha$e an% car that %u !ant as ln# as "t6s )lack 2)ecause )lack !as the
cheapest car t prduce4E
<. Sales r"entat"n - cnsumers !n6t )u% unless r#an"sat"ns undertake
lar#e-scale prmt"nal e1rts 2e.#. l"*e "nsurance4. BDe% cme and )u% the
)lue car, !e kn! %u can #et )lack )ut )lue "s )etterE sa%s the used car
salesman.
F. Market"n# r"entat"n - *cus n the custmer and (nd"n# ut !hat the% need
and !ant.
G. Sc"etal market r"entat"n- used as a sell"n# p"nt and le$era#e t tar#et
sc"all% a!are custmers ".e. &rprate Sc"al Respns")"l"t% and Eth"cs.
Se((ing and Marketing Con&epts
Con&ept Starting %oint Fo&us Means #nds
Se((ing Factory &xisting products (elling and
promoting
$rofits through
sales volume
Marketing Market 'ustomer #eeds ntegrated
Marketing
$rofits through
customer
satisfaction

%hi(osophies
- Sc"al market"n# cncept - )alance )et!een "deas * SO&IETA> 2DUMAN
/E>FARE4 H &OM0ANA 20ROFITS4 H &ONSUMERS 2SATISFA&TION4
%reparing an Integrated Marketing %rogra'
< | M A R K E T I N G F O U N D A T I O N S
- Outl"nes !h"ch custmers the cmpan% !"ll ser$e and h! "t !"ll create $alue
- De$elped t del"$er $alue t tar#et custmers
- 'u"lds relat"nsh"ps? cns"sts * market"n# m"3
Managing the Marketing Mi+
0RODU&T - #d, ser$"ce r "dea 1ered t the market *r e3chan#e.
0RI&E - the amunt * mne% a )us"ness demands "n e3chan#e *r "ts
prducts.
- 0ROMOTION - ad$ert"s"n#, persnal sell"n#, nl"ne market"n#
- 0>A&EMENT - channel mana#ement
- 0h%s"cal e$"dence - used t measure sat"s*act"n ".e. as ser$"ces are
"ntan#")le
- 0rcess - "n Ih"#h-cntact6 ser$"ces, custmers "n$l$ed "n creat"n# and
en=%"n# e3per"ences
- 0eple - man% ser$"ce e3per"ences "n$l$e "nteract"n# !"th peple?
relat"nsh"ps
Custo'er Re(ationship Manage'ent ,CRM-
- O$erall prcess * )u"ld"n# and ma"nta"n"n# pr(ta)le custmer relat"nsh"ps
)% del"$er"n# super"r $alue and sat"s*act"n
- Deals !"th all aspects * ac+u"r"n#, keep"n# and #r!"n# custmers
Re(ationship .ui(ding .(o&ks/ Custo'er 0a(ue and Satis1a&tion
- &ustmer perce"$ed $alue - e$aluat"n * d"1erence )et!een )ene(ts and
csts
- &ustmer sat"s*act"n - prduct6s perce"$ed per*rmance and )u%er6s
e3pectat"ns
Capturing 0a(ue 1ro' Custo'ers
- &reat"n# custmer l%alt% and retent"n - del"#hted custmers rema"n l%al
and !"ll tell thers a)ut the"r ps"t"$e e3per"ence !"th )rand? ls"n# a
custmer "s ls"n# mre than a sale
- Gr!"n# share * custmer - thru#h $ar"et% and crss-sell"n# e.#.
restaurants !ant Ishare * stmach6 !h"lst )anks !ant Ishare * !allet6
- 'u"ld"n# custmer e+u"t% - the cm)"ned d"scunted custmer l"*et"me $alue
* all a cmpan%6s current and ptent"al custmers
-
F | M A R K E T I N G F O U N D A T I O N S
Chapter T2o 3 M!R"#TIN$ #N0IRONM#NT
The Marketing &nvironment is all the internal and external forces that affect a marketer+s ability
to create communicate and deliver products of value. Marketers must influence their
environment. They use environmental analysis to break the marketing environment into smaller
bits to make it easier to understand. The interna( en)iron'ent is the people and processes
within an organisation that affect a marketer+s ability to create, communicate and deliver
products of value e.g. marketing information system and sales force.
The Micro environment "s the *rces !"th"n an r#an"sat"n6s "ndustr%. It "s nt
d"rectl% cntrlla)le )% the r#an"sat"n. It cns"sts * custmers, cl"ents,
cmpet"trs and partners.
0artners "nclude 2>F/ARS4 >#"st"c (rms 2stra#e and transprt4, (nanc"ers
2)ank"n# and "nsurance4, !hlesalers 2';'4, ad$ert"s"n# a#enc"es, reta"lers 2';&4
and suppl"ers. Marketers must ensure the"r prducts pr$"de the"r tar#et market
!"th #reater $alue than the"r cmpet"trs6 prducts.
The Ma&ro en)iron'ent is the forces outside of an organisation+s industry. t includes $olitical,
&conomic, (ocio cultural, Technological and "egal forces4
$olitical forces include lobbying for favourable treatment at the hands of government and
lobbying for favourable regulation.
&conomic forces are how much money individuals and organisations have to spend and how
they choose to spend it. They include prices, income and availability of credit.
G | M A R K E T I N G F O U N D A T I O N S
(ocio cultural factors affect people+s attitudes, beliefs, behaviours, preferences, customs and
lifestyles. (ocial 'ultural factors include demographics such as statistics about a population2 age,
gender, ethnicity, educational attainment and marital status. Furthermore, the natural
environment is an example of a social cultural theme that has recently emerged.
Technological forces allow a better way of doing things. Technology changes expectations and
behaviours of customers and clients and have huge effects on how suppliers work.
"egal factors include legislation enacted by elected officials. "aws and regulations fall under the
following categories2 privacy, fair trading, consumer safety, prices, contract terms and
intellectual property.
(ituational !nalysis involves assessing an organisation+s current position in the market place. !
marketing plan communicates how marketers plan to get from the current situation to where
senior management thinks the organisation should be.
Marketing 'etri&s are used to measure the current performance and the outcomes of past
activities. t includes )eturn on nvestment, 'ustomer satisfaction, Market share and 0rand
&quity.
-)eturn on investment 'ost and benefit analysis which takes into account sales volume,
marketing investment ,cost, share of voice. and bottom line ,profit, share of industry profit..
3'ustomer satisfaction3 churns ,the percentage of customers lost. and number of complaints
received4 resolved.
3Market share is defined as the percentage share of total industry profits including the percentage
improvement in the market share growth4 decline.
30rand equity3 awareness ,the percentage of the total target market. and loyalty ,repeat purchase
behaviour..
! (15T analysis is used to identify strengths ,those attributes of the organisation that help to
achieve its ob%ectives., weaknesses ,those attributes of the organisation that hinder it in trying to
achieve its ob%ectives.6 opportunities ,factors that are helpful to achieve the organisation+s
ob%ectives. and threats ,factors that are harmful to achieving the organisation+s ob%ectives..
(trengths and weaknesses are internal6 opportunities and threats are external..
S5OT !na(*sis o1 6antas
Strengths
- highest safety standard
J | M A R K E T I N G F O U N D A T I O N S
- employees strong commitment to the *antas 7roup
- #amed one of the world+s top airlines in the prestigious (kytrax 1orld !irline !wards.
-
5eaknesses
- operations deemed as inferior to competitors
- strikes
Opportunities
- transitioning the business from cost centres to profit centres
Threats
- (ecurity concerns
- ncreased competition
- The federal government+s 1orkplace )elations policy
- )ising fuel prices
-
Respond to the Marketing #n)iron'ent
Sme cmpan"es $"e! market"n# en$"rnment as uncntrlla)le, thers take n
en$"rnmental mana#ement perspect"$e.
Market"n# mana#ement shuld a"m t )e pract"$e rather than react"$e
!here$er pss")le
Chapter Three 3M!R"#T R#S#!RC7
Market )esearch ,M). is gathering information and knowledge about the market. For example,
a business that makes bird houses involves understanding, creating ,production and operations.,
communicating ,promotion e.g. on 'hannel #ine on T8 on a show such as The 8oice !ustralia.
and delivering ,e.g. a store such as 9mart or Target because older people are not as tech savvy..
The above stated market research process is interlinked and ongoing. Moreover, if a business
creates what it perceives to be a profitable product but if there are hardly any customers, then the
firm needs to do market research to find out why the consumers are not buying. The results of
market research are fed into a Marketing In1or'ation S*ste' ,MIS-8 which holds and
organises all of the organisation+s marketing information. The M( is in house ,internal
environment..
Market research involves five ma%or components2
- defining the research problem ,profit or sales related clause.
- designing the research methodology ,design. e.g. dropping prices by : per cent increases
sales by twenty per cent i.e. actionable results
- collecting data
- analysing data and drawing conclusions
- presenting the results and making recommendations.
1hat the research is intended to answer is known as the resear&h pro9(e' e.g. ;. why is
the sale of sultanas down at the $ymble 1oolworths< =. 1hy is !pple+s brand image taking
a hit< !s the research pro%ect proceeds the research problem may need to be redefined. !
market research brief should be prepared to guide the pro%ect. ! market research brief
specifies the research problem, the info required, the time frame and the budget. ! planned
K | M A R K E T I N G F O U N D A T I O N S
methodology to answer the research problem is known as the resear&h design. Types of M)
include exploratory, descriptive or causal research. #+p(orator* resear&h gathers more
information about a loosely defined problem e.g. a focus group. es&ripti)e resear&h is
used to solve well defined problem by clarifying more about certain phenomena e.g. healthy
product range for M' /onald+s *uick (ervice )estaurants ,food done fast. . Causa(
resear&h tests if a variable affects an outcome e.g. effect of coupons on pi>>a sales at $i>>a
?ut.
M) draws on two types of data. (econdary data is data already exists. %ri'ar* data gathers
specifically for the current research pro%ect. )esearch methods can be :uantitati)e or
:ua(itati)e resear&h. *uantitative research collects data that can be represented numerically and
analysed statistically. &xperimentation, neuroscience and observation are quantitative research
methods e.g. the survey. *ualitative research obtains rich and detailed info that underlie
observable behaviour. nterviews and focus groups are the most qualitative research methods.
M) tries to find out about the population by studying a small part of it and generalising the
results ,sample..
$robability sampling ensures every member of a population has a known chance of being
selected in the sample. #on $robability sampling provides no way of knowing the chance of a
member being selected in the sample.
5nce a research pro%ect has been designed, it must be implemented in compliance with the
design via pro%ect management. /ata must be carefully collected and organised so that it can be
efficiently analysed. *uantitative data can be statistically manipulated to identify trends and
patterns in the data. *ualitative data can be reduced to allow statistical analysis but much of the
rich detail can be lost. *ualitative data analysis can lead to further research in the form of
quantitative research. /ata analysis allows conclusions to be drawn and recommendations
formulated. The findings and recommendations of the market research pro%ect should be
presented in a concise and clear manner.
Two types of probability sampling methods are random sampling and stratified sampling. n a
random sample each member of the population has an equal opportunity of being for the sample.
n a stratified sample the population is divided into different groups based on some characteristic
e.g. age and gender and then from each groups a random sample is chosen.
Two types of non probability sampling methods are quota sampling and convenience sampling.
! quota sample divides the population into groups based on a number of characteristics. n a
convenience sample, participants are selected based on convenience e.g. interviewing your
friends and family for a pro%ect.
Unethi&a( 'arket resear&h e+a'p(es
(ugging selling under the guise of market research.
Frugging3 fund raising under the guise of market research.
L | M A R K E T I N G F O U N D A T I O N S
Chapter Thirteen 3 Internationa( Marketing
7lobalisation is the process via international individuals, organisations and government
become interconnected and similar. 0arriers have diminished facilitating greater
interconnections between different countries and their people. This has resulted in close
interdependence in terms of trade, finance, living standards and security.
M | M A R K E T I N G F O U N D A T I O N S
Chapter 4 3 Consu'er .eha)iour ,C.-
Factors influencing consumer behaviour (ummary
(ituational factors include physical, social, time, motivational and mood factors.
7roup factors3 cultural ,sub cultural and social class. and social ,reference groups, family, roles
and status..
ndividual factors3 personal ,demographics e.g. age, occupation and income6 lifestyle,
personality and self concept. and psychological ,motivation, perception, beliefs and attitudes and
learning..
Case Stud*/ Ne2 9usiness )entures 9ui(t on understanding &onsu'er 9eha)iour
,5oti14&o'-
'onsumer behaviour involves getting inside the heads of consumers and understanding their
psychological values. 1otif.com has clear target market i.e. nternational business travellers and
has built a business by selling last minute cheap hotels. f you see a target market not being
served, create a product and make cash money.

'onsumer behaviour is the study of the behaviour of individuals and households who buy
products for personal consumption. t provides an understanding of the reasons behind the
decisions consumers make which is central to creating an effective marketing mix. 'onsumer
behaviour is influenced by situational, group and individual factors. (ituational factors are the
circumstances in which consumers make purchasing decisions. They relate to physical, social,
1N | M A R K E T I N G F O U N D A T I O N S
time, motivation and mood factors. 7roup factors comprise cultural and social influences.
'ultural influences affect the behaviours of society2 culture, sub culture and social class. 'ulture
is the system of knowledge, values and beliefs by which society defines it. #ational cultures can
be described according to ?ofstede+s cultural dimensions2 power distance, uncertainty
avoidance, individualism, masculinity and long term orientation.
-%o2er distan&e3 the degree of inequality among people that is acceptable within a culture.
1estern societies tend to score low on power distance manifesting their relatively egalitarian
cultures, whereas !sian societies score high in power distance, reflecting greater social
inequality. "ess social inequality ,=@ per cent. #ew Aealand, !ustralia ,BC per cent., Dnited
(tates of !merica ,E@ per cent.6 more social inequality Fapan ,:: per cent., (ingapore ,G: per
cent. and ndia , GH per cent..
-Un&ertaint* a)oidan&e3 the extent to which people in a culture feel threatened by uncertainty
and relies on mechanisms to reduce it.
3ndividualism is the extent to which people focus on their goals over those of the group.
1estern societies are generally individualistic, whereas !sian societies are more collectivist.
3 Masculinity is the extent to which traditional masculine values ,e.g. status, assertiveness and
success. are valued over traditional feminine values ,solidarity, quality of life..
! sub culture is a group of individuals who share common attitudes, values and behaviours that
distinguish them from the broader culture in which they are immersed. ! social class is a group
of individuals who share common rank within the social hierarchy. (ocial influences are those
that influence an individual to conform to group norms. ! reference group is any group to which
an individual looks for guidance including membership, aspirational and dissociative reference
group. !n opinion leader is any reference group member who provides influential advice to
other group members. nnovators introduce innovations, early adopters including opinion leaders
drive adoption by early ma%ority, late ma%ority and laggards. Family influences are a vital
influence on consumer behaviour with many purchasing decisions made by certain members or
combinations of members of the household. $ersonal and psychological factors influence
consumer behaviour independently of social circumstances. $ersonal characteristics include
demographic, lifestyle and personality. $sychological characteristics include motivation which is
the internal drive to satisfy unfulfilled needs or achieve goals. !ccording to Maslow+s hierarchy
of needs individuals try to satisfy lower order biogenic needs such as food and sleep ahead of
higher order psychogenic needs such as learning< !nother psychological characteristic is
perception, how an individual manages meaning to external stimuli including marketing
communications. 0eliefs and attitudes are a vital influence on consumer behaviour as they
determine the context in which product evaluations are made. &ffective marketing needs to
appeal to the cognitive, affective and behavioural components of consumer attitudes. The
consumer decision making process comprises of need4want recognition, information search,
11 | M A R K E T I N G F O U N D A T I O N S
evaluation of options, purchase and post purchase evaluation. 'onsumer decisions involve
different levels of involvement2
3 ?abitual decision making involves low involvement such as buying bread and milk.
3 "imited decision making involve limited information to evaluate options e.g. buying
appliances and clothing.
3 &xtended decision making involve high involvement and is usually for once in a life time
purchase e.g. a car, wedding ring, house or wedding dress.
'ognitive dissonance is second thoughts about the wisdom of a purchase ,post purchase
evaluation4 regret..
1; | M A R K E T I N G F O U N D A T I O N S
Ro(es in the .u*ing %ro&ess
Chapter ;- .usiness .u*ing .eha)iour
The business market can be divided into reseller, producer, government and institutional
markets. )eseller markets comprise marketing intermediaries that buy products in order to sell
and lease them to another party for profit. $roducer markets comprise businesses and
professionals that buy products in order to produce other products, or in their daily business
operations. 7ovt markets comprise federal, state and local govt+s that buy products in order to
provide services to citi>ens. nstitutional markets comprise non public and not for profit
organisations that buy and sell products.
There are vital differences in the reflection of business markets and consumer markets. 0usiness
markets involve high value purchases ,lots of money., high volumes ,lots of money. and regular
repeat purchases. $rice and other conditions of the sale are open to negotiation. There are far
fewer buyers and sellers in business markets. $roducts alternatives are sub%ect to extensive
formal evaluation with decisions made by committees. The relationships between buyers and
sellers tend to be long term and involve extensive after sales support. /emand in business
markets tends to fluctuate much more than demand in consumer markets.
1< | M A R K E T I N G F O U N D A T I O N S
Many business products are used in the production of another product. This creates a situation of
%oint demand, where demand for one product is related to demand for another product. 0ecause
business products are one of many used in the production of other products, demand for them
tends to be relatively unresponsive to changes in price. This is known as inelastic demand.
/emand tends to be relatively inelastic within an industry but can be elastic in relation to
individual companies. 0usiness purchases take the form of a straight rebuy, modified rebuy or
new task purchase, each of which leads to different levels of engagement in the purchase
decision making process. The group of people who make business purchasing decisions is the
buying centre.
Chapter < 3 M!R"#T S#$M#NT!TION8 T!R$#TIN$ !N
%OSITIONIN$
(ellers can take three approaches to a market. Mass marketing is the decision to mass produce
and mass distribute product and attract all kinds of buyers. 5ne to one marketing is providing a
customised product to meet individual customer needs. Target marketing is creating a group of
customers with homogeneous needs and wants. The target marketing process involves market
segmentation, market targeting, market positioning. Market segmentation involves creating sub
groups within the total market that are homogenous. (egmentation variables used in consumer
markets include geographic, demographic, psychographic and behavioural.
n business markets, organisation si>e, product use and geography are used as segmentation
variables.
Market Seg'ents
1F | M A R K E T I N G F O U N D A T I O N S
- Se#mentat"n "n$l$es d"$"d"n# a market "nt d"rect #rup * )u%s !h m"#ht
re+u"re separate prducts r mark"n# m"3es? class"*%"n# custmers "nt
#rups !"th d"1erent needs, character"st"cs r )eha$"ur
- Ge#raph"c - #e#raph"cal un"ts such as nat"ns, re#"ns, ne"#h)urhd
- Dem#raph"c - $ar"a)les such as a#e, #ender, l"*e c%cle, "ncme ccupat"n,
rel"#"n
- 0s%ch#raph"c - sc"ecnm"c status, l"*est%le, persnal"t% character"st"cs
- 'eha$"ural - ccas"ns, )ene(ts su#ht, user status 2nn-user, (rst7t"me,
re#ular4, usa#e rate 2l"#ht, mderate, hea$%4, l%alt% status, )u%er-read"ness,
att"tude
- Business Markets - persnal character"st"cs, dem#raph"cs, perat"n#
$ar"a)les, purchas"n# appraches, s"tuat"nal *actrs
#)a(uate Market Seg'ents
- S"Oe and #r!th - anal%se data n current and pr=ected sales #r!th rates?
lar#e cmpan"es ma% !ant lar#e current sales and h"#h #r!th rates,
!hereas smaller cmpan"es ma% (nd "t t cmpet"t"$e
- Structural attract"$eness - cmpet"trs, p!er * )u%ers, su)st"tute prducts,
p!er * suppl"ers
- &mpan% )=ect"$es and resurces - e$aluate !hether se#ment (ts !"th
cmpan%6s #als and )=ects? !hether the cmpan% has resurces t # "nt
the se#ment
Targeting Strategies
- Und"1erent"ated market"n# - ne hm#enus market? ne market"n# m"3
- D"1erent"ated market"n# - se$eral markets? se$eral market"n# m"3es
2d"1erent prduct 1er"n#s4
- &ncentrated market"n# - ne tar#et market thu#h market "s
heter#eneus? ne market"n# m"3
i11erentiation and %ositioning
- 0rduct ps"t"n - !a% the prduct "s de(ned )% cnsumers n "mprtant
attr")utes
- 0s"t"n"n# strate#"es - prduct attr")utes, )ene(ts, usa#e ccas"ns,
a#a"nst9a!a% *rm cmpet"trs, prduct classes
Choosing and I'p(e'enting %ositioning Strateg*
- Ident"*% $alue d"1erences - perceptual mapp"n#, anal%se ps"t"n * )rand "n
m"nd * cnsumers, rat"n# )rands a#a"nst each ther
- Ident"*% cmpet"t"$e ad$anta#e - understand needs and )u%"n# prcesses?
del"$er mre $alue
Diferentiation
- 0rduct - per*rmance, st%le, des"#n, dura)"l"t%, rel"a)"l"t%, cns"stenc%
- Ser$"ces - del"$er%, "nstallat"n, repa"r, custmer ser$"ce, cnsult"n# ser$"ce
- 0ersnnel - h"r"n# and tra"n"n# )etter empl%ees than cmpet"trs
- Ima#e - )rand, s%m)ls and l#s, spnsrsh"p
1G | M A R K E T I N G F O U N D A T I O N S
Se(e&ting O)era(( %ositioning Strateg* ,%ositioning State'ent-
.rand=s 0a(ue %roposition 6ua(it* o1
%rodu&t>Ser)i&e
Cost
More for more Most upscale ?igher price
More for the same ,attack competitor+s
positioning.
'omparable quality6
more product4service
"ower price
(ame for less ,powerfully value
proposition.
(ame quality "ower price
"ess for much less "ess quality "ower price
More for less ,winning value proposition6
hard to maintain.
More quality6 more
product4service
"ower price
Co''uni&ating and e(i)ering the Chosen %roposition
- Market"n# m"3 e1rts must supprt the ps"t"n"n# strate#%
- 0s"t"n must )e mn"trs and adapted $er t"me t match chan#es "n
cnsumer needs and cmpet"trs6 strate#"es
Chapter ? 3 %ROUCTS
! product is a good, service or idea offered to the market for exchange. t can be tangible,
intangible or both. Marketers analyse products using the tota( produ&t &on&ept2 core, expected,
augmented and potential products.
Tota( %rodu&t Con&ept
-&re 0rduct - )as"c )ene(t )u#ht? e#. *r a car "t "s transprtat"n *rm A t
'. Fr c1ee "t "s ca1e"ne h"t4. Fr m)"le phnes "t "s cmmun"cat"n.
1J | M A R K E T I N G F O U N D A T I O N S
-E3pected 0rduct - prduct6s character"st"cs 2+ual"t% le$el, *eatures, st%l"n#,
)rand "ma#e and packa#"n#4.
-Au#mented 0rduct - )undle * )ene(ts that d"1erent"ates the prduct 2e.#.
!arrant"es, del"$er%4
e.#. *r a !ash"n# mach"ne "t culd )e !arrant"es, a dela% *unct"n and del"$er%.
Fr a m)"le phne "t culd )e a camera.
-0tent"al 0rduct- *eatures that are )e"n# de$elped and prtt%ped. e.#. ret"na
rec#n"t"n secur"t% *r a cred"t card.
A prduct can )e tangible and intangible #"$e e3amples * each.
A prduct that "s tan#")le and can )e del"$ered t the cnsumer "s a #d "t
"ncludes cmmd"t"es l"ke c1ee, tea, su#ar, salt and m"nerals.
A prduct that "s "ntan#")le and des nt "n$l$e !nersh"p "s a ser$"ce l"ke a
ha"r cut, "nsurance and a"r plane tra$el.
$roducts can be divided into &onsu'er produ&ts ,purchased by individuals and households. and
9usiness produ&ts ,purchased by an organisation to be used in its operations or in the
production of other products..
The concept of produ&t (i1e &*&(e says that a product passes via five stages2 new product
development, introduction, growth, maturity and decline.
Ne2 %rodu&t de)e(op'ent has eight stages2 idea generation, screening ,eliminating unviable
ideas., concept evaluation, marketing strategy, business analysis ,how the new product will
affect costs, sales and profits., product development, test marketing and commercialisation.
The product adoption process describes the stages via which a potential customer passes, first
becoming aware of the new product, then deciding to adopt4 buy the product. n this process the
consumer who accepts a new product passes via five stages2 awareness, interest, evaluation, trial
and adoption.
$roduct differentiation is the creation of products and attributes that distinguish one product
from one and another. Most of the differentiation occurs in the augmented product layer of the
total product concept. The design, brand image. (tyle, quality and features are the key product
attributes that can be used to differentiate products from competitors products.
0rand is the collection of symbols ,e.g. name, logo and slogan. intended to create a
differentiated image in the customer+s mind. 0rands play a ma%or role in the consumer+s choice
of a product, namely high involvement products, as well a highly popular brand with a good
reputation will more likely be chosen rather than a cheaper and unknown brand.
Consu'er %rodu&t C(assi1i&ations and Market Considerations
e1inition Custo'er
.u*ing
%ri&e istri9ution %ro'otion
1K | M A R K E T I N G F O U N D A T I O N S
.eha)iour
Con)enien&e
%rodu&ts
,Stap(e8 i'pu(se
and e'ergen&*
produ&ts-
&.g. toothpaste,
household items,
breakfast cereals
0ought
frequently, with
little engagement
in the purchasing
decision making
process.
Frequent
purchase, little
planning or
comparison, low
involvement
"ow
price
1idespread
distribution,
convenient
locations
Mass
promotion by
producer
Shopping
%rodu&ts
&.g. ma%or
appliances,
electronics,
clothes
Moderate to high
engagement based
on quality, price
and features.
"ess frequent,
much planning
and shopping
effort,
comparison of
brands on price,
quality and style
?ighe
r price
(elective
distribution
in fewer
outlets
!dvertising
and personal
selling by
both
producer and
resellers
Spe&ia(t*
%rodu&ts
&.g. luxury goods
Dnique
characteristics,
unique brand
identification,
willing to make
special purchase
effort
(trong brand
preference and
loyalty, little
comparison of
brands, low price
sensitivity
?igh
price
&xclusive
distribution
in one or few
outlets per
market area
'arefully
targeted
promotion by
both
producer and
resellers
Unsought
%rodu&ts
&.g. life
insurance, blood
donation, $est
control and
'rimsafe
9now about
products or
doesn+t normally
think of buying
"ittle product
awareness, little
product
knowledge, little
or even negative
interest
8aries 8aries easy
access
helpful
,online
distribution
advantageous
.
!ggressive
advertising
and personal
selling
%rodu&t Re(ationships
-0rduct "tem- a part"cular $ers"n * a prduct
-0rduct l"ne - set * prduct "tems related )% character"st"cs such as end use,
tar#et market, technl#"es and ra! mater"als
-0rduct m"3- set * all prducts that an r#an"sat"n makes a$a"la)le t
custmers.
%a&kaging
- Des"#n"n# and prduc"n# the cnta"ner r !rapper *r prduct
- Alter"n# packa#"n#, secndar%-use packa#"n#, cate#r% cns"stent packa#"n#,
"nn$at"$e packa#"n#, mult"ple packa#"n#, handl"n#-"mpr$ed packa#"n#
@a9e((ing
- 0art * packa#"n#, cns"st * pr"nted "n*rmat"n appear"n# n r !"th the
packa#e
1L | M A R K E T I N G F O U N D A T I O N S
.randing
- Add $alue t prduct, p!er*ul )rands ha$e cnsumer *ranch"se - cmmand
strn# cnsumer l%alt%
- 'rand e+u"t% - $alue * )rand )ased n e3tent t !h"ch "t has h"#h )rand
l%alt%, name a!areness, perce"$ed +ual"t%, strn# )rand assc"at"ns and
ther assets such as patents, trademarks and channel relat"nsh"ps
- 'rand mean"n#s - attr")utes 2)rand )r"n#s t m"nd attr")utes such as
prest"#e4? )ene(ts 2custmers )% *unct"nal and emt"nal )ene(ts4? $alues
2)rand sa%s smeth"n# a)ut )u%ers6 $alue4? persnal"t% 2)rand pr=ects
persnal"t%4
- 'rand spnsr dec"s"n - manu*acturers6 )rand, pr"$ate )rand, l"cens"n#, c-
)rand"n#
- 'rand strate#% - l"ne e3tens"n, )rand e3tens"n, mult")rands, ne! )rands
- 'rand reps"t"n"n# - need t chan#e prduct and "ma#e, chan#e att"tudes
and percept"ns t!ards )rands, need hu#e prmt"ns
@#CTUR# ?. 3 N#5 %ROUCTS
5hat is a Ne2 %rodu&t
- Ne! t the !rld 2e.#. "n$ent"ns4
1M | M A R K E T I N G F O U N D A T I O N S
5verview of
branding
decisions
- Ne! cate#r% entr% 2".e. tak"n# cmpan% t ne! cate#r%4
- Add"t"ns t prduct l"ne
- 0rduct "mpr$ements
- Reps"t"n"n# 2e.#. retar#eted *r ne! use r appl"cat"n e.#. Dettl hand
!ash H clean"n# a#ent4
- 5ar"at"ns * the a)$e 2e.#. ne! t a cuntr%, ne! t channel, packa#"n#
"mpr$ement4
Ne2 %rodu&t Su&&ess and Fai(ure
- Ne! custmer packa#ed #ds ra"l LNP * t"me, <<P * "ndustr"al prducts
*a"l at launch
- 0rducts ma% *a"l due t ne#at"$e percept"n, !rn# t"m"n#, pr market
research, pr cmmnctn
Ne2 %rodu&t e)e(op'ent ,N%- %ro&ess
14 Idea $eneration
- S%stemat"c search *r ne! prduct "deas
- Internal "dea surces *rmal research and de$elpment, cmpan%
sc"ent"sts, en#"neers, )ra"nstrm"n#
- E3ternal "dea surces cmpet"trs, custmers, d"str")utrs9suppl"ers,
market"n# "ntermed"ar"es
- Others e.#. trade ma#aO"nes, sh!s and sem"nars, ad$ert"s"n# a#enc"es,
market"n# research (rms
24 Idea S&reening
- Reduce num)er * "deas #enerated )% sptt"n# #d "deas and drpp"n# pr
"deas
- &r"ter"a ma% "nclude cmpan% )=ect"$es, prduct"n capa)"l"t"es, *eas")"l"t%
* tar#et market
A4 Con&ept e)e(op'ent and Testing
- 0rduct "dea - "dea *r pss")le prduct cmpan% can see "tsel* 1er"n# t
market
- 0rduct cncept - deta"led $ers"n * "dea stated "n terms mean"n#*ul t
custmers
;N | M A R K E T I N G F O U N D A T I O N S
- 0rduct "ma#e - !a% cnsumers perce"$e an actual r ptent"al prduct
- &ncept test"n# - prcess * test"n# prduct cncepts !"th a #rup * tar#et
custmers
44 Marketing Strateg* e)e(op'ents
- Des"#n"n# * "n"t"al market"n# strate#% *r ne! prduct
1. Descr")e tar#et market, planned prduct ps"t"n"n#, sales, market
share, pr(t #als
;. Outl"ne prduct6s planned pr"ce, d"str")ut"n and market"n# )ud#et
<. Descr")e planned ln#-run sales, pr(t #als and market"n#-m"3
strate#%
;4 .usiness !na(*sis
- Re$"e! * sales, csts and pr(t pr=ect"ns t (nd ut !hether the% sat"s*%
cmpan% )=ect"$es
- Assessment * (nanc"al )ud#ets, ptent"al markets and #r!th rate
<4 %rodu&t e)e(op'ent
- RQD r en#"neer"n# de$elps prduct cncept "nt ph%s"cal prduct
2prtt%pe r test run4
- De$elpment act"$"t"es prtt%pe, *eas")"l"t% test"n#, prel"m"nar% market
strate#"es
- >ar#e "n$estments
- Th"s sta#e !"ll sh! !hether prduct "dea can )e turned "nt !rka)le
prduct
?4 Test Marketing
- Intrduct"n * prduct and market"n# pr#ram "nt mre real"st"c market
sett"n#s
- &nsumer markets standard test markets 2*ree samples4? cntrlled test
markets 2lea$"n# prducts "n certa"n places4? s"mulated test markets 2tr%
sell"n# at part"cular en$"rnment4
- 'us"ness markets prduct use-test
84 Co''er&ia(isation
- Intrduc"n# ne! prduct "nt market
- Full scale prduct"n, *ull scale market"n#
- Inte#rat"n "nt the (rm
- &mpan% launch"n# prduct must dec"de /DEN, /DERE, TO /DOM and
DO/
;1 | M A R K E T I N G F O U N D A T I O N S
The %rodu&t @i1e C*&(e ,%@C-
Marketing @a2
The law imposes a number of duties on the marketer. &ach element of the marketing mix is
controlled in some way by the law, be it common law or by statute. They include2
- (57 legislation
- 'onsumer protection legislation
- 'onsumer credit legislation
- /ebt collection
- )estrictive trade practices legislation
- $rincipal and agency law
- $ law
- "aw of contract
- "aw of torts
;; | M A R K E T I N G F O U N D A T I O N S
Chapter 1ourteen- Marketing %(anning
Strategi& %(anning process of developing and maintaining a strategic fit between
organisations goals and capabilities in light of changing marketing opportunities
Marketing %(an )s4 .usiness %(an
-'us"ness plan "ncrprates plans * all )us"ness *unct"ns
-Market"n# plan *cuses n:
a. &ustmer ac+u"s"t"n, retent"n and re+u"red resurces
). Resurces re+u"red t "mplement spec"(c market"n# *unct"ns
c. &$ers ne %ear 2markets keep chan#"n#4
d. 5ar"es "n len#th
e. Shrtcm"n#s ma% "nclude lack * real"sm, "nsuRc"ent market,
shrt-run *cus
Contents o1 Marketing %(an
1. E3ecut"$e Summar% - )r"e* summar%, a"med at sen"r mana#ement, n
ln#er than a pa#e
;. &urrent market"n# s"tuat"n - )ack#rund data n tar#et market, prduct,
cmpet"t"n, d"str")ut"n and macr-en$"rnment
<. S/OT and Issue Anal%s"s - stren#ths H !eaknesses 2"nternal4, pprtun"t"es
H threats 2e3ternal4
F. O)=ect"$es - (nanc"al and market"n# )=ect"$es, Smart Measura)le
Ach"e$a)le Real"st"c T"me*rame
G. Market"n# Strate#% - spec"(c strate#"es *r tar#et markets, market"n# m"3,
market"n# e3pend"ture le$el, *ten cmes a*ter ps"t"n"n# strate#%
statement
J. Act"n 0r#rams - "mplementat"n, !hat !"ll )e dne, !hen, !h !"ll d "t
and h! much spentC
K. 0r=ected 0r(t-and->ss Statement - )ud#et !"th re$enue sh!"n# sales,
e3penses sh!"n# cst * prduct"n, d"str")ut"n and market"n#
L. &ntrls - mn"tr"n# plans pr#ress? cnt"n#enc% plan
;< | M A R K E T I N G F O U N D A T I O N S
%RICIN$8 CONSI#R!TIONS B !%%RO!C7#S
$rice is the amount of money charged for a product or service. s the only element in the
marketing mix that produces revenue, all other elements represent cost. t is used as a
competitive weapon.
I'portan&e o1 %ri&ing/
$ricing is getting more and more important due to better informed customers ,e.g.
through new media. and mistakes in companies+ communication
$ricing has a huge impact on competitors2
'ompetitors can expect effects from a price change that are twice as high as those from a
change in another marketing variable
Interna( Fa&tors !11e&ting %ri&ing/
Marketing O9Ce&ti)es/
survival
current profit maximi>ation ,short run.
market3share leadership ,long run.
product3quality leadership ,high prices.
'ompanies often have more than one ob%ective, which may lead to a conflict of interestsI
Co'pan* Resour&es/
si>e of the company
resources.
%ri&ing 2i(( 9e a 1un&tion o1 &osts/
fixed cost
variable cost
total cost
experience cost curves, costs decline over time as a result of accumulated production
experience
Marketing Mi+ Strateg*/
%rodu&t/
how important is the product<
is it part of a range or accessory<
quality<
%ro'otion/
who does the promotion<
is price a ma%or selling point<
%(a&e/
;F | M A R K E T I N G F O U N D A T I O N S
wholesale and retail margins store image
#+terna( Fa&tors !11e&ting %ri&ing e&isions/
The Market and e'and/
$ricing in different types of markets
'onsumer $erceptions of $rice and 8alue
$rice and /emand )elationship
$rice &lasticity of /emand ,sensitivity.
'ompetitor+s $rices and 5ffers
5ther &xternal Factors
7overnment regulations
"oyalty programs
%ri&ing 1or i11erent T*pes o1 Markets
%ure &o'petition
Market consists of many buyers and sellers with each having little influence on market
price
Trading of uniform commodity
Monopo(isti& &o'petition
Market consists of many buyers and sellers
)ange of prices occurs
O(igopo(isti& &o'petition
Market consists of a few sellers
(ellers are highly sensitive to each other+s pricing and marketing strategies
/ifficult for new sellers to enter the market
! pure 'onopo(*
'onsists of one seller
$ricing is handled differently in each case
e'and/
%ri&e and e'and Re(ationship
mapped on a demand curve
%ri&e #(asti&it* o1 e'and
how sensitive will demand be in relation to changes in price for your product<
;G | M A R K E T I N G F O U N D A T I O N S
$enera( %ri&ing !pproa&hes/
Cost-9ased pri&ing/
cost3plus pricing
breakeven analysis and target profit pricing
sets the floor for the price that the company can charge for its product
Co'petitor .ased %ri&ing/
economic value pricing
going3rate pricing
sealed3bid pricing
Re(ationship %ri&ing
special relationship
enrichment
shared risk and reward
.reak #)en !na(*sis and Target8 %ro1it %ri&ing/
determine the price at which it will break even
Target pri&ing
uses concept of a breakeven chart which shows total costs and total revenue expected at
different sales volume levels
setting the price to break even on the costs of making and marketing a product, or to
make the desired profit
0a(ue-.ased %ri&ing/
buyers+ perceptions of value are the key to pricing
use non3price variables to build up perceived value in the buyers+ minds
price is set to match the perceived value
;J | M A R K E T I N G F O U N D A T I O N S
Cost )s4 0a(ue-.ased %ri&ing/
Cost-.ased %ri&ing/
$roduct, design a new product
'ost, total the costs of making the product
$rice, sets a price that covers cost plus target profit
8alue, convince buyers that at the products value at that price %ustifies its purchase
'ustomers, purchase the products
0a(ue-.ased %ri&ing/
)everse of 'ost30ased $ricing
'ustomer
8alue
$rice
'ost
$roduct
Co'petition-.ased %ri&ing/
#&ono'i& 0a(ue %ri&ing
The price set by a company is lower than customers+ perceived value and lower than that of its
competitors.
$oing-Rate %ri&ing
$rice based largely on competitors+ prices, with less attention paid to its own costs or demand.
Sea(ed-9id>Tender
'ompany bases its price on how it thinks competitors will price ,e.g., %ob offers, governmental
tenders..
Ne2 %rodu&t %ri&ing/
Market-ski''ing pri&ing
(etting a high price for a new product
!ppropriate if2
(ales are less sensitive to price in early stages
'apacity constraints exist. &.g. !pple used for the pod a skimming strategy
Market3penetration pri&ing
(etting a low price for a new product
!ppropriate if2
(ales are very sensitive to price
$roduct faces strong potential competition. &.g. Microsoft used a penetration strategy for
5ffice J$ in =@@;
5hat is %ri&eD
;K | M A R K E T I N G F O U N D A T I O N S
- Amunt char#e *r a prduct r ser$"ce, r sum * $alues cnsumers
e3chan#e *r the )ene(ts * ha$"n# r us"n# the prduct r ser$"ce
- Onl% element * market"n# m"3 that prduces re$enue
- &mpr"sed * d"1erent cmpnents 2e.#. pr"ce * prduct"n, r%alt"es,
sh"pp"n#, la)ur4
- 0r"ce "s ad=usted acrss d"1erent prducts, t"mes and custmers 2e.#. ne!
prducts attract h"#her csts, d"scunts *r ch"ldren and pens"ners4
Fa&tors to Consider 2hen Setting %ri&es
Interna( Fa&tors !11e&ting %ri&ing
- Market"n# )=ect"$e sur$"$al, current pr(t ma3"m"sat"n, market-share,
prduct-+ual"t%
- &mpan% resurces, s"Oe * cmpan%
- Funct"n * csts - (3ed csts, $ar"a)le csts, ttal csts, e3per"ence cst
cur$es
- Market"n# m"3 strate#% - prduct, prmt"n, place
#+terna( Fa&tors !11e&ting %ri&ing e&isions
- 0r"c"n# "n d"1erent t%pes * markets
- &nsumer percept"ns * pr"ce and $alue
- 0r"ce and demand relat"nsh"p
- 0r"ce elast"c"t% 2h! sens"t"$e )u%ers are t pr"ce4
- &mpet"trs pr"ces and 1ers
%ri&ing in i11erent Markets
- 0ure cmpet"t"n - markets !"th )u%ers and sellers !"th l"ttle "nSuence n
market pr"ce 2e.#. petrl4
- Mnpl"st"c cmpet"t"n - man% )u%s and sellers, d"1erent prducts and
pr"ces
- Ol"#pl"st"c cmpet"t"n - *e! sellers, sellers h"#hl% sens"t"$e t each ther6s
pr"c"n# and market"n# strate#"es, d"Rcult *r ne! sellers t enter market
- 0ure mnpl% - ne seller, pr"c"n# handled d"1erentl% "n each case 2e.#.
Austral"a 0st4
;L | M A R K E T I N G F O U N D A T I O N S
e'and
- 0r"ce and demand relat"nsh"p can )e mapped n demand cur$e
- 0r"ce elast"c"t% sh!s h! sens"t"$e demand "s "n relat"n t chan#es "n pr"ce
$enera( %ri&ing !pproa&hes
- &st-)ased - cst-plus pr"c"n#? )reak e$en anal%s"s and tar#et pr"c"n#
- 5alue )ased - )u%ers6 percept"ns * $alue? nn-pr"ce $ar"a)les )u"ld up
perce"$ed $alue "n )u%ers6
- &mpet"tr )ased - ecnm"c $alue 2cst l!er than cmpet"trs and l!er
than perce"$ed $alue4? #"n#-rate 2pr"ces clse t cmpet"trs4? sealed-
)"d9tender 2h! "t th"nks cmpet"trs !"ll pr"ce4
- Relat"nsh"p pr"c"n# - used !hen there are *e! custmers? shared r"sk and
re!ard
Ne2 %rodu&t %ri&ing
- Market sk"mm"n# - h"#h pr"ce *r ne!9"nn$at"$e prduct, sales less sens"t"$e
t pr"ce, apprpr"ate "* capac"t% cnstra"nts e3"st, cnsumers ma% !a"t *r
pr"ces t *all
;M | M A R K E T I N G F O U N D A T I O N S
- Market penetrat"n - l! pr"ce *r ne! prduct, sell lar#e +uant"t"es, sales
sens"t"$e t pr"ce, prduct *aces strn# ptent"al cmpet"t"n, d"Rcult t ra"se
pr"ces as prduct perce"$ed as l! +ual"t%
%ri&e !dCust'ent Strategies
- D"scunt pr"c"n# and all!ances - #enerate mre sales $lume
- Se#mented9d"scr"m"natr% pr"c"n# - cncess"ns *r students, cheaper t"mes
* da%
- 0s%chl#"cal pr"c"n# - T1.MM "nstead * T;.NN, us"n# the Iluck%6 num)er L "n
&h"na
- 0rmt"nal pr"c"n# - create a!areness * prduct
- 5alue pr"c"n# - accrd"n# t del"$ered $alue 2e.#. planes (rst, )us"ness and
ecnm% classes
- Ge#raph"c pr"c"n# - transprtat"n csts "ncreas"n# cst * #ds
- Internat"nal pr"c"n# - certa"n prducts mre ppular "n d"1erent cuntr"es
<N | M A R K E T I N G F O U N D A T I O N S
@#CTUR# < 3 S#R0IC#S M!R"#TIN$
5hat are Ser)i&esD
- BActs, per*rmances, and e3per"encesE? Bdeeds, prcesses and
per*rmancesE? Bact"$"t"es, )ene(ts, and sat"s*act"ns, !h"ch are 1ered *r
sale r are pr$"ded "n cnnect"n !"th the sale * #dsE
- Service Industry cre prduct "s ser$"ce e.#. a"rl"nes 2T&G4
- Service Products "ntan#")le prduct 1er"n#s e.#. De!lett-0ackard
cnsultanc%
- Customer Service supprts the cmpan%6s cre prducts, *ten *ree
- Ser$"ce as a prcess !hen there "s: peple prcess"n#, pssess"n
prcess"n#, mental st"mulus prcess"n# r "n*rmat"n prcess"n#
I7I% Fra'e2ork 3 Intangi9i(it*
- &annt )e stred, demand d"Rcult t mana#e
- Nt prtected )% patents? can )e cp"ed
- Nt eas% t d"spla% r cmmun"cate? +ual"t% d"Rcult t assess
- D"Rcult t pr"ce
- Slut"ns - tan#")le cues? ph%s"cal e$"dence? persnal surces * "n*rmat"n?
create strn# reputat"n9r#an"sat"nal "ma#e 2TQG create strn# reputat"n
*r +ual"t%? making customers feel a million dollars and passing on word of
mouth to others4
I7I% Fra'e2ork 3 7eterogeneit*
- 0eple are nt mach"nes? n t! ser$"ces !"ll )e e3actl% al"ke 2hair dressers
cut diferently depending on person and their mood4
- D"Rcult t measure and cntrl ser$"ce +ual"t%
- Slut"ns - custm"sat"n t ma3"m"se pr(ts? standard"sat"n *r *aster,
cheaper, mre cns"stent ser$"ce? sta1 tra"ned "n ser$"ce rec$er% 2teaching
standard techniques which can be put together diferently to ofer a
customised haircut4
I7I% Fra'e2ork 3 Insepara9i(it*
- &ustmer and ser$"ce representat"$e at the same place and t"me 2customers
highly inoled in haircuts! need to cooperate e"g" turning head to one side4
- Mass prduct"n * ser$"ces "s d"Rcult, "* at all pss")le
- Other custmers ma% )e "n$l$ed "n the prduct"n prcess 2e.#. c"nemas4
<1 | M A R K E T I N G F O U N D A T I O N S
- Ser$"ce +ual"t% depends n !hat happens "n real t"me
- Slut"ns - care*ul select"n and r"#rus tra"n"n# * ser$"ce persnnel?
strate#"es t mana#e cnsumers 2T&G #reatie $cademy! apprenticeships%
I7I% Fra'e2ork 3 %erisha9i(it*
- Ser$"ces cannt )e "n$entr"ed 2at T&G each hair dresser can do &' haircuts
a day4
- &annt )e returned - ser$"ce rec$er% "s mre d"Rcult
- Mana#"n# suppl% and demand a challen#e 2no bookings mean that time is
gone! cannot get it back4
- Slut"ns - keep"n# custmers I"n stck6 2resere bookings if another
customer cancels booking4 ? de$elpment * ser$"ce rec$er% strate#"es?
creat"$e mana#ement * suppl% and demand
The ?%s - %rodu&t
- Ser$"ce prducts are the cre * ser$"ce market"n# strate#% 2the haircut
itself4
- Supplementar% elements are $alue-added enhancements 2e"g" label"M hair(
care range4
The ?%s 3 %(a&e ,and Ti'e-
- Ser$"ce d"str")ut"n can take place thru#h ph%s"cal and nn-ph%s"cal
channels
- Sme (rms can use electrn"c channels t del"$er all r sme * the"r ser$"ce
elements 2e.#. "n*rmat"n )ased ser$"ces can )e del"$ered almst
"nstantaneusl% electrn"call%4
- Del"$er% dec"s"ns - !hen, !here, h!
- &n$en"ence * place and t"me * #reat "mprtance as custmers are
ph%s"call% present 2e"g" salons in conenient places4
The ?%s 3 %ri&e
- Generates "ncme *r the (rm? ke% part * csts t )ta"n !anted )ene(ts *r
cnsumers
- F"rms need t m"n"m"se nn-mnetar% csts t custmers 2e"g" time waiting!
)nding parking spot! unwanted physical efort of getting to salon4
The ?%s 3 %ro'otion
- 0r$"des "n*rmat"n and ad$"ce 2promotions at hair e*pos4
- 0ersuades the tar#et custmers * mer"t * ser$"ce prduct r )rand 2e"g"
adertising in maga+ines4
- Encura#es custmer t take act"n at spec"(c t"me 2discount coupons in
maga+ines! &', discounts to students4
- &ustmers ma% )e "n$l$ed "n c-prduct"n and tau#ht h! t m$e
e1ect"$el% thru#h ser$"ce prcess and shape custmers6 rles and mana#e
the"r )eha$"ur
<; | M A R K E T I N G F O U N D A T I O N S
The ?%s 3 %ro&ess
- Actual prcedure, mechan"sms and S! * act"$"t"es thru#h !h"ch ser$"ce "s
del"$ered
- >en#th: num)er * steps
- Durat"n: t"me "t takes
- >#"st"cal e1ect"$eness: smthness "n del"$er%
- Ser$"ce del"$er% ma% *ll! standard"sed prcedure that cmpr"ses a num)er
* act"$"t"es
- Act"$"t"es ma% ccur frontstage 2"n $"e! * custmer4 r backstage 2nt
seen4 e"g" frontstage at T&G is the process of the wash! haircut and blow(dry-
backstage is washing the t!els
The ?%s 3 %h*si&a( #)iden&e
- Sett"n# !here ser$"ce "s del"$ered? tan#")le cmpnents
- Ser$"cescapes - ph%s"cal en$"rnment !here the custmer and pr$"der
"nteract 2the salon4
- An% tan#")le cmpnents that *ac"l"tate per*rmance r cmmun"cat"n *
the ser$"ce 2the shampoos used! the scissors and other tools4
- The "ntan#")"l"t% * ser$"ce 1er"n#s makes tan#")le cues an essent"al part *
the ser$"ce prcess
The ?%s 3 %eop(e
- All humans !h pla% a rle "n ser$"ce del"$er% !h "nSuence the percept"ns
* custmers
- Ser$"ce del"$er% empl%ees 2*rnt-l"ne sta14 the hairdressers themseles
- General sta1 * the ser$"ce cmpan% 2the receptionist when making a
booking4
- The custmer
- Other custmers present "n the ser$uct"n 2ser$"ce-prduct"n4 and del"$er%
prcess
<< | M A R K E T I N G F O U N D A T I O N S
Ser)i&e as a %ro&ess/ I'p(i&ations
- 0eple prcess"n# - custmers must ph%s"call% enter the Iser$"ce *actr%6 and
cperate !"th ser$"ce perat"n? mana#ers must th"nk a)ut prcess and
utput *rm custmers6 perspect"$e
- 0ssess"n prcess"n# - custmers less ph%s"call% "n$l$ed? prduct"n and
cnsumpt"n are separa)le
- Mental st"mulus prcess"n# - eth"cal standards re+u"red as custmers can )e
man"pulated? ph%s"cal presence nt re+u"red? cre cntent * ser$"ce "s
"n*rmat"n )ased? can )e "n$entr"ed
- In*rmat"n prcess"n# - mst "ntan#")le ser$"ce utput? trans*rmed "nt
endur"n# *rms * ser$"ce utput? l"nk )et!een "n*rmat"n prcess"n# and
mental st"mulus prcess"n# can )e )lurred
Using ?%s 1or Ser)i&es Strateg*
- O$erall strate#"c assessment - h! e1ect"$e "s a (rm6s ser$"ces market"n#
m"3? "s the m"3 !ell al"#ned !"th $erall $"s"n and strate#%? !hat are
stren#ths9!eaknesses "n terms * K0sC
- Spec"(c ser$"ce "mplementat"n - !h "s custmer? !hat "s the ser$"ce? h!
e1ect"$el% des the ser$"ces market"n# m"3 *r a ser$"ce cmmun"cate "ts
)ene(ts and +ual"t%? !hat chan#es neededC
Ser)i&es Marketing/ "e* Cha((enges
- D! can ser$"ce +ual"t% )e de(ned and "mpr$ed
- Des"#n"n# and test"n# ne! ser$"ces t take "nt accunt "ntan#")"l"t%
- &mmun"cat"n and cns"stenc% * "ma#e
- Deal"n# !"th demand Suctuat"n
- Strate#"c and tact"cal dec"s"n mak"n# !hen "nter-*unct"nal crd"nat"n "s
re+u"red
- 'alance )et!een custm"sat"n and standard"sat"n
- Susta"na)le cmpet"t"$e ad$anta#e
- &mmun"cat"n# the $alue and +ual"t% * smeth"n# "ntan#")le t custmers
- Del"$er"n# ser$"ce +ual"t% !hen empl%ees and custmers cntr")ute t "t
themsel$es
<F | M A R K E T I N G F O U N D A T I O N S
@#CTUR# 8 - %@!C#M#NT
Marketing @ogisti&s Net2ork
- Trad"t"nall% ph%s"cal d"str")ut"n? tda% "ncludes l#"st"cs, market"n#
l#"st"cs, "nte#rated l#"st"cs mana#ement, suppl%-cha"n mana#ement and
mater"als mana#ement and ph%s"cal d"str")ut"n
- Includes prcur"n# "nputs 2e.#. ra! mater"als, e+u"pment, cap"tal4 and
cn$ers"n t (n"shed prducts and cn$e%"n# them t end users
- Net!rk pla%ers suppl"ers, purchas"n# a#ents, manu*acturer, marketers,
transprt a#enc"es, end-cnsumer
- Other 06s
0rduct - $ar"at"n 2clur, s"Oe, *eatures4 ma% "mpse )urden n
d"str")ut"n *ac"l"t"es
<G | M A R K E T I N G F O U N D A T I O N S
0rmt"n - campa"#ns must reSect l#"st"cs del"$er%
0r"c"n# - surce * d"1erent"al ad$anta#e )ased n super"r
l#"st"cal ser$"ce, need t cmpare the pr"ce end-user !"ll pa% *r
each channel
Marketing Channe(s
- D"str")ut"n channels are the path!a%s that cmpan"es use t sell the"r
prducts t end-users
- Net!rk * "nterdependent r#an"sat"ns mak"n# prduct9ser$"ce a$a"la)le
*r use9cnsumpt"n
- Intermed"ar"es are r#an"sat"ns l"nk"n# prducers t ther "ntermed"ar"es r
t the custmer thru#h cntractual arran#ements t purchase and resale
prducts
5h* Marketing Inter'ediaries are Used
- &st - manu*acturer "s pa"d "mmed"atel% re#ardless * !hether prducts are
e$entuall% sld
- Increased c$era#e
- &nsumer cn$en"ence - cnsumers # t
nce place
- &ustm"sed appraches t custmer needs
- Greater eRc"enc% and e1ect"$eness
- Impr$ed market"n# e1rt
- Reduct"n * num)er * channel
transact"ns
Marketing Channe(s adding 0a(ue
- In*rmat"n - #ather"n# and d"str")ut"n# market"n# research and "ntell"#ence
- 0rmt"n - de$elp"n# and spread"n# cmmun"cat"ns a)ut an 1er
- &ntact - (nd"n# and cmmun"cat"n# !"th prspect"$e )u%ers
- Match"n# - shap"n# and (tt"n# the 1er t the )u%er6s needs
- Ne#t"at"n - reach an a#reement n pr"ce and ther terms * the 1er s
that !nersh"p r pssess"n can )e trans*erred
- 0h%s"cal d"str")ut"n - transprt"n# and str"n# #ds
- F"nanc"n# - ac+u"r"n# and us"n# *unds t c$er the cst * the channel !rk
- R"sk tak"n# - assum"n# the r"sks * carr%"n# ut the channel !rk
Channe( Organisation 3 0erti&a( Marketing Net2orks ,0NM-
- In*rmat"n - #ather"n# and d"str")ut"n# market"n# research and "ntell"#ence
- &ns"sts * suppl"ers, !hlesalers, reta"lers act"n# as un"(ed net!rk
- Net!rk can )e nm"nated )% e"ther the suppl"er, !hlesaler r reta"ler
-
-
<J | M A R K E T I N G F O U N D A T I O N S
'onsumer Marketing 'hannels
-
-
-
-
-
-
-
-
-
- T%pes * 5MN "nclude crprate, cntractual r adm"n"stered
Choosing a istri9ution Mode(
- Ne! prducts - needs t )e "ntrduced )% demnstrat"n and e3planat"n,
retailers not appropriate- ne! tls and e+u"pment need d"rect market"n#
thru#h commission agents 2'U'4
- Small custmer )ases - read"l% access")le custmers ha$e wholesalers r
distributors tar#et custmers *r d"rect sales thru#h commission agents-
direct sales can help ma3"m"se pr(ts and create #d custmer
relat"nsh"ps
<K | M A R K E T I N G F O U N D A T I O N S
- 0ersnal"sed ser$"ce - local dealer network r reseller program t pr$"de
ser$"ce
- 'u%"n# nl"ne - e(commerce website t sell d"rect? sell t online retailer or
distributor
- O!n spec"al"sed sales team - lk *r sales prspects and clse deals d"rectl%
!"th custmers
Retai(ing
- Reta"l"n# - act"$"t"es "n$l$ed "n sell"n# #ds r ser$"ces d"rectl% t (nal
cnsumers *r the"r persnal, nn-)us"ness use
- Reta"lers - )us"nesses !hse sales cme pr"mar"l% *rm reta"l"n#? class"(ed
thru#h:
Retai(er Marketing e&isions ,Strateg*- 3 Target Market and %ositioning
- 0rduct 2and ser$"ce assrtment4 - dec"de n prduct $ar"a)les * prduct
assrtment, ser$"ces m"3 and stre atmsphere
- 0r"ce - pr"ce pl"c% must (t tar#et market and ps"t"n"n#, prduct and
ser$"ce assrtment and cmpet"t"n? e"ther h"#h mark-ups n l!er $lume
r l! mark-ups n h"#her $lumes
- 0rmt"n - use an% r all * prmt"n tls 2ad$ert"s"n#, persnal sell"n#,
sales prmt"n, pu)l"c relat"ns and d"rect market"n#4? !e)s"tes 1er"n#
"n*rmat"n and sell"n# d"rect
- 0lacement - &'D, shpp"n# centres 2re#"nal and str"p4, clusters * reta"lers
"n cmmerc"al )u"ld"n#s r near htels, Id "t %ursel*6 reta"l parks,
enterta"nment centres, arcades and cn$ers"n * h"str"cal )u"ld"n#s
<L | M A R K E T I N G F O U N D A T I O N S
5ho(esa(ing
-All act"$"t"es "n$l$ed "n sell"n# #ds and ser$"ces t thse )u%"n# *r resale
r )us"ness use
-/hlesalers per*rm ne r mre *unct"ns: sell"n# and prmt"n#, )u%"n#
and assrtment )u"ld"n#, )ulk )reak"n#, !arehus"n#, transprtat"n,
(nanc"n#, r"sk )ear"n#, market "n*rmat"n, mana#ement ser$"ces and ad$"ce
<M | M A R K E T I N G F O U N D A T I O N S
T*pes o1 5ho(esa(ers
-Merchant !hlesalers - "ndependentl% !ned )us"ness that take t"tle t the
merchand"se the% handle? lar#est s"n#le #rup * !hlesalers
-Full ser$"ce !hlesalers - pr$"de *ull set * ser$"ces 2e.#. carr%"n# stck,
us"n# sales-*rce, 1er"n# cred"t, mak"n# del"$er"es and pr$"d"n#
mana#ement ass"stance4
->"m"ted ser$"ce !hlesalers - cash and carr% !hlesalers, trust !hlesalers,
drp sh"ppers rack =))ers, prducers6 cperat"$es, ma"l rder !hlesalers
-'rkers - )r"n#s )u%ers and seller t#ether and ass"sts ne#t"at"n? pa"d )%
part"es h"r"n# them? d nt carr% "n$entr% r #et "n$l$ed "n (nanc"n# nr
assume r"sk
-A#ents - represent )u%ers r sellers n a mre permanent )as"s? there are
214 manu*acturer6s a#ent 2;4 sell"n# a#ent 2<4 purchas"n# a#ent 2F4
cmm"ss"n merchant
No (e&ture E 3 @a9our a* ho(ida*
FN | M A R K E T I N G F O U N D A T I O N S
@#CTUR# 10 3 INT#$R!T# M!R"#TIN$ COMMUNIC!TION/
!0#RTISIN$
1hat is promotion< ?ow do marketing communication activities assist the other elements of the
marketing mix in an organisationKs marketing strategy<
$romotion is the marketing communication that makes potential customers, partners and society
aware and attracted to the benefits of a businessKs products. t comprises of a strategic mix of
advertising, public relations, sales promotion and personal selling. $romotion sends messages
about other parts of the marketing mix mix2 product, pricing and distribution.
Integrated Marketing Co''uni&ation
- 'oordination of organisation+s promotional efforts
- Dse ma%or communication elements such as advertising, sales promotion, public
relations, direct and online marketing, personal selling.
- Meets ob%ectives such a to inform, persuade and remind customers
?ow does the model of communication help in explaining how an advertisement works<
!nalyse a current advertising campaign in your answer.
The communication process2 a message is encoded and sent by a sender via a message channel
to a target audience who decodes the message and responds by some form of feedback. !nything
that gets in the way of the effective communication process is known as noise. The !!M
advertisement where )honda is on the beach with 9etut is very effective in communicating that
with !!M you save so much that you can go on a holiday.
e1inition .ene1its @i'itations
!dvertising
$aid, non3personal
presentation and
promotion of ideas, goods
or services by an
identified sponsor
- 'ost efficient
- )epeats message
- 'an control message
- 'reate favourable
images
- Dard t measure
e1ect"$eness
- Dela%ed *eed)ack
- &red")"l"t% pr)lems
- &lutter "n med"a
(ales
$romotion
(hort3term incentives,
encourage purchase6
alters price3value
relationship
- Appeal t pr"ce-
sens"t"$e
- Generate e3tra
"nterest
- &an measure e1ect
- Shrt-term "mpact
- Desn6t cntr")ute
t )rand "ma#e
- 0rmt"nal !ars
$ublic
)elations
#on3personal
communication in news
story form through
medium for free
- Mre cred")le
- >! cst
- >ack * cntrl
- &an )e ne#at"$e
F1 | M A R K E T I N G F O U N D A T I O N S
#(e'ents in the Co''uni&ation %ro&ess
F; | M A R K E T I N G F O U N D A T I O N S
@e&ture E/
Marketing @ogisti&s Net2orks/
Managing the network of players providing customer fulfillment, ranging from2
suppliers ,raw materials, components and capital equipment.
purchasing agents
manufacturer
marketers
transport agencies
end3consumer ,managing their expectations.
Marketing @ogisti&s Net2ork and the Other %=s
%rodu&t/
variations ,colour, si>e, features, styles.
may impose a burden on distribution facilities
%ro'otion/
campaigns must reflect logistics delivery
%ri&ing/
a source of differential advantage based on superior logistical service
if you use multiple channels, compare the price that the end3user will pay6 if a customer
can buy from one channel at a lower price than another, your partners will rightfully have
concerns.
Marketing Channe(s/
! set of interdependent organisations involved in the process of making a product or service
available to users.
/istribution channels are the pathways that companies use to sell their products to end3
users.
#etwork of interdependent organisations ,or intermediaries.
making product or service available for use or consumption
ntermediaries are organisations linking producers to other intermediaries or to the
customer through contractual arrangements to purchase and resale products ,i.e. transport
companies, /an Murphy+s.
7o2 Marketing Channe(s !dd 0a(ue/
nformationLgathering and distributing marketing research and intelligence.
$romotionLdeveloping and spreading communications about an offer.
'ontactLfinding and communicating with prospective buyers.
MatchingLshaping and fitting the offer to the buyer+s needs, including such activities as
manufacturing, grading, assembling and packaging.
F< | M A R K E T I N G F O U N D A T I O N S
#egotiationLreaching an agreement on price and other terms of the offer so that
ownership or possession can be transferred.
$hysical distributionLtransporting and storing goods.
FinancingLacquiring and using funds to cover the costs of the channel work.
)isk takingLassuming the risks of carrying out the channel work.
@e)e(s and Channe( Con1(i&t/
'hannel level is a layer of intermediaries who perform some work in bringing the product and its
ownership closer to the final buyer.
'hannel ;, manufacturer 'onsumer ,no intermediary levels.
'hannel =, manufacturer )etailer 'onsumer
'hannel B, manufacturer 1holesaler )etailer 'onsumer
'hannel conflict is the disagreement among marketing channel level members on goals and
roles, on who should do what and for what rewards.
Channe( Organisation/
0erti&a( Marketing Net2orks ,0MN- are a distribution channel structure in which producers,
wholesalers and retailers act as a unified network, one channel member owns the others.
8ertical Marketing #etworks ,8M#. consists of2
suppliers
wholesalers
retailers acting as a unified network
The vertical marketing network can be dominated by the suppliers, wholesaler or retailer.
T*pes o1 0MN/
corporate, combines successive stages of production and distribution under single
ownership
contractual, independent firms at different levels %oin together to obtain economies of
scale
wholesaler3sponsored voluntary chain, wholesalers organise voluntary chains of
independent retailers to help them compete with large corporate chain organisations
retailer cooperatives, retailers organise a new, %ointly owned wholesale business
franchise organisation, a channel member called a franchisor links several stages in
the production3distribution process
administered, coordinates successive stages of production and distribution, not through
common ownership but through the power of one of the parties
Retai(ing
!ll activities involved in selling goods or services directly to final consumers for their personal,
no3business use.
Retai(ing C(assi1i&ation/
)etail stores can be classified four ways2
!mount of (ervice2
FF | M A R K E T I N G F O U N D A T I O N S
self service retailer, provides few or no services to shoppers, shoppers perform their own
locate3compare3select process, e.g. discount stores
limited service retailer, provides only a limited number of services to shoppers, e.g.
smaller hardware chains
full service retailer, provides a full range of services to shoppers, e.g. first class
department stores
$roduct "ine
specialty store, carries a narrow product line with a deep assortment within that line
combination store, a combined grocery and general merchandise store
department store, carries a wide range of product lines, each line is operated as a separate
department managed by specialist buyers or merchandisers
supermarket, a large, low cost, low margin, high volume, self service store that carries a
wide variety of food, laundry and household products
convenience store, a small store located near a residential area, open long hours seven
days a week, carrying a limited line of high turnover convenience goods
superstore, twice the si>e of a supermarket carrying a large assortment of routinely
purchased food and no food items and services such as dry cleaning
service business, the product line is a service, e.g. hotels, airlines and restaurants
)elative $rices
discount stores, sells at lower prices, accepting lower margins and selling at higher
volume
off price retailer, buys at less than regular wholesale prices and sells at less than retail
/F5, carries the manufacturer+s surplus, discontinued or irregular goods
independent off3price retailer, owned and run by an entrepreneur
warehouse club, sells a limited selection of brand name grocery items, appliance and
clothing at discounts to members who pay an annual membership fee
5rganisational !pproach
chain store, two or more outlets that are commonly owned and controlled and employ
central buying and merchandising
voluntary chain, a wholesaler sponsored group of independent retailers that engages in
group buying and common merchandising
a contractual association between a manufacturer, wholesaler or service organisation and
independent business people who buy the right to own and operate a franchise system.
Retai(er Marketing e&isions/
Target Market and %ositioning e&ision
must define their target markets and then decide how to position themselves.
until they define and profile their markets, retailers cannot make consistent decisions
about product assortment
%rodu&t and Ser)i&e !ssort'ent e&ision
FG | M A R K E T I N G F O U N D A T I O N S
)etailers must decide on three main product variables2
product assortment
services mix
store atmosphere
%ri&e e&ision
a retailer+s price policy must fit its target market and positioning, product and service
assortment, and competition.
most retailers seek either high markups on lower volumes or low mark3ups on higher
volumes.

%ro'otion e&ision
use any or all of the promotion tools advertising, personal selling, sales promotion, public
relations and direct marketing to reach consumers.
most retailers have also set up websites offering customer information and other features
and often sell merchandise directly.
%(a&e'ent e&ision
'entral 0usiness /istrict ,'0/.
(hopping 'entres
regional shopping centres.
strip shopping centres.
5ther types of store clusters include2
clusters of retailers in commercial buildings or surrounding ma%or hotels.
-/o it yourself+ retails parks.
entertainment centres.
arcades and the conversion of historical buildings.
5ho(esa(ing
1holesaling includes all activities involved in selling goods and services to those buying for
resale or business use. 1holesalers are performing one or more of the following functions2
selling and promoting
buying and assortment building
bulk breaking
warehousing
transportation
financing
risk bearing
market information
management services and advice
T*pes o1 5ho(esa(ers/
Merchant 1holesalers
independently owned businesses that take title to the merchandise they handle. The
largest single group of wholesalers.
FJ | M A R K E T I N G F O U N D A T I O N S
Full (ervice 1holesalers
$rovide a full set of services, such as carrying stock, using a sales3force, offering credit,
making deliveries and providing management assistance.
"imited (ervice 1holesalers
cash3and3carry wholesalers, truck wholesalers, drop shippers rack %obbers, producers+
cooperatives, mail order wholesalers.
"imited services to supplies and customers
0rokers
brings buyers and sellers together and assists in negotiation. 0rokers are paid by the
parties hiring them. They do not carry inventory, get involved in financing or assume
risk.
!gents
)epresent buyers or sellers on a more permanent basis. Types of agents2
;. manufacturer+s agent
=. selling agent
B. purchasing agent
E. commission merchant
FK | M A R K E T I N G F O U N D A T I O N S
@e&ture 10/
Integrated Marketing Co''uni&ation ,IMC-2
The concept under which a company carefully integrates and coordinates its many
communications channels to deliver a clear, consistent and compelling message about its
products
'o3ordination of the organisation+s promotional efforts
Dses ma%or communication elements such as2
advertising,
sales promotion,
public relations,
direct and online marketing
personal selling.
Meets ob%ectives such as to inform, persuade, and remind consumers
!d)ertising/
!ny paid form of non3personal presentation and promotion of ideas, goods or services by an
identified sponsor.
0enefits2
cost efficient in reaching a large audience ,unlike personal selling.
lets the advertiser repeat the message several times and in several different media ,unlike
personal selling.
ability to control message ,unlike publicity.
able to create favourable images ,unlike some sales promotions like price discounts, buy
one get one free.
"imitations2
difficult to determine or measure its effectiveness in terms of sales, for example ,unlike
sales promotion eg coupons.
delayed feedback from customers in terms of intention to buy, for example ,unlike
personal selling.
FL | M A R K E T I N G F O U N D A T I O N S
credibility problems,unlike publicity.
clutter in many media ,billboards, T8 etc.
Sa(es %ro'otion/
(hort3term incentives ,activity or material. to encourage purchase of a good or service.
,!ttempts to alter the price3value relationship of a product in the prospect+s mind, usually
for a limited time..
0enefits2
a way to appeal to price3sensitive consumers
can generate extra interest in ads
easier to measure effects of sales promotion ,such as coupons, price discounts. on sales,
for example
"imitations2
often has short3term impact only
often does not contribute to brand image ,unlike advertising.
can lead to promotional wars among competitors
%u9(i& Re(ations/
! broad set of communication tools or methods used to create and maintain favourable
relationships between an organisation and its stakeholders ,employees, customers, shareholders,
government officials, society at large etc.. &xample of $) Tools2 $ublicity (ponsorship, ,even
advertisingI.
%u9(i&it*8 a too( o1 %u9(i& Re(ations/
t is non3personal communication in a news story form about an organisation4product transmitted
through a medium for MfreeN.
0enefits2
$ublicity via news items ,editorial in print4blogs4T8 broadcasts etc. is more credible than
advertising in mass media.
"ow cost way to communicate
"imitations2
"ack of control ,unlike advertising.
'an be negative
e&isions in e)e(oping IMC/
Identi1*ing the Target !udien&e
!udience may be2
potential buyers or current users,
those who make the buying decision,
those who influence it
Identi1* Response Sought/
.u*er Readiness States/
!2areness "no2(edge @iking %re1eren&e Con)i&tion %ur&hase
FM | M A R K E T I N G F O U N D A T I O N S
Se(e&ting a Message/
deally the message should2
7et !ttention
?old Interest
!rouse esire
5btain !ction
,! framework known as the !/! model.
Message Content/
)ational !ppeals
relate to the audience+s self interest
show how the product will produce the benefits
&motional !ppeals
stir up positive or negative emotions that can motivate purchase
Moral !ppeals
directed to the audience+s sense of what is right and proper
Message (tructure3there are three message structure issues2
whether to draw a conclusion or leave it to the audience<
whether to present a one3sided or two3sided argument<
whether to present the strongest argument first or last<
Message Format
communicator needs a strong format for the message.
in print ads, the communicator decides on the headline, copy, illustration and colour.
for radio, the communicator chooses words, sounds and voices.
for T8, all elements plus body language have to be planned. May be expensive now but
you save in the long run
Setting the IMC .udget and Mi+/
affordable method, setting the promotion budget at what management thinks the
company can afford
percentage of sales method, setting the promotion budget at a certain percentage of
current forecast sales, or as a percentage of the sales price
competitive3parity method, setting the promotion budget to match competitors outlays
ob%ective and task method, developing promotion budget by defining ob%ectives,
determining the tasks that must be performed to achieve these ob%ectives and estimating
the costs of these is the proposed promotion budget
Considerations in e)e(oping Integrated Marketing Co''uni&ation/
'ompanies consider many factors when developing their M' program2
type of product and market
-push versus pull+ strategy
GN | M A R K E T I N G F O U N D A T I O N S
buyer3readiness state
product life cycle stage
! push strateg* is a promotion strategy that calls for using the sales force and trade
promotion to push the product through marketing channels to final consumers
! pu(( strateg* is a promotion strategy that calls for spending a lot on advertising and
consumer promotion to build up consumer demand
!d)ertising/
!n ad)ertising o9Ce&ti)e is a specific communication task to be accomplished with a
specific target audience during a specific period of time.
!dvertising ob%ectives can be classified by purpose2 whether their aim is to inform,
persuade or remind. )esulting in2
informative advertising
persuasive advertising
comparison advertising
reminder advertising
!d)ertising Media/
Ne2spapers ,)ersus MagaFines-/
!dvantages2
Flexibility ads for newspapers can be produced in a matter of hours, and deadline for
receiving ads is usually =E hours before publication ,unlike maga>ines.
7eographic selectivity local, regional, national newspapers ,like maga>ines.
/isadvantages2
$oor reproduction quality ,unlike maga>ines.
G1 | M A R K E T I N G F O U N D A T I O N S
"ack of demographic ,eg gender. or lifestyle selectivity ,eg gardening enthusiasts.
,unlike maga>ines.
(mall pass3along audience ,unlike maga>ines.
(hort life span ,unlike maga>ines.
Te(e)ision ,)ersus Radio-
!dvantages2
7reater creativity and impact ,than radio.
7reater attention ,than radio.
/isadvantages2
"ess demographic4geographic selectivity ,than radio.Ofew local T8 stations than local
radio stations
?igher cost ,than radio.
@e&ture 11/
%u9(i& Re(ations/
Ma%or mass3communication tool.
!ims at building good relations with the company+s various publics using different tools2
news
speeches
special events
written materials
audiovisual materials
corporate identity materials
community service activities
Sa(es %ro'otion
nfluencing customer perception and behaviour to2
build market share,
increase sales and
reinforce brand image
Dsed to2
!ttract new triers ,#on3users, loyal users of another brand, and brand switchers.
)eward and retain brand3loyal customers
G; | M A R K E T I N G F O U N D A T I O N S
)educe time between purchases
Turn light users into medium or heavy users
)egain past purchasers
&valuation of performance
Sa(es %ro'otion Too(s
'ontests and games of skill and chance, give consumers the chance to win something of
value by luck
(amples, free or discounted goods provided at store level through the media
)edeemable coupons, a coupon carried on pack or in other media that when forwarded to
a marketer will be redeemed for a product or service
'ash3back offers, a cash discount
'ents3off deals or $rice $acks, a reduced price that is marked by the producer directly on
the label or package
$remiums, goods offered free of charge or at reduced price as an incentive to buy a
product
!dvertising (pecialties, a article imprinted with an advertisers name, given as a gift to
consumers
$atronage )ewards, a cash, merchandise or service reward offered to consumers who
make continual use of a companyPs product or service, e.g. frequent flyer plans
$oint3of3$urchase, an offer ranging from a theme promotion in store to a specially
arranged selling area
Ro(e o1 %ersona( Se((ing
$ersonal selling involves two3way, personal communication between salespeople and individual
customers
face3to3face
by telephone
through video conferences
or by other means
(ales people are concerned with producing sales but should also be concerned with
customer satisfaction and profit
MaCor Steps in #11e&ti)e Se((ing/
Se((ing %ro&ess/
The steps that the salesperson follows when selling. These are2
$rospecting, salesperson identifies qualified potential customers
$reapproach, salesperson learns as much as possible about a prospective customer before
making a call
$resentation, salesperson tells the product story to the buyer, showing how the product
will save them money
G< | M A R K E T I N G F O U N D A T I O N S
?andling ob%ections, salesperson seeks out, clarifies and overcomes customers ob%ections
to buying
'losing, salesperson asks the customer to an order
Follow3up, salesperson follows up after the sale to ensure customer satisfaction and
repeat business
%ersona( Se((ing and Re(ationship Marketing/
)elationship marketing2
process of creating, maintaining and enhancing strong, value3laden relationships with
customers and other stakeholders
stresses profitable long3term relationships with customers by creating superior customer
value and satisfaction
1inning and keeping accounts requires more than making good products and closing lots
of sales
ire&t and igita( Marketing/
This is an interactive system of marketing which uses one or more advertising media to affect a
measurable response or transaction to any location.
nternet is a public network.
ntranet2,secure websites accessed by company employees only.
&xtranet, websites accessed by both employees and known customers.
'ustomer relationship management ,')M.2
one3to3one marketing ,5neto5ne.
direct marketing or direct3order marketing
&3marketing
interactive marketing
For's o1 On(ine and ire&t Marketing/
(ales $romotion
/irect print and reproduction, involves mail outs of letter, product lists and catalogues to
a list of known database of customers
/irect3response, T8 and )adio, use of mass promotion media combined with a direct
response offer, usually involving telemarketing
Telemarketing, use of telephone operators to attract new customers or contact existing
customers
ntegrated database marketing,
Telesales, routine order taking by telephone operators
&lectronic shopping, purchasing via an electronic bulletin board or Telstra+s /iscovery,
or via interactive cable television
/irect selling, selling directly to consumers or businesses rather than using a reseller,
such as a retailer or agent
GF | M A R K E T I N G F O U N D A T I O N S
&lectronic dispensing Q kiosks, a machine that dispenses products or services usually by
inserting cash or a transaction
ire&t and igita( ata9ase Use/
ire&t and on(ine data9ase 'arketing
development and maintenance of electronic databases to interact with past, present and4or
potential customers and others in the marketing channel
maintain value3ladden relationships
7o2 !re ire&t and igita( Marketing ata9ases UsedD
Marketing organisations use their databases in a number of ways2
;. identifying prospects
=. deciding which customers should receive
;. a particular offer
=. deepening customer loyalty
B. reactivating customers
E. data mining
@e&ture 12/
So&ia( and #thi&a( Issues in Marketing/
! number of social and ethical issues arise from marketing practice and emerge as areas
of attention for marketing scientists and regulators.
These matters generate considerable criticism of marketing practice, some of which is
%ustified but much of which is not.
The I'pa&t o1 Marketing on Indi)idua( Consu'ers/
'onsumer worries include2
high prices
poor3quality
dangerous products
GG | M A R K E T I N G F O U N D A T I O N S
misleading advertising claims
deceptive practices
breaches of privacy
high3pressure selling
planned obsolescence
poor service to disadvantaged consumers
The I'pa&t o1 Marketing on So&iet*/
The marketing system has been accused of adding to several -evils+ in society2
false wants and over concern with materialism.
too few social goods.
cultural pollution.
too much political power.
Marketing=s I'pa&t on Other .usinesses/
There are three ma%or problems involved2
acquisition of competitors
marketing practices that create barriers to entry
unfair competitive marketing practices
%ri)ate and %u9(i& !&tions to Regu(ate Marketing/
There are movements that attempt too ensure that2
ethical business practices are adopted
particularly at times when executive salaries seem to be disproportionately high or when
fraud and misappropriation of company monies are uncovered ,e.g. &nron.
The two ma%or movements are2
'onsumerism, an organised movement of citi>ens and government agencies whose aim is
to improve the rights and power of buyers in relation to sellers
&nvironmentalism, an organised movement of concerned citi>ens, businesses and
government agencies seeking to protect and improve people+s living environment
Consu'eris'/
'onsumerism is an organised movement of citi>ens and government agencies to improve the
rights and power of buyers in relation to sellers
1hy the push for consumerism groups<
consumers have become better educated,
products have become more complex and ha>ardous,
marketing organisations have raised consumers+ expectations
#n)iron'enta(is'/
False 1ants and Too Much Materialism
GJ | M A R K E T I N G F O U N D A T I O N S
Too Much $olitical $ower
Too Few (ocial 7oods
'ultural $ollution
&co3(ystems
$ollution
"ong3Term
#thi&a( Marketing/
approach by which organisations recogni>e that the task of marketing is to be both
enlightened to society+s views and ethical in the organisations+ approach to society as a
whole and to customers.
most organisations respond positively to consumerism and environmentalism.
develop corporate marketing ethics policies.
!dopting #thi&a( Marketing/
(ocietal marketing is a principle of enlightened marketing which holds that an organisation
should make marketing decisions by considering consumers wants, the organisations
requirements and the long term interests of consumers and society.
Makes marketing decisions by considering2
consumer+s wants and interests,
the company+s requirements and
society+s long term interests.
$roducts may be classified according to their degree of immediate customer satisfaction and
long3term consumer benefit2
deficient products, products such as bad tasting and ineffective medicine that have
neither immediate appeal nor long term benefits
pleasing products, products that give high immediate appeal nor long term benefits
salutary products, products that give high immediate satisfaction, but they may hurt
consumers and society in the long run
desirable products, products that give both high immediate satisfaction and high long
term benefits
%!RT T7R##/ #0#@O%IN$ T7# M!R"#TIN$ MIG
C7!%T#R NIN#/ N#5 %ROUCTS
1. Identify the challenges companies face in creating a new-product development strategy.
! ne2 produ&t is a product that is new in any way for the company concerned. t can be6
GK | M A R K E T I N G F O U N D A T I O N S
1. Ne! t the !rld - "nn$at"ns
;. Ne! cate#r% entr"es
<. Add"t"ns t prduct l"nes- e# $eh"cles
F. 0rduct "mpr$ements
G. Reps"t"n"n#- prducts re-tar#eted *r ne! use, appl"cat"n r t a ne! user
J. 5ar"at"ns * the a)$e-$ar"at"ns such as ne! t the cuntr% r ne! t the
channel are nt cmmnl% accepted as ne! prducts
5rganisations must develop ne2 produ&ts. Their current products face (i'ited (i1e spans and
must be rep(a&ed by newer products. 0ut new products can 1ai(LH:R never reach the market,
SBR of those that survive last for : years3the risks of innovation are as great as the rewards. The
key to successful innovation lies in a total company effort, strong planning and a systematic
new3product development process. ! new product can be obtained through a&:uisition or
interna( ne2-produ&t de)e(op'ent process.
Ne2 produ&t su&&ess is 9ased onH Reasons 1or produ&t 1ai(ureH
0rduct super"r"t%9+ual"t%
Ecnm"c ad$anta#e t the
user-$alue *r mne%
O$erall cmpan%9pr=ect (t
Technl#"cal capa)"l"t%
Fam"l"ar"t% !"th the cmpan%
Market needs, #r!th, s"Oe
&mpet"t"$e s"tuat"n-ease *
entr% "nt the market
De(ned pprtun"t%
0r=ect de(n"t"n-h! !ell
de(ned the prduct Q pr=ect
are "nternall%
'ad t"m"n#
Ins"#n"(cant p"nt * d"1erence
0r +ual"t%
0r market"n# e3ecut"n
markets t small r
"naccess")le
>ack * tp mana#ement
cmm"tment
Must ha$e an ade+uate )ud#et
t meet sales #als
Ne2-produ&t de)e(op'ent3 the dev of original products, product improvements, product
modifications and new brands through the company+s own )Q/ efforts.
'ommon reasons for ne2 produ&t 1ai(ure include the inability of potential consumers to see the
product concept or how it might apply to them, no perceived need or perceived inferior product,
wrong timing, poor market research and poor marketing implementation as well as inadequate
promotional budget and lack of support.
GL | M A R K E T I N G F O U N D A T I O N S
To create su&&ess1u( ne2 produ&ts, a company must understand its consumers, markets and
competitors and develop products that deliver superior value to customers. M orgs also need to
understand how leading3edge users and opinion leaders are involved in spreading positive word
of mouth in the diffusion process.
Cha((enges2
Keen cmpet"t"n
Meet"n# #r!"n# sc"al and #$ cnstra"nts
Man% cmpan"es cannt a1rd r ra"se the *unds needed *r ne! prduct
de$elpment
D"#h de#ree * cmple3"t% and a mult"tude * dec"s"ns
&nS"ct"n# set * m#t demands that prduct "nn$atrs must cmpl% !"th
The ne2-produ&t de)e(op'ent pro&ess consists of C stages2
1. ideas generation,
;. ideas screening,
<. concept deelopment and testing,
F. marketing strategy deelopment,
G. business analysis,
J. product deelopment,
K. test marketing and
L. commercialisation.
2. List different sources for ideas generation and discuss how an idea moves ahead through
ideas screening, concept development and concept testing.
deas generation 3 the systematic search for new product ideas.
Sour&es of new ideas include6
Internal surces - sales *rce
&ustmers
&mpet"trs
D"str")utrs
Reta"lers
/hlesalers
GM | M A R K E T I N G F O U N D A T I O N S
Suppl"ers
deas screening 3 (creening new product ideas in order to spot good ideas and drop poor ones as
soon as possible. t aims to reduce the number of ideas as product development costs rise greatly
in later stages. The company only wants to go ahead with the product ideas that will turn into
profitable products.
S&reening &riteria includes6
&mpan% )=ect"$es
0rduct"n capac"t%
0rduct"n capa)"l"t%
Market"n# capa)"l"t%
0rduct r"sk
0rduct (t
'oncept development Q testing involves testing new product concepts with a group of target
consumers to find out if the concepts have strong &onsu'er appea(. t considers2
1. Product idea -An "dea *r a pss")le prduct that the cmpan% can see "tsel*
1er"n# t the market.
;. Product concet- a deta"led $ers"n * the "dea stated "n terms that are
mean"n#*ul t custmers. The "dea that cnsumers *a$ur prducts that 1er
the mst +ual"t%, per*rmance and *eatures and that the r#an"sat"n shuld
there*re de$te "ts ener#% t mak"n# cnt"nuus prduct "mpr$ements.
<. Product image- the !a% cnsumers perce"$e an actual r ptent"al prduct.
F. Concet testing- prcess * test"n# prduct cncepts !"th a #rup * tar#et
cnsumers.
&xample2 The Hydro Car
Con&ept 1Lan inexpensive small si>ed vehicle designed as a second family car to be used
around town ,ideal for loading groceries and hauling children, and easy to enter..
Con&ept 2La medium3cost, medium3si>ed car designed as an all3purpose family car.
Con&ept ALa medium3cost sporty compact appealing to young people.
Con&ept 4Lan inexpensive sub3compact appealing to conscientious people who want basic
transportation, low fuel cost and low pollution.
3. Outline how a potential product advances from a concept to a product through marketing
strategy development, usiness analysis and product development.
JN | M A R K E T I N G F O U N D A T I O N S
Marketing strategy development 3 /esigning an initial marketing strategy for a new product
based on the product concept, i.e. the process of designing an initial marketing strategy for a new
product. t consists of B parts2
1. Descr")e target market, planned roduct ositioning, and the sales,
market share and pr(t goals *r the (rst *e! %ears
;. Outl"ne prduct6s planned rice, distribution and marketing budget *r the
(rst %ear.
<. Descr")e planned long!run sales, pr(t goals and marketing!mi" strate#%.
0usiness analysis3 ! re)ie2 of the sales, costs and profit pro%ections for a new product to find
out whether these factors satisfy the &o'pan*=s o9Ce&ti)es. f they do, the product can move to
the product3development stage. t involves the assessment of financial budgets, potential market
and growth rate.
$roduct development3 so far the product only exists on paper. ) Q / or engineering develops the
product concept into a physical product. t is a strategy for promoting company growth by
offering modified or new products to current market segments6 developing the product concept
into a physical product to ensure that the product idea can be turned into a workable product.
/evelopment activities incl. prototype, feasibility testing, preliminary market strategies. This
step involves large investments.
!. "#plain the purpose of test marketing and distinguish etween standard, controlled and
simulated test markets.
Test marketing the stage of new3product development in which the product and marketing
program are introduced into more realistic market settings.
It #"$es the marketer e"erience !"th market"n# the prduct, (nd"n# ptent"al
roblems and learn"n# !here mre information "s needed )e*re #"n# t the
#reat e3pense * *ull "ntrduct"n.
The )as"c purpse "s t test the prduct "tsel* "n real market situations.
It als all!s the cmpan% t learn h! cnsumers and dealers !"ll react t
handling, using and reurchasing the prduct.
Thus a #d test market can pr$"de a !ealth * "n*rmat"n a)ut the ptent"al
success * the prduct and "ts market"n# pr#ram.
&nsumer markets?
o Standard test markets- test the ne! cnsumer prduct "n s"tuat"ns
l"ke thse "t !uld *ace "n a *ull-scale launch. The results are used t
*recast nat"nal sales and pr(ts, t d"sc$er ptent"al prduct pr)lems
and t (ne-tune the market"n# pr#ram.
J1 | M A R K E T I N G F O U N D A T I O N S
o Controlled test markets- se$eral research (rms keep cntrlled panels
* stres that ha$e a#reed t carr% ne! prducts *r a *ee. The cmpan%
!"th the ne! prduct spec"(es the V * stres and the #e lcat"ns "t
!ants. The research (rm del"$ers the prduct t part"c"pat"n# stres and
cntrls shel* lcat"n, amunt * shel* space, d"spla%s and p"nt-*-
purchase prmt"ns and pr"c"n#, accrd"n# t spec"(ed plans. Sales
results are tracked t determ"ne the "mpact * these *actrs n demand.
Take less t"me than standard test markets Q usuall% cst less.
o Simulated test markets- &mpan% r research (rm sh!s a sample *
cnsumers the ads and prms *r a $ar"et% * prducts, "ncl the ne!
prduct )e"n# tested. The cnsumers are #"$en a small amunt * mne%
Q are "n$"ted "nt a real r la) stre !here the% ma% keep the mne% r
use "t t )u% "tems. The cmpan% ntes h! man% cnsumers )u% the
ne! prduct and cmpet"n# )rands. Th"s pr$"des a measure * tr"al
purchase and assesses the cmmerc"al6s e1ect"$eness a#a"nst cmpet"n#
cmmerc"als. &nsumers are then asked the reasns *r the"r purchase r
nn-purchase. Sme !eeks later the% are "nter$"e!ed t determ"ne
prduct att"tudes, usa#e, sat"s*act"n Q repurchase "ntent"ns.
'us"ness markets? prduct-use tests.
$. Evaluate the product life-cycle theory, detailing the e#tent to which you accept the
se%uence of the introduction, growth, maturity and decline stages.
%rodu&t (i1e &*&(e3 The course of a product+s sales and profits during its lifetime. &ach product
has a life cycle marked by a changing set of problems and opportunities. Management+s goal is
to maximise lifetime and sales. 'ompany needs to recover all )Q/ costs. The sales of the
typical product follow an (3shaped curve made up of : stages. &xact shape and length is not
known in advance.
1. The c%cle )e#"ns !"th the product deelopment stage !hen the cmpan% (nds
and de$elps a ne! prduct idea.
;. The introduction stage "s marked )% slo# gro#th and lo# ro$ts as the
prduct "s )e"n# pushed "nt d"str")ut"n. The ne! prduct "s (rst d"str")uted and
made a$a"la)le *r purchase.
<. I* success*ul, the prduct enters a growth stage marked )% raid sales gro#th
and increasing ro$ts. Dur"n# th"s sta#e the cmpan% tr"es t "mpr$e the
prduct, enter ne! market se#ments and d"str")ut"n channels and reduce "ts
pr"ces sl"#htl%.
F. Then cmes a maturity stage "n !h"ch sales gro#th slo#s d!n and ro$ts
stabilise% The cmpan% seeks strate#"es t rene! sales #r!th, "nclud"n#
market, prduct and market"n#-m"3 md"(cat"n.
G. F"nall%, the prduct enters a decline stage "n !h"ch sales and ro$ts d#indle.
The cmpan%6s task dur"n# th"s sta#e "s t "dent"*% the decl"n"n# prduct and
dec"de !hether "t shuld )e ma"nta"ned, har$ested r drpped. I* drpped, the
prduct can )e sold t anther (rm r li&uidated *r sal$a#e $alue.
Marketers apply it to describe how products and markets work6
J; | M A R K E T I N G F O U N D A T I O N S
Frecast"n# prduct per*rmance r *r de$elp"n# m strate#"es presents sme
pract"cal pr)lems
Mana#ers ma% ha$e tru)le "dent"*%"n# !h"ch sta#e * the 0>& the prduct "s "n
D"Rcult t *recast the sales le$el at each 0>& sta#e, the len#th * each sta#e
and shape * the 0>& cur$e
Aet !hen used care*ull%, the 0>& cncept can help "n de$elp"n# #d m
strate#"es *r d"1 sta#es * the 0>&.
Stage 'lication
Intrduct"n Starts !hen the ne! prduct "s (rst launched
0r(ts are ne#at"$e r l! )c * l! sales and h"#h d"st and
prmt"n e3penses
(oals) "n*rm cnsumers * the ne! prduct Q #et them t
tr% "t
Fcus sell"n# n thse )u%ers !h are the read"est t )u%-
usuall% the h"#her-"ncme #rups
Strategy *) M#t m"#ht launch the ne! prduct !"th a h"#h
pr"ce and l! prmt"n spend"n#. D"#h pr"ce helps t rec$er
as much #rss pr(t per un"t as pss")le and l! prm
spend"n# keeps m spend"n# d!n.
!+sed #hen) the m "s ltd "n s"Oe, !hen mst cnsumers "n the
m kn! a)ut the prduct and are !"ll"n# t pa% a h"#h pr"ce
and !hen there "s l"ttle "mmed"ate ptent"al cmpet"t"n.
Strategy ,) "ntrduce "ts ne! prduct !"th a l! pr"ce and
hea$% prm spend"n#. Th"s prm"ses t )r"n# the *astest m
penetrat"n and h"#hest m share.
!+sed #hen) m "s lar#e, ptent"al )u%ers are pr"ce sens"t"$e
and una!are * the prduct, ptent"al cmp "s strn# and the
c6s un"t manu*actur"n# csts *all !"th the scale * prduct"n
J< | M A R K E T I N G F O U N D A T I O N S
and accumulated manu*actur"n# e3per"ence.
Gr!th Earl% adpters !"ll cnt t )u% and later )u%ers !"ll *ll! the"r
lead, esp "* the% hear *a$ura)le !rd * muth
Attracted )% the pprtun"t"es *r pr(t, ne# cometitors !"ll
enter the m
The%6ll "ntrduce ne! prduct *eatures and the m !"ll e3pand
W "n cmps 7 W V d"st utlets and sales =ump =ust t )u"ld
reseller "n$entr"es
Prices rema"n !here the% are r *all nl% sl"#htl%
&mpan"es keep the"r romo sending at the same r a
sl"#htl% h"#her le$el? educat"n# the m rema"ns a #al )ut n!
the c must als meet the cmp
In high!tech m, the earl% #r!th sta#e "s t%p"(ed )% n"che
strate#"es !"th custmer-ta"lred slut"ns e.#. spreadsheet
packa#es !ere (rst tar#eted at (nanc"al pr*ess"ns nl%. .
Dur"n# rap"d #r!th, strate#"es chan#e t!ards mre mass!
market slut"ns "n$l$"n# a cmmn standard "n*rastructure.
E.#. enrmus #r!th "n laser and "nk =et pr"nters t mult"-
)"ll"n dllar "ndustr% led )% De!lett 0ackard reSects th"s. D0
#eared up *r hu#e prduct"n and e3tended d"st channels and
kept dr"$"n# *r l!er pr"ce p"nts.
Pro$ts "ncrease dur"n# th"s #r!th sta#e as prm csts are
spread $er a lar#e $lume and un"t manu*actur"n# csts *all.
The c uses se$eral strategies t susta"n rap"d m #r!th as
ln# as pss")le:
-"mpr$es prduct +ual"t% and adds ne! prduct *eatures and
mdels.
-enters ne! m se#ments and ne! d"st channels.
-sh"*ts sme ad$ert"s"n# *rm )u"ld"n# prduct a!areness t
)u"ld"n# prduct"n cn$"ct"n and purchase
-l!ers pr"ces at the r"#ht t"me t attract mre )u%ers.
& *aces trade!of )! h"#h m share and h"#h current pr(t: )%
spend"n# a lt n prduct "mpr$ement, prm and
d"str")ut"n, "t can capture a dm"nant ps"t"n )ut "t #"$es up
the ma3 current pr(t "n the hpe * mak"n# th"s up "n the ne3t
sta#e.
Matur"t% Th"s sta#e lasts longer than pre$"us sta#es and pses strn#
challen#es t market"n# mana#ement
JF | M A R K E T I N G F O U N D A T I O N S
Most roducts are "n the matur"t% sta#e * the 0>&
-igh!tech roducts re+u"re a chan#e "n strate#% t!ards
mre custm"sed slut"ns that *cus n spec"(c adaptat"ns
* the "n*rastructure *r added $alue thru#h mass
custm"sat"n.
M e"tension ccurs thru#h mre tar#eted n"che-)ased
strate#"es e.#. mst marketers * pr"nters tar#et hme users
!"th a l!-cst "nk-=et pr"nter that autmat"call% cnnects t a
d"#"tal camera and e$en d"spla%s d"#"tal phts. &mpan"es
such as 'rther and D0 cnduce n"che campa"#ns prmt"n#
the"r cmpact, prta)le pr"nters t appeal t thse !"th ltd
space, mult"*unct"n de$"ces *r thse !h d nt ha$e a *a3,
and h"#her-per*rmance clur pr"nters *r peple !ant"n# t
create the"r !n prmt"nal mater"al.
Sl!d!n "n sales #r!th results !hen man% prducers ha$e
man% prducts t sell 7 th"s overcaacity leads t X
cmpet"t"n
Cometitors mark d!n pr"ces, "ncrease the"r ad$ert"s"n# and
sales prms and push up RQD )ud#ets t (nd )etter $ers"ns
* the prduct. These 7 drp "n pr(t.
Sme * #eaker cometitors drp ut Q e$entuall% the
"ndustr% cnta"ns nl% !ell esta)l"shed cmpet"trs
'ttack "s the )est de*ence s prduct mana#ers shuld
cns"der md"*%"n# the market, prduct and the market"n# m"3.
1. Market md"(cat"n:
-c tr"es t "ncrease cnsumpt"n * the current prduct )%
lk"n# *r ne# users and ne# m segments. E.#. Yhnsn Q
Yhnsn tar#eted the adult m !"th "ts )a)% p!der and
shamp.
-Als lk *r !a%s t "ncrease usa#e amn# resent
customers. E.#. Glden &"rcle 1ers rec"pes and cn$"nces
custmers that Icanned *ru"t "s #d and eas% t use.6
-Ma% als !ant t reosition the brand t appeal t a lar#er
r *aster #r!"n# se#ment. E.#. Nesca*e appealed t the
)each-#"n# se#ment )% 1er"n# tr"als * "ced c1ee as a cl
and re*resh"n# dr"nk, a"m"n# t "ncrease "ts usa#e )e%nd r"nks
at c1ee lun#es and "n cler !eather.
;. 0rduct md"(cat"n: chan#e a prduct6s characteristics-
+ual"t%, *eatures * st%le t attract ne! users and mre usa#e.
<. M M"3 md"(cat"n: rices can )e cut t attract ne! users and
cmpet"trs6 custmers, a )etter ad$ert"s"n# camaign can )e
launched, a##ress"$e sales romotion 2trade deals, cntests
etc4 can )e used, the c can m$e "nt lar#er m channels
us"n# mass merchand"sers "* these channels are #r!"n#
and9r "t can 1er ne! r "mpr$ed services t )u%ers.
JG | M A R K E T I N G F O U N D A T I O N S
Decl"ne Decl"ne ma% )e slo# e.#. canned *ds acrss the
#l)e r rap"d as *r 5&R #ames
.easons: technl#"cal ad$ances, sh"*ts "n cnsumer
tastes and "ncreased cmpet"t"n.
As sales and pr(t decl"ne, sme c6s #ithdra# *rm
the m. Thse rema"n"n# m"#ht reduce the V * the"r
prduct 1er"n#s, drp the smaller m se#ments and
mar#"nal trade channels r cut the prm )ud#et and
reduce the"r pr"ces *urther.
&arr%"n# a !eak prduct can )e $er% cstl% t the (rm-
pr(t as !ell as hidden costs: "t ma% take up t
much * m#t6s t"me, "t *ten re+u"res *re+uent pr"ce
and "n$entr% ad=ustments, "t re+u"res ad$ert"s"n# and
sales*rce attent"n that m"#ht )e )etter used t make
Ihealth%6 prducts mre pr(ta)le, "ts *a"l"n#
reputat"n can cause custmer cncerns a)ut the c
and "ts ther prducts.
'"##est cst ma% l"e "n the future- keep"n# !eak
prducts dela%s the search *r replacements, creates a
lps"ded prduct m"3, hurts current pr(ts and
!eakens the c6s *thld n the *uture.
*
st
task: *r c6s "s t "dent"*% thse prducts "n the
decl"ne sta#e )% re#ularl% re$"e!"n# sales, m shares,
cst and pr(t trends
,
nd
: *r each decl"n"n# prduct m#t must dec"de
!hether t ma"nta"n, har$est r drp "t.
-Maintain7 )rand !9ut chan#e "n hpe that
cmpet"trs !"ll lea$e the "ndustr%. Or m#t ma% dec"de
t reps"t"n the )rand "n the )el"e* that "t !"ll m$e
)ack "nt the #r!th sta#e
-harvest7 reduc"n# $ar"us csts 2plant and
e+u"pment, ma"ntenance, RQD, ad$ert"s"n#,
sales*rce4 and hp"n# that sales hld up. I* success*ul,
"t !"ll W the c6s pr(ts "n te shrt run.
Drp7 the prduct *rm the l"ne. It can sell "t t
JJ | M A R K E T I N G F O U N D A T I O N S
anther (rm r s"mpl% l"+u"date "t at sal$a#e $alue.
JK | M A R K E T I N G F O U N D A T I O N S
Fads3 Fashions that enter quickly, are adopted with great >eal, peak early and decline fast. Tend to attract
only a limited following. 5ften have a novel or quirky nature.
Fashion3 ! currently accepted or popular style in a given field. Fashions pass through many stages6
JL | M A R K E T I N G F O U N D A T I O N S
Tabl e 9. 6 Summary of product life-cycle characteristics, objectives and strategies
1. A small V * cnsumers taken "n "nterest "n smeth"n# ne! t set themsel$es apart
;. Other cnsumers )ecme "nterested ut * a des"re t cp% the *ash"n leaders
<. The *ash"n )ecmes ppular and "s adpted )% the mass market.
St*(e3 ! basic and distinctive mode of expression. ! style has a cycle showing several periods of renewed
interest.
&. "#plain the differences e#perienced y technology products in the technology adoption cycle.
! variation of the classic life3cycle model is the technology adoption cycle. This refers to the adopted
acceptance pattern of a technology innovation identifying different stages of adoption with different
adopter groups. t highlights the challenge of crossing the chasm from attracting innovators to attracting
early adopters.
1. The early market - a t"me * e3c"tement, custmers are technl#% enthus"asts and
$"s"nar"es
;. The chasm-a t"me * despa"r, earl% market6s "nterest d"sappears, ma"nstream m st"ll
nt accept"n# the "mmatur"t% * the slut"ns a$a"la)le
<. The bo#ling alley-a per"d * n"che )ased adpt"n "n ad$ance * the #eneral
marketplace, dr"$en )% cmpell"n# custmer needs and !"ll"n#ness * suppl"ers t
des"#n n"che-spec"(c !hle prducts.
F. The Tornado-per"d * mass m adpt"n, #eneral marketplace s!"tches $er t ne!
technl#%.
G. Main Street- per"d * *urther de$, )ase technl#% "n*rastructure has )een depl%ed
and #al n! "s t e3tend "ts ptent"al.
J. /nd of life- *ten cme $er% sn !"th h"#h tech "nn$at"ns, )c pr"ce and per*rmance
are dr"$en t unheard-* le$els
84 Co''er&ia(isation ntroducing a new product into the market. t involves6
Full scale prduct"n
Full scale market"n#
Inte#rat"n "nt the (rm
The cmpan% launch"n# a ne! prduct must make F
dec"s"ns: !hen 2seasns, #"*t-#"$"n# t"mes, a lt *
prducts launched at 3mas t"me4, !here 2lcal area4, t
!hm 2!men, mthers, p"n"n leaders4 and h!.
Ne2 produ&t de)e(op'ent The dev of original products, product improvements, product
modifications and new brands through the company+s own )Q/
efforts.
JM | M A R K E T I N G F O U N D A T I O N S
(peeding up new product development through6
*% Se&uential roduct develoment! A ne! prduct de$ apprach "n !h"ch ne
cmpan% department !rks "nd"$"duall% t cmplete "ts sta#e * the prcess
)e*re pass"n# the ne! prduct aln# t the ne3t department and sta#e.
,% Simultaneous roduct develoment ! An apprach t de$ ne! prducts "n
!h"ch $ar"us cmpan% departments !rk clsel% t#ether, $erlapp"n# the
steps "n the prduct de$ prcess t sa$e t"me and "ncrease e1ect"$eness.
KN | M A R K E T I N G F O U N D A T I O N S
C7!%T#R T#N/ %RICIN$ CONSI#R!TIONS !N !%%RO!C7#S
1. 'iscuss how marketing o(ectives, marketing-mi# strategy and costs and other company
factors affect pricing decisions
Price- the amunt * mne% char#ed *r a prduct r ser$"ce, r the sum * the
$alues cnsumers e3chan#e *r the )ene(ts * ha$"n# r us"n# the prduct r
ser$"ce.
It "s the nl% element * the m m"3 that prduces revenue, all ther elements
represent csts
Pricing structure usuall% c$ers d"1erent "tems "n a (rm6s prduct l"ne
'd0ustments * prduct pr"ces t reSect chan#"n# csts and demand and t
accunt *r $ar"at"ns "n )u%ers and s"tuat"ns
the pr"ce the c char#es !"ll )e )et!een 1 that "s t l! t prduce a pr(t and
1 that "s t h"#h t prduce an% DD
K1 | M A R K E T I N G F O U N D A T I O N S
Marketing ob%ectives (ome of the most common ob%ectives are2
Survival- l! pr"ce hp"n# t "ncrease DD
Current ro$t ma"imisation- set a pr"ce that !"ll ma3
pr(ts
Market!share leadershi- ma"nta"n"n# dm"nance7
undercut cmpet"t"n )% sett"n# pr"ces as l! as pss")le
Product!&uality leadershi- char#e a prem"um 2h"#h
pr"ce t c$er h"#h +ual"t% and h"#h cst * RQD4
1ther ob0ectives- pr"ces can )e set t keep custmer
l%alt% r a$"d #$ "nter$ent"n, can )e temprar"l%
reduced t create e3c"tement *r a prduct r t dra!
custmers "nt a reta"l stre.
Marketing3mix strategy 0r"ce dec"s"ns must )e coordinated !"th prduct
des"#n, d"str")ut"n and prmt"n dec"s"ns t *rm a
cns"stent and e1ect"$e m pr#ram
Dec"s"ns made *r ther m m"3 $ar"a)les ma% a1ect
pr"c"n# dec"s"ns e.#. prducers !h use man% resellers
!h are then e3pected t supprt and prmte the"r
prducts ma% ha$e t )u"ld lar#er reseller mar#"ns "nt
the"r pr"ces
Smet"mes the intended rice determ"nes !hat
roduct features can )e 1ered and !hat prduct"n
csts can )e "ncurred. E.#. Aamaha, a trad"t"nal
marketer * h"#h-+ual"t% spec"al"sed mus"c e+u"pment,
des"#ned a m"n" stere s%stem t cmpete !"th Sn% and
0h"ll"ps. It had d"sc$ered a m se#ment *r a1rda)le
steres and des"#ned mdels t sell !"th"n the pr"ce
ran#e the se#ment !as !"ll"n# t pa%. Dere, pr"ce !as a
cruc"al prduct-ps"t"n"n# *actr that de(ned the
prduct6s market, cmpet"t"n and des"#n
Sme (rms use Itarget costing2- starts !"th a tar#et
cst and !rks )ack
O*ten the )est strate#% "s nt t char#e the l!est pr"ce,
)ut rather t diferentiate the m 1er t make "t !rth
a h"#her pr"ce
I* the prduct "s ps"t"ned n non!rice factors then
dec"s"ns a)ut +ual"t%, prmt"n and d"str")ut"n !"ll
strn#l% a1ect pr"ce
I* pr"ce "s a cr"t"cal ps"t"n"n# *actr then pr"ce !"ll
strn#l% a1ect dec"s"ns made a)ut ther m m"3
elements
'osts &sts set the Sr *r the pr"ce that the c can char#e *r
"ts prduct
The c !ants t char#e a pr"ce that c$ers all "ts csts
*r prduc"n#, d"str")ut"n# and sell"n# the prduct, and
als del"$ers a *a"r rate * return *r "ts e1rt and r"sk
T%pes * csts-
-$"ed costs: dn6t $ar% !"th prduct"n r sales le$els
-variable costs: $ar% d"rectl% !"th the le$el *
K; | M A R K E T I N G F O U N D A T I O N S
prduct"n
-total costs: sum * (3ed and $ar"a)le csts *r an%
#"$en le$el * prduct"n
-roduction level costs
-costs as a function of roduction e"erience:
a$era#e cst tends t *all !"th accumulated prduct"n
e3per"ence 2e"erience curve: the drp "n the a$era#e
per-un"t prduct"n cst that cmes !"th acc prduct"n
e3per"ence4
-r#an"sat"nal cns"derat"ns: m#t must dec"de !h
!"th"n the r# shuld set pr"ces
=. List and discuss factors outside the company that affect pricing decisions )
3. "#plain how price setting depends on consumer perceptions of price and on the price-
demand relationship
*% T-/ M'.3/T '4D D/M'4D
0r"c"n# "n d"1 t%pes * markets:
o Pure com- m cns"sts * man% )u%ers and sellers !"th ha$"n# l"ttle
"nSuence n m pr"ce. Trad"n# * un"*rm cmmd"t%. E.#. !heat,
$e#eta)les, (n secur"t"es.
o Monoolistic com- man% )u%ers and sellers, ran#e * pr"ces ccurs )c
sellers can d"1erent"ate the"r 1ers t )u%ers.
o 1ligoolistic com- *e! sellers !h are h"#hl% sens"t"$e t each ther6s
pr"c"n# and m strate#"es. 0rduct can )e un"*rm 2alum"n"um, ac"d4 r
nn-un"*rm 2*d prcessrs, cars4. It "s d"Rcult *r ne! sellers t enter
the m.
o Pure monooly- a s"n#le seller. E.# #$ mnpl%- Aus 0st. 0r"c"n# "s
handled d"1erentl% "n each case.
&nsumer percept"ns * pr"ce and $alue:
o In the end, the consumers !"ll dec"de !hether a prduct6 pr"ce "s r"#ht
o E1ect"$e buyer!oriented ricing "n$l$es understand"n# h! much
$alue cnsumers place n the )ene(ts the% rece"$e *rm the prduct and
then sett"n# a pr"ce that (ts th"s $alue
o 'c cnsumers $ar% "n the $alues the% ass"#n t d"1erent prduct *eatures,
marketers *ten $ar% the"r pr"c"n# strate#"es *r d"1erent pr"ce se#ments.
The% 1er d"1 sets * prduct *eatures at d"1erent pr"ces.
Anal%s"n# the pr"ce demand relat"nsh"p:
o Each pr"ce char#ed )% a c !"ll lead t a d"1 le$el * DD
o DD curve- sh!s the V * un"ts the m !"ll )u% "n a #"$en t"me per"d, at
d"1 pr"ces that m"#ht )e char#ed
o Nrmall%, DD and pr"ce are inversely related7 h"#her pr"ce7l!er DD.
o 5u"ury goods DD cur$e slpes up!ards 2d"rect rsh"p4
o Impact * non!rice factors n DD are sh!n thru#h sh"*ts "n the DD
cur$e rather than m$ements aln# "t
E.#. Da"r% Farmers Th"ck and &ream% A#hurt- "ncreased prduct
+ual"t%
K< | M A R K E T I N G F O U N D A T I O N S
0r"ce elast"c"t% * DD:
o Price elasticity- a measure * the sens"t"$"t% * DD t chan#es "n pr"ce
Frmula- P chan#e "n +uant"t% demanded
P chan#e "n pr"ce
o Inelastic DD! DD hardl% chan#es !"th a small chan#e "n pr"ce
the less elast"c the DD, the mre "t pa%s *r the seller t ra"se the
pr"ce
o /lastic DD! DD chan#es #reatl% !"th a chan#e "n pr"ce
I* DD "s elast"c, sellers !"ll cns"der l!er"n# the"r pr"ce
A l!er pr"ce !"ll prduce mre ttal re$enue
o )u%ers are less pr"ce sens"t"$e !hen:
the prduct the% are )u%"n# "s un"+ue r !hen "t "s h"#h "n +ual"t%,
prest"#e r e3clus"$eness e.#. ant"+ue car, art, (rst class a"rl"nes.
su)st"tute prducts are hard t (nd r !hen the% cant eas"l%
cmpare the +ual"t% * su)st"tutes e.# "nsurance pl"c"es, m)"le
phne plans.
the ttal e3pend"ture *r a prduct "s l! relat"$e t the"r "ncme r
!hen the cst "s shared )% anther part%
KF | M A R K E T I N G F O U N D A T I O N S
,% C1MP/TIT1.2S P.IC/S '4D 166/.S
the c6s pr"c"n# strate#% ma% a1ect the nature * the cmp "t *aces e.#. "* T"me3
*ll!s a h"#h-pr"ce, h"#h-mar#"n strate#%, "t ma% attract cmp.
the c needs t learn the pr"ce and +ual"t% * each cmp6s 1er
7% 1T-/. /8T/.4'5 6'CT1.S
Ecnm"c cnd"t"ns- ecnm"c *actrs- "nSat"n, )m r recess"n and IR
a1ect pr"c"n# dec"s"ns )c the% a1ect the csts * prduc"n# a prduct and
cnsumer percept"ns * the prduct6s pr"ce and $alue
G$- la!s a1ect"n# pr"ce.
o Trade Practices 'ct- prh")"ts pr"ce (3"n#, resale pr"ce ma"ntenance and
*rms * pr"ce d"scr"m"nat"n as !ell as predatr% pr"c"n# )%
mnpl"st"call% ps"t"ned cmpet"trs and decept"$e pr"c"n#
o 'CCC! pla%s a ma=r rle "n "n$est"#at"n# pss")le )reaches
$. *ompare the four general pricing approaches
I. &st-)ased pr"c"n# 2prduct-dr"$en4
Cost!lus ricing: add"n# a standard markup t the cst * the prduct
2s"mplest methd4. E.#. cnstruct"n cmpan"es.
o Mark-ups are smallest n staple #ds and h"#h n prducts such as *resh
ch"cken, seasna)le "tems and per"sha)les, spec"alt% "tems, sl!er
m$"n# "tems, "tems !"th h"#h stra#e and handl"n# csts and "tems !"th
"nelast"c DD.
o Mark-up pr"c"n# nl% !rks "* that pr"ce actuall% )r"n#s "n the e3pected
le$el * sales.
o Ke% reasns *r oularity: "ncreased certa"nt%, m"n"m"se pr"ce cmp Q
perce"$ed *a"rness
9reakeven analysis and target ro$t ricing: sett"n# pr"ce t )reake$en n
the csts * mak"n# and market"n# a prduct r t make the des"red pr(t.
o Used )% man% Aus "mprters? and )% pu)l"c ut"l"t"es !h"ch are cnstra"ned
t make a *a"r return n the"r I.
o Uses the cncept * a )reake$en chart !h"ch sh!s the ttal cst and
ttal re$enue e3pected at d"1 sales $l le$els.
o As pr"ce "ncreases, )reake$en $l drps. It "s "mp t cns"der the anal%s"s
"n a cmpet"t"$e cnte3t.
o 'reake$en $lume 7 (3ed cst 9 2un"t sell pr"ce - un"t $ar"a)le cst4
II. 5alue-)ased pr"c"n#
KG | M A R K E T I N G F O U N D A T I O N S
Sett"n# pr"ce )ased n )u%ers6 ercetions of value rather than n the seller6s
csts
E.#. $ar"us pr"ces d"1 restaurants char#e *r the same "tems due t the $alue
added )% the atmsphere and ser$"ce
& uses non!rice variables "n the m m"3 t )u"ld up perce"$ed $alue "n the
)u%er6s m"nd
III. &mpet"t"n-)ased pr"c"n#
/conomic value ricing: csts perce"$ed )% custmers e3tend !ell )e%nd
trhe pr"ce char#ed 2e# ma% "ncl "nstallat"n csts4. E+u"p purchases are
e$aluated $er the"r ecnm"c l"$es and cmpar"sns )! cmpet"trs # )e%nd
stra"#ht pr"ce assessment. Thus, m$"n# a!a% *rm pr"ce cmpar"sns t
d"1erent"at"n# prducts n the )as"s * ecnm"c $alue t custmers. E.#.
a"rcra*t t%re manu*acturer pr"ces "ts t%res n )as"s * cst per ne hundred
land"n#s "nstead * cst per t%re.
(oing!rate ricing) sett"n# pr"ce )ased lar#el% n *ll!"n# cmpet"trs6 pr"ces
rather than n c csts r DD. In l"#pl"st"c "ndustr"es that sell a cmmd"t%
such as steel c6s nrmall% char#e the same pr"ce. Is +u"te ppular.
Sealed!bid:tenders: sett"n# pr"ce )ased n h! the (rm th"nks cmpet"trs
!"ll pr"ce rather than "ts !n csts r DD- used !hen a c )"ds *r =)s.
I5. Relat"nsh"p 0r"c"n# 2nt "mprtantZ4
&ncerned !"th mana#"n# custmer e3pectat"ns and the rsh"p s that a
cnt"nuus stream * transact"ns results and the l"*et"me $alue * each
custmer "s pt"m"sed.
&. 'escrie the ma(or strategies for pricing new products
1. Market skimming ricing: sett"n# a h"#h pr"ce *r a ne! prduct t sk"m ma3
re$enue *rm the se#ments !"ll"n# t pa% the h"#h pr"ce? the c makes *e!er )ut
mre pr(ta)le sales. E.#. Apple adpted th"s !"th the release * "ts "0d M0<
pla%er. It "s e1ect"$e !hen:
o The prduct6s +ual"t% and "ma#e are cns"stent !"th a h"#h pr"ce
KJ | M A R K E T I N G F O U N D A T I O N S
o There are enu#h )u%ers t purchase the prduct at that pr"ce
o the csts * prduc"n# a small $l are nt s h"#h that there "s an
"nade+uate mar#"n
o !hen the (rm has a ne! prduct that "s patent-prtected l"ke man% ne!
eth"cal dru#s r cnta"ns des"#n )ene(ts that aren6t eas"l% emulated )%
cmpet"trs
;. Market enetration ricing: sett"n# a l! pr"ce *r a ne! prduct "n rder t
attract a lar#e num)er * )u%ers and a lar#e market share. E..# M"crs*t,
!arehuse stres and d"scunt reta"lers use "t. Se$eral cnd"t"ns *a$ur sett"n#
a l! pr"ce:
o M must )e sens"t"$e t d"1 pr"ce le$els s that a l! pr"ce prduces mre
rap"d m tr"al and mre m #r!th
o 0rduct"n and d"st csts *all as sales $l "ncreases
o >! pr"ce ma% help t keep ut r dela% cmp
o Adpted *r man% FM&G )c the% are e.#. * cnt"nuus "nn$at"n
$ricing for an i'itati)e ne2 produ&t is rather difficult2 position on quality or price<
+. *omprehend the way in which companies estalish a set of prices that ma#imises the
profits from the total product mi#
The strategy for setting a price on an offer has to be changed when the product is part of a mix.
$ricing is difficult bc the various g4s have related // and costs and face different degrees of
comp.
KK | M A R K E T I N G F O U N D A T I O N S
(trategy /escription
$roduct4service line pricing (etting the price steps bw various products in a product line,
based on cost differences bw the products, customer evaluations
of different features and competitors+ prices.
5ptional produce4service
pricing
$ricing of optional or accessory products along with a main
product. &.g. car companies must decide which items to build
into the base price and which to offer as options.
'aptive product4service
pricing
$ricing of products that must be used along with a main product
such as blades for a ra>or or film for a camera. !lso ink
,consumables. for ink%et printers ,captive products..
T2o-part pri&ing2 a strategy for pricing services in which price
is broken into a fixed fee plus a variable usage rate.
0y3product pricing (etting a price for by3products in order to make the main
product+s price more competitive. &.g. in the production of
processed meats, petroleum products, chemicals and other
products, there are often by products. The manufacturer will
seek a market for these by products and should accept any price
that covers more than the cost of storing and delivering them.
This allows the seller to reduce the main product+s price to
make it more competitive.
$roduct3bundle pricing 'ombining several products and offering the bundle at a
reduced price. &.g. sport teams sell season tickets.
,. "#plain how companies ad(ust their prices to take into account different types of
customers and situations
'ompanies apply a variety of price3ad%ustment strategies to account for differences in consumer
segments and situations6
Discount ricing allo#ances- c est cash d"scunts, +uant"t% d"scunts,
*unct"nal d"scunts, seasnal d"scunts and all!ances.
Segmented ricing- c sets d"1erent pr"ces *r d"1erent custmers, prduct
*rms, places r t"mes. E.#. tthpaste tu)es $s. pumps, tra"n *ares *r sen"rs,
students, ch"ldren, Dapp% Dur.
Psychological ricing- c ad=usts the pr"ce t cmmun"cate mre e1ect"$el% a
prduct6s "ntended ps"t"n.
Promotional ricing- c dec"des n lss-leader pr"c"n# 2supermarkets4, spec"al
e$ent pr"c"n# and ps%chl#"cal d"scunt"n#.
;alue ricing- c 1ers =ust the r"#ht cm)"nat"n * +ual"t% and #d ser$"ce
at a *a"r pr"ce.
(eograhic ricing- c dec"des h! t pr"ce t d"stant custmers, chs"n#
*rm such alternat"$es as FO' pr"c"n#, un"*rm del"$ered pr"c"n#, One pr"c"n#,
)as"n#-p"nt pr"c"n# and *re"#ht-a)srpt"n pr"c"n#.
International ricing- c ad=usts "ts pr"ce t meet d"1 cnd"t"ns and
e3pectat"ns "n d"1 !rld markets.
KL | M A R K E T I N G F O U N D A T I O N S
KM | M A R K E T I N G F O U N D A T I O N S
C7!%T#R #@#0#N/ %@!C#M#NT
%(a&e'ent covers many concepts including physical distribution, location, channels of
distribution and logistics management. The appropriate assortment of products must be in the
right place, at the right time and in the right condition to maximise customer satisfaction.
"ogistics is an area of potentially high cost savings and improved customer satisfaction.
Trad"t"nall%, mana#ement *cused n the hysical distribution of goods. N! "t
*cuses n the logistics * mak"n# and d"str")ut"n# prducts.
&" .escribe the nature of marketing logistics network management
Marketing (ogisti&s net2ork 3 system of efficiently and effectively making and getting
products and services to end3users. t involves coordinating the activities of the entire chain to
deliver maximum value to customers. t begins earlier than physical distribution and includes6
0rcur"n# "nputs 2ra! mater"als, K e+u"pment4
&n$ers"n * these t (n"shed prducts Q
&n$e%"n# them t end users
#o such network can both maximise customer service and minimise logistics costs. nstead, the
goal of marketing logistics management is to provide a targeted (e)e( o1 ser)i&e at an
a11orda9(e &ost, where the customer perceives value. Marketing logistics networks management
also entails managing 'arketing distri9ution &hanne(s6 the ma%or functions include effective
and efficient conversion operations, order processing, warehousing, inventory management and
transportation.
Marketing @ogisti&s e&isions includes making trade3offs to meet customer+s service
requirements6
1. &%cle t"me reduct"ns
;. &n$ers"n perat"ns lcat"n
<. 0urchas"n# dec"s"ns
F. Manu*actur"n# and perat"ns
prcess dec"s"ns
G. Order prcess"n# and csts
J. /arehuse num)ers and csts
K. In$entr% le$els and csts
L. Transprt t%pe and csts
M. Restructure the market"n#
channels
There is a critical interaction bw (ogisti&s Q each of the firm+s 'arketing 1un&tions Q this
requires careful coordination.
Product variations ma% "mpse a )urden n d"str")ut"n *ac"l"t"es
Promo camaigns must real"st"call% crd"nate !"th ptent"al l#"st"cs del"$er%
Pricing ma% )e the (rm6s d"1erent"al ad$anta#e )ased n super"r l#"st"cal
ser$"ce
LN | M A R K E T I N G F O U N D A T I O N S
/" .escribe the nature of marketing channels and e*plain why marketing
intermediaries are used
Marketing &hanne(s refer to a network of interdependent organisations ,or intermediaries.
involved in the process of making a product or service available for use or consumption by the
consumer or industrial user. The functions of marketing channels are2
1. 0nformation? #ather"n# and d"str")ut"n# market"n# research and "ntell"#ence
;. 1romotion? de$elp"n# and spread"n# cmmun"cat"ns a)ut an 1er
<. #ontact? (nd"n# and cmmun"cat"n# !"th prspect"$e )u%ers
F. Matching? shap"n# Q (tt"n# the 1er t the )u%er6s needs, "ncl such act"$"t"es
as manu*actur"n#, #rad"n#, assem)l"n# and packa#"n#
G. 2egotiation? reach"n# an a#reement n pr"ce and ther terms * the 1er
J. 1hysical distribution? transprt"n# and str"n# #ds
K. 3inancing? ac+u"r"n# Q us"n# *unds t c$er the csts * the channel !rk
L. 4isk taking? assum"n# the r"sks * carr%"n# ut the channel !rk
Inter'ediaries are organisations linking producers to other intermediaries or to the customer
through contractual arrangements to purchase and resale products. They are used because of2
&st
Increased c$era#e
&nsumer cn$en"ence
&ustm"Oed appraches t custmer needs
X eRc"enc%
Impr$ed market"n# e1rt
Marketing inter'ediaries can reduce the overall costs of market exchanges by efficiently
performing certain functions.
5" 6*plain the organisation and behaiour of marketing channels
Marketing &hanne(s are complex behavioural networks in which people and companies interact
to accomplish individual, company and channel goals. (ome channel networks consist only of
informal interactions among loosely organi>ed firms6 others consist of formal interactions
guided by strong organisational structures. 'hannel networks do not stand still, new types of
intermediaries surface and whole new channel networks evolve.
Marketing distri9ution &hanne( de&isions are among the most complex and challenging
decisions facing the firm. &ach channel network creates a different level of sales and costs. 5nce
a marketing channel has been chosen, the firm must usually stick with it for a long time. The
chosen channel strongly affects, and is affected by, the other elements in the marketing mix.
! marketing channel consists of dissimilar firms that have banded together for their &o''on
good. deally, because the success of individual channel members depends on overall channel
success, all channel firms should work together smoothly. 0y cooperating, they can more
effectively sense, serve and satisfy the target market. !lthough channel members are dependent
on one another, they sometimes act alone in trying to meet their own short3run best interests.
L1 | M A R K E T I N G F O U N D A T I O N S
This may result in &hanne( &on1(i&t 3 a disagreement among marketing channel members on
goals and roles3 who should do what and for what rewards.
-ori<ontal con=ict- cnS"ct )et!een (rms at the same le$el * the channel
2"e cmmun"cat"n d"Rcult"es "nh")"t crd"nat"n4 e.#. Franch"sees * lar#e
*ast *d cha"ns m"#ht cmpla"n a)ut the pr"c"n# pract"ces * ther
*ranch"sees "n the same "ma#e cha"n.
;ertical con=ict- e$en mre cmmn and re*ers t cnS"cts )et!een
d"1erent le$els * the same channel. E.#. !hen Kmart started "n Austral"a,
sme pa"nt manu*acturers !ere !ar% a)ut suppl%"n# them !"th the
manu*acturer6s )randed prduct )ecause * the ptent"al )acklash that
!uld ccur *rm ther reta"lers !h stcked the )rand.
Sme cnS"ct ma% )e "n the *rm * healthy cometition.
Marketing channels in the ser)i&es &onte+t6
E3per"ences aren6t sh"pped r m$ed )ut "n th"s cnte3t cns"der
o 0h%s"cal *ac"l"t"es *r del"$er%
o >cat"n
o D"rect d"str")ut"n $s. channels
o /e)-)ased del"$er%, cntact centres, etc.
The channel will perform better if it contains a company, agency or mechanism that has the
power to assign roles and manage conflict. n recent years, new types of channel organisations
have appeared that provide stronger leadership and improved performance.
Con)entiona( 'arketing &hanne(/ consists of one or more independent producers or
suppliers, wholesalers or retailers where each is a separate business seeking to maximi>e its
own profits, even at the expense of profits for the network as a whole.
0erti&a( 'arketing
net2orks ,0MN-/
7oriFonta( 'arketing
net2orks
7*9rid 'arketing &hanne(
net2orks ,aka 'u(ti&hanne(
net2orks-
- distriution channel
structure in which producers,
wholesalers and retailers act
as a unified network- one
channel memer owns the
others, has contracts with
them or wields so much
power that they all cooperate.
&an )e dm"nated )%
the reta"lers,
!hlesaler r
prducers.
The% ach"e$e
ecnm"es thru#h
s"Oe, )ar#a"n"n# p!er
- channel arrangement in
which 2 or more companies at
one level (oin together to
follow a new marketing
opportunity.
&mpan"es m"#ht ="n
*rces !"th
cmpet"trs and nn-
cmpet"trs.
Usuall% *rmed t
m$e "nt ne!
markets 2esp. #l)al
markets4
.ultichannel distriution
systems in which a single firm
sets up 2 or more marketing
channels to reach one or
more marketing segments.
'ene(t- X sales as
mult"-cnsumer
se#ments are reached
R"sks- ma% 1end
e3"st"n# channel
mem)ers !h cr%
Iun*a"r cmpet"t"n,6
channel mem)ers are
smet"mes
cmpensated )%
L; | M A R K E T I N G F O U N D A T I O N S
and el"m"nat"n *
dupl"cated ser$"ces.
< ma=r t%pes:
1. &rprate 5MNs-
cm)"nes success"$e
sta#es * prduct"n Q
d"str")ut"n under
s"n#le !nersh"p.
;. &ntractual 5MNs-
cns"sts *
"ndependent (rms at
d"1erent le$els *
prduct"n Q
d"str")ut"n !h ="n
t#ether thru#h
cntracts t )ta"n
mre ecnm"es r
sales "mpact than the%
culd ach"e$e alne. <
t%pes * cntractual
"nclude? !hlesaler-
spnsred $luntar%
cha"ns 2net!rks "n
!h"ch !hlesalers
r#an"Oe $luntar%
cha"ns * "ndependent
reta"lers t help them
cmpete !"th lar#e
r#s4, Reta"ler
cperat"$es
2net!rks "n !h"ch
reta"lers r#an"Oe a
ne!, ="ntl% !ned
)us"ness t carr% n
!hlesal"n# and
pss")l% prduct"n4 Q
*ranch"se r#an"sat"ns
2a channel mem)er
called a I*rach"sr6
l"nks se$eral sta#es "n
the prduct"n-
d"str")ut"n prcess. It
"ncludes manu*acturer-
spnsred reta"ler
*ranch"se net!rks,
manu*acturer-
spnsred !hlesaler
*ranch"se net!rks Q
ser$"ce-(rm-spnsred
reta"ler *ranch"se
net!rks4.
<. Adm"n"stered 5MNs-
crd"nates success"$e
e3clus"$e r spec"al
all!ances.
E.#. In#hams sells
dressed ch"cken
prt"ns t KF& as !ell
as t a m%r"ad *
"ndependent take-
a!a% *d shps and
als sells )readed
prt"n-cntrlled
ch"cken prducts t
e$er% part * the *d
ser$"ces "ndustr%, "ncl
McDnald6s and KF&.
L< | M A R K E T I N G F O U N D A T I O N S
sta#es * prduct"n Q
d"str")ut"n thru#h
the s"Oe and p!er *
ne * the part"es.
t has been argued that the 5e9 will revolutionise the distribution of marketing channels by6
Re)u"ld"n# the suppl% cha"n
Trans*rm"n# r )l"terat"n# channels
Speed"l% cn$e%"n# and rece"$"n# "n*rmat"n
Impr$"n# cmmun"cat"n !"th channel mem)ers
All!"n# (rms t reach d"stant parts * the !rld
0r$"d"n# custmers !"th the pt"n * !rld!"de $endrs
0r$"d"n# ser$"ces "nstantaneusl% acrss "nternat"nal )rders
O1er"n# !e)-enhanced ser$"ces *r each d"str")ut"n *unct"n
&heaper channels
Esta)l"sh"n# >T relat"nsh"ps
LF | M A R K E T I N G F O U N D A T I O N S
7" .iscuss traditional & online store retailing and the diferent ways of classifying
stores8 by amount of serice proided! breadth and depth of the product line!
relatie price leels! control of outlets and type of store cluster"
Retai(ing includes all activities involved in selling g4s directly to final consumers for their
personal, non3business use. )etailers can be classified as store retailers and non3store retailers.
!lthough most g4s are sold through -bricks and mortarK stores, direct and on(ine forms of
retailing have seen rapid growth. This was followed by a falling away as mistakes were made
due to initial stock market support for, and then a retreat from, flawed business models for online
intermediaries.
Retai(ing &(assi1i&ations2
1. Amunt *
ser$"ce
D"1 prducts needs d"1 amunts * ser$"ce and custmer
ser$"ce pre*erences $ar%.
Three le$els * ptent"al ser$"ce?
o Sel* ser$"ce reta"ler
o >"m"ted ser$"ce reta"ler
o Full ser$"ce reta"ler
Se(1 Ser)i&e Te&hno(ogies ,SSTs-/ technological interfaces that allow
customers to create services themselves, without direct assistance from
service personnel. &.g. automated hotel check3in and check3out
facilities, !TMs, self3service kiosks, retail self scanners Q internet3
based tools such as self3booking services ,flights.. !dv cost
reduction, offer consistent service Q don+t have to money and time in
training. /is3 v impersonal.
;. 0rduct l"ne2s4
sld
)etailers can be classified by the length and breadth of their product
assortments2
Spec"alt% stres
Department stres e.#. Da$"d Ynes
&m)"nat"n stres e.#. /l"es and >"+urland
Supermarkets
&n$en"ence stres
Mass merchants e.#. 'unn"n#s
D%permarkets
Ser$"ce )us"nesses
<. Relat"$e pr"ces
Most retailers charge regular prices and offer normal quality goods and
customer service. (ome offer higher quality g4s at higher prices.
)etailers which feature low prices are2
Discount stores - sells standard merchand"se at l!er
pr"ces )% accept"n# l!er mar#"ns Q sell"n# at h"#her
$lume.
1f rice retailers - reta"lers that )u% at [ reta"l, usuall%
carr% a chan#"n# and unsta)le cllect"n * h"#her-+ual"t%
LG | M A R K E T I N G F O U N D A T I O N S
merchand"se, *ten le*t $er #ds, $erruns and
"rre#ulars )ta"ned *rm manu*acturers at reduced pr"ces.
E.#. *actr% utlets.
Catalogue sho#rooms - a reta"l perat"n that sells a
!"de select"n * h"#h mark-up, *ast-m$"n# )rand name
#ds at d"scunt pr"ces.
F. &ntrl *
utlet
Cororate chains - ; r mre utlets that are cmmnl%
!ned Q cntrlled, empl% central )u%"n# and
merchand"s"n# Q sell s"m"lar l"nes * merchand"se.
.etailer cooeratives - a #rup * "ndependent reta"lers
that )and t#ether t set up a ="ntl% !ned central
!hlesale perat"n and cnduct ="nt merchand"s"n# and
prmt"n e1rts.
;oluntary chains- a !hlesaler-spnsred #rup *
"ndependent reta"lers that en#a#es "n #rup-)u%"n# and
cmmn merchand"s"n#.
6ranchise organisations - a cntractual assc"at"n
)et!een a manu*acturer, !hlesaler r ser$"ce
r#an"sat"n 2the *ranch"sr4 and "ndependent )us"ness
peple 2*ranch"sees4 !h )u% the r"#ht t !n and perate
1 r mre un"ts "n the *ranch"se s%stem.
Merchandising conglomerates- cmpan"es that
cm)"ne se$eral d"1erent reta"l"n# *rms under central
!nersh"p and share sme d"str")ut"n and mana#ement
*unct"ns.
G. T%pe * stre
cluster
Most stores cluster to increase their customer pulling power Q to give
consumers the convenience of one3stop shopping. Main types are6
C9D - the area * )us"ness at the heart * a c"t% r t!n
Shoing centre- a #rup * reta"l )us"nesses planned,
de$elped, !ned and mana#ed as a un"t.
&mmun"t% shpp"n# centre- a centre cnta"n"n# 1G-GN
reta"l stres Q e$en a )ranch * a d"scunt department r
$ar"et% stre, a supermarket, spec"alt% stres, pr*ess"nal
Rces Q smet"mes a )ank.
Str"p cmmun"t% centre- a #rup * reta"l )us"nesses
lcated aln# an arter"al rad.
$. *ompare the different types of wholesalers, including full-service and limited-service
merchant wholesalers, rokers ) agents, ) manufacturers/ sales ranches.
5ho(esa(ing includes all the activities involved in selling goods or services to those who are
buying for the purpose of resale or for business use. 1holesalers perform many functions,
including6
1. sell"n# and prmt"n#
;. )u%"n# and assrtment )u"ld"n#
<. )ulk )reak"n#, !arehus"n#
F. transprt"n#
G. (nanc"n#
J. r"sk )ear"n#
K. suppl%"n# market "n*rmat"n
L. 0r$"d"n# mana#ement ser$"ces
and ad$"ce.
LJ | M A R K E T I N G F O U N D A T I O N S
T*pes o1 2ho(esa(ers/
1. Merchant
!hlesalers
Ind !ned )us"nesses that take t"tle t the
merchand"se the% handle
>ar#est s"n#le #rup * !hlesalers
Include:
o 6ull service #holesalers- pr$"de a *ull set
* ser$"ces
o 5imited service #holesalers- cash Q carr%
!hlesalers 2(sh markets4, truck !hlesalers
2*d $ans that # t hsp"tals4, drp sh"ppers
2at !har* s"tes "n$ drpped "n4, rack =))ers
2ser$e #rcer% and pharmaceut"cal reta"lers4,
prducers6 cperat"$es 2assem)le *arm
prduce t sell "n lcal markets4 Q ma"l rder
!hlesalers.
;. 'rkers and
a#ents
.roker
- wholesaler who does not take title to goods and whose
function is to ring uyers and sellers together and assist in
negotiation.
Are pa"d )% the part"es h"r"n# them
D nt carr% "n$, #et "n$l$ed "n (nanc"n# r assume
r"sk
!gent
- wholesaler who represents uyers or sellers on a more
permanent asis, performs only a few functions and does not
take title to the goods.
T%pes * a#ents "nclude?
o Man*acturer6s a#ent
o Sell"n# a#ent
o 0urchas"n# a#ent
o &mm"ss"n merchant
The% are pa"d a cmm"ss"n *r a"d"n# )u%"n# and
sell"n#.
<. Manu*acture
rs6 sales
)ranches Q
Rces
0holesaling y sellers or uyers themselves rather than through
independent wholesalers.
Manu*acturer6s *ten set up the"r !n sales )ranches
and Rces t "mpr$e "n$ cntrl, sell"n# Q
prmt"n
Sales )ranches carr% "n$ Q are *und "n such
"ndustr"es as t"m)er and car e+u"pment Q parts
Sme lar#e reta"lers set up purchas"n# Rces "n
ma=r market centres else!here "n the !rld. These
purchas"n# Rces per*rm a rle s"m"lar t that *
)rkers r a#ents )ut are part * the )u%er6s r#.
9" 6*plain the wholesaler marketing decisions of target market and
positioning and marketing(mi* decisions! and describe trends in
wholesaling"
Trends in wholesaling6
Consolidation !"ll reduce the V * (rms "n the "ndustr%
The rema"n"n# !hlesalers !"ll gro#
Distributors !"ll need t learn h! t comete efectively $er
!"der and mre d"$erse areas
The increased use of technology !"ll help mana#ement
The distinction bet#een large retailers and #holesalers !"ll
cnt"nue t )lur
/hlesalers !"ll cnt"nue t increase their services t reta"lers:
pr"c"n#, ad$ert"s"n#, "n*rmat"n etc.
C7!%T#R T5#@0#/ IMC 1/ !0#RTISIN$ B %U.@IC R#@!TIONS
&" .escribe integrated marketing communication :0M#% and
classify 0M# media! tools and technologies"
IMC- the concept under which a company carefully integrates and coordinates its
many communication channels to deliver a clear, consistent and compelling message
about the org and its products. t aims to most effectively meet ob%ectives such as to
inform, persuade and remind consumers as well as to reinforce their attitudes and
perceptions.
t entails coordinating the org+s promotional efforts using ma%or communication
elements such as
Ad$ert"s"n#
Sales prmt"n
0R
D"rect and nl"ne market"n#
0ersnal sell"n#
Tabl e 12. 1 A classification of integrated marketing communication media, tools and technologies
Integrated 'arketing &o''uni&ation &ategor* Media8 too(s and te&hno(ogies
Mass communication !dvertising via FT!3T86 radio6 newspapers6 maga>ines6 outdoor6 cinema6
cooperative advertising6 motion pictures. 1ith or without sales promotion
incentives.
3to a large diverse market
Targeted communication $ay3T8 ,satellite, cable and narrowcast microwave T8 with no back3
channel.6 home shopping ,FT!3T8 or pay3T8.6 public relations6 door3to3
door selling6 catalogues6 telephone directories ,Tellow $ages.6 events
,Formula 5ne championship.6 sponsorships6 mobile and static trade
exhibitions6 automatic vending machines. 1ith or without sales promotion
incentives.
3to more specific groups.
n3store communication )etail counter selling6 merchandising6 location3T8 and radio ,narrowcast or
closed.6 aisle displays6 electronic aisle messaging6 point3of3purchase media
,e.g. trolley advertising.6 packaging. 1ith or without sales promotion
incentives.
3at point of purchase, throughout store, at end of aisles
5ne3to3one communication /atabase marketing in all its forms2 direct mail6 interactive T86
telemarketing ,telephone or fax.6 telesales6 electronic dispensing and kiosks6
direct selling ,home and office.6 online value transformation. 1ith or
without sales promotion incentives.
/" ;utline the steps in deeloping 0M# including identifying the target
audience! and determining the response sought"
14 Sender-$arty sending the message to another party
24 #n&oding-$rocess of putting thought into symbolic form
A4 Message-(et of symbols that the sender transmits3the actual advertisement
44 Media- 'ommunication channels through which the message moves from sender to
receiver
;4 e&oding-$rocess by which the receiver assigns meaning to the symbols encoded
by the sender3a consumer watches the ad and interprets the words and illustrations it
contains
<4 Re&ei)er-$arty receiving the message sent by another party3the consumer who
watches the ad.
?4 Response-)eactions of the receiver after being exposed to the message3any of
hundreds of possible responses.
84 Feed9a&k-$art of the receiverKs response communicated back to the sender.
E4 Noise- Dnplanned static or distortion during the communication process that results
in the receiver getting a different message from the one which the sender sent
dentifying the Target audience2
M communicator starts with a &(ear target audien&e in mind. !udience may be
potential buyers or current users, those who make the buying decision or those who
influence it. !udience may be ind, groups, special publics or the general public
/etermining response sought2
The m communicator needs to know where the target audience now stands and to
what state it needs to be moved. The target audience may be in any of U buyer3
readiness states2
1. '#areness-* the prduct r r#. Ma% )e thru#h s"mple name
rec#n"t"n. Th"s prcess can )e#"n !"th s"mple messa#es repeat"n#
the name.
;. 3no#ledge- e1ect"$e cmmun"catrs need t learn h! man% peple
"n the"r t aud"ence ha$e l"ttle, sme r much kn!led#e a)ut the
prduct r r#.
<. 5iking- "* the aud"ence lks un*a$ura)l% n the r# r "ts prducts,
the cmmun"catr must learn !h% and then de$ a m cmmun"cat"n
campa"#n t create *a$ura)le *eel"n#s.
F. Preference- cmmun"catrs must tr% t )u"ld cnsumer pre*erence,
prmt"n# the prduct6s +ual"t%, $alue, per*rmance and ther
*eatures.
G. Conviction- the cmmun"catr6s =) "s t )u"ld cn$"ct"n that tak"n#
the ne3t step and )u%"n# the )rand "s the r"#ht th"n# t d.
J. Purchase- cmmun"catr must lead cnsumers t take the (nal step.
Act"ns m"#ht "ncl 1er"n# the prduct at a l! pr"ce, 1er"n# a
prem"um r lett"n# cnsumers tr% "t n a l"m"ted )as"s.
3. 'escrie the communication process1 selecting a message, selecting the media,
selecting a message source and collecting feedack.
(electing a message2
Ideall% the messa#e shuld 2AIDA mdel4:
o Get 'TT/4TI14
o Dld I4T/./ST
o Aruse D/SI./S
o O)ta"n 'CTI14
Message content- the cmmun"catr has t !rk ut an appeal r
theme that !"ll prduce the des"red respnse:
o .ational aeals- relate t the aud"ence6s sel*-"nterest. Sh!
that the prduct !"ll prduce the des"red )ene(ts. E.#. car ads-
pr"ce, *eatures
o /motional aeals- attempt t st"r up e"ther - r H emt"ns
that can mt"$ate purchase. E.#. *ear, #u"lt, shame.
o Moral aeals- d"rected t the aud"ence6s sense * !hat "s r"#ht
and prper. E.#. sc"al causes, Bsa$e the !rld.E
Message structure- cmmun"catr must dec"de
o /hether t dra! a cnclus"n r lea$e "t t the aud"ence
2pr"nc"ple * clsure4
o /hether t present a ne-s"ded r t!-s"ded ar#ument 2ne-
s"ded usuall% mre e1ect"$e4
o /hether t present the strn#est ar#uments (rst r last
Message format- need a strn# *rmat t e1ect"$el% del"$er the
messa#e. Th"s $ar"es "n pr"nt, rad" and T5 med"ums.
(electing the media2
There are two broad types of communication channels the communicator can select
from2
Personal communication channels - channels, thru#h !h"ch t!
r mre peple cmmun"cate d"rectl% !"th each ther, "nclud"n# *ace-
t-*ace, persn-t-aud"ence, $er the telephne r thru#h the ma"l.
Als, !rd-*-muth and p"n"n leaders.
4on!ersonal communication channels - med"a that carr%
messa#es !"thut persnal cntact r *eed)ack, "nclud"n# med"a 2pr"nt
med"a, )radcast med"a and d"spla% med"a4, atmsphere 2des"#ned
en$"rnments that create r re"n*rce the )u%ers lean"n#s t!ards
)u%"n# a prduct4 and e$ents 2ccurrences sta#ed t cmmun"cate
messa#es t tar#et aud"ences4.
(electing the message source2
Messa#e6s "mpact n the aud"ence "s als a1ected )% h! the aud"ence
$"e!s the sender
Messa#es del"$ered )% highly credible surces are mre persuas"$e
E.#. marketers h"re !ell-kn!n actrs and athletes t del"$er the"r
messa#es
Three *actrs mst *und "n a cred")le surce are e"ertise,
trust#orthiness and likeableness
'ollecting Feedback2
A*ter send"n# the messa#e the cmmun"catr must #au#e "ts efect n
the tar#et aud"ence
Th"s "n$l$es ask"n# the tar#et aud"ence !hether the% remem)er the
messa#e, h! man% t"mes the% sa! "t, !hat p"nts the% recall, h!
the% *elt a)ut the messa#e, and the"r past and present att"tudes
t!ards the prduct and cmpan%.
The cmmun"catr !uld als l"ke t measure )eha$"ur result"n# *rm
the messa#e
3. 'efine the ways of setting an integrated marketing communication udget1
affordale, percentage-of-sales, competitive parity and o(ective-and-task
methods.
Method used
to set tota(
ad)ertising
9udget
e1inition !d)antages isad)antages
*% 'fordab
le
method
(etting the promotion
budget at what
management thinks the
company can afford.
They begin with the
total revenues, deduct
operating expenses and
capital outlays, and then
devote some portion of
the remaining funds to
the M' element in
question.
"#nres the
e1ect *
market"n#
cmmun"cat"
n n sales
$lume,
lead"n# t an
uncerta"n
annual IM&
)ud#et,
!h"ch makes
ln# ran#e
market
plann"n#
d"Rcult.
*ten results
"n
underspend"n
#.
,% > of
sales
method
Sett"n# the
prmt"n )ud#et at
a certa"n P *
current r *recast
sales r * the sales
pr"ce. E.#. car
cmpan"es usuall%
)ud#et a (3ed P *r
IM& )ased n the
planned car pr"ce.
Spend"n# "s
l"kel% t $ar%
!"th !hat
the cmpan%
can a1rd
Delps
mana#ement
t th"nk
a)ut the
relat"nsh"p
)et!een
market"n#
cmmun"cat"
n spend"n#,
sell"n# pr"ce
and pr(t
per un"t
It suppsedl%
creates
cmpet"t"$e
sta)"l"t%
)ecause
cmpet"n#
(rms tend t
spend a)ut
the same P
* the"r sales
n IM&
It !rn#l%
$"e!s sales
as the cause
* IM& rather
than the
"ntended
result.
The )ud#et "s
)ased n
a$a"la)"l"t% *
*unds rather
than n
pprtun"t"es
.
It ma%
pre$ent the
"ncreased
spend"n#
smet"mes
needed t
turn arund
*all"n# sales.
'ecause the
)ud#et
$ar"es !"th
%ear t %ear
sales, ln#
ran#e
plann"n# "s
d"Rcult.
It des nt
pr$"de an%
)as"s *r
nm"nat"n# a
spec"(c P,
e3cept !hat
has )een
dne "n the
past r !hat
cmpet"trs
are d"n#.
?% Cometi
tive
Parity
Method
(etting the promotion
budget to match
competitors+ outlays.
Two arguments support
this method2
1. &mpet"trs
)ud#ets
represent the
cllect"$e !"sdm
* the "ndustr%
;. Spend"n# !hat
cmpet"trs
spend helps
Ne"ther
ar#ument "s
$al"d.
pre$ent
prmt"n !ars
7% 1b0ectiv
e and
task
method
/eveloping the
promotion budget by
1. De(n"n# spec"(c
)=ect"$es
;. Determ"n"n# the
tasks that must
)e per*rmed t
ach"e$e thse
)=ect"$es
<. Est"mat"n# the
csts *
per*rm"n# these
tasks. The sum *
these csts "s the
prpsed
prmt"n )ud#et
makes m#t
spell ut "ts
assumpt"ns
a)ut the
relat"nsh"p
)et!een
dllars spent
and IM&
results
"s the mst
d"Rcult
methd t
use.
$. "#plain I.* media, tools and technologies 2 advertising, 34, direct and online
marketing, sales promotion and personal selling 2 and the factors involved when
setting the I.* program5 type of product and market, push vs pull strategies, uyer-
readiness states and lifecycle stage.
IMC 'edia8 too(s and te&hno(ogies
5rgs need to divide budget among ma%or marketing communication categories,
specific media, tools and technologies. Mix of marketing communication needed to
achieve marketing ob%ectives defers greatly between companies, even those within the
same industry.
Too( !d) is
!d)ertising Ad$ert"s"n#6s pu)l"c nature
su##ests that the ad$ert"sed
prduct "s standard and
legitimate.
>ets the seller reeat a
messa#e man% t"mes and "t
lets the )u%er rece"$"n#
comare the messa#es *
$ar"us cmpet"trs.
5er% e"ressive, lett"n# the
cmpan% dramat"se "ts
prducts thru#h the art*ul use
* pr"nt, sund and clur.
&an )e used t )u"ld up a long
term image * a prduct and
als t trigger &uick sales.
&an reach masses *
#e#raph"call% spread ut
)u%ers at a l! cst per
e3psure.
"t "s imersonal and can6t )e
as persuas"$e as a cmpan%
sales persn.
Is asynchronous
communication 2a)le t carr%
n nl% a ne-!a%
cmmun"cat"n !"th the
aud"ence4.
&an )e $er% costly.
%R 9elievability "s h"#her t
readers than ads
&an reach man% prspects
!h a$"d sales peple and
ads
>"ke ad$ert"s"n# 0R can
dramatise a cmpan% r
prduct
ire&t and
On(ine
Marketing
".g. scattergram dropped in post office
o#es, mailouts left in household
lettero#es addressed to the
householders y name
There "s a $er% lar#e rivacy
"ssue !hen !e lk "nt the
means )% !h"ch d"rect
marketers #a"n the"r data)ase
"n*, !h the% sell "t t and h!
"t "s used
SMEs make up MNP * )us"ness
(rms "n Austral"a and #"$en
the"r l!er csts * d"rect
market"n#, th"s aspect *
prmt"n has )een keenly
adoted
Sa(es
%ro'otion
'ttracts cnsumer attention
and pr$"des info that ma%
lead the cnsumer t )u% the
prduct
The 1er strn# incentives t
purchase !"th "nducements r
cntr")ut"ns that #"$e
add"t"nal value t cnsumers
The% invite and re#ard +u"ck
respnse
&an )e used t dramatise
prduct 1ers and boost
sagging sales
Sales prmt"n e1rts are
usuall% short!lived and ma%
nt )e e1ect"$e "n )u"ld"n# ln#
run )rand pre*erence
%ersona(
Se((ing
oral presentation in a conversation with
one or more prospective purchasers for
the purpose of making sales.
Re+u"res a longer term
commitment than ad$ert"s"n#
Is the cmpan"es most
e"ensive IM& tl
In$l$es ersonal interaction
)et!een ; r X peple s each
persn can )ser$e the ther6s
needs and character"st"cs and
make +u"ck ad=ustments
Als lets relat"nsh"ps spr"n# up
The )u%er usuall% *eels a X
need t respnd and l"sten
Fa&tors in)o()ed 2hen setting the IMC progra'
T%pe * prduct and market
Consumer goods comanies spend mst n ad$ert"s"n# then
sales prm, then persnal sell"n#, *ll!ed )% 0R
9,9 of industrial goods spend mst n persnal sell"n#, *ll!ed
)% sales prm, ad$ert"s"n# and 0R
Personal selling "s mre hea$"l% used !"th e3pens"$e and r"sk%
#ds and "n markets !"th *e!er and lar#e sellers
0ush $ersus pull strate#%
Push strate#% "s a prmt"n strate#% that calls *r us"n# the
salesforce and trade romo t push the prduct thru#h
channels? the prducer prmtes the prduct t !hlesalers, the
!hlesalers prmte t reta"lers and the reta"lers prmte t
cnsumers
Pull strate#% "s a prm strate#% that calls *r sending a lt n
advertising and consumer romo t )u"ld up cnsumer demand?
"* success*ul, cnsumers !"ll ask the"r reta"lers *r the prduct,
reta"lers !"ll ask the !hlesalers and !hlesalers !"ll ask the
prducers
Mst lar#e cmpan"es use a cm)"nat"n * )th. Recentl%,
cnsumer #ds cmpan"es ha$e )een decreas"n# the pull prt"ns
* the"r IM& m"3es
'u%er-read"ness state
'dvertising and P. pla% ma=r rles "n a#areness and
kno#ledge states
Customer liking@ reference and conviction are mre a1ected
)% ersonal selling and advertising
Closing the sale "s mstl% dne !"th direct marketing, sales
calls and sales romo
0rduct l"*ec%cle sta#e
Intro - ad$ert"s"n#, d"rect market"n#, nl"ne market"n# and 0R are
#d *r prduc"n# h"#h a!areness.
/arly trial - sales prm "s use*ul.
Personal selling must )e used t #et the trade t carr% the
prduct.
(ro#th stage - ad$ert"s"n#, d"rect market"n#, nl"ne market"n#
and 0R cnt"nue t )e p!er*ul )ut sales prm can )e reduced.
Mature stage - sales prm )ecmes mre "mprtant relat"$e t
ad$ert"s"n#.
Decline stage - ad$ert"s"n# kept at a rem"nder le$el, 0R "s drpped
and sales peple #"$e the prduct nl% a l"ttle attent"n. Sales
prm m"#ht cnt"nue t )e strn#.
&. 'escrie the nature of media advertising, including the ma(or decisions involved1
advertising udget, setting strategy, creative e#ecution, media selection and
evaluation in terms of communication and sales outcomes.
(etting 5b%ectives
'dvertising ob0ectives shuld )e )ased n past dec"s"ns a)ut the
target market, ositioning and marketing m"3. The market"n#
ositioning and m"3 strategies de(ne the =) that ad$ert"s"n# must
d "n the ttal market"n# pr#ram.
'dvertising ob0ective- a spec"(c cmmun"cat"n task t )e
accmpl"shed !"th a spec"(c tar#et aud"ence dur"n# a spec"(c per"d *
t"me
D"1erent tyes * ad$ert"s"n#
o Informative advertising- used !hen "ntrduc"n# a ne!
prduct cate#r%, )=ect"$e "s t )u"ld pr"mar% demand
o Persuasive advertising- mre "mprtant as cmp "ncreases,
)=ect"$e t )u"ld select"$e demand. Sme has )ecme
cmparat"$e ad$ert"s"n# !h"ch cmpares ne )rand !"th ne r
mre ther )rands
o .eminder advertising- "mprtant *r mature prducts, keeps
cnsumers th"nk"n# a)ut the prduct
(etting the !dvertising 0udget
6actors that shuld )e cns"dered !hen sett"n# a )ud#et are
o Sta#e "n prduct l"*ec%cle
o Market share
o &mpet"t"n and clutter
o Ad$ert"s"n# *re+uenc%
o 0rduct d"1erent"at"n
'ud#et t )e set *r each prduct
Rle * ad$ert"s"n# "s t a1ect demand *r a prduct. &mpan% !ants
t spend the amunt needed t ach"e$e the sales #al.
!dvertising (trategy
&ns"sts * creat"n# advertising messages and selecting
advertising media
>ar#e ad$ert"s"n# )ud#et desn6t #uarantee a success*ul ad$ert"s"n#
campa"#n
T%p"cal message e"ecution styles
o Slice of life- sh!s peple us"n# prduct "n a nrmal sett"n#
o 5ifestyle- sh!s h! a prduct (ts "n !"th a l"*est%le
o 6antasy- creates a *antas% arund the prduct r "ts use
o Mood r image- )u"lds ne arund the prduct
o Musical- sh!s peple r cartn characters s"n#"n# a sn#
a)ut the prduct
o Personality symbol- creates a character that represents the
prduct
o Technical e"ertise- sh!s cmpan"es e3pert"se "n mak"n# the
prduct
o Scienti$c evidence- presents sc"ent"(c e$"dence that the )rand
"s )etter r )etter l"ked than anther
o Testimonial evidence- *eatures )el"e$a)le r l"kea)le surce
endrs"n# the prduct
Media (election2
Fur ma=r steps "n med"a select"n are
o Dec"d"n# n reach@ fre&uency and imact
o Select"n# ma=r media tyes
o Select"n# spec"(c media vehicles
o Dec"d"n# n media timing
!dvertising &valuation2
Communication efects
o Measur"n# the cmmun"cat"n e1ect tells !hether an ad "s
cmmun"cat"n# !ell. &alled coy testing, "t can )e dne
)e*re r a*ter an ad "s pr"nted r )radcast.
o Three ma=r methds * ad$ert"s"n# re!testing are direct
rating@ ortfolio tests and lab tests%
o T! ppular methds * ost testing ad$ert"sements are
recall tests and recognition tests%
Sales efects
o One !a% t measure "s t comare past sales !"th past
ad$ert"s"n# e3pend"tures.
<" .e)ne public relations and outline the more common forms of this 0M#
tool"
%R building good relations with the companies various publics by obtaining
favourable publicity, building up a good corporate image and handling or heading off
unfavourable rumours, stories and events. t is a form of ma%or mass communication
tool. Ma%or %R too(s include press relations, product publicity, corporate
communication, lobbying and counselling.
4e#s- sme ccur naturall% r 0R persn can su##est e$ents9act"$"t"es
that !uld create ne!s
Seeches-create prduct and cmpan% pu)l"c"t%
Secial events- ne!s cn*erences, press turs, #rand pen"n#s and
(re!rks t laser sh!s that !"ll reach and "nterest tar#et pu)l"cs
Aritten materials- annual reprts, )rchures, art"cles and cmpan%
ne!sletters and ma#aO"nes
'udiovisual materials! sl"de sh!s, (lms
Cororate identity materials! l#s, stat"nar%, )rchures, s"#ns,
)us"ness cards, un"*rms, cmpan% cars
Community service activities! t "mpr$e pu)l"c #d!"ll
=" 6*plain the need for socially responsible marketing communication and
how this is achieed"
!dvertising2
&mpan"es must a$"d false r decetive advertising
Sellers must a$"d bait!and!s#itch ad$ert"s"n# that attracts
)u%ers under *alse pretences
$ersonal (elling2
&mpan"es must ensure the"r sales peple *ll! the rule * fair
cometition
/irect and 5nline Marketing2
Marketers and custmers usuall% en=% mutually re#arding
relationshis
+nfairness@ decetion and fraud are the dark s"de that ma%
emer#e
Gr!"n# cncerns a)ut invasion of rivacy "ssues.
C7!%T#R T7IRT##N/ IMC 2/ S!@#S %ROMOTION !N %#RSON!@
S#@@IN$
&" .escribe sales promotion tools and techniques that may be used to
create immediacy and close sales! as well as reward loyal
customers
(ales promotion3 short ter' incentives to encourage purchase of a product or
service6 act of influencing &usto'er per&eption and 9eha)iour to build market share
and sales which reinforces brand image. They are value3adding tools used to prompt
an immediate sale by adding urgency. May take many forms depending on the
ob%ectives to be met, type of market and product and the budget available and has its
origins in Fast Moving 'onsumer 7oods ,FM'7..
(ales promotion is used to2
Attract ne# triers 2nn-users, l%al users * anther )rand and )rand
s!"tchers4
Re!ard and reta"n brand!loyal customers
Turn l"#ht users "nt medium r heavy users
Re#a"n ast urchasers !h ha$e ceased )u%"n#
(ales promotion ob%ectives3 are as varied as the methods used. (ellers may use
consumer promotions to increase ST sa(es or to help build @T 'arket share. The
ob%ectives may be one of the following2
Ent"ce custmers t tr% a ne# roduct:brand
>ure cnsumers a#ay from cometitor2s prducts9)rands
Get cnsumers t Iload u2 n a mature prduct
Dld and re#ard l%al custmers
n general terms, sales promo should pro'ote the product+s positioning and include a
se((ing 'essage along with the deal. deally, the ob%ective is to build positive
consumer attitudes, stronger brand equity, V market share and increased profitability
rather than to prompt temporary brand switching. f properly designed, every sales
promo tool has consumer franchise3building potential, even where a price cut is
included.
(ales promotion tools3
*% Consumer romotion tools
TOO@ #FINITION #G!M%@#>!%%@IC!TION
Sa'p(es Free or dis&ounted goods provided at store
level or through the media designed to
facilitate product trial. 5ffers of a trial of a
product. &xpensive but effective way to create
a2areness of and trial a new product.
5ften low3priced categories
and FM'7.
Redee'a9(e
&oupons
Coupons carried on3pack or in another media
that can be forwarded to a marketer or
appointed agent and will be redeemed for a
product or service, even a discount on the
next purchase.
5n back of shopping dockets
Cash-9a&k
o11ers ,re9ates-
Cash dis&ounts usually received by
forwarding a proof3of3purchase where state
legislation permits.
Cents-o11 dea(s
or pri&e pa&ks
%ri&e dea(s, usually offered at retail level but
also by direct marketers. Most &o''on form
of promotion at store level in !ustralia.
= for ; deals Q in those lines
where they complement each
other well
%re'iu' o11ers $oods o11ered 1ree of charge or at redu&ed
pri&e as an in&enti)e to buy a product. $art of
the augmented product.
$ack itself may be a reusable
commemorative mug
!d)ertising
spe&ia(ties
Dseful arti&(es imprinted with an advertiser+s
name, given as gifts to consumers.
$ens, key rings and other
novelty items. Found a lot at
hotels
%atronage
re2ards
Cash, 'er&handise or ser)i&e re2ards
offered to consumers who make continual use
of a company+s product or service.
"oyalty programs e.g. *antas
Frequent Flyer programs
%oint-o1-
pur&hase ,%O%-
pro'otions
5ffers ranging from the'e pro'otions in-
store to specially arranged se((ing areas.
1. D"spla%s- at cash
re#"ster
;. Dems- e.#. ck"n# "n
supermarkets 2*d
dra!s us "n )% ur
senses4
Contests and
ga'es o1 &han&e
and ski((
$romotional e)ents that give consumers the
chance to win something of value by luck or
skill. t creates interest and involvement.
24Trade pro'o too(s
Man% sales prms a"med at cnsumers are accmpan"ed )% trade
prms !here)% the $ar"us dpt mana#ers at stre le$el can !"n pr"Oes
*r the )est merchand"s"n# d"spla% r the h"#hest sales le$els dur"n# a
prm
Manu*acturers als pa% allo#ances t reta"lers *r such act"$"t"es as
ad$ert"s"n#, d"spla%s and ph%s"cal d"str")ut"n
In sme "ndustr"es ush money 2cash r "ncent"$es4 "s pa"d t dealers
r the"r sales *rce t Ipush6 the manu*acturer6s #ds.
?% 9usiness!to!business romo tools
Industr"al markets als use prms t #a"n a#areness *r ne!
prducts r t "ncrease enetration * a part"cular "ndustr% )%
"ncreas"n# )us"ness leads *r the"r sales *rce.
&ncentrate n conventions and trade sho#s and sales cntests
Conventions and tradesho#s! used )% $endrs t (nd ne! sales
leads, cntact custmers, "ntrduce ne! prducts, meet custmers,
sell mre t e3"st"n# custmers and educate custmers !"th
pu)l"cat"ns and aud"$"sual presentat"ns
Sales contest! r#an"sed )% )us"ness market"n# t ther )us"nesses
"s an attempt t #"$e "ncent"$e t a (rm6s sales *rce, a d"str")utr6s
sales *rce r a dealer net!rk t "ncrease the"r sales per*rmance
dur"n# a spec"(ed per"d.
/ecisions to be made in order to develop a sales promotion program include
Si<e * the "ncent"$e-nt t lar#e 2can %u c$er csts, decreases
)rand "ma#e e.#. lu3ur% prducts4
D! t romote and distribute the pr#ram 2ther med"as, sales
sta1, 0R campa"#n4
5ength * the prmt"n
Sales prmt"n budgeting 2P * ttal )ud#et r the marketer can
chse the prms and est"mate the"r ttal cst4
2. 'iscuss the role of a company/s salespeople in creating value for customers and
uilding customer relationships
Sa(espeop(e- are involved in two3way personal communication with customers with
whom they build "T relationships.
0ersnal sell"n# "s the interersonal arm * the prmt"n m"3.
Th"s persnal cmmun"cat"n ma% )e thru#h *ace t *ace, telephne,
$"de cn*erences r )% ther means.
The% reresent the c t the custmers and $"ce $ersa and ser$e as a
cr"t"cal l"nk )et!een a c and "ts custmers.
Salespeple shuld nt nl% )e cncerned a)ut prduc"n# sales )ut
als prduc"n# custmer satisfaction and comany ro$t.
Salespeple can pr)e custmers t learn mre a)ut the"r roblems.
The% can ad=ust the market"n# 1er t (t the spec"al needs * each
custmer and can ne#t"ate terms * sale.
The% can )u"ld 5T ersonal relationshis !"th ke% dec"s"n makers.
7" 0dentify the 9 ma>or salesforce management steps
Sa(es1or&e 'anage'ent3 the analysis, planning, implementation and control of
salesforce activities.
Ma%or salesforce management steps are6
1. Des"#n"n# sales*rce strate#% and structure
;. Recru"t"n# and select"n# salespeple
<. Tra"n"n# salespeple
F. &mpensat"n# salespeple
G. Super$"s"n# salespeple
J. E$aluat"n# salespeple
?" 6*plain how companies recruit! select and train salespeople
)ecruiting salespeople
The company must first decide which traits its salespeople need to possess. !mong
the most common of these traits are2
&mm"tment t sales and =)
Strn# cnsumer r"entat"n and l"nk"n# sk"lls
Enthus"asm
0ers"stence
In"t"at"$e
Sel*-cn(dence
Independence
Sel*-mt"$at"n
>"sten"n# sk"lls
)ecruiting procedures
A*ter dec"d"n# n needed tra"ts, mana#ement must recru"t.
The persnnel dpt lks *r alicants )% #ett"n# names *rm current
salespeple, us"n# empl%ment a#enc"es, plac"n# =) ads and
cntact"n# un"$ers"t% students.
(electing salespeople
Recru"t"n# !"ll attract man% appl"cants *rm !h"ch the cmpan% must
select the )est.
The select"n prcedure can $ar% *rm a single informal intervie# t
lengthy testing and intervie#ing.
Man% cmpan"es #"$e formal tests t sales appl"cants. Tests t%p"call%
measure sales apt"tude, anal%t"cal and r#an"sat"nal sk"lls, persnal"t%
tra"ts and ther character"st"cs.
Ke% areas * cncern "n recru"t"n# and select"n# are imortance,
&uality@ selection and rocedures.
Training salespeople
The a$era#e tra"n"n# per"d "s 7 months
The initial eriod m"#ht *cus n sell"n# sk"lls, prduct kn!led#e, the
cmpan% and the d"str")utrs that sell the cmpan%6s prducts.
Amn# ther th"n#s, the% learn that d"str")utrs ha$e dOens *
salespeple call"n# n them all the t"me.
'fter the initial training, cmpan"es *ten )r"n# the"r sales*rce )ack
t cmpan% D8 *r *ll!-up tra"n"n#
The goals * tra"n"n# pr#rams are
o Delp salespeple t kno# and identify #ith the comany 7
descr")e cmpan%6s h"str% and )=ect"$es, "ts r#, "ts (nanc"al
structure and *ac"l"t"es, and "ts ch"e* prducts and markets
o Salespeple need t )e *am"l"ar !"th the comany2s roducts
7 sales tra"nees are sh!n h! prducts are prduced and h!
the% !rk
o Need t kn! customers2 and cometitors2 characteristics
7 tra"n"n# pr#ram teaches them a)ut cmpet"tr6s strate#"es
and a)ut d"1erent t%pes * custmers and the"r needs, )u%"n#
mt"$es and )u%"n# ha)"ts
o Need t kn! h! t make efective resentations 7 tra"ned
"n pr"nc"ples * sell"n#
o Need t understand $eld rocedures and resonsibilities 7
learn h! t d"$"de the"r t"me )et!een act"$e and ptent"al
accunts, h! t use an e3pense accunt, prepare reprts and
rute cmmun"cat"n e1ect"$el%.
9" .escribe how companies compensate and superise salespeople! and
how they ealuate salesforce efectieness
'ompensating salespeople
To attract needed salespeople, a company must have an attra&ti)e &o'pensation
p(an. These plans vary greatly both by industry and by companies within the same
industry. The level of compo must be close to the -going rate= for the type of sales %ob
and needed skills. 'ompensation consists of6
a $"ed amount-usuall% a salar%? #"$es the persn a sta)le %
a variable amount- cmm"ss"ns r )nuses )ased n sales
per*rmance? re!ards the salespersn *r X e1rt
e"ense allo#ances- repa% salespeple *r =)-related e3penses?
all! them t undertake needed and des"ra)le sell"n# e1rts
fringe bene$ts- pa"d hl"da%s, s"ckness r acc"dent )ene(ts, l"*e
"nsurance and ch"ldcare? pr$"de =) secur"t% and sat"s*act"n.
/ifferent combinations of fixed and variable compensation give rise to E basic types
of compensation plans3 straight salary, straight commission, salary plus bonus and
salary plus commissions.
Th"s plan can )e des"#ned t motivate saleseole and t direct
the"r activities. E.#. "* sales m#t !ants salespeple t emphas"se ne!
accunt de$, "t m"#ht pa% a )nus *r pen"n# ne! accunts.
The cmp plan shuld d"rect the sales*rce t!ards activities that
are consistent !"th $erall market"n# ob0ectives.
Mre and mre cmpan"es are m$"n# a!a% *rm h"#h-cmm"ss"n
plans that ma% dr"$e salespeple t make ST #ra)s *r )us"ness rather
than )u"ld"n# >T, $alue-laden relationshis.
(upervising salespeople
Through supervision, the company dire&ts and 'oti)ates the salesforce to do a better
%ob.
Mst cmpan"es classify customers )ased n sales $lume, pr(t
and #r!th ptent"al and then the% set call nrms accrd"n#l%.
&mpan"es *ten spec"*% h! much time the"r sales*rces shuld
spend prspect"n# *r ne! accunts.
One tl t help salespeple use the"r t"me eRc"entl% "s the annual
call schedule !h"ch sh!s !h"ch custmers and prspects t call n
"n !h"ch mnths and !h"ch act"$"t"es t carr% ut. Anther tl "s time
and duty analysis.
Ad$ances "n technological develoments ha$e all!ed dramat"c
"mpr$ements "n sales*rce prduct"$"t%.
Motivating salespeople
M#t can )st sales*rce mrale and per*rmance thru#h "ts
r#an"sat"nal cl"mate, sales +utas and ps"t"$e "ncent"$es.
o 1rg climate- descr")es the *eel"n# that salespeple ha$e a)ut
the"r pprtun"t"es, $alue and re!ards *r #d per*rmance
!"th"n the cmpan%. I* the% are held "n h"#h esteem, there "s less
turn$er and )etter per*rmance.
o Sales &uotas! standards set *r salespeple stat"n# the amunt
the% shuld sell and h! sales shuld )e d"$"ded amn# the
cmpan%6s prducts.
o Positive incentives! sales meet"n#s, spnsr"n# sales cntests,
hnurs, merchand"se and cash a!ards, tr"ps and pr(t-shar"n#
plans.
&valuating salespeople
(ources of information about its salespeople are obtained from2
E3pense reprts
Sales reprts
/rk plan
Annual terr"tr% market"n# plan
&all reprts
For'a( e)a(uation produces three 9ene1its2
I. M#t must de$elp and cmmun"cate clear standards *r =ud#"n#
per*rmance
II. M#t must #ather !ell runded information a)ut each salespersn
III. Salespeple kn! the% !"ll ha$e t s"t d!n ne mrn"n# !"th the sales
mana#er and e"lain the"r per*rmance
The formal evaluation process may involves
Comaring saleseole2s erformance - can )e m"slead"n# due t
d"1erences such as terr"tr% ptent"al, !rklad, le$el * cmp and
cmpan% prm e1rt
Comaring current sales #ith ast sales
Bualitative evaluation of saleseole-usuall% lks at the"r
kn!led#e * the c, "ts prducts, custmers, cmpet"trs, terr"tr% and
tasks and ma% als rate persnal tra"ts.
<" .iscuss the personal selling process! distinguishing between
transaction(oriented marketing and relationship marketing
The selling process consists of several steps that the salesperson must master. These
steps focus on the goal of getting new customers and obtaining orders from them.
?owever, most salespeople spend much of their time maintaining existing accounts
and building "T customer relationships.
1. 0rspect"n#
and
+ual"*%"n#
0rspect"n#- salespersn "dent"(es +ual"(ed
ptent"al custmers.
Th"s ma% "n$l$e ask"n# current custmers *r
names * prspects, )u"ld"n# re*erral surces such
as suppl"ers and )ankers, ="n"n# r#an"sat"ns t
!h"ch prspects )eln# r can en#a#e "n speak"n#
and !r"t"n# act"$"t"es that !"ll dra! attent"n,
search"n# *r names "n ne!spapers r d"rectr"es
and us"n# the phne9ma"l t track d!n leads.
8ual"*%"n#- "dent"*% the #d leads and screen the
pr nes.
0rspects can )e +ual"(ed )% lk"n# at the"r
(nanc"al a)"l"t%, $lume * )us"ness, spec"al needs,
lcat"n and pss")"l"t"es *r #r!th.
;. 0reapprach Salespersn learns as much as pss")le a)ut a
prspect"$e custmer )e*re mak"n# a sales call.
Salespersn shuld set call )=ect"$es, dec"de n
the )est apprach and #"$e thu#ht t an $erall
sales strate#% *r the accunt.
<. Apprach Salespersn meets and #reets the )u%er t #et the
rsh"p 1 t a #d start
In$l$es salespersn6s appearance, pen"n# l"nes
and *ll!-up remarks
F. 0resentat"n
and
demnstrat"
n
0resentat"n- salespersn tells the prduct Istr%6
t the )u%er, sh!"n# h! the prduct !"ll make r
sa$e mne%
&ncentrate n custmer )ene(ts
&mpan"es can use < st%les * sales presentat"n-
canned aroach 2memr"sed9scr"pted talk4,
formula aroach 2"d )u%er6s needs, att"tudes
and )u%"n# st%le? sh!s h! the prduct !"ll
sat"s*% )u%er6s needs-*ll!s a #eneral plan4 and
need!satisfaction aroach 2search *r
custmer6s needs )% #ett"n# custmer t d mst
* talk"n#4
An% presentat"n can )e "mpr$ed !"th
demnstrat"n a"ds e.#. )klets, S"p charts, sl"des,
$"detapes and prduct samples.
G. Dandl"n#
)=ect"$es
Salespersn seeks ut, clar"(es and $ercmes
custmer )=ect"ns t )u%"n#
Must )e a)le t *resee these +uest"ns: "s "t hard
t "nstallC An% a*ter sales ser$"ceC
J. &ls"n# Salespersn asks the custmer *r an order
Salespeple shuld kn! h! t rec#n"se cls"n#
s"#nals *rm the )u%er, "nclud"n# ph%s"cal act"ns,
cmments and +uest"ns
&ls"n# techn"+ues- asks *r the rder, re$"e!
p"nts * a#reement, 1er t help !r"te up the
rder, ask !hether the )u%er !ants th"s mdel r
that ne r nte that the )u%er !"ll lse ut "* the
rder "s nt placed n!. The% ma% 1er the )u%er
spec"al reasns t clse, such as a l!er pr"ce r
an e3tra +uant"t% at n char#e.
K. Fll!-up Salespersn *ll!s up a*ter the sale t ensure
custmer sat"s*act"n and repeat )us"ness
Th"s $"s"t !uld re$eal an% pr)lems, assure the
)u%er * the salepersn6s "nterest and reduce an%
)u%er cncern that m"#ht ha$e ar"sen the sale
The principles of personal selling as %ust described are transa&tion oriented3 their
aim is to help salespeople close a specific sale with a customer.
Re(ationship 'arketing2 the process of creating, maintaining and enhancing strong,
value3laden rships with customers and other stakeholders.
It emphas"ses )u"ld"n# and ma"nta"n"n# >T rsh"ps !"th custmers )%
creat"n# super"r custmer $alue and sat"s*act"n.
Mre cmpan"es are rec#n"s"n# that !"nn"n# and keep"n# accunts
re+u"res mre than mak"n# #d prducts and d"rect"n# the sales*rce
t clse lts * sales.
/"nn"n# and keep"n# accunts re+u"res mre than mak"n# #d
prducts and cls"n# lts * sales.
C7!%T#R FOURNT##N/ IR#CT !N ON@IN# M!R"#TIN$
&" 6*plain the nature of direct and online marketing
ire&t and on(ine 'arketing- integrates marketing communication techniques, using
traditional and new media, with traditional and electronic fulfilment approaches and
sophisticated customer rship mgt techniques ,')M..
It "s )th a *rm * one to one communication and als a step
)e%nd market"n# prduct, r "n* a)ut del"$er% r e$en h! t "nstall
the prduct r $ercme a pr)lem.
Anther *eature * d"rect and nl"ne market"n# "s Iaccessible
memory2- m r#s use a data)ase t accumulate !hat the% learn *rm
custmers.
A cmpan%6s kno#ledge base- data)ase * *re+uentl% asked
+uest"ns r slut"ns t pr)lems ma"nta"ned )% a cmpan% t ass"st
custmers.
/irect marketing3 an intera&ti)e system of marketing which uses one or more
advertising media to effect a measurable response and4or transaction at any location.
re*ers t thse act"$"t"es that em)race Itargeted media2 !h"ch ma%
ser$e t attract ptent"al and current custmers )ut !h"ch perm"t
transact"ns such as thse alread% descr")ed, and !h"ch ena)le
"nteract"n $"a ne-t-ne med"a.
The% ke% p"nt "s that there "s continuous interaction and nt s"mpl%
ep"sd"c ne-!a% cmmun"cat"n and purchase act"$"t%.
Tabl e 14. 1 Forms of direct and online marketing
/irect print and reproduction Making a tailored offer using printed or reproduced materials such as a
mailing, a printed catalogue or '/3)5M version delivered to a list or
database. (ynchronous if the customer responds in real time when the offer is
received.
/irect3response television and radio nteractive marketing, using FT!3T8, pay3T8, narrowcast T8 and radio, as
well as interactive T8 and radio. n some cases, there will be a back3channel
for order placement6 in other cases, the telephone or mail is used to order.
Telemarketing nbound or outbound personal selling or automated voice response unit selling
to a list or database. May be interactive in situations where a donation is made
or a vote is cast, or where orders are taken immediately the offer is made.
Telesales 5utbound calls, usually order3taking with prompts, from a known and stable
database of customers6 usually involves calls to intermediaries.
&lectronic dispensing and kiosks ! range of technologies used in receiving orders and payments as well as
delivering products and services6 now includes the use of -smart+ card
technologies and digital cash, to a known database of customers or to potential
customers.
/irect selling $ersonal selling into the home or office to potential customers or a known
clientele ,database..
&lectronic shopping ,also referred to as e3
commerce4e3business. (ee -1hat is online
marketing<+ later in this chapter.
)ecording responses, including taking orders, from inbound electronic signals
or messages, in response to communications via any number of media2 FT!3
T8, broadband interactive T8, pay3T8, narrowcast T8, the nternet ,email,
secure transaction websites, and fax., quick response direct marketing where
same3day or fast3track fulfilment is involved, e.g. gifts ordered from
1ishlist.com.au.
/irect and online database marketing ,see the
section on this topic later in the chapter.
The development and maintenance of electronic databases to interact with
past, present and4or potential customers and others in the marketing channel,
on a one3to3one basis, often in real time, and where the databases are used to
maintain value3laden relationships and to generate a measurable response
and4or transactions through the integrated use of electronic network tools and
technologies.
:
Tabl e 14. 2 Mass marketing versus one-to-one marketing
Mass 'arketing One-to-one 'arketing
!verage customer ndividual customer
'ustomer anonymity 'ustomer profile
(tandard product 'ustomised market offering
Mass production 'ustomised production
Mass distribution ndividualised distribution
Mass advertising ndividualised message
Mass promotion ndividualised incentives
5ne3way message Two3way messages
&conomies of scale &conomies of scope
(hare of market (hare of customer
!ll customers $rofitable customers
'ustomer attraction 'ustomer retention
5nline marketing3 this type of marketing entails interaction with known customers
and others in the marketing channel, on a one3to3one basis, often in rea( ti'e, to
maintain value3laden rships and to generate a measurable response and4or transactions
using electronic network tools and technologies.
M r#s arund the !rld ha$e chan#ed )th "n *rm and $alue as a
result * #l)al"sat"n, dere#ulat"n and d"#"t"sat"n.
Terms used t descr")e nl"ne market"n#
o Intranet- secure !e)s"tes accessed )% cmpan% empl%ees
nl%
o /"tranet- !e)s"tes accessed )% )th empl%ees and kn!n
custmers
o Customer rshi marketing CC.MD! ne t ne market"n#,
d"rect rder market"n#, d"rect market"n#, eMarket"n# and
"nteract"$e market"n#.
/" .iscuss the bene)ts of direct and online marketing to both
marketing organisations and their customers and identify the
reasons for the rapid growth in this area of 0M#
Buadrant *! m r#s are )est su"ted t us"n# a mass m apprach
"nclud"n# mass med"a ad$ert"s"n#, t ps"t"n the"r )rands "n
cnsumers6 m"nds and t ensure the% ha$e merchand"s"n# space "n
trad"t"nal reta"l utlets.
Buadrant ,- ma% (nd n"che market"n# mst apprpr"ate strate#% t
adpt.
Buadrant ?! FM&G manu*acturers ha$e lar#e se#ments * custmers
!h all !ant the same prduct h!e$er "t "s the"r supermarket
custmers !h accunt *r the )ulk * the"r sales.
Buadrant 7! m r#s that ha$e custmers !"th a !"de ran#e *
re+u"rements and sme custmers are !rth much mre than thers.
6igure above: custmers ha$e h"#hl% d"1erent"ated needs and d"1
custmers rep d"1 $aluat"ns t the )us"ness. &mp A and ' are mre
a)le t meet custmers6 re+u"rements. The c must real"#n "ts m
strate#% )% tak"n# ad$ * the s"tuat"n and )e"n# capa)le *
custm"s"n# "ts rder and "nteract"n# n a OnetOne )as"s !"th
custmers. The (rm !uld )e !"se t real"#n )% adpt"n# an nl"ne
OnetOne m strate#% that "ncrprates the use * the /e) "n
"nteract"$e m cmmun"cat"n and t enhance rsh"ps.
D!e$er "t "sn6t enu#h t s"mpl% munt a I$an"t%6 !e)s"te that
rema"ns lcked "nt a ne !a% mass-m cmmun"cat"n parad"#m,
cmpletel% $erlk"n# the *act that custmers tda% are learn"n#
custmers mre s than e$er )e*re and that the use * the /e)
cupled !"th data)ase technl#% means that )us"nesses ha$e
)ecme learn"n# r#an"sat"ns.
5earning organisation- an r# de(ned )% "ts a)"l"t% t "nn$ate,
adpt and chan#e "n l"ne !"th "ts chan#"n# en$.
!h"le !"despread use * the Net "s %et t reach "ts *ull ptent"al, due
partl% t the mre real"st"c $aluat"ns )e"n# placed n ne! and e3"st"n#
)us"nesses that empl% Net technl#"es )% !rld K markets, mre
sph"st"cated nl"ne OnetOne m cnt"nues t de$ "n Australas"a "n <
areas * m: m cmmun"cat"n, m channel and &RM.
D"rect and nl"ne data)ase market"n#
Enta"ls the de$ and ma"ntenance * electrn"c data)ases t "nteract
!"th past, present and9r ptent"al custmers and thers "n the m
channel.
One a ne-t-ne )as"s
O*ten "n real t"me
Used t ma"nta"n $alue-laden rsh"ps
T #enerate a measura)le respnse and9r transact"ns thru#h the
"nte#rated use * electrn"c net!rk tls and technl#"es.
M orgs use their databases in a number of ways2
$oa( es&ription
*% Identifying
rosects
Man% c6s #enerate sales leads )%
ad$ert"s"n# the"r prducts r 1ers.
Ads #enerall% ha$e a respnse
*eature such as a tll *ree phne
num)er
The data)ase "s )u"lt *rm these
respnses
& srts thru#h the data)ase t "d
the )est prspects then reaches
them )% ma"l etc "n an attempt t
cn$ert them t custmers
,% Deciding #hich
customers should
receive a articular
ofer
&6s "d the pr(le * an "deal
custmer and search the"r data)ases
*r "nd mst clsel% resem)l"n# th"s
"deal t%pe
'% track"n# "nd respnses the c can
"mpr$e "ts tar#et"n# prec"s"n $er
t"me
?% Deeening
customer loyalty
&6s can )u"ld custmers6 "nterest
and enthus"asm )% remem)er"n#
the"r pre*erences and send"n#
apprpr"ate "n*rmat"n, #"*ts r
ther mater"als
7% .eactivating
customers
The data)ase can help a c t make
attract"$e 1ers * prduct
replacements, up#rades r
cmplementar% prducts =ust !hen
custmers m"#ht )e read% t act
E% Data mining &heck"n# data)ases *r patterns and
trends that m"#ht e3"st r t (nd ne!
cnnect"ns )! data "tems
5" .iscuss the arious direct marketing techniques and their
application
/irect print and
reproduction
nvolves 'ai(-outs of letters, product lists, samples and paper3based
and digital catalogues to a list or kno2n data9ase o1 &usto'ers, or to
a targeted group that the marketer wishes to convert to a database entry.
/irect mail %rinted 'ateria(s sent by mail and conveying offers to &usto'ers,
whether targeted to the recipient by name, or to the business or
householder by a broader targeting method.
'atalogues ! printed (isting of products, often featuring high3quality illustrations
of the items on sale. /ifferent types include6 full3line merchandise
catalogues e.g. kea, 0=0 catalogues e.g. 5fficeworks, specialty
consumer catalogues e.g.
)adio $arts 7roup.
/irect3response
television, radio
and print
Dse of 'ass pro'otion 'edia combined with a dire&t response
o11er, usually involving telemarketing.
Telemarketing Dse of te(ephone operators to attract new customers, contact existing
customers to ascertain satisfaction levels or take orders. Ma%or use
relates to customer service. 5utbound and inbound ,people ring in and
out..
Telesales Routine order taking by te(ephone operators. !re used by marketing
firms of all persuasions, not %ust by direct marketers. /iff bw this and
telemarketing is that in telesales the calls are routinely made to regular
customers such as retailers. 5utbound calls to facilitate orders on
products.
&lectronic
vending
/lectronic disensing machines- mach"nes that
d"spense prducts and ser$"ces 2cash4 usuall% )% "nsert"n#
cash, transact"n r stred $alue card
/6TP1S C/lectronic funds transfer at oint of saleD-
reta"ler cash re#"ster electrn"call% l"nked t )ank
accunts? cnsumers pa% d"rectl% us"n# a cashcard r
cred"t card, and *unds ma% als )e cred"ted t an accunt
"* #ds are returned.
3iosks- electrn"call% net!rked m"n"-Rces, sta1ed r
unsta1ed, capa)le * d"spens"n# "n*rmat"n, prducts and
ser$"ces and * rece"$"n# pa%ments )% "nstalment r "n
*ull.
/irect selling (elling directly to consumers or businesses rather than using a reseller,
such as a retailer or agent. &.g. door to door selling by Tupperware,
!von, #utrimetics.
&lectronic
shopping
$urchasing via an electronic bulletin board or Telstra+s /iscovery, or
via interactive cable tv.
7" 6*plain how direct and online marketing campaigns are deeloped!
pretested! implemented and ealuated
E$aluat"n- the mst cmmn assessment "s t cmpare sales )e*re,
dur"n# and a*ter a sales prmt"n r ther d"rect and nl"ne market"n#
pr#ram r campa"#n. The pr(ta)"l"t% * such 1ers and the return n I
are e$en mre "mprtant.
/valuating direct marketing
o 0er*rmance has mult"ple d"mens"ns
o D"rect and nl"ne m r#s set up pr#rams t all! later
mn"tr"n# * such *actrs as?
Sales lead #enerat"n
Data)ase #enerat"n
Ful(lment respnse\
0rduct "n+u"r"es
Sales respnse
0r(ta)"l"t%
Return n the I made "n pr#rams and campa"#ns
>"*et"me custmer $alue
W1u(1i('ent response3order processing, delivery response times and accuracy of
delivery must be considered when responding to product orders.
/valuating online marketing- )% cns"der"n# "ts < ma=r aspects:
Onl"ne m
cmmun"cat"n
Thse r#s us"n# the Net9/e) "n IM& seek t measure
)th efectiveness 2d"d the% reach the tar#et market4
and eFciency 2h! cst-e1ect"$el% d"d the% reach the
tar#et market4.
Onl% sure !a% t track "nd )eha$"ur at a !e)s"te "s t
all! nl% subscriber access t the s"te. Th"s !rks
!ell "n the case * e"tranet usa#e )% ';' and ';G
su)scr")ers )ut !uld )e unreal"st"c *r hme users t
su)scr")e t "ts part"cular s"te.
< cate#r"es * measures are "n$l$ed:
1. Aeb!centric measures- e$aluat"n# success *
!e)s"tes "n m cmmun"cat"n )e#an !"th use * !e)
centr"c measures such as anal%s"s *?
o -its- V * (les re+uested )% #uests t a !e)
p#.
o 5og $les- a recrd ma"nta"ned )% all hst
ser$ers * the I0 address * the #uest6s
cmputer and * e$er% (le sent ut.
o Pg imressions- V * !e) pa#es $"e!ed )% a
s"n#le $"s"tr t a s"te.
;. 'udience!centric measures- are n! *a$ured )%
man% r#s. <
rd
part% research cmpan"es such as
A&N"elsen pr$"de these measures us"n# /e)-user
panels. A +uas"-slut"n t est !e) use "dent"t% "s the
use * ck"es.
Cookies- shrt "dent"(er p"eces * te3t, deps"ted n a
$"s"tr6s cmputer )% a !e)s"te. On su)se+uent $"s"ts,
the !e)s"te s*t!are recrds the ck"e respnse and
thus measures repeat #uest $"s"ts.
<. 4et#ork!centric measures- man% m r#s use
ser$"ces * -it#ise%com, t ascerta"n the"r
per*rmance "n the"r !n r"#ht r t est n !h"ch
na$"#at"n s"tes t )u% )anner ad space. The
measures pr$"ded "ncl the V * p# d!nlads and
d!ell-t"me durat"n n cnsecut"$e pa#es $"s"ted.
D"t!"se als pr$"des "n* n clickstream 2the path
*ll!ed )% !e)s"te $"s"trs4.
Onl"ne m channel
per*rmance
The !e) "s an nl"ne m channel r "t ma% )e used t
supplement trad"t"nal m channels.
Onl"ne m channels are =ud#ed "n the same !a% that mre
trad"t"nal d"rect m "s =ud#ed- *ul(lment respnse, "n
terms * prduct "n+u"r"es, sales respnse and
pr(ta)"l"t%.
Rsh"p m#t and
custmer l"*et"me
$alue
/"th all *rms * d"rect and nl"ne m, "t "s pss")le t
calculate "n ad$ance !hat respnse rate !"ll )e re+u"red
t break even, as !ell as ther $"tal respnse rates such
as a$era#e purchase le$els.
Customer lifetime value- the amunt )% !h"ch
re$enues *rm a custmer $er t"me !"ll e3ceed the
cmpan%6s csts * attract"n#, sell"n# and ser$"c"n# that
custmer.
"t "s Imre $alua)le t a )us"ness t ach"e$e +ual"(ed
custmers up*rnt and *cus n reta"n"n# them than "t "s
t cnstantl% search ut ne! custmers6 2p G;J4
$. 'iscuss the pulic policy and ethical issues facing direct and online marketers
$rivacy concerns3 ! ma%or direct and online m issue in most countries is $)8!'T.
'ross referencing of data /hen an "nd6s persnal "n* such as health status
and !rk attendance le$el "s "ntercnnected and
used !"thut perm"ss"n.
Dnwanted post and email One slut"n "s t ask peple !h"ch prduct
cate#r"es- "* an%- the% !uld l"ke t rece"$e
"n*rmat"n a)ut.
Samming- send"n# unsl"c"ted ema"l, usuall% t
lar#e Vs * peple, !"th a $"e! t mak"n# a sale.
&ncerns als e3"st a)ut the means used t )u"ld the data)ase and the
pss")"l"t"es * data)ase a)use, part"cularl% "n nl"ne m !here spamm"n#
threatens man% cmmerc"al uses * the Net. 0r"$ac% #u"del"nes are n! "n
place.
ire&t and on(ine data9ase 'arketing3 entails dev and maintenance of electronic
databases to interact with past, present and4or potential customers and others in
marketing channel.
Dses of databases
*% Identifying rosects
Ads #enerall% ha$e a respnse *eature, such as a )us"ness repl%
card r tll-*ree phne num)er
Data)ase "s )u"lt *rm these respnses
,% Deciding #hich customers should receive a articular ofer
&mpan"es "dent"*% the pr(le * an "deal custmer *r an 1er
Search * data)ases *r "nd"$"duals mst clsel% resem)l"n# the
"deal t%pe
'% track"n# "nd"$"dual respnses, the cmpan% can "mpr$e "ts
tar#et"n# prec"s"n $er t"me
?% Deeening customer loyalty
&reate custm"sed "n*rmat"n, #"*ts r ther mater"als
&ustm"sed t "nd"$"dual custmers pre*erences
7% .eactivating Customers
&reate attract"$e 1ers * prduct replacements, up#rades r
cmplementar% prducts
Dec"d"n# n r"#ht t"m"n# * 1er"n#
E%Data mining
Enta"ls check"n# data)ases *r patterns and trends that are
h%pthes"sed t e3"st
Enta"ls (n"dn# ne! cnnect"ns )et!een data "tem
&valuating database performance
$rofitable use of a database requires customer relationship mgt and keeping track of
sales so as to be able to predict future sales levels more accurately. Three criteria to
use are2
Recenc% * purchase
Fre+uenc% * purchase
Mnetar% $alue * purchase
%!RT FOUR/ R#S%ONSI.@# M!R"#TIN$
C7!%T#R FIFT##N/ #T7ICS !N M!R"#TIN$ COM%@I!NC#
1. 'iscuss social criticisms of marketing/s impact on individual consumers
'onsumers hold mixed or even slightly unfavourable attitudes toward m practices.
'onsumers are worried about high prices, poor quality and dangerous products,
misleading advertising claims and several other marketing related problems incl
planned obsolescence.
2. Identify and define criticisms of marketing/s impact on society as a whole
!dvertising has been a special target. 'riticisms of marketing+s impact on society are2
6alse #ants and too much materialism- m ur#es t much "nterest
"n mater"al pssess"ns. 0eple are =ud#ed )% !hat the% !n rather
than )% !h the% are.
T much pl"t"cal p!er- ad$ert"sers are accused * hld"n# t much
p!er $er the mass med"a, l"m"t"n# the"r *reedm t reprt
"ndependentl% and )=ect"$el%. All "ndustr"es prmte and prtect the"r
"nterests.
Too fe# social goods- )us"ness has )een accused * $ersell"n#
pr"$ate #ds at the e3pense * pu)l"c #ds. E..# "ncrease "n car
!nersh"p 2pr"$ate #d4 re+u"res mre h"#h!a%s, traRc cntrl,
park"n# spaces and pl"ce ser$"ces 2pu)l"c #ds4. O$ersell"n# pr"$ate
#ds results "n sc"al csts e.#. traRc cn#est"ns, a"r pllut"n,
deaths and "n=ur"es *rm acc"dents.
Cultural ollution- ur senses are )e"n# assaulted cnstantl% )%
ad$ert"s"n#.
Marketing+s impact on other businesses2
&r"t"cs cla"m that an r#6s m pract"ces can harm ther cmpan"es and
reduce cmpet"t"n < ma=r pr)lems are:
*% 'c&uisition of cometitors
;. M ractices that create barriers to entry- lar#e m
cmpan"es can use patents and hea$% prmt"n spend"n#
and t"e up suppl"ers r dealers t keep ut r dr"$e ut
cmpet"trs
<. +nfair cometitive m ractices- sett"n# pr"ces )el!
csts, threaten"n# t cut 1 )us"ness !"th suppl"ers, r
d"scura#"n# the )u%"n# * a cmpet"tr6s prducts.
3. Outline citi6en and pulic actions to regulate marketing 2 consumerism,
environmentalism and regulation- and the way they affect marketing strategies
'onsumerism
X!n organised movement of citi>ens and gov agencies whose aim is to improve the
rights and power of buyers in relation to sellers
)egulation
E.#. Choice ma#aO"ne- n )"as, n ad$ert"s"n#
Trad"t"nal seller2s rightsG
o R"#ht t "ntrduce an% prduct
o R"#ht t char#e an% pr"ce
o R"#ht t spend an% amunt t prmte the prduct
o R"#ht t use an% prduct messa#e
o R"#ht t use an% )u%"n# "ncent"$e schemes
Trad"t"nal buyer2s rights?
o R"#ht nt t )u% a prduct
o R"#ht t e3pect prduct t )e sa*e
o R"#ht t e3pect the prduct t per*rm as cla"med
'dditional rights that cnsumer ad$cates ha$e !n are such
matters as?
o kn!"n# the true IR and ttal csts * cnsumer cred"t
o true cst per un"t * a )rand
o "n#red"ents "n a prduct
o nutr"t"nal $alue * *dstu1s
o prduct *reshness
o True )ene(ts * a prduct 2truth "n ad$ert"s"n#4.
&nvironmentalism
X !n organised movement of concerned citi>ens, businesses and gov agencies seeking
to protect and improve people+s living environment.
&ncerned !"th
o Ecs%stems
o 0llut"n
o >T e1ects e.#. >T health
o Gr!th "ssues
The market"n# s%stem6s #al shuld t )e t ma"imise B15%
/ant en$ csts "ncluded "n )th prducer and cnsumer dec"s"n
mak"n#
D"t sme "ndustr"es hard such as steel "ndustr%
&mpan"es ha$e respnded !"th Igreen marketing2 - de$elp"n#
ecl#"call% sa*er prducts, rec%cla)le and )"de#rada)le packa#"n#,
)etter pllut"n cntrls and mre ener#%-eRc"ent perat"ns.
o E.#. ;irgin 9lue- %u can chse *r %ur S"#ht t )e carbon
neutral
Susta"na)le de$elpment
!. "#plain the usiness actions towards socially responsile marketing that can
foster marketing ethics and lead to different philosophies of enlightened
marketing
/thical marketing- an apprach )% r#s !here)% the% rec#n"se that
the task * market"n# "s t )e )th enl"#htened t sc"et%6s $"e!s and
eth"cal "n the r#6s apprach t sc"et% as a !hle and t custmers.
Mst m r#s ha$e respnded ps"t"$el% t cnsumer"sm and
en$"rnmental"sm "n rder t ser$e custmers6 needs )etter
In adpt"n# sc"all% and eth"call% respns")le market"n#, m r#s *ten
take ph"lsph"cal ps"t"ns !h"ch the% "nst"l "n the"r empl%ees
&mpan"es need t de$elp Icororate marketing ethics olicies2
as nt all mana#ers ha$e (ne mral sens"t"$"t%
Societal marketing- a pr"nc"ple * enl"#htened market"n# that hlds
that an r# shuld make m dec"s"ns )% cns"der"n# cnsumers6 !ants
the r#6s re+u"rements, cnsumers6 ln# run "nterest and sc"et%6s ln#
run "nterests.
Under the sc"etal market"n# cncept, each mana#er must lk )e%nd
!hat "s le#al and all!ed and de$elp standards )ased n persnal
"nte#r"t%, crprate cnsc"ence and ln#-run cnsumer !el*are.
Eth"cs and sc"al respns")"l"t% re+u"re a ttal crprate cmm"tment.
The% must )e a cmpnent * the crprate culture
$. 'iscuss the need for and value of legal compliance programs in marketing
and the issues involved in implementing them
One * the )est !a%s t ensure that an r# acts eth"call% and le#all% "s
t ha$e a culture * #d eth"cal pract"ce and a le#al cmpl"ance
pr#ram.
5egal comliance rogram- a s%stem des"#ned t "dent"*%, mana#e
and reduce the r"sk * )reak"n# the la!.
a cmpl"ance pr#ram can als )e a cometitive advantage "n the m
place )% ensur"n# eth"cal pract"ce, h"#h +ual"t% per*rmance and the
ps"t"$es created )% such )eha$"ur.
'ustralian Standards #u"de )us"ness "n man% !a%s
'ustralian Standard 'S?HI "s use*ul "n #u"d"n# the "mplementat"n
* a cmpl"ance pr#ram "n market"n# as "t dra!s t#ether cmments
*rm curts, p"n"ns * le#al pract"t"ners and )est pract"ce. It est
re+u"rements *r
o H cmm"tment t cmpl"ance at )ard and &EO le$el
cmmun"cated t sta1
o H prmt"n * cmpl"ance )% all mana#ers
o &nt"nuus mn"tr"n# and "mpr$ement * all cmpl"ance
prcedures
o Inte#rat"n * all cmpl"ance prcedures "nt the r#6s da% t
da% perat"n# prcedures, s%stems and dcuments
o Ade+uate Vs * sen"r sta1 !"th h"#h status and suRc"ent Iclut6
t take respns")"l"t% *r cmpl"ance
o On#"n# educat"n and tra"n"n# *r all sta1
"egal education
>e#al educat"n pr#rams tend t c$er F sets * rsh"ps that need t )e
mn"tred "n a cmpl"ance pr#ram:
o .shis #ith cometitors- t a$"d m r"##"n#, #rup )%ctts
and pr"ce (3"n#
o .shis #ith suliers - t a$"d resale r"ce ma"ntenance and
such $ert"cal restra"nts as ma% ser$e t reduce cmpet"t"n
o .shis #ith other arties such as atent licensees- t
a$"d "n*r"n#"n# "ntellectual prpert% r"#hts and patents an
l"cence a#reements #enerall%
o .shi #ith the industry itself- t a$"d us"n# trade
assc"at"ns r #rup"n#s * (rms that m"#ht $"late sect"ns *
the le#"slat"n prh")"t"n# arran#ements r understand"n#s that
su)stant"all% lessen cmpet"t"n.
'overage of a legal compliance program
Co'petition (a2 main source of !ustralian comp law is $art 8 of the Trade
$ractices !ct and case decisions interpreting this legislation
Contra&t and
&onsu'er (a2
"aws governing the sale of g4s deal with the matter
differently in different countries although the intent of
legislation is much the same. n !ustralia, the laws
governing the sale of g4s come from a three3tiered scheme
that includes common law ,reported decisions of courts.,
state legislation ,e.g. (ale of 7oods !ct and Fair Trading
!ct in each state. and 'ommonwealth legislation ,Trade
$ractices !ct ;HGE..
Standards Movement to standardise legal requirements bw countries
,eg 1T5. and trading partners ,e.g. !us and #A '&)T!.
continues.
%rodu&t (ia9i(it* 'lass actions more likely in !us with the introduction of
legislation in H= which liberalised the ability of plaintiffs to
engage in representative or class actions.
M &o''uni&ation
Sa(es and a1ter sa(es
1inan&e
the details of any credit sale must be spelt out
Fran&hising s an area where specialised legal knowledge is required bc
of the exclusive rights and obligations granted under a
franchise agreement. HC Franchising 'ode of 'onduct falls
under $art 80 of the Trade $ractices !ct and requires a
comprehensive set of disclosures and provides a dispute
resolution procedure for franchise disputes. The 'ode is
enforced by the !'''.
Inte((e&tua( propert*
,I%-
$ law involves such areas as copyright, trade mark, patents,
designs, trade, secrets and domain names.

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