Marketing topic handout

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					Marketing – Isn’t it just advertising?
Marketing is often confused with advertising, but it actually includes advertising as one of its components.
Marketing is better described as strategising to bring consumers and products together.


THE MARKETING MIX
The marketing mix is the combination of PRODUCT, PRICE, PLACE and PROMOTION (the four Ps) chosen to
satisfy buyers. Product and price are self-evident, but Place defines where the product is sold while Promotion is
the choices of advertising, which can include everything from print ad strategies to competitions. Each area is
important in itself, but the overall combination is paramount in marketing because each choice has to work well
together or individual strengths can be lost. For example, if a company puts the price of a product up too much,
then sales will drop even though the product is still good quality, well-advertised and easy to buy. This is because
the level of price upsets the overall marketing mix and, therefore, the overall appeal of the product.


MARKET SEGMENTATION
Companies often segment buyers into types (based on, for example, gender, religion or profession) to define the
different products and services they respond to, and the different ways they want them delivered, so they can
target their customers more effectively and increase sales. A student and a stay-at-home parent, for example,
are going to make different meal choices – from opting for a take-away meal to preparing a family roast dinner.
Researching both segments and identifying the differences would allow a supermarket to alter the way it markets
itself to each group so it could meet their particular needs better.


PRICE
Part of marketing is finding the right price by researching the price buyers are happy to pay for a product or
service to maximise sales. When defining this price, the company has to consider its business aims and the type
of product before choosing a strategy. Pricing strategies include:
High-price strategies
High prices are set towards the TOP limit of what buyers are willing to pay to achieve maximum profits or give the
impression of quality. High price strategies include Contributing Pricing (price varies with cost to maintain profit
margins – good for high cost products), Demand-based Pricing (price varies with demand – good for seasonal
products such as holidays) and Skimming Pricing (price starts high for a new product and then falls with
demand – good for unique products such as technology).
Competitive price strategies
Competitive prices are set the same as the competition to achieve maximum sales on ordinary products in
packed markets offering consumers lots of choice (like washing-up liquid, for example).
Low-price strategies
Low prices are set to achieve maximum sales by making them easy to buy for more people. However, prices set
too low give an impression of poor quality and can actually cause sales to fall. Examples of specific low-price
strategies include Penetration Pricing (short-term low pricing for a new product to gain consumer loyalty),
Competitive Pricing (prices set exceedingly low to dominate the market before rising to make maximum profit)
and Promotional Pricing (temporary low pricing to generate interest in a specific product – good for declining
products such as run-out car models). Competitive Pricing requires massive resources to put competitors out of

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business and discourage further ones from entering the market, which is why it is commonly seen with large
business products.


PLACE
After defining the right price marketers, have to define the right place and time, and how to get the product there.
The following issues are critical to this decision:
The channel of distribution – The way it is sold
Options include Wholesalers (who buy large amounts direct from manufacturers to sell on at a profit – good for
quick deliveries of product to large markets, but some profit is lost to the wholesaler), Retailers (who either buy
direct or from a Wholesaler to sell on at a profit – good for quick delivery to small or medium markets, but profits
lost to retailer) and Direct Sales.
Direct Sales sees manufacturers selling direct to consumers for maximum profit or selling specialist goods to a
dedicated market that requires support.
Market size and product type, plus brand control and profit requirements are factors that influence which
distribution channel is used.
The method of distribution – How it gets there
The method is the way a product is transported to its channel of distribution. The main options are road, rail,
plane or boat. Market size and product type again have an influence on this decision, but the cost of the method
and the local infrastructure available (no nearby airport means no planes) are major factors.


PROMOTION
Promotion is maximising sales by making sure buyers know about products and are encouraged to purchase
them:
Advertising
The two types are Informative Advertising (just giving consumers facts – i.e., for a health product) and
Persuasive Advertising (persuading consumers to change their habits and buy the product by focusing on
unique selling points).
Methods of advertising
Options include Broadcast Adverts (TV, radio, Internet cinema – high-cost, attention grabbing, normally for
large companies to reach wide markets), Print Adverts (newspaper, magazine, flyers – variable costs depending
on size of market, generates brand loyalty through believability) and Outdoor Adverts (buses, taxis, posters,
billboards – variable cost depending on size of market, attention grabbing).
Promotional activities
The aim here is to encourage buyers to buy with a special offer. Main methods include:
BUY ONE GET ONE FREE, SPECIAL OFFERS (e.g., one child free for each adult), DISCOUNTS, MONEY-OFF
VOUCHERS, FREE GIFTS, COMPETITIONS and FREE SAMPLES/TASTINGS.


FURTHER RESOURCES:
www.business.govt.nz/managing/marketing (for articles on marketing from Business.govt.nz)




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posted:10/1/2012
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