MARKETING by suchenfz


									                    Topic 3 Notes- Marketing

Chapter 9: Nature and role of marketing

   1.) Role of Marketing

*Marketing is the process of planning and executing the conception, pricing, promotion
and distribution of ideas, goods and services to create exchanges that satisfy individual
and organisational objectives.

    Simplified definition of marketing: A total system of interacting activities
     designed to plan, price, promote and distribute products to present and potential
    The functions of marketing:
   - gathering marketing information
   - selling
   - distributing
   - promoting and advertising
   - calculating price
   - satisfying people
   - disseminating information
   - forecasting sales
   - serving customers
    The essence of marketing: -Finding out what customers want and then attempting
     to satisfy their needs
    To achieve the goal of profit, the marketing plan should be the focus of all short
     term planning for three reasons:
   - The marketing plan outlines the strategies to be used to bring the buyer and seller
     together. The business must be able to identify where the market is, who will buy
     the product and why they will buy the product (where, who, why)
   - Marketing satisfies existing customers and therefore should lead to repeat sales
   - Marketing is the revenue generating activity of any business. Nothing is achieved
     until a sale is made.

2.) Types of Markets
*Market- A distinct group of customers or potential customer who have the necessary
interest and need for a product or service that is available for purchase

    Resource Market- Consists of those individuals or groups who are engaged in all
     forms of primary production, including mining, agriculture, forestry, and fishing.
     This market is part of the industrial market.
    Industrial Market -Industries and businesses that purchase products to use in the
     production of other products or in their daily operations (secondary and tertiary
    Intermediate markets- Consists of wholesalers and retailers who purchase
     finished products and resell them to make a profit
    Consumer markets- Consists of individuals (i.e. members of a household) who
     plan to use or consume the products they buy. Consumers do not intend to use the
     products to make other goods and services
    Mass Market- The seller mass producers, mass distributes and mass promotes
     one product to all buyers. (Example: coke used to have one universal cola drink,
     but has now branched out)
    Niche market- The mass market is finely divided into smaller markets consisting
     of buyers who have specific needs or lifestyles. For example, in a newsagent there
     will be rows and rows of magazines, each appealing to a specific niche market.

3.) Approaches to Marketing:

 The production approach                          The sales approach

       1820‟s to 1920‟s                                  1920‟s to 1960‟s
       emphasis on producing                             emphasis on selling goods
        goods                                             demand is less strong
       demand for goods is
        greater than supply                       Advertising and personal selling

 Taking orders and delivering

                 The marketing approach
                     1960‟s to present
                     emphasis on marketing products
                     establishing and maintaining customer
                     identifying consumer needs
                     producing products for customers

                 Coordinated efforts aimed at satisfying
                 customers needs

    The production approach – businesses able to sell all their output. Therefore, very
     production orientated (all demand)
    The sales approach – supply catching up with demand as businesses become more
     productive. Focus on persuading customers to buy a product
    The marketing approach – consumers have discretionary income (able to be spent
     after necessities have been purchased). Emphasis shifts to marketing concept; see

4.) Marketing Concept:
*The marketing concept (60‟s- 70‟s) – business philosophy which states that all sections
of the business are involved in satisfying a customers needs and wants whiles achieving
he businesses goals

    Heavier emphasis on market research and determining what the customer wants
     before the product is made
    1980‟s to present: Marketing executives begin to realise that their organisations
     have a social responsibility. Customers demand ecologically sustainable products.
     Marketing plans have to be altered.

    Customer Orientation (1980’s to present):
        - A business bases its marketing decisions and practices on its customers
        - The customer relationship does not end with the sale, it begins there.
           Companies must strive to exceed customer expectations resulting in repeat
        - To be effective, the marketing concept must be adopted by all members of
           the organisation, not just those in the marketing sector. All employees
           must work towards customer satisfaction.

    Relationship Marketing: (1980‟s to present)
        - The developing of long term and cost effective relationships with
            individual customers.
        - This is believed to be the strategy for the future; an improvement of the
            marketing concept, whereby businesses attempt to satisfy their individual
            best customers to gain customer “loyalty” and repeat sales.

5.) Marketing Planing Process:
* The business environment is constantly changing and becoming more complex.

*Globalisation has led to fierce competition in the marketplace, consumer‟s tastes change
over time and expectations are increasing. For these reasons, it is essential for businesses
to have a marketing plan.

       After all market research is gathered, business should then use it to develop a
        strategic marketing plan:
* Strategic market planning: the process of developing and implementing marketing
strategies to achieve marketing objectives. The plan consists of five steps:
1.) Performing situational analysis:
The starting point for any marketing plan is an assessment of the businesses present
position. This is best achieved using a situational analysis, which investigates the
marketing opportunities and potential problems. Where is the business now and in the

2.) Establishing market objectives:
Businesses need to outline precisely what it is they want to achieve. A marketing
objective is a statement of what is to be achieved through marketing activities. This is the
most important step. (An example – increase market share by 5%)

3.) Identifying target markets:
Who will buy my product or service? This is vital as sales are the lifeblood of any
business. Any business that does not have a clear understanding of why its customers buy
its products will be unable to decide the best way to promote, price and present the
product. Target market – group of customers to which the business intends to sell its

4.) Developing marketing strategies:
Marketing strategies are actions undertaken to achieve the businesses marketing
objectives. The four main strategies a business can pursue are referred to as the marketing
mix, which includes product, price, promotion and place.
A certain marketing mix must be determined by each individual business. For example, a
no frills business will have a different marketing mix to a prestigious products business.

5.) Implementing, monitoring and controlling:
Marketing management – process of monitoring and modifying the marketing plan.
Monitoring – comparing actual performance with predetermined performance

*Marketing planes need to be flexible as customer satisfactions are not static; they are
always changing. An inflexible marketing plan will result in dissatisfied customers, lost
sales and reduced profits. As technology changes, often marketing plans will mimic these
changes. (I.e. introduction of databases as a means of obtaining information)
Chapter 10- Elements of a Marketing Plan:
* A business must fully understand its current position with a clear picture of where it is

1.) Situational Analysis:

Swot analysis
   Strengths, weaknesses, opportunities and threats
   Internal environment: strengths and weaknesses
   External environment: opportunities and threats (competitors ect)
   After the SWOT analysis has been carried out, the business assesses the products
      position on the product life cycle as a different marketing strategy will be required
      for different stages of a product life cycle.

Product life cycle
* At each successive stage of the product‟s life, a different marketing strategy will be
required. A product life cycle is similar to that of a business life cycle (i.e. introduction
stages, growth stage, maturity, decline and regrowth – see p255).

2.) Establishing Marketing Objectives
Marketing objectives should be closely aligned to the overall business objectives. For
example, to achieve the business objective of a 10% return on shareholders funds for the
next year, the marketing objective may be to increase market share by 7%.

Marketing objectives should be more customer orientated than the business objectives.
Marketing objectives are directed towards:

    -   increasing market share
    -   expanding the product range
    -   broadening the geographical representation
    -   expanding sales through export markets

Increasing market share
Objectives must be specific such as increase market share by 10% over next 12 months.

Expanding the product range: The product mix
Product mix – total range of products offered by a business

A product mix can be described according to either its width or depth:
Product mix width – the number of different product lines offered by a business
Product mix depth – the number of specific products within a product line
An extensive product range allows a company to eliminate the “all of its eggs into one
basket” philosophy and appeal each product to a different target market, satisfying
different needs.

Broadening geographical representation
Geographical representation – presence of a business and the range of its products across
a suburb, town, city, state or country.

The demand for products varies greatly from one geographic region to another. Swim
gear in the winter at the Snowy Mountains is non existent but ski equipment demand is

Expansion through export/ overseas expansion

Maximising customer service
Customer service – responding to the needs and problems of the customer.

High levels of customer service will mean greater customer satisfaction and a positive
reaction from customers toward products they purchase. This will mean repeat purchases.
Businesses must be aware of the saying, “the customer is always right”
To keep existent customers and attract new ones, businesses need to talk and listen to

3.) Identifying Target Markets
Target market – group of customers with similar characteristics who currently, or who
may in the future, purchase the product

There are two broad approaches that can be adopted when selecting a target market:

   -   the total market approach
   -   market segmentation approach

Total market approach
This approach means that the total market is the target market. The business has a single
marketing mix and directs it at the entire market for the product. When a buyer‟s needs
vary, the market segmentation approach should be adopted. The total market approach is
used, for example, with basic food items such as vegetables.

Market segmentation approach
If a business is selling diamond rings, not everybody in the jewellery market wants that
item, some might want a watch, others a necklace. In this instance, the market must be

Market segmentation – the total market is subdivided into groups of people who share
one or more common characteristics.
Marketers use four main variables when segmenting the total market:
    Demographic – age, gender, ethnicity, income, education, religion etc
    Geographic – urban, suburban, rural
    Product related – regular user, first timer, end use
    Psychographic – personality, motivates, lifestyles

4.) Developing Marketing Strategies
Marketing strategy – plan that outlines how the business will use its resources to achieve
its objectives

Marketing mix: the four P’s
The best way to develop a marketing strategy is to examine each of the elements of the
marketing mix – the four P‟s – product, price, promotion, and place

Product: The business owner ultimately needs to decide which product to make, but also
   - quality
   - design
   - name
   - warranty
   - packaging
   - labelling
   - exclusive features

The product is a combination of all these variables.

Price: a price set too high could mean lost sales. A price set too low could give the
impression “cheap and nasty”

Promotion: this involves the methods a business uses to inform, persuade and remind
customers about its products. The main forms include personal selling, advertising, below
the line and public relations.

Place: This element deals with the distribution of the good or service. It deals with two
    1) transportation and storage of finished product
    2) amount of intermediaries used in distribution of product (i.e. wholesalers,
5.) Implementing the Marketing Plan.
Implementation – putting the marketing strategies into operation

When implementing a marketing plan a business must ask itself:
  - is the plan integrated with the other departments
  - are there effective lines of communication between the marketing department and
      other departments
  - who are the best people to perform the various tasks to implement the plan
  - are the marketing personnel motivated and focused
  - are all employees familiar with the objectives and strategies

6.) Monitoring and Controlling
Monitoring– checking and observing the actual progress of the marketing plan. All
employees must be monitoring for signs of change that arise during the life of a
marketing plan.
Controlling – comparison of planned performance against actual performance and taking
reactive action to make sure the objectives are achieved.

Controlling involves two distinct steps:
   1) Establishing forecast performance standards (forecast level of performance for
       which actual performance can be measured. i.e. increase monthly sales by 5%)
   2) Comparing actual performance with forecast performance (budgets, sales
       statistics, cost analyses. Example compare salespersons results with sales quota)

Developing a financial forecast
It is important for businesses to be able to measure both costs and benefits of a marketing
strategy. When this has been done, a business can perform a cost – benefit analysis and
determine the most appropriate course of action. This is known as financial forecasting.

A cost benefits analysis:

   1) projected revenues and costs
   2) expenditure breakdown (subdivided into market research costs, promotion,
      advertising, distribution, packaging and warranties – allows business to pinpoint
      reason for blow out in expenditure)
   3) Revenue breakdowns (business sales forecast – how much of each product the
      business expects to sell as a result of a specific marketing strategy.)

Comparing actual and planned results:
Access to a number of useful pieces of information which allow them to compare actual
and planned results. This information includes sales analysis data, market share analysis
and profitability data.

Sales analysis: the comparing of actual sales with forecast sales to determine the
effectiveness of the marketing strategy. To determine where the sales are coming from a
business can subdivide the sales figures into salesperson, sales territory, time period,
company division etc

Firstly, a business will conduct a sales analysis by territory. If say territory 7 is weak it
will conduct a sales analysis of the people in territory 7. And finally, a sales analysis of
an individual person. This breaking down of the sales analyses allows for pinpoint
identification of the problem and controlling processes can be implemented.

Market Share analysis: Just as sales can be analysed, so to market share.
For example, if total sales drops but market share remains stable, it can be concluded that
an external factor affected all businesses. However, if total sales drops and market share
drops, it is because of the marketing strategy.
Also, just as sales analysis, market share analysis can be broken down into territories,
sales reps and products

Marketing cost analysis (profitability by product/territory): Whilst sales and market
share analyses provide information on results, unless costs are broken down, no
evaluation of the effectiveness of marketing strategies can take place. The most effective
marketing cost analysis is an examination of individual marketing costs contained in the
business profit and loss statement.

Revising the marketing strategy

Once the analyses have been calculated, a marketer is in a position to determine which
objectives are being met and which are not. Based on the information, a marketing plan
can be modified.

Changes in the marketing mix: the environment is constantly changing, and therefore the
product, price, promotion and place must be continually modified.

New product development: a product has a life cycle of anywhere between 5 and 10
years. Therefore, products must be continually introduced, regardless of cost to survive in
the competitive environment.

Product deletion: the elimination of some lines of products. Negative images may rub off
on other products.

Allocation of human resources: selecting the right employees, the right numbers and at
the right time is crucial in implementing the marketing plan.

*refer to p276 for detailed example of entire marketing plan
Chapter 11: Market Research, customer and buyer behaviour:
*Market research: the process of systematically collecting, recording and analysing
information concerning a specific marketing problem. The main purpose of market
research is to gather information.

*Role of market research: attempts to identify and outline both marketing opportunities
and problems as well as evaluating the implementation of the marketing plan.

1.) Market Research Process:

STEP 1: Determine information needs
STEP 2: Collecting data from primary and secondary sources
STEP 3: Analysing and interpreting data

2.) Determining information needs
Information must be relevant to the situation of problem to be meaningful. If irrelevant
information is gathered, time, effort and money have been wasted. Marketers must find
the balance, as a sometimes there is not a sufficient supply of money for effective market
research and other times, irrelevant information is gathered.

Information is useful if it:
    1) results in marketing strategies that meet the needs of the businesses target market
    2) assists the business to achieve its marketing objectives
    3) may be used to increase sales and profits

3.) Data Collection (primary secondary)
Marketing data: refers to the information, usually expressed as facts and figures, relevant
to the defined marketing problem.

Primary data: original sources.
-outsource this activity as it can be expensive and time consuming.
Main advantage – collection is directed at solving a specific marketing problem
Main function – find out exactly what the customer is thinking

Three methods to gather primary data:
   1) Survey
   2) Observation
   3) Experimentation

The survey method – gathering data by asking or interviewing people.
Four types: 1) personal interviews – face to face conducted in public
2) Focus groups – small group of people meeting with researcher
3) Electronic methods of collection – telephone, mail and WWW
4) Questionnaires – set of specific q‟s requiring customer response

This method is becoming less effective as less and less people take part in the surveys.

The observation method – recording the behaviour of customers. Direct contact with
respondents is avoided. Rather, the actions of customers are observed. Raises ethical
issues with regards to privacy.
Information may be gathered through:
1) Personal observation – such as when a researcher poses as a customer in a store
2) Mechanical observation – using camera, tape recorder or counting machines.

This method is becoming more popular with the development of computerised
technology. I.e. through the use of bar coding and smart cards, businesses can access
customer spending habits and its customer database.
Advantage: This data can then be used to monitor the impact of price changes, track
current and new product sales, and evaluate the effectiveness of an advertising campaign.
Disadvantage: does not explain why, only what.

Experiments: Altering factors under tightly controlled conditions to evaluate cause and
effect. That is, determining whether changing one of the factors (cause) will alter the
behaviour of what is being studied (the effect).

Secondary Data: information that has already been collected by some other person or
organisation. With the advent of computer databases, secondary data is in abundance

Two types:
  1) Internal Data: information already collected from internal sources/inside the
      business, including financial statistics, annual reports, research reports, customer
      feedback, sales reports and sales figures
  2) External Data: published data from sources outside the business, including
      Internet sources and private data collection agencies. ABS website commonly

Most market research should begin with internal secondary data as it is the least
expensive of all data to be obtained.

3.) Data analysis and interpretation:
Statistical interpretation analysis: the process of focusing on the data that represents
average, typical or deviations from typical patterns.

Data must be tabulated (put in table format). Spreadsheets – enables you to cross tabulate
or compare certain categories of data.
NB: better to involve a number of people in the interpretation part as it requires
significant experience.
4.) Customer and buying behaviour
    Buying behaviour: the decisions and actions of people involved in buying and
     using products.
    Consumer buying behaviour: process of purchasing goods and services for
     personal and household use.
    Organisational buying behaviour: purchasing of goods and services by producers,
     resellers, government, departments and institutions such as schools and religious
    Market Research: when do they buy? What do they buy? How often? Who are
    Customer behaviour: Why do they buy?

5.) Types of Customers
1) Individual and household customers

   -   includes people and families
   -   personal spending: consumer purchases by individuals.
       Household spending: (family spending) combined purchases of individuals living
       together, such as electricity, food and rent.
   -   These two groups make up the total consumer market
   -   The consumer market is massive market, effecting economic activity and in turn,
       affecting business profits, unemployment levels, rate of inflation and interest rate
   -   Children have large purchasing power, influencing the purchasing decisions of
       many households

2) Organisational Customers

   -   Includes firms
   -   Firms market: orgs. That purchase goods/services for further processing or for use
       in their production process.
   -   Approx one million firms in Australia
   -   Fewer customers than above but larger dollar value, more products purchased

3) Institutional customers

   -   includes schools, hospitals, clubs, churches, other non profit orgs.
   -   Because instituions normally have limited budgets and different objectives,
       marketers needs to devise specific marketing strategies to serve them

4) Government Customers

   -   local, state and federal governments
   -   governments spend billions of dollars each year ranging from paperclips to
       battleships, and therefore, opportunities are presented for many businesses
   -   the buying procedure for government is very formalised (referred to as red tape)
   -   Governments make many purchases through tendering
   -   Tendering: firms submit quotes for particular good/service and the lowest bid that
       meets the specifications is usually accepted. Also note that delivery dates and
       technical support must also be met.

6.) The Customers Buying Process
PHASE 1: recognise problem
- need or want requiring satisfaction
PHASE 2: Search of information
    - brand names
    - product characteristics
    - warranty
    - service
    - price
PHASE 3: Evaluate alternatives
    - various alternatives discovered
    - cost and benefit analysis
PHASE 4: Purchase
    - particular choice made
    - product bought
PHASE 5: Evaluate after purchase
    - weighting up the suitability of the product
    - satisfaction gained
    - dissatisfaction may occur

      Buyers – individual or group purchasing the product
      User – individual of group who actually uses the product being purchased
      Consumer purchases – buyer and user often the same
      Organisational purchases – buyer different to user most of the time. Important that
       the buyer understand the needs of the user so that appropriate products are

7.) Factors influencing customer choice
Four main factors influencing customer choice:
   1) psychological
   2) sociocultural
   3) economic
   4) government


Four main factors: perception, motives, attitudes, personality
Perception: To ensure customers perceive a product positively, businesses create a certain
image of the product through promotion such as advertising. The “trendy, luxurious or

Motives: A motive is the reason that makes an individual do something
   i.e. a motive for eating after 12hrs of not eating is strong, however, after you have
      already just ate, your motive for eating is not strong.
   Common motives – comfort, health, safety, ambition, taste, pleasure, fear,
      amusement, cleanliness and approval by others.
   Promotion will help motivate a customer to buy their product. For EG, emulate a
      sporting hero.

Attitudes: An attitude is a persons overall feeling about an object or activity
Customer attitudes to a business and its products influence the success of failure of the
marketing strategies. Negative attitudes will result in changing these marketing strategies.

Personality: The products a person buys will reflect his/her personality.


Whereas psychological influences are internal forces, sociocultural influences are forces
exerted by other people and groups that affect customer behaviour.
Four main factors: family and roles, reference (peer) group, social class, culture and

Family and roles: These roles influence buying decisions. For eg, women still interested
in health care products, laundry supplies. Children major influencing power.

Reference (peer) groups: A customers buying behaviour may change to match the rest of
the groups beliefs and attitudes. EG, your peer group wears distinctive clothing, you
purchase similar.

Social Class: Most classification comes from peoples income. People within similar
social classes have similar buying behaviours. Social class also influences the type,
quality and quantity of products. EG, high income purchase luxury, low income no frills

Culture and subculture: Culture infiltrates all that we do in our life, i.e. what we wear,
what and how we eat, where and how we live etc. therefore culture heavily influences
buying behaviour. EG, in response to desire for healthy foods, many low fat foods are
being marketed.
*Boom, contraction, recession and expansion will effect marketing environment in
different ways.

Boom: low unemployment and rising incomes. Businesses and customers more
optimistic, customers feel safer in their jobs and income and are therefore, more willing
to spend. Greater production by business and more purchasing of equipment and plant
etc. Marketing potential during this period is large

Contraction: slowly rising unemployment with incomes stabilising. Mood changes from
optimism to caution. This caution results in decreased spending and reduced level of
investment by business. Customer become price conscious, looking for good value and
long lasting products.
Marketing plans must now stress the value and usefulness of a product.

Recession: unemployment at high levels, incomes falling dramatically. Customers and
businesses lack confidence in economy and mood of deep pessimism sets in. Customer
and business spending reach lows. Marketing Plan must concentrate on maintaining
existing market share, whilst survival becomes prominent.

Expansion: Unemployment falls slowly and incomes begin to rise. Customer and
businesses regain confidence. Marketing Plans must modify to tap into new prosperity.
I.e. increasing market share again become important objective.


   -   Depending on the prevailing economic conditions, the government will put in
       place policies that expand or contract the level of economic activity and thus
       influence business activity and customer spending and ultimately, influence
       business marketing plans
   -   More direct impact is government regulation. Abiding by these regulations is vital
       otherwise financial penalty.
   -   Trade practices Act 1974 (commonwealth), Sale of Goods Act 1923 (NSW), Fair
       Trading Act 1987 (NSW).
   -   Fair trading laws facilitate misleading, deceptive or unconscionable conduct.
Chapter 12: Developing Marketing Strategies
1.) Market segmentation
*Aim: increase sales and profits by better understanding and responding to the desires of
the target customers.

Once the a marketer segments the market, one of these segments is chosen as the target
market to which the business will direct its attention.

The total market can be segmented into:
   i)      customer markets
   ii)     organisational/business markets

Within the customer market, further segmentation can occur:
   i)      demographic (age, gender, occupation, religion)
   ii)     geographic (region, urban/rural, climate, landforms)
   iii)    lifestyle (personality, motives, socioeconomic, opinions and interests)
   iv)     behavioural (purchase occasion, loyalty, price sensitivity)

    Primary target market: market segment at which most of the marketing resources
     are directed
    Secondary market: smaller and less important market segment.

Mass marketing approach: seeks a large range of customers. EG, basic food items,
water, gas

Concentrated or niche markets: Concentrated market – requires the business to direct
its marketing mix toward one selected segment of the total market

Niche Market – extension of concentrated market, narrowly selected target market

Differentiated products:
*Process of developing and promotion differences between the businesses products and
those of its competitors.
     The differences are highlighted by the business using different marketing
       strategies such as product features.
     Aim – help the customer view the product as superior to all similar products.
2.) Products and Services Strategies:
Product – good, service or idea.
Total product concept – buying both the intangible (services and ideas) and tangible
(product itself) benefits

The intangible benefits of a product are vital. Often, intangible benefits are used to
differentiate a product from its competitors.
Customers are now looking for greater service, safety, warratny, prestige and delivery

EG – a car does the same thing, but it is the intaginble benefits, reputation, style image
that differentiate the cars.

*Development of a product image as compared with the image of competing products.
    The marketing mix will be based around the selected positioning of the product
    The combining of factors such as price, channels of distribution, products name,
       styling and promotion will all interrelate in regards to creating an “image” for a

    Brand – name, term, symbol or design that identifies a specific product and
      distinguishes it from its competitors
    Brand name – the part of the brand that can be spoken
    Brand symbol or logo – graphic representation that identifies a business or

    Manufacturers or national brands – those owned by the manufacturer (mambo
     clothing, kraft food)
    Private or house brand – owned by a retailer or wholesaler (myers, grace bros)
    Generic brand – no brand name at all (no frills, home brand)
    Trademark – signifieis the brand name or symbol is registered and the business
     has exclusive right of use. (TM or R at end of brand name)

* Involves the development of a container and the graphic design of the product
Main aim – to assist sales

Well designed packaging will give a positive impression of the product and encourage
first time customers.
Packaging – preserves, informs, protects and promotes the product

Considerations with packaging for business:
   i)      cost – customers are willing to pay more for good packaging but only to an
   ii)     environmentalism – marketers must be sensitve to the problems caused by
           throw away packaging. Approx half of all household garbage consists of
           discarded packaging.

3.) Price and Pricing Strategies:
*Price refers to the amount of money a customer is prepared to offer in exchange of a

Pricing Methods:
    Cost Plus Margin- extra mark up margin for profit
    Market- level of supply and demand (demand is high price is high)
    Competition Based- high degree of competition, price is either below, equal to or
       above that of competitors

Pricing Strategies:
    Priced Skimming- „skim the cream of the market‟- highest price possible for
       innovative products
    Price Penetration- lowest price possible to quickly achieve a large market share
       („mass market pricing)
    Loss Leader- retail stores deliberately sell product below market price to attract
       customers to shop, where they are expected to buy other products as well
    Price lining- limited number of price numbers or key numbers in price ($4.98/

Price and Quality Interaction:
    „you get what you pay for‟- price quality relationship
    Charge a high price and the product develops an aura of quality and status
       (prestige pricing)

4.) Promotion Strategies:
* Promotion describes the methods used by a business to inform, persuade and remind
target market about its products.
Promotion attempts to:
     Attract new customers
     Increase brand loyalty
     Encourage existing customers
     Provide information
     Change individuals behaviour
*A promotion mix is the various methods used in a promotional campaign

Elements of Production Mix:
    Personal selling- involves the activities of a sales representative directed to a
      customer in an attempt to make a sale
   Advertising- is a paid, non personal message communicated through a mass
     medium- inform, persuade and remind
Methods of Advertising include:
   Television- advantages= large audience, disadvantage= expensive
   Radio- most accessible medium yet „radio noise‟ means uncritical listening
   Newspapers- advantage= reasonable cost, yet it has short life span
   Magazines- advantages= specific target market, disadvantage= high cost
   Online- global reach and customer interaction, yet it has high establishment and
     maintenance costs.
   Below the line Promotions:- promotional activities for which a business does not
     need an advertising agency. (exhibitions, demonstration, direct marketing). „The
     line‟= boundary between business that pay commission to agencies and those that
   Publicity and Public Relations:
         - Publicity= any free news story about a business or its products
         - Public relations= activities aimed at creating and maintaining favourable
             relations with customers

The Communication Process:
   - Communicate with customers or organisation directly or indirectly so as to
      influence their buying behaviour
   - A channel of communication is any method used to carry a message
   - Any interference of distraction that affects promotional communication is
      referred to as „noise‟
   - Feedback is needed to determine the effectiveness of process
   - However managers may not receive immediate feedback in the form of increased
      sales or changed customer behaviour
   - Survey provides managers with basic level of feedback
   - Opinion Leaders – people who have the ability to drive or influence the decisions
      of others. e.g. a celebrity promoting a product. Opinion leaders can be paid for
      their endorsements such as Pat Rafters appearance in Bonds underwear.
   - Word of Mouth – what customers say to other people about the product. People
      hold the opinion of a friend or relative in higher regard than industry
      professionals making it a powerful influence on purchase decisions

5.) Place / Distribution Strategies:
Distribution Channels
Distribution channels take products from the point of production into the hands of
consumers. Four main types of distribution;
1. Producer to customer (direct distribution).
2. Producer to retailer to customer (indirect distribution).
3. Producer to wholesaler to retailer to customer (indirect distribution).
4. Producer to agent to wholesaler to retailer to customer (indirect distribution).
Indirect distribution is when intermediaries are used to distribute the product for the
Intermediaries such as agents, brokers and retailers, are businesses or institutions that
facilitate the distribution of products to the market by operating between the source of the
product and the final user.
Three key decisions for channel choice;
    1. The length of the channel (how many intermediary stages)
    2. The intensity at various stages (how many intermediaries involved)
    3. What intermediaries are involved
There are three different intensities of distribution;
    1. Intensive – product is available in every possible outlet Eg. Milk
    2. Selective – restrictions are placed on the number of intermediaries at different
         stages – manufacturer wants to widely distribute but does not want an intensive
         strategy. Eg. Hair shampoo that can only be purchased at salons not supermarkets
    3. Exclusive – limits the supply of products to particular stores or outlets. Usually
         products are very expensive or aiming to create very elite image. Eg. Versace or
         Ferrari cars

Physical Distribution Issues
Transportation - choose the most efficient mode of transport, considering how and
when the goods are required and what the costs of each different form of transport are.
Warehousing – is a set of activities involved in receiving, storing and dispatching goods.
Businesses must decide where to store their goods, how to store them and how to
organise them when they need to be moved.
Inventory – Is a system that maintains quantities and varieties of products appropriate
for the target market. Businesses must balance the desire to minimise storage costs and
the loss of cash reserves with the costs associated with relying on inventory systems such
as JIT (Just in Time).

6.) Environmental Effects on Business:
    -   Changes in the business environment have had significant impact on the whole
        range of distribution activities.
    -    Technological advances such as the Internet (removed the need for many
        intermediaries to exist) have changed the concept of distribution channels whilst
        developments in computer technology and robotics have changed the nature of
        warehousing and materials handling.
Chapter 13- Ethical and Legal Aspects of Marketing

Examples of ethical behavior:
 Recycling packaging
 Honestly labeling all contents
 Engaging in truthful and non sexist behavior
The main laws in Australia than governs business behavior and encourage ethical
practices are:
 Trade Practices Act 1974 (Commonwealth) administered by the ACCC
 Fair Trading Act (NSW) administered by the Department of Fair Trading NSW

1.) Environmentally Responsible Products
Businesses can damage the environment in two key ways:
    1. Depleting natural resources in production
    2. Creating products of packaging that is not environmentally friendly
In many industries there is a shift towards environmentally friendly products and material
usage such as:
 Ozone safe spray cans
 Biodegradable cleansers
 Recyclable packaging
 Rechargeable batteries
 Using cotton and hemp instead of manufactured fibres
 Environmentally friendly sources of power such as solar and wind power
 Biodegradable materials

2.) Other Issues
Creation of Needs – Persuasive marketing can be used to create needs in the minds of
the consumers that did not previously exist. Use of advertising to create false needs is an
ethical issue – especially with children. Children nag parents to buy the toys although
they don‟t really need them and many parents can‟t actually afford them.
Impacts of Retail Developments – The impact on consumers of the large growth of
retail developments in recent years. The ethical and legal responsibilities that arise from
the impact of retail developments are outlined below;
 Accessibility – retail centers zoned for easy access. This causes safety concerns as
    large volumes of traffic can lead to dangerous situations.
 Visibility – Balance has to be stuck between retailers who want to make a high visual
    impact and residents and customers who want the visual effects of such developments
 Noise – Retailers need to balance the need for their supplies with the needs for local
    communities to have as little disturbance as possible.
Sugging – “Selling under the guise of”. Refers to a process where someone is
interviewed under the belief they are participating in a legitimate marketing research
survey and then the interviewer tries to sell a product to the person being interviewed.
This is an unethical yet widespread practice.
3.) Role of Consumer Laws
The need for regulations and laws for consumer protection arises because of the unethical
conduct of businesses that occurs when businesses are left unregulated. The main federal
law concerning consumer protection is the Trade Practices Act 1974, which is mirrored,
in NSW state legislation with the Fair Trading Act.
    - Deceptive and Misleading Advertising – The use of untrue statements by
        business when selling their product Eg. Falsely representing that goods or
        services are of a particular standard, quality, value or grade.
    - Price Discrimination – the act of charging different prices for the same product
        to different people. Businesses must not charge different prices for goods if those
        prices do not reflect differences in the costs of providing those goods to different
    - Implied Conditions and Warranties – An implied condition of sale is a
        condition that is not explicitly stated but rather conveyed and understood at the
        point of sale. To be of merchantable quality the product must be in a condition
        reasonable for its advertised condition and price. It is illegal to sell a product that
        doesn‟t work or will break soon after. The implied warranty governs any defect
        that is the fault of the manufacturer or seller of the product.
    - Resale Price Maintenance – It is illegal for a supplier to fix a product‟s resale
        price. Resale price maintenance occurs when the supplier of a product tells the
        retailer that the business must sell their product for a particular price, usually
        accompanied by a threat to stop supply if the retailer breaks the agreement.

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