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 customers. 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 businesses) 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 good The marketing approach 1960‟s to present emphasis on marketing products establishing and maintaining customer relationships identifying consumer needs producing products for customers demands 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 below 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 wants - The customer relationship does not end with the sale, it begins there. Companies must strive to exceed customer expectations resulting in repeat sales. - 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 future? 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 products 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 heading. 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 high. 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 customers. 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 segmented. 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 parts 1) transportation and storage of finished product 2) amount of intermediaries used in distribution of product (i.e. wholesalers, retailers) 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 used. 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 organisations. Market Research: when do they buy? What do they buy? How often? Who are they 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 levels. - 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 purchased 7.) Factors influencing customer choice Four main factors influencing customer choice: 1) psychological 2) sociocultural 3) economic 4) government PSYCHOLOGICAL INFLUENCES 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 fun” 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. SOCICOCULTURAL INFLUENCES 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 subculture 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. ECONOMIC INFLUENCES *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. GOVERNMENT INFLUENCES - 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 segment. 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. Positioning: *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 product Branding: 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 product 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) Packaging: * 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 extent 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 product. 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/ $599) 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 (distraction) 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 don‟t. 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 producer. 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 minimized 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 businesses. - 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.