Lecture 1 - Introduction to Marketing - MCV 2.docx PDF

[Lecture 1 -- Introduction to Marketing] **Marketing** = the activity, set of institutions, and processes for creating, communicating, delivering + *exchanging offerings* that have value for customers, clients, partners + society at large Market = group of buyers that have different needs/wants (e...

[Lecture 1 -- Introduction to Marketing] **Marketing** = the activity, set of institutions, and processes for creating, communicating, delivering + *exchanging offerings* that have value for customers, clients, partners + society at large Market = group of buyers that have different needs/wants (e.g. geographic, demographic, product) Marketing puts the market at the centre of business decisions companies that focus on the needs/wants of customers (+ stakeholders) do better Other teams in an organisation are also concerned with creating, communicating + delivering value of marketing exchanges (e.g. product teams, sales teams, financials) **Value** = a perception (e.g. value of a product is subjective) can change interpersonally + situationally Value refers to the 'total offering' - Reputation of organisation - Features of products - Associated ideals - Quality + price Value = quality/price Form utility = transforming raw materials/knowledge into a usable product/service Place utility = making offering available to customers Time utility = having offerings available when they are needed Possession utility = allowing customers to own (or use) a product/service **Exchange** = mutually beneficial transfer of offerings of value between the buyer + seller a mutually beneficial exchange must take place for marketing to be successful Sellers deem a transaction valuable when it generates profits, prestige, ability to educate, delight, motivate + engage Marketing evolution (trade product orientation sales orientation market orientation societal market orientation) **Corporate Social Responsibility** = businesses have an obligation to act in the interest of societies that sustain them **Sustainability** = business philosophy that is needed to ensure our future Marketing process = understand create communicate deliver (cycle) **Marketing mix** = 4Ps - Product, Price, Promotion, Place (distribution) Marketing environment = internal + external forces that affect a marketer's ability to create, communicate, deliver and exchange offerings Environmental analysis = important to identify strengths, weaknesses, opportunities + threats internal environment can be controlled (strengths + weaknesses) external environment cannot be directly controlled (opportunities + threats) **Micro-environment** = forces within an organisation's industry that affect its ability to serve its customers + clients (target markets, partners + competitors) Customers = people who buy Clients = customers of not-for-profits Partners = firms that supply directly Monopoly One main supplier dominates the market -------------------------- ------------------------------------------------- Monopsony One main buyer dominates the market Oligopoly Few main players; entry barriers high Monopolistic competition Numerous competitors; striding to differentiate Marketers must provide offerings that are of a greater value than competitors Macro-environment = PESTEL - Political: effect of political issues on marketing + impact of party in power - Economic: higher inflation = less disposable income = less spending - Sociocultural: demographics, changes in societal behaviours - Technological: changes expectations + behaviours of customers - Environmental: natural disasters, weather + climate change - Laws: depends on product (e.g. could impact advertising) Situational analysis: ongoing processes that combines organisational objectives + situational analyses to formulate a plan that helps the organisation achieve objectgives SWOT [Lecture 2 -- Market Research] **Market research** = gathering information about customers/target market Data = objective fact, compiling data = information Market research informs decisions (e.g. market segmentation, sales performance, 4Ps)  Big data: - Improvements are constantly being made + more links are possible - Linking data informs decision making - Finding insights that weren't known before - E.g. Netflix uses big data in demographic, internet-based behaviour, browsing behaviour + user's watch history, search queries, time spent scrolling (recommendations are based on this) Components of market research: - Defining the research problem - Designing the research methodology - Collecting data - Analysing data + drawing conclusions - Presenting the results + making recommendations Before undertaking market research, consider: relevance, timing, availability of resources, need for new information, cost-benefit analysis market researchers also have an ethical responsibility to stakeholders The decision maker is aware of only 10% of the true problem why market research is important Market research generally solves the problem usually information Marketers often prepare a market research brief stating the problem, information required, timeframe, budget + other conditions of the project Designing a research methodology: descriptive = there is data on the problem, but it is just describing causal = if product feature/price is changed, will sales go up exploratory = gathering data on a loosely defined problem Hypothesis = tentative explanation that can be tested Data types: - Primary = data collected specifically for the current market research project - Secondary = data originally gathered for a purpose other than to address the current market research problem (info that is already available) cheaper good idea to look at secondary data first Qualitative research: intended to obtain rich, deep + detailed info about the attitudes + emotions underlying a consumer's behaviour (often used for exploratory research) e.g. interviews + focus groups (role of social influence is very strong -- 8-10 is ideal) Quantitative research: research that collects information that can be represented numerically (usually used for descriptive + causal research) e.g. survey, experimentation, observation + neuroscience (incentives can help) - There is a global shift towards quantitative research Useful to: monitor market size, identify market patterns + trends, predict success of proposed marketing campaigns, track customer perceptions for existing products Data collection: *Population* = all of the things (people) of interest to the researcher in the particular research project *Sampling* = choosing members of the total population *Sample* = group chosen for the study Random sampling, stratified sampling, quota sampling, convenience sampling Once data has been collected, it needs to be filtered + organised quality control techniques may be needed sometimes Market research is continuous, marketers must evaluate the effectiveness of each marketing activity for optimal effectiveness [Lecture 3 -- Consumer + Buyer] Behaviour Customers purchase, consumers use **Consumer behaviour** = behaviour of individuals + households who buy G+S for personal consumption (to satisfy needs + wants) Influences of consumer behaviour: - Situational influences (e.g. physical, social, time, motivational, mood) - Group influences (e.g cultural -- sociocultural, social class - , social -- reference groups, family, roles + status) - Culture = a system of knowledge, beliefs, values, rituals + artefacts by which a society/other large group defines itself contains both tangible + intangible elements - Personal characteristics -- relatively stable in short term (e.g. demographics, lifestyle, personality + self-concept, motivation, perception, beliefs + attitudes, learning) Nudge theory: makes advantage of situational influences, make people behave in a predictable way does so in a way without disposing of alternatives does not provide significant incentives to for the behavioural change - (e.g. first food item on the menu -- nudge people towards ordering that) Hofstede found that national cultures could be distinguished by variations across four core dimensions: 1. Power distance (less powerful members accept + expect unequal power distributions) 2. Uncertainty avoidance (what extent members tolerate uncertainties) 3. Individualism (focus on the rights/concerns of each member) 4. Masculinity/nurturing (extent to which members stress different expectations for men + women) 5. Long-term orientation (live for now + don't save for the future/save for the future) Subculture: - Group of individuals who differ on some influential dimensions - Extracted from the broader culture in which they are immersed - E.g. Australian beach culture Social class = individuals of similar social rank within the hierarchy often better to consider economic indicators (income, occupation, educational background) - Socioeconomic status can be useful (where the primary focus is on 'purchasing power' Social factors: how group influences behaviour of individual members pressures to conform e.g. a sporting group Reference group = any group which an individual looks for guidance (e.g. guidance in values, attitudes, behaviours) 1. Membership reference groups: those we are part of already 2. Aspirational reference groups: those we want to be associated with 3. Dissociative reference groups: those we don't want to be associated with Opinion leader: 'super' influencer in a group Family life cycle describes the stages through which most families pass:  **Personal characteristics** Demographics: objective characteristics (e.g. age, occupation, income) Lifestyle: how they spend their time + how they interact with others significant difference between an individual's actual lifestyle + preferred lifestyle Personality: unique psychological art Motivation: individual's internal drive to act to satisfy unfulfilled needs or achieve unmet goals A pyramid of blocks with text Description automatically generated with medium confidence Beliefs/attitudes: consumers rely upon these when making judgements + products for which there is no readily apparent need three components = cognitive, affective, behavioural Perception: psychological process that filters, organises + attributes meaning to external stimuli it is selective + can result in: exposure, attention, distortion, retention Learning: process by which individuals acquire new knowledge + experiences can apply to future problems, opportunities + behaviour - Behavioural learning theories stress the role of experience + repetition of behaviour - Cognitive learning theories describe learning that takes place through rational problem solving, + that emphasise the acquisition of processing new information pleasant behavioural is repeated **Consumer decision-making processes**  Cognitive dissonance = prior + post beliefs are different Cognitive consistency = prior + post beliefs are the same Habitual decision-making = involves little involvement with the purchase Limited decision-making = involves seeking limited information to evaluate options for infrequent purchases within familiar product categories Extended decision-making = involves a high level of involvement with the purchase decision in a protracted, deliberate + detailed way (e.g. car purchase) Impulsive purchases = made with very little involvement **Buyer behaviour** Business markets = different from consumer markets (business markets frequently have a small number of large competitors + are made up of a small number of large buyers, purchases are for large amounts, + are much larger in revenue terms) Business markets are made up of individuals/organisations that purchase products for one or more of the following purposes: 1. To resell the product 2. To use the product in the production of other products 3. To use the product in their daily business operations **Reseller markets**: sells to the consumer but makes no fundamental change to the product from the supplier - Wholesaler = purchase products from suppliers + producers for resale to other intermediaries - Industrial distributors = purchase products from producers + sell them on to organisational buyers - Retailers = purchase products from suppliers, manufacturers or other intermediaries for resale to consumers **Producer markets**: purchase products for use in the production of other products/for use in daily business operations the share of GDP generated by manufacturing in Aus + NZ has been steadily declining **Government markets**: represents a substantial provider + purchaser of G+S **Institutional markets**: NGOs + non-for-profits Buying approach that businesses take may involve negotiation, description, inspection + sampling Most business to business transactions are high volume or high value (expensive) Straight rebuy = buyers purchase the same products routinely (e.g. paper) Modified rebuy = involves some degree of evaluation of alternative product options New task purchase = completely new product purchase  [Lecture 4 -- Segmentation, Targeting + Positioning] Market = group of customers with heterogenous needs + wants Market segmentation enables the organisation to form a strategy for a group/segment that has common features The organisation develops the most effective marketing mix for each segment (target marketing concept) The choice of marketing strategy typically involves a degree of compromise compromise between the necessity to respond to the particular desires of potential customers + the objective of achieving the lowest possible production + marketing costs Principally done through achieving economies of scale want this to be large enough to get economies of scale (but small enough to customise it to a particular group) Target marketing is based on three premises: - Individual buyers or group of buyers can be identified - Sellers understand the needs of buyers - Sellers seek to shape their offer to meet the needs of target buyers Buyers have common wants, needs + demands = mass marketing positive = economies of scale negative = less customisable (undifferentiated) Buyers have unique wants, needs + demands = one-to-one marketing positive = more customisable/meets specific needs/wants better negative = higher cost per unit (less efficient economies of scale) The market contains subgroups = target marketing (target specific subgroups) **Mass marketing** - Single product offering to meet the needs of most people in the market - Undifferentiated approach - Capture large markets at very low cost per unit = high levels of profitability - E.g. salt **One-to-one marketing** - Meets individual needs by providing a unique, customised offering - Common for small services businesses - Usually results in higher unit costs + more restricted market - These conditions typically form the basis of a focus/niche strategy **Target marketing** - When choosing target markets, organisation generally considers: its own resources, market demand + competition - A differentiated targeting strategy identifies a range of target market segments - For each market segment the organisation develops a tailored marketing mix - E.g. Colgate has different toothpaste ranges (whitening, kids, herbal) **Product + market specialisation** - Small organisations with limited financial resources frequently adopt one of the following approaches to target marketing - Product specialisation - Market specialisation - Product-market specialisation - Specialisation approaches work if: - The market is characterised by a wide range of needs + product preferences - Clear market segments/product categories are identified - Market is clearly divided - Market segments/product categories are profitable enough - Segments/product categories are actionable The target marketing process involves three main stages: 1. Segmentation 2. Targeting 3. Positioning A diagram of a marketing process Description automatically generated Market segmentation has two steps: 1. Identifying variables that can be used to define meaningful market segments 2. Profiling the market segments so they can be assessed in the second stage of the target marketing process Segmentation variables are characteristics that buyers (i.e. individuals, groups or organisations) have in common + that might be closely related to their purchasing behaviour The possible variables for segmenting consumer markets fall into four broad categories: - Geographic, demographic, psychographic, behavioural Geographic variables = reliable predictors of customer needs + purchasing behaviours e.g. climate, local population density, region, topography, urban, suburban + rural location Demographic segmentation = based on demographic variables which are related to the quantifiable social characteristics of populations (objective) e.g. age, ethnicity, household composition, income, gender Psychographic segmentation = variables based on consumer characteristics e.g. psychological traits (personality attributes + motives), geodemographics, lifestyles (the expression of the two former categories) Behavioural segmentation = not based on consumer characteristics, likely to be a better indicator of market segments + their purchasing behaviour e.g. benefit expectations, brand loyalty, occasion, price sensitivity, volume of usage Behavioural + psychographic can be a bit harder to measure **Business market** = characterised by a small number of buyers, each of which might display a very close relationship with the seller Crucial that segments are evaluated against the following criteria: - Measurability, accessibility, substantiality, practicability Market segment profile = typical potential customer in the market segment (the common features shared by members of market segments + how they differ between market segments) Market targeting involves a systematic examination of the range of possible market segments: - Potential sales volume - Potential revenues - Ability of the organisation to satisfy the expectations requires a close understanding of competitors (how their offerings are seen by potential target market segments) - May pick 5 segments -- then evaluate from those to pick fewer Selecting target markets: - Estimating market potential in each target market segment is important - Determines whether the chosen target market strategy will lead to healthy sales volumes + sustainable profitability - Selecting particular market segments (+ ignoring others) is at the heart of the marketing concept - The organisation is no longer referring to an individual buyer/the entire mass market (it is a target market segment) **Positioning** = how a product is perceived in a consumers head in relation to competing offers  two-dimensional map showing how each of the competing brands relate to each other in terms of a range of product attributes - Have a desired position marketing mix reinforces this Brand re-positioning = moving position on perceptual map (+ change marketing mix) Analysing current positioning = establishing an organisation's current positioning should be undertaken based on rigorous analysis + market research Some commonly used positioning variables = attributes, use/application, product user, price + quality + product class Beliefs change slowly The final step in the target marketing process is to determine an appropriate marketing mix for each market segment The marketing mix for each segment should: - Be consistent with the desired positioning - Be internally consistent - Be sustainable in the long term [Lecture 5 -- Product] Product = what the marketer takes to the market to get consumers to buy/engage in some type of exchange Product = good/service/idea offered to a market for exchange A product is a solution to a problem **Total product concept:** - *Core product* -- the fundamental benefit that responds to the customer's problem of an unsatisfied need/want - *Expected product* -- attributes that actually deliver the benefit that forms forms the core product - *Augmented product* -- a bundle of benefits that the buyer may not require as part of the basic fulfillment of their needs (product differentiation) - *Potential product* -- all possibilities that could become part of the expected/augmented product Many organisations produce multiple products/several different styles of a product relationships between the organisation's products are: - Product item - Product line - Product mix Consumer's are classified into one or more of the following categories: - **Shopping products** (medium-high engagement with decision making, expected to last a long time, purchased relatively infrequently, sell in low volumes, durables, reasonably large profit margins) - **Convenience products** (frequently purchased, stocked up large number of retail outlets, sell in high volumes, low profit margins) 3 further categories = staple, impulse, emergency - **Specialty products** (unique characteristics desired by their buyers, consumers know exactly what they want, pre-selected by consumers, no close substitutes or alternatives, limited availability, sell in low volumes, high product margins) - **Unsought products** (unknown/unconsidered by the consumer, challenge = making consumers aware, marketing communication efforts = crucial) Business-to-business products can be classified into: - Parts + materials, equipment, services + supplies **Product life cycle** An organisation needs to be adept at developing new products + successfully launching them into the marketplace need to consider environmental changes (technological changes, changes in fashion, actions of competitors) Five stages: **New product development** process sets out eight phases for introducing products idea generation, screening, concept evaluation, marketing strategy, business analysis, product development, test marketing, commercialisation Marketers need to understand how a consumer perceives a new product, learns about it + decides to adopt it: awareness, interest, evaluation, trial, adoption  New product development + product adoption can run at the same time **Introduction**: considerable investment required, goal = build awareness + interest, lag in building sales, sales recoup R&D costs, minor profits towards end **Growth**: increase in popularity, sales + profit, dependent on welcomingness of market **Maturity**: profits decline, novelty wears off, competitors more of + established, sales peak + profitability falls, decision to determine future of the product (change marketing mix -- move back to growth, leave market + allow decline) **Decline**: sales + profits fall, new products entering, little interest, drop/change product Diffusion of innovation = how product is adopted over time - Innovators (see product before it is released) - Early adopters (always have the latest 'thing') - Early majority (wait a little bit \~ a month) - Late majority (wait a bit longer -- ensure the product is working correctly \~ 3 months) - Laggards (wait longer \~ a year, super cautious, or forced through a technological shift) Product differentiation = creation of products/attributes that distinguish one product from another most differentiating features are part of the augmented product layer - Marketers usually modify, upgrade + reposition products during their life cycle to maintain/improve competitive advantage **Brand** Brand = collection of symbols intended to create an image of differentiation e.g. name, logo, slogan, design Brand image = set of beliefs that a consumer has regarding a particular brand marketing decisions must consider this Brand name = part of a brand that can be spoken (words, letters + numbers) Brand mark = part of a brand not made up of words (symbols/designs) To protect the brand, an organisation can register it as a trade mark (e.g. IP Aus) Brand equity = the added value that a brand gives a product can be very valuable in financial + non-financial terms For marketers, the brand: - Identifies the organisation's products - Differentiates the organisation's products from competing products - Attracts customers - Helps introduce new products - Facilitates the promotion of same-brand products Brand loyalty = when the customer shows a highly favourable attitude towards a specific brand Brand equity metrics = measuring the value of brands (useful to organisations) high brand equity can be a valuable asset + be a strong competitive advantage - Brand assets - Stock price analysis - Replacement cost - Brand attributes - Brand loyalty - Willingness-to-pay analysis Branding strategies: - *Individual branding* (uses a different brand on each product, giving each its own specific identity) - *Family branding* (using the same brand on several of the organisation's products) - *Brand extension* (gives an existing brand name to new product in a different category) Brand ownership: - Manufacturer brands (owned by producers + most common type of brand) - Private label brands (owned by resellers, such as wholesalers/retailers + are not identified with the manufacturer) - Generic brands (those that only indicate the product category) some organisations can enter a licensing agreement to use the names + symbols of other brands for a fee (franchising has many parallels with licensing) Co-branding = two brands working together on the same product (e.g. M&M McFlurry) **Packaging** = important recognisable way for customers to identify a particular product Marketers may want to change the package to: - Express to customers that the product has changed - Update the style of package/logo to broaden customer appeal - Emphasise certain elements to further differentiate it from the competition Labelling = forms part of the package + provides identifying, promotional, legal + more important factor in a customer's decision to purchase Product strategy consists of ongoing evaluation + responses to the changing marketing environment Developing an entirely new product is a lot riskier than modifying an existing product (e.g. new flavour range) Marketers must determine which life cycle stage their product is in to make appropriate decisions related to the marketing mix Line extensions are the most common form of 'new' product (variations of existing products added to the product line, rather than superseding the original product) There may be the need to change an aspect of the marketing mix to reposition the product Eventually products may become obsolete (may be planned or unplanned) [Lecture 6 -- Price] Price is easiest to change Price = a measure of value to both buyers + sellers - Buyers = need prices that reflect product worth + what they can pay - Sellers = need prices to cover their costs + provide sufficient profit margin to justify the risk Price is directly related to profitability If a buyer + seller cannot agree on the value expressed in the price, the transaction Is unlikely to proceed The price of a product is situational (e.g. buying water from supermarket vs stadium) 'Price shoppers'/'price seekers' are a key market segment in all markets the web has made price comparison shopping much easier + more efficient Most pricing objectives tend to focus on combinations of the following: - Profitability - Long-term prosperity - Market share - Positioning - What the customer is prepared to pay Pricing objectives should be specific, measurable, actionable, reasonable + timetabled Not-for profit organisations do not seek to make profits, however, they do generally seek a return on their activities + many charge for their products - Their pricing objectives may be to generate enough funds to sustain their activities - Alternatively, may price products to make them appealing to target market - State + provincial governments may subsidise loss-making services Legal environment needs to be considered Bait + switch advertising is illegal (captive advertising isn't) Under Australian Consumer Law, there is a clear intention + expectation that pricing to consumers should be explicit + transparent Pricing method: - The value of the product to the customer places a ceiling on prices - The organisation's costs place a floor on prices - Organisations must make pricing decisions that make their products competitive There is a difference between direct competitors + indirect competitors (may have a different material) Pricing can be based on costs, demand, competition **Demand-based pricing** = sets prices according to the level of aggregate/individual customer demand in the market - Demand exists when consumers are willing + able to buy a product - Demand for a product arises when it can fulfil an unsatisfied need/want of a customer - Surge pricing = based on immediate/current market demand Demand schedule = table that shows the actual/estimated quantity demanded for a particular product at particular prices For majority of products, there is an inverse relationship between price + quantity sold (as price rises, quantity sold falls + vice versa) demand curve would have a negative slope - Prestige products are an exception Price elasticity of demand = sensitivity of quantity demanded to changes in price percentage change in quantity demanded/percentage change in price - Varies from product to product + industry to industry PED \>1 = price elastic (demand is price sensitive) luxuries PED \