Extensive Notes on Topic 2 – Marketing.pdf

Year 12 2019 Examination Study Notes Business Studies Half-Yearly Paper ​(3 hours)​: Topic 2: Marketing Year 12 2019 Examination Study Notes Role of Marketing...

Year 12 2019 Examination Study Notes Business Studies Half-Yearly Paper ​(3 hours)​: Topic 2: Marketing Year 12 2019 Examination Study Notes Role of Marketing Process of ​developing a product and implementing series of strategies aimed at correctly promoting, pricing & distributing ​the product to a​ core group of potential customers​. Involves researching changing nature of consumer preferences and ensuring resources of the business are directed towards developing a product that satisfies its target market. Aims to maximize sales, increase market awareness & maximize consumer choice and satisfaction. Strategic Role of Marketing Goods and Services Marketing aims to serve the interests of both the business and society: (i) Choice - Marketing provides consumers with choice as businesses are striving to differ their products from those of competitors. - Preference could be achieved through price, product quality & reputation or consumer loyalty. (ii) Improved Standard of Living - Businesses are constantly improving their products features so they can develop their income streams and provide consumers with better products to enhance their lifestyles. - e​.g. ​several types of milk are now available to cater for diverse range of health concerns consumers may have (iii) Employment - Source of employment and income ​→​ consumers can purchase goods/services to satisfy their needs and (iv) Brand Awareness - Extent to which consumers are aware of a products existence as well as its features, price and possible place of purchase. - Strong brand awareness = remains in mind of consumers, influences their decision. - Often achieved through strong and effective advertisement campaigns (v) Increasing Market Share - Refers to % of total sales business has within a particular market compared to its competitors. Achieving increased market share increases sales and profitability. Interdependence with Other Key Business Functions Operations - Incorporate info on consumer wants gathered by marketing department - Successful marketing = boosted production (requires increased materials + labour) - Marketing must develop strategies to sell the product Human Resources - Relies on HR to hire, train and develop employees who sell the output of the business and conduct research. - Responsibility of well-trained marketing employees to successfully connect the customer with the products - Marketing process makes it clear to the business who they should hire to produce the desired product Finance - Assesses financial viability of marketing campaigns and fulfilling consumer needs. - Establishes budgets and forecasts - Marketing aims to sell what the business produces which in turns benefits profitability. Production, Selling, Marketing Approaches Year 12 2019 Examination Study Notes (i) Production-Oriented (1820s – 1920s) - Focused on production of goods and services where it was assumed high quality products ensured success. - Businesses emphasized low-cost manufacture achieved through large scale manufacturing. (ii) Selling Approach (1920s – 1960s) - Managers believed they could overcome the issue of increasing competition with good sales teams. - Emphasized persuasive sales techniques such as radio ads and door-to-door salesmen to convince they had the better product. (iii) Marketing Approach (1960s – present) - Based on researching what consumers want and developing products accordingly. - Stage 2 (80s to present):​ with changing social and economic conditions in the past three decades, the approach has been further developed with greater ​customer orientation ​and ​relationship marketing (to encourage brand loyalty & repeat sales)​. Types of Markets (i) Resource Provides factors of production (labor, capital assets, land, enterprise) to firms producing goods and services for consumers. Includes ​mining, agriculture, fishing and forestry​. e.g. farmers purchase machinery, seeds and fertilizer (ii) Industrial Industries and businesses purchasing finished products to use in production of other products or in daily operations e.g. ​Toyota buying parts from local suppliers (iii) Intermediate Consists of wholesalers and retailers who purchase finished products and sell them again to make a profit. e.g. ​Woolworths (iv) Consumer Individuals and households who intend to use or consume the products they buy. Consumer markets can be divided into two categories: Mass market - Seller mass produces, mass distributes, and mass promotes one product to all buyers. - Products not targeted to a specific group as it is assumed all customers in the market have similar needs & wants ​e.g. electricity or petrol Niche market - Narrowly selected target market segment consisting of buyers with specific needs or lifestyles ​e.g. different magazines appealing to specific market Influences On Marketing Year 12 2019 Examination Study Notes Factors Influencing Customer Choice​ ​“​PEGS” (i) Psychological Personal characteristics influencing buying behavior and attitudes to certain products: Perception:​ i​ mage that a particular product has in the mind of consumers ​→​ marketing campaigns should promote positive image of the product to targeted customer group. Motive:​ reason for buying the good or service- may be comfort, health, safety, ambition, pleasure or approval of others. Attitudes & beliefs:​ shaped by one’s environment and life experiences- includes ethnic, religious beliefs, political persuasions and attitudes to social issues. Personality & Self-Concept: ​behaviors, characteristics of the customer and how they view themselves Learning: ​changes in an individual’s behavior caused by information and experiences ​→ marketing strategies that assist customers learning about the business encourages brand loyalty. (ii) Sociocultural Social class​: Influences type, quantity and quality of products bought (e.g. higher income earners may purchase luxury cars to symbolize status) Culture and subculture: ​values, beliefs, behaviors and traditions shared by a society determines what people wear, what and how they eat, and where and how they live. Family and household role:​ ​research show most women still make buying decisions related to healthcare products, food and laundry supplies. Peer groups: ​buying behavior may change to match friends (e.g. if friend has bad experience at a shop or if peer group wears distinctive clothing you may purchase clothing based on this influence). (iii) Economic - Influence of general economic trends (unemployment levels, interest rates, economic growth/decline) along with socioeconomic status which is determined by the persons level of income, occupation and education. (iv) Government - Depending on prevailing economic conditions, government will put in place ​policies​ to expand or contract the level of economic activity ​→​ influence business activity & customer’s spending habits and therefore the marketing plan - Business behavior controlled by ​Competition and Consumer Act 2010 (Cth) - Age restrictions placed on alcohol, tobacco Consumer Laws Australian Consumer Law​ introduced in ​2011​ and applies to all Australian consumers and businesses nationwide (i) Deceptive and Examples of deceptive and misleading advertising under​ ​Competition and Misleading Consumer Act: Advertising Providing misleading info about a products features, content or place of manufacture Overstating its benefits Offering discounts and special offers that are not genuine Bait and switch advertising = promoting a heavily discounted product despite the business having limited or no supply. When the consumer expresses interest, the salesperson will direct them to a more profitable item. (ii) Price - Practice of selling the same product to different buyers at different Discrimination prices Year 12 2019 Examination Study Notes - CCA aims to stop discrimination against smaller retailers who are forced to ​pay higher prices for stock compared to their larger competitors​ who receive it discounted (iii) Implied - Unspoken and unwritten terms of a contract Conditions - Under ​CCA ​goods purchased by consumers must be: Acceptable quality (up to standard for its price & free of defects) Fit for purpose Match description or sample (iv) Warranties - Promise made by business to repair or replace faulty products within certain time period - All products have implied warranty ​→​ ​by law a business must refund the client’s money or exchange the good if it is recognized to have been faulty when it left the store. Ethical (i) Truth, Accuracy and Good Taste in Advertising - Marketers expected to engage in fair & honest behavior when developing marketing campaigns, failure to do so is a breach of CCA. - Unethical marketing practices include untruths due to concealed facts, exaggerated claims, vague statements and invasion of privacy. - What is considered good taste varies between consumers, some may regard an advertisement offensive whilst others don't. Marketers consider what society agrees is acceptable and be aware of any community sensitivities. (ii) Products That May Damage Health - Health warnings must be displayed on cigarette packs, they cannot be advertised or displayed in stores - Push to have similar health warnings for products containing alcohol and advertising junk food during children’s TV times (iii) Engaging in Fair Competition - Australian Competition and Consumer Commission​ (ACCC) is a federal government independent authority that ensures businesses engage in fair, legally acceptable competition & enforces ​competition and consumer act 2010 - Unfair competitive behavior includes: Price-fixing​ between competitors Long-term loss leader​ –undercutting smaller competitors and forcing them to engage in price war Misleading advertising regarding the products of a competitor (iv) Sugging - Selling technique disguised as market research (survey) ​→ unethical as it aims to deceive Marketing Processes Situational Analysis (i) SWOT Analysis Enables management Strengths: what the business does better than its competitors to gain an Weaknesses: what competitors do better understanding of the Opportunities: changes in external environment that can be exploited to achieve businesses current objectives position and where it Threats: changes in external environment that make it difficult to achieve is headed. objectives. - Internal forces (business can control) = strengths & weaknesses Year 12 2019 Examination Study Notes - External forces (out of businesses control) = opportunities & threats (ii) Product Life Cycle Consists of the stages a product passes through, with different marketing strategies required at each stage. Introduction: slow sales, low profit and requires heavy promotion to increase consumer awareness and marketshare. Growth: sales increase, profits rise, high levels of promotion, competition grows Maturity: high competition, sales steady, profits may begin to decline Post-maturity (enters either decline or renewal) ✔ Decline​ = sales fall, negative profits, reduce promotion efforts, narrow distribution and eventual elimination ✔ Renewal​ = product revitalized with increased promotion, new promotional campaigns, brand altered Market Research Collection and analysis of information to identify what consumers want so marketing decisions can be based on these wants. It is a ​three-step​ process: (i) Determining Information Needs - Problem is clearly and accurately stated to determine what needs to be measured and the issues involved. (ii) Collecting Data from Primary and Secondary Sources Primary – ​collected first hand by the researcher for the marketing problem (​e.g.​ surveys, observational research) Secondary – ​already exists for another purpose. Can be ​internal (​e.g.​ research reports, financial statements, customer feedback) or external ​(​e.g. ​ABS, government reports) (iii) Analyzing and Interpreting Data - Data will be tabulated then analyzed to identify any trends or patterns present. - Appropriate course of action will be taken based on conclusions drawn. Establishing - Marketing plan objectives are the realistic and measurable goals to be Market Objectives achieved through the marketing plan. - Effective objectives should be ​SMART: S​= specific (clear, precise and relate to specific elements of the business) M​= measurable (developing controls to measure extent to which its been achieved) A​= achievable (needs to have financial & HR resources necessary) R​= realistic T​= timed (establish a time frame for it to be achieved) Common Market Objectives are: Increasing Market Share ​– allows business to become more dominant in marketplace Expanding Product Range​ – may attract new markets, same product mix in long term will be ineffective due to changing tastes Year 12 2019 Examination Study Notes Maximizing Customer Service ​– encourages repeat purchases Identifying Target Target market = group of customers with similar characteristics who Markets the product is aimed at. Three approaches to choose from: Mass Market - Seeks large range of customers with similar needs, therefore uses uses a single marketing mix aimed at the entire market and has little product variation. Market Segmentation Approach - Total market is subdivided into groups with common characteristics, one of these segments becomes the target market and the business is able to develop a marketing plan that meets the needs of a relatively uniform group. Niche Market Approach - Specific, narrowly selected target market segment e.g. Fernwood for females Developing Marketing strategies are actions undertaken to achieve the business’s marketing Marketing objectives through the ​marketing mix. Strategies Product - Determining quality, packaging/labelling, design, brand name and guarantee. Price - Whether to set above, below or around competitor price. Should consider production cost, consumer demand and desired profit. Promotion - Methods business uses to inform, persuade & remind customers about its products. Main forms include advertising, personal selling and relationship marketing. Place - Includes intermediaries (e.g. wholesaler, retailer), channel choice (creates image) and physical distribution (trucks, trains, warehousing, etc). Year 12 2019 Examination Study Notes Implementation, (i) Developing a Financial Forecast Monitoring and - Measuring expected revenue, the marketing plan will generate Controlling compared to the anticipated cost of implementing it (benefit-cost analysis) (ii) Comparing Actual and Planned Results - Three common ways to do this: Sales analysis:​ breakdown of sales figures by product, customer or market for a given period of time. Market share analysis: ​comparing sales to those of competitors Marketing profitability analysis: ​evaluating financial (profit/sales)​ ​and non-financial (brand awareness/customer satisfaction)​ ​benefits achieved by a​ ​specific marketing plan​ ​against the costs of​ ​implementing the plan. (iii) Revising the Marketing Strategy - Assessing which objectives are being met and which are not, the marketing plan can then be modified based on this information. - May involve ​making changes to the marketing mix, new product development or product deletion. Marketing Strategies Market Segmentation, Product/Service Differentiation and Positioning (i) Market Segmentation - By focusing its efforts on one or more segments, business can better understand the needs of its market ​→ more competitive - Markets can be segmented according to: Demographic Geographic Psychographi Behavioral c Age Region Lifestyle Purchase Gender Urban Personali occasion Educatio Suburb ty Benefits n an Values sought Occupati Rural Interests Loyalty on Price sensitivity (ii) Good/Service Differentiation and Positioning - Business ​distinguishes features of its products against competitors​ to persuade consumers their brand is more superior - May be focused on price, higher quality, more environmentally friendly or customer service (pre-sale & after-sales). - Positioning ​refers to the development of a products image in the mind of a consumer relative to others in the market. - Often based on price, quality or benefits ​e.g. ​brand names Rolex evoke an image of their products quality Product - Products refer to goods or services offered in an exchange for the purpose of satisfying a need or want. - They offer consumers tangible and intangible benefits: Tangible ​benefits = physical attributes such as design, color and features. Intangible​ benefits = such as prestige, image associated with product, after sales service (e.g. warranty) Year 12 2019 Examination Study Notes (i) Branding - Reputation that a business or product developed over a period of time - Brand names and logos provide messages of quality/value/prestige ​→ consumer forms judgments. - Strong brand name provides reassurance and customer loyalty - Types of branding: manufacturer​ (owned by the manufacturer, well-known ​e.g.​ sunbeam) private ​(owned by retailer or wholesaler ​e.g.​ Myer owns miss shop) generic ​(no name, aimed at low budget buyers ​e.g. ​Woolworths select) (ii) Packaging - Refers to the way a product is physically presented to customers - Often the first image of a product consumers sees ​→​ must give positive impression to encourage first-time customers - Must protect & maintain quality of product, attract attention of target market, communicate brand identity and communicate to the consumer Price, including Pricing Methods Price charged must reflect position and branding of the business within the marketplace. Three key pricing methods: Cost-based​ – cost to produce plus a profit markup. Limitation: ignores state of market or market demand and difficult to find an appropriate %markup (may be too low or too overpriced) Market-based ​– set according to demand and supply of the market When demand for product is greater than its supply in the market, the price of the good will be forced up. Competition-based ​– business observes competitor’s prices and sets their own accordingly May choose to set above (to convey more superior image), below (to break into market) or equal to (i) Pricing Strategies Skimming - Business sets relatively high price then lowers it over time. - Occurs in beginning of product lifecycle when quick profits are needed Penetration - Business charges lowest price possible to achieve a large market share, usually in a highly competitive market Loss leaders - Product sold at or below its cost price to attract customers to the shop so they can buy more products. - Often used when business wants to gain new customers, build a reputation of having low prices, is overstocked or has a slow selling product. Price points - Certain price levels set for products with relatively constant demand - E.g​. clothing label may sell shirts at the price points $55, $75 and $95 regardless of their production costs (ii) Price and Quality Interaction - Customers often associate quality of a product with its price (high price = superior quality) - Prestige or premium pricing strategy where high price is charged to give aura of quality and status. Promotion (i) Elements of The Promotion Mix Promotion mix refers to the various promotion techniques businesses use to inform and influence a target market. Advertising Year 12 2019 Examination Study Notes - Form of paid, non-personal communication intended to persuade audience to purchase a product - Can be conducted through several mediums such as TV, radio, internet, magazines, billboards - When considering which medium to use business must consider type of product and its positioning, where the product is on the product life cycle, its target market, the marketing budget and the cost of the medium. Personal Selling and Relationship Marketing - Involves personal interaction between salesperson and customer where the salesperson attempts to persuade customer through their ​depth of knowledge and positive personal characteristics​. - Key to establishing positive, long term relationship with customer to encourage repeat sales (relationship marketing). Sales Promotion - Activities aiming to entice new customers, encourage trial purchases of new products & increase repeat purchases from existing customers - Includes competitions, free gifts and loyalty card offers and point of purchase displays. Publicity and Public Relations - PR refers to planned efforts to present a business & its product in a positive light - Can be done by working w/the media, sponsoring events or attention seeking gestures such as donations. - Publicity = any free news story about business & its products - Aims to enhance image of a product, raise awareness of it and highlight a business’s favorable features. (ii) The Communication Process - Often customers are more willing to purchase a product if the businesses message is communicated via a respected and trusted channel such as by word of mouth or an opinion leader: Opinion leader:​ highly respected and influential individuals (​e.g. ​musicians, actors, athletes) Word of mouth:​ people influencing each other in conversation, people tend to trust someone they know more than advertisements. Place/Distribution (i) Distribution Links point of manufacturing to the final customer​ ​→ ​often involves intermediaries Channels such as wholesalers and retailers. Three main types of channels: Producer to Consumer – involves no intermediaries (e.g. tax services) Producer to Retailer to Consumer – retailer accesses goods from producer, usually in bulk then sells to consumer Producer to Wholesaler to Retailer to Consumer – wholesaler buys in bulk from producer and resells in smaller quantities to retailers (ii) Channel Channel choice will influence the type of consumers the product attracts, its Choice perception in the market and its accessibility. Intensive –​widely available & in as many outlets as possible (​e.g.​ milk) Selective – ​available in limited number of outlets in a geographical area, using the most appropriate and best performing outlets. Exclusive – ​individual outlets are given exclusive distribution rights, usually used for expensive products (e.g. Rolex watches) (iii) Physical Refers to activities involved in efficiently moving products from producer to Distribution consumer. Issues Transport - Method chosen (rail, road, air, sea) will depend on type of good, cost, necessary speed of delivery and distance to be covered. Warehousing - Involves storing products in a secure manner, with ready access to they can be easily dispatched to retailers in smaller quantities when needed. Year 12 2019 Examination Study Notes Inventory - Inventory ​control​ ensures products are available for sale when needed so sales are not lost, without the issue of having too much stock and high storage costs. - Many businesses use​ J.I.T People, Processes and Physical Evidence (3/7P’s) Marketing mix (product, price, promotion place) has three additional P’s which apply particular to intangibles/services (i) People - Having well-trained staff to support the businesses products → excellent customer service = customer satisfaction - May include extensive product knowledge, attending to customer concern. (ii) Processes - Refers to the flow of activities a business follows in its delivery of a service - Without a tangible product, processes must be highly efficient to achieve customer satisfaction (iii) Physical Evidence - Refers to the environment in which the service is delivered ​e.g​. how staff look and act, shop layout, product packaging - Business should provide high-quality physical evidence to create an image of value & excellence E-Marketing - Refers to use of internet & digital media to perform marketing activities - Enables business to have expand their market & reach a global audience - E-marketing technologies include ​web pages, podcasts, SMS, blogs & social media advertising - Also sought to establish secure payment methods to assure safety & security of financial details for customers. Global Marketing (i) Global Branding - Worldwide use of a name, term symbol or logo to identify a brand - Effective global branding is key to driving business growth - Can be cost effective as one advertisement can be used in various locations, however marketing mix may vary around the world to local language & culture (ii) Standardisation Standardisation or - When products aren't modified to suit different markets, they Customisation are presented and received the same worldwide ​e.g. ​electrical equipment, mobile phones - Marketing mix is same everywhere - Benefits include decreased r&d costs and achieving economies of scale ​as production runs are usually longer. Customisation - Modifications made to products so the marketing mix suits various global markets. - Provides opportunities to better meet needs and tastes of customers in various global markets ​e.g​. McDonalds India doesn't use beef products Year 12 2019 Examination Study Notes (iii) Global Pricing How a business coordinates its pricing policy across different countries is vital as price is the only area of the marketing mix that generates revenue. Global businesses can implement one of three global pricing strategies: Customised Pricing​ ​– different countries charged different prices for same product. Many global businesses will use ​cost pricing​ method to cover exportation costs (taxes, transport, tariffs) Market-Customized Pricing ​– sets prices according to local market conditions (supply and demand) More flexible than customized Standardised Worldwide Price ​– ​same​ price charged worldwide Only successful if foreign marketing costs remain low enough not to affect overall costs and if domestic businesses do not undercut the price. (iv) Competitive - Relates to how a business will differentiate its products in the Positioning market - Global businesses must clearly show how their products are better than competitors - Business must gain understanding of environment and form strategies according to evolving conditions