Unit 2 Marketing Key Terms and Notes Intl Business PDF

International Business Study Notes Unit 2: Marketing Essential Question: How can products and services become more successful when the marketing mix is designed and executed thoughtfully? Guiding Questions: How can the marketing mix influence customer perceptio...

International Business Study Notes Unit 2: Marketing Essential Question: How can products and services become more successful when the marketing mix is designed and executed thoughtfully? Guiding Questions: How can the marketing mix influence customer perceptions about the quality, value and purpose of a product? Key Terms and Definitions 1. Marketing is the management process of predicting, identifying and meeting the needs and wants of customers in a profitable manner. 2. Market leadership refers to firms with the largest market share in a particular market. 3. Market orientation is a marketing approach adopted by businesses that are outward looking by focusing on making products that they can sell, rather than selling products that they can make. 4. Market share measures the value of a firm’s sales revenues as a percentage of the total sales revenue in the industry. 5. Market size refers to the magnitude of an industry, usually measured in terms of the value of sales revenue from all the businesses in a particular market, per time period. 6. Product orientation is a marketing approach used by businesses that are inward looking as they focus on selling products that they can make, rather than making products that they can sell. 7. Consumer profiles are demographic and psychographic characteristics of consumers in different markets. 8. Differentiation is the act of distinguishing a business or its products from rivals in the industry. It tries to create the perception among customers that the firm’s product is different compared with substitute products from rival businesses.. 9. Market segmentation is the process of categorizing customers into distinct groups with similar characteristics and similar needs or wants for market research and targeting purposes. 10. Convenience sampling uses subjects that are easy to reach. It relies on ease of reach and volunteers because of their availability. 11. Focus groups involve forming small discussion groups to gain insight into the attitudes and behavior of respondents. The group is typically made up of participants who share a similar customer profile. 12. Interviews involve discussions between an interviewer and interviewees to investigate their personal circumstances and opinions. Beliefs, attitudes and feelings can be examined in detail. 13. Market analysis reveals the characteristics and the trend for a particular product or industry. 14. Market research refers to marketing activities designed to discover the opinions, beliefs and preferences of potential and existing customers in order to identify and anticipate their needs and wants. 15. Observations involves watching how people behave or respond in different situations. It can be done under controlled situations or as real-life situations. 16. Population refers to all potential customers in a particular market. 17. Primary research is market research that involves fathering new data first-hand for a specific purpose. 18. Qualitative market research involves getting non-numerical answers and opinions from respondents.. 19. Quantitative market research is about collecting and using factual and measurable information rather than opinions. 20. Random sampling gives everyone in the population an equal chance of being selected for the sample. 21. Sample is a selected proportion of the population used for primary market research purposes. 22. Marketing mix is the combination of various elements needed to successfully market a product. It is used to review and develop marketing strategies and is at the heart of marketing planning. It consists of the 4 P’s: product, price, place and promotion. 23. Marketing plan refers to the document outlining a firm’s marketing objectives and strategies for a specified time period. 24. Mass marketing refers to undifferentiated marketing. This is a strategy that ignores targeting individual market segments. 25. Niche marketing targets a specific and well-defined market segment. 26. Targeting refers to each distinctive market segment having its own specific marketing mix. Different markets can be targeted depending on whether firms operate in niche or mass markets. 27. Unique selling point refers to any aspect of a product that makes it stand out from those offered by rival businesses. 28. Branding refers to the use of an exclusive name, symbol or design to identify a specific product or organization. It differentiates a product from similar ones offered by rival firms. 29. Triple bottom line the three pillars of sustainable development 30. Cost-plus pricing involves adding a percentage or predetermined amount of profit to the cost per unit of output to determine the selling price. 31. Loss leader pricing involves setting the price of a product below its production costs. The purpose is to entice customers to buy other products with high profit margins in addition to purchasing the loss leader product. 32. Penetration pricing involves setting low prices to gain entry into a new market. Once the product has established market share, prices can be raised. 33. Price skimming involves initially charging high prices for innovative or high-tech products. Price is reduced as the novelty wears off and as substitute products appear. 34. Psychological pricing involves rounding down numbers such as $9.99 to make prices seem lower, than $10.00. 35. Above the line (ATL) promotion is any form of paid-for-promotion through mass media to reach a wide audience. 36. Advertising is a method of informative and/or persuasive promotion that is usually paid for. 37. Below the line (BTL) promotion doesn’t use paid-for-mass media sources. 38. Guerilla marketing is a promotional strategy that aims to ambush or catch the attention of customers through unusual, innovative, unconventional and/or shocking techniques, on a relatively low budget. 39. Promotion is a component of the marketing mix. It refers to the methods used to inform, persuade and/or remind people about a firm’s products or brands. 40. Promotional mix refers to the combination of individual ATL and BTL promotional methods used by a business, such as advertising, direct marketing, packaging, sales promotion. 41. Publicity is the process of promoting a business and its products by getting positive media exposure without directly paying for it.. 42. Sales Promotion are short-term incentives designed to stimulate demand for the product. 43. Social media refers to the marketing practice of gaining internet traffic through social media websites. 44. Viral marketing is a promotional strategy that combines online technologies with word of mouth (WOM) techniques. It is usually done through the internet via emails or social networks. 45. Distribution channels are the ways that a product gets from the manufacturer to the consumer. 46. Distribution/Place refers to the process of getting the right products to the right customers at the right time and place in the most cost-effective way. 47. Distributors are independent businesses that act as intermediaries by specializing in the trade of products made by certain manufacturers. 48. Intermediaries are agents or other businesses that act as a middle person in the chain of distribution. 49. Retailers are the sellers of products to the general public that operate in outlets. 50. Wholesalers are businesses that purchase large quantities of products from a manufacturer and then separate or ‘break’ the bulk-purchases into smaller units for resale, mainly to retailers. Marketing Study Notes Four main objectives for Marketing 1. Ensure that the right products are supplied to fulfill the needs and wants of customers. 2. Set the correct price so that customers can afford to buy the product. 3. Distribute the products conveniently for customers to buy the product. 4. Ensure that the promotion is effective enough for customers to buy the firm’s products. Characteristics that differentiate the marketing of goods and services (Remember the acronym: HIIPPPPP) 1. Heterogeneity Common to mass produce goods such as books, phones, soft drinks. People have different experiences for the same product. If customers get poor customer services, they will use same service from competitors. 2. Intangibility Goods are tangible. Services are intangible. Marketers face a challenge to show benefits of the service. Purchase is largely based on trust. When marketing goods, marketers can show physical aspects of the product that differentiates from other products, which is less challenging compared to services. 3. Inseparability Services are consumed at the time of purchase. Therefore, it’s not possible to separate consumption and production of services. Marketers ensure staff are well trained to provide high quality customer services. 4. Perishability Services cannot be stored, unlike goods. Empty seats in public buses, airplanes, cinema means loss of potential revenue for firms. Goods can be stored and sold to customers later through wholesalers and retailers. 5. Product strategy Many firms provide value-added services to attract customers. Restaurants and fast food restaurants offer free delivery service. Hotels, banks, coffee shops offer free Wifi services. Service providers have to decide whether their service is customized or standardized. 6. Price strategy Cost and price of services tend to be high. Challenge for marketers to provide right pricing to appeal customers for the service, covers production cost and generate profits for the firm. Depends of source of value to customers. Lawyers and doctors offer high prices since their service is highly valued to their customers. Some firms focus on time spent on providing the service and others focus on skill levels required to provide the service. 7. Promotion strategy Promoting a service can be challenging for marketers as it is intangible. They use physical environment to promote their services, such as hotels, resorts, schools so that customers can see the quality of their services. Other strategies include branding, slogans, logos, celebrity endorsements. 8. Place strategy Location decision is vital for marketing of services as customers are highly unlikely to visit hotels, restaurants, theaters, banks if the location is weird or unsafe. Goods can be ordered, via. eBay, Amazon etc, so the location is less important as there are effective distribution channels to deliver the products to customers. Market orientation vs. Product orientation Market orientation Product orientation 1. Outward looking. 1. Inward looking. 2. Focus on making products they can sell, 2. Focus on selling products they can make, rather than selling products they can make. rather than making products they can sell. 3. Examples include retail stores like IKEA. 3. Examples include hi-tech firms that encourage creativity and innovation. Advantages 1. Firms respond quicker to changes in 1. Quality of the product can be assured since market and anticipate changing trends → they know they are trying their best to product More prepared to face those challenges. high quality products. 2. More confident that their products will sell 2. The firm has more control of their and be more successful. operations.  Disadvantages 1. Market research can be very expensive. 1. R&D of products tend to be very costly. 2. External business environment and 2. High failure rate in this approach as firms uncertainty of the future makes it difficult for don’t necessarily know the needs of firms to carry on this approach. customers → Very high risk strategy Elements of a marketing plan 1. Marketing objectives that are SMART (specific, measurable, agreed, realistic and time constrained) 2. Methods of market research to be used to identify target markets. 3. Assessment of strengths and weaknesses of competitors (SWOT/STEEPLE Analysis). 4. Outline of the marketing mix. 5. Details of the marketing budget. 6. Outline of anticipated difficulties and strategies to deal with these problems. 4 P’s of the Marketing Mix 1. Product Physical good or intangible services. Two types of products: ❖ Consumer products: Sold to private individuals. ❖ Producer products: Sold to other businesses to further the production process. Wide range of products in a business → Increased customer base and profits. 2. Price Amount of money customers pay for a good or service. Pricing decisions depends on DRASTIC number of factors: ❖ Demand: Higher demand → Higher prices. ❖ Rivalry: Higher degree of competition → Similar pricing to rival firms of the business. ❖ Aims: NGO’s price differently compared to for profit organizations due to different aims. ❖ Supply: Lower supply → Higher prices. ❖ Time: Scarce products → Higher prices. Substitute products → Lower prices.  ❖ Image: High reputation and brand image → Higher prices. ❖ Costs of production: Higher production costs → Higher prices. 3. Place Methods of distributing products to customers. Distribution channels begins at factory of the manufacturer → selling the products to wholesalers → Selling it to retailers → Selling it to customers. The fewer the people involved in a transaction → Lower the price of the product. 4. Promotion Strategies used to attract customers to buy a firm’s products. Classified as: ❖ Above the line (ATL) marketing: Uses mass media to advertise their products. ❖ Below the line (BTL) marketing: Other types of promotion, such as packaging. Examples of promotional activities include: ❖ Advertising: ATL advertising → Most expensive. Carried out via TV, radio, social media, newspapers, magazines and posters. ❖ Sales promotion: Temporary way of boosting sales, such as gift vouchers and free gifts. ❖ Sponsorship: Financial gifts, donations, payments to support an event or a business venture in return of the sponsor’s name written on display. ❖ Publicity: Process of getting good press coverage, such as celebrity endorsements. Marketing Objectives 1. Market share: Achieved through market penetration strategies → Increase profits & revenue. 2. Market leadership: Firms strive for the greatest market share in the industry. 3. Product positioning: Firms improve their corporate image & perceptions held by consumers. 4. Consumer satisfaction: Achieved by ensuring consumers are satisfied with the price, product and level of customer service. 5. High market standing: Based on firm’s image and reputation which can be maintained or enhanced by effective marketing strategies. Segmentation by geographic factors 1. Location Different geographical areas and regions → Different cultures and social attitudes. 2. Climate Typical weather in a geographical region has a huge impact on business activity. Businesses tend to adjust their products depending on where they sell it worldwide. Segmentation by psychographic factors 1. Hobbies and interests Understanding customer’s hobbies and interests → Marketing opportunities for a firm. 2. Values Socially responsible businesses would act depending on their target customers beliefs, morals and principles. 3. Religion Religious beliefs provide many opportunities for businesses who operate in places that are religion-centric, such as Makkah in Saudi Arabia. 4. Status Very conscious of social and economic status. People have the “feeling good” factor when owning certain assets. 5. Culture Provide immense opportunities for marketers. Segmentation by demographics factors 1. Age Each age group have similar needs and wants and are in financial circumstances. Different age groups have different spending habits. 2. Gender Males and females have different needs and wants and spending habits. 3. Race and ethnicity Different races → Different cultures → Significant effect on demand. Businesses have many opportunities to sell cultural exports abroad for wider customer base because of globalization. 4. Marital status High costs of weddings and career aspirations for women → Increasing number of people delaying marriage. Divorce rates are increasing → Opportunities or threats for marketers. 5. Religion Different religions have different food tastes. 6. Language Firms cater for different customers based on their mother-tongue language. 7. Income and socio-economic class Wealthy people and middle-class people have different spending habits. Level of income for different consumer groups affect pricing policy of a business. Niche markets vs. Mass markets 1. Niche Markets Targets a specific and well-defined market segment. Advantages of niche marketing: ❖ Better marketing focus as a specific marketing segment is targeted. ❖ Less competition → Higher prices for unique/exclusive products. ❖ Firms become highly specialized in meeting needs and wants of their niche target market. Helps deliver first-rate customer service and encourages customer loyalty. Disadvantages of niche marketing: ❖ Small markets → Limits number of customers in the market. ❖ Limited market size → Fewer opportunities to exploit economies of scale → Average costs tend to be higher. ❖ Attract new entrants in the industry → Endanger the survival of businesses operating in niche markets. 2. Mass Markets Undifferentiated marketing. Ignored targeting individual marketing segments. Advantages of mass marketing: ❖ Supplying products in mass markets → Gain from huge economies of scale. ❖ Targeted with a single marketing campaign → Saves time and resources. ❖ Businesses establish a bigger customer base → Earn more profits. Disadvantages of mass marketing: ❖ Not suitable as there are high entry barriers for mass production. ❖ Competition can become INTENSE as customers must be persuaded to buy the firm’s products rather than to buy from a rival business. ❖ Specific customers aren’t being targeted → Mass marketing can be quite wasteful. Role of Market Research 1. Gives businesses the latest information on the market. 2. Enables businesses to improve their marketing strategies.  3. Assesses customer reactions to a new product by testing trials on a small sample size. 4. Gives businesses an understanding of the activities and strategies used by rivals. 5. Helps businesses predict what is likely to happen in the future → Maximize opportunities. Primary Market Research 1. Surveys Series of questions used to collect data for a specific purpose. Effective surveys: ❖ Avoid bias in order to collect meaningful and useful data. ❖ Avoid jargon. ❖ Include both open-ended and closed questions ❖ Be tried and tested. ❖ Allow the objectives of the survey to be met by gathering only relevant data. 2. Interviews One-to-one discussions between an interviewer and interviewees. Investigates personal beliefs, feelings and opinions. Findings are used to analyse the views the respondents share. Identifying differences are important as it helps refine firm’s marketing strategies. 3. Focus groups Involve small discussion groups to gain insight into attitudes and behavior of respondents. Made up of participants who share a similar consumer profile. Provide important information for businesses to develop their marketing strategies. 4. Observations Watching how people behave and respond in different situations. Done under controlled conditions or as real-life situations. Advantages of Primary Market Research 1. It is carried out for a specific purpose, so they address the questions that needs to be answered. 2. More recent and reliable as the research was carried very recently. 3. No one, other than the businesses, have access to the information gathered from the research. Disadvantages of Primary Market Research 1. Very tedious and lengthy task in order to be accurate and representative. 2. Costly due to time involved or collecting quality and limited data. 3. Faults in market research lead to misleading or biased results. Secondary Market Research 1. Market Analyses Reveals characteristics and trend for a particular product/industry. Measure how well a business is doing compared to rival firms. New businesses rely on market analyses to formulate business plans and strategies. 2. Academic journals Publications from educational and research institutions. Data and information relating to particular academic discipline is published here. Purpose is to distribute and share theoretical work and market research findings. 3. Government publications Governments publish a broad range of data, such as: ❖ Population census ❖ Labor market developments ❖ Social trends ❖ Unemployment and inflation rates 4. Media articles General media contain valuable data and information. Widely available online. 5. Internet Provide a range of invaluable information. Good starting point to find other secondary market research data and information. Advantages of Secondary Market Research 1. Data or information that is available are cheaper and faster to collect and analyse. 2. Provides an insight to changes or trends in an industry. → Develop strategies. 3. Huge range of resources that the market researcher could use. 4. Findings are often based on large sample sizes → Statistically valid. Disadvantages of Secondary Market Research 1. Second-hand data → Outdated or can become obsolete quickly.  2. Data or information might be in an innapropriate format for the market researcher as it might have been done for another purpose. 3. Might only provide partial information as it was produced for a different purpose. 4. Widely available to competitors. Qualitative vs. Quantitative Market Research 1. Qualitative market research Involves getting non-numerical answers and opinions from respondents. Purpose is to understand the behavior, attitudes and perceptions of respondents. Examples: In-depth interviews and focus groups. Advantages of qualitative market research: ○ Explores motivators and demotivators concerning the behavior and attitudes of respondents. ○ Information obtained can be very rich and flexible. ○ It is inexpensive, but provides detailed information. ○ Respondents aren’t under pressure to conform the views and opinions of the majority. Disadvantages of qualitative market research: ○ Might not represent the entire population due to small sample size. ○ Time consuming to conduct and interpret findings. ○ High level of interviewing expertise is required to engage and encourage respondents → Very expensive to get high skilled interviewers. ○ Validity of the information is questionable because of interviewer bias. 2. Quantitative market research Relies on a much larger number of responses to get a numerical answer. Involves using a representative sample to gauge the views of the population Examples: Closed questions, ranking/sliding scales in surveys/questionnaires. Advantage of quantitative market research: ○ Easier to analyze Disadvantage of quantitative market research: ○ Not as flexible as qualitative research as all questions are fixed. Sampling methods 1. Quota sampling Certain number of people from different market segments is selected for sampling. Sample is grouped based on similar consumer profile. Advantages of quota sampling: ○ Relatively small representative sample can be obtained quickly. ○ Findings are more reliable than asking anyone randomly to participate in the research. Disadvantages of quota sampling: ○ Number of people interviewed and how randomly they are chosen for interview, are not always representative of the entire population. ○ Sampling errors are likely to occur as many people don’t get a chance to be sampled. 2. Convenience sampling Uses subjects that are easy to reach. Relies on ease of reach and volunteers because of their availability. Advantages of convenience sampling: ○ Availability and quickness of data collection. ○ Useful when time or cost is a factor. Disadvantages of convenience sampling: ○ Excludes large proportion of the population → skewed findings. ○ Unrepresentative of the entire population. 3. Cluster sampling Used when getting feedback from respondents involves too much time, travelling, money. The opinions from selected clusters (geographical areas) represent views of the population. Advantages of cluster sampling: ○ Quicker, easier, cheaper if the population is widely dispersed over different areas. ○ It’s not necessary to sample people from every location due to similar consumer profile. Disadvantages of cluster sampling: ○ Bias. ○ Sampling errors. Branding Brand names create a legal identity for a product by giving a unique name to differentiate themselves with rival firms.  Branding is a risk reducer as it gives new products better chance of survival, sense of value for money and encourage brand awareness. Branding is an image enhancer as it allows a firm to charge high prices because the brand is ‘good’ when looked by the society. Branding is a revenue earner as it encourages brand loyalty. Advantages: ○ Branding adds value to products → Charging higher prices. ○ Brand recognition → Greater chance of products getting sold. ○ Successful branding → Better distribution of firm’s products. Aspects of branding 1. Brand awareness Measures the extent to which potential customers or general public knows a brand. Plays a major part in buying decisions of consumers. Gives firms a competitive edge over its rivals → Greater market share → Encourages repeat purchases. Important for the launch stage of a product life cycle. 2. Brand development Marketing process of improving and enlarging the brand name to boost sales revenue and market share. Helps the firm stand out from their rivals. It takes a longer time to develop a brand, unlike brand awareness. Successful brand development extends a product’s life cycle. Brand owners strive to maximize the popularity of their trademarks, which leads to generic brands. Generic use of brand name leads to copyright problems for the trademark. 3. Brand loyalty Occurs when customers buy the same brand of product again and again. Reasons why brand loyalty is important: ○ Helps firms to maintain or improve their market share. ○ Allows firms to charge premium prices for their products → Improving profit margins. ○ Acts as a high entry barrier in competitive markets. ○ Plays a huge role in future success of a firm. Firms use customer loyalty schemes to make customers be loyal to their brand. 4. Brand value Premium that customers are willing to pau for a brand name over and above the value of the product itself. Customers believe well-known brand sells better quality products than unknown brands. Advantages of high brand value: ○ High market share for the firm. ○ Charging higher prices for their products for higher profit margins. ○ Difficult for new firms to compete with them due to high entry barriers. Packaging It has an impact on customer perceptions of a product or brand. High quality packaging = Good product. Form of product differentiation. Protects a product against damage during transportation and distribution of the product. Labeling can provide useful information. Easier method of distribution. Encourages impulse buying. Used to promote the brand or business. Limitations include customers being the only ones paying for attractive packaging, environment issues due to excess of wastage. Sustainability In addition to what products to develop, marketers also have to take several other factors into account. These factors fall into three categories: Economic Factors Social Factors Ecological (environmental) Factors These three factors are known as “the three pillars of sustainable development”. Their combination is called the “triple bottom line”. It is often represented in a Venn diagram as shown below. The “triple bottom line” stresses the fact that business decisions should not only consider financial aspects (i.e. breaking even and making money for shareholders), but also the well-being of local communities and the natural environment. Although this is relevant for all business functions, it is particularly relevant for operations, as manufacturing activities may have more negative impacts than marketing campaigns or financial transactions. In many cases, though, the “triple bottom line” remains an ideal rather than a reality, as economic aspects largely drive most commercial organizations. Pricing strategies 1. Cost-plus (mark-up pricing) Involves adding a % or amount of profit to the cost per unit of output to determine the selling price. The % or specified amount is known as markup or profit margin. Advantage: ○ Simple to calculate. Disadvantage: ○ Relies too much on intuitive decision making rather than needs of customers. 2. Penetration pricing Setting a low price to help establish a product in the industry. Main purpose is to gain brand recognition and market share. As the product continues to sell, prices can be raised. Advantage: ○ Suitable for mass market products sold in large quantities to sustain a low profit margins. Disadvantage: ○ Setting prices too low can cause customers to think the products are inferior and of poor quality. 3. Price skimming Used for high-tech products. High price is set to pay off costs for research and development and maximize profits. High pricing = Unique and prestigious image for the product. Prices fall when other products come into the industry. Can only be successful if supported by other elements in the marketing mix. 4. Psychological pricing Involves rounding down numbers such as $0.99 to make prices seem lower than $1. Customers feel they are getting a bargain for the product. Advantage: ○ This strategy is used everywhere and works well when selling the product in bulk.  Disadvantage: ○ Might not be suitable for firms such as taxi firms as rounded numbers are more suitable for customers and service providers. 5. Loss Leader Selling a product below its cost values. Supermarkets and gaming firms use this strategy frequently to gain as many customers as they can. Aim is to recoup the loss of sales of gaming goods and collecting royalty payments from games manufacturers. Three objectives to any promotional strategy 1. To inform Informative promotion aims to alert the market about a firm’s new and updated products. Promotion might include info on product functions and price. Based on providing facts and figures of the firm or their products. Aim is to give customers sufficient info to influence their purchasing decisions. 2. To persuade Persuasive promotion aims to encourage customers to make a purchase, to switch from rival products and create brand loyalty. Firms might use product differentiation strategies to create a unique identity or enhance the product’s brand image. Successful persuasion → Generate impulse buying. 3. To remind Reminder promotional techniques are used to maintain customer awareness of, and interest in, an established product. Suitable for products in maturity or saturation stages of their product life cycle. Above the line (ATL) promotion Any form of paid-for-promotional method through mass media. Advantage: ○ Reaches a potentially large number of customers. ○ Attracts more attention for customers as it is interesting and appealing to them.  Disadvantage: ○ Very expensive and might not appeal to the audience. ○ Many advertisements are ignored because people switch channels during TV and radio commercial breaks, readers don’t notice ads in magazines or newspapers, and people complain about pop-up ads on the internet. Below the line (BTL) promotion Non-mass media promotional activities → Firms have direct control for promotion. No commission has been paid to external agencies. Tend to be cheaper compared to ATL promotion. 1. Branding Huge amount of money is spent on promoting brands. Successful brands are instantly recognized. Firms use extension strategies to launch, promote new products under the company name. 2. Slogans Memorable catchphrases used to gain and retain attention of customers. Factors that determine effectiveness of slogans: ○ Slogan is memorable due to simplicity and catchy musical tunes. ○ Outlines the advantages of the product or brand. ○ Creates an upbeat image and desire for the need of the product. 3. Logos Visual symbol that represents a firm, its brands or its products. Firms spend lots of money to make logos that are eye appealing and distinctive. Create a monetary value for firms. 4. Packaging Low market share + Low market growth. Don’t generate as much cash. Market tends to be stagnant or declining. Firms may use extension strategies or dispose their dogs. May face liquidity problems. 5. Word-of-mouth promotion Spread of info from one person to another through oral communication. Most effective form of promotion as messages about a product or a business are passed onto other people and firms don’t incur costs from this promotion method. It can damage a firm’s reputation if their products are sub-standard or bad. 8. Sales promotion Temporary ways to boost sales and attract new buyers, such as: ○ Buy one get one free deals. ○ Discount vouchers. ○ Winning a prize for lottery. ○ Free gifts to customers for making a purchase. ○ Customer loyalty schemes. Advantages: ○ Boost sales in the short run. ○ Distract customers from rival firms. ○ Encourages customers to purchase the product rather than reminding or informing customers about the product. Disadvantages: ○ Free samples, gifts, discounts, competitions add marketing costs to a firm → Reducing profit margins on each product. ○ Short term strategy and might not be sustainable in the long term. 9. Point of sales promotion Promotion of a product at the place where the customer buys the product. Supermarkets use this method a lot as they promote products when customers are queuing at the checkouts. 10. Publicity Process of promoting a firm and its produce via media coverage without paying for it. Examples include celebrity endorsements. 11. Sponsorship Involves a firm providing finance and resources to support an event or another firm in return for publicity and advertising space. Promotional mix Set of tools firms can use to communicate the benefits of its products or services to customers. Range of ATL and BTL methods to market a product. 1. Sales promotion LOOK ABOVE. 2. Advertising Communicates marketing messages in a persuasive/informative way. Successful marketing campaign is distinctive rather than relegated to advertising clutter. Many firms hire advertising agencies to produce ads for their products. 3. Personal selling Rely on sales representatives directly helping and persuading customers to buy their product. Common promotional method in financial services and real estate agencies. Examples include sales presentations, face-to-face meetings with clients, telemarketing and door-to-door sales. Advantages: ○ Tailored to the individual needs of the customer. ○ Help the firm build a positive, trusting and long term relationship with customers. Disadvantages: ○ Sales agents are expensive to hire. 4. Public relations (PR) Refers to business activities aimed to establishing and protecting the brand image of a firm. Concerned with getting good media coverage, without directly paying for it. Examples include interviews, launch parties for new products, donating to charities etc. Types of intermediaries in distribution channels 1. Wholesalers Firms that purchase large quantities of products from a manufacturer and then break the bulk purchases into smaller units for resale. Act as the intermediary between producers and retailers. Examples include Costco, Sam’s Club. Advantages: ○ They bear the storage costs → More space for retailers and manufacturers. ○ Selling smaller batches of products to retailers → Eliminates need to purchase large quantities directly from the manufacturer. ○ Lower transaction costs for the producer. ○ Producers can focus on production while wholesalers focus on distribution issues and problems associated.  Disadvantages: ○ Producer takes a risk in passing responsibility of marketing its products. ○ Wholesalers might not promote products in terms of company’s vision → Ruining the producer’s efforts in making the product. ○ Some retailers don’t use wholesalers → Reducing their capital earned. 2. Distributors and agents Distributors: ○ Specialised firms that trade products to only a few manufacturers. ○ Examples including car distributors selling products of one manufacturer to the customer. Agents: ○ Negotiators who act on behalf of buyers and sellers of a product. ○ Not employed by the producer but acts as an intermediary. ○ Experts in their market and charge a commission fee. ○ Rely on personal selling techniques, such as door-to-door sales, telesales, trade fairs and exhibitions. 3. Retailers Sellers of the product to final consumer. Types of retailers: ❖ Independent retailers Small local shops owned by a sole trader. Sell a small range of products or are specialist outlets. ❖ Multiple retailers Retailers that have multiple outlets. Benefit from brand loyalty and recognition. Examples include Debenhams, Louis Vuitton etc. ❖ Supermarkets Retailers/outlets that sell mainly food and a broad range of products. Tend to buy their products directly from manufacturers → Removing wholesalers. Examples include Walmart, Target, Tesco. ❖ Department stores Retail outlets that sell large range of products.  Franchisors run different parts of the store. Examples include Ikea, Macy’s.