Marketing Foundations Notes

Content: - The Role of Marketing - Strategic Marketing & Planning - Market Research - Customer Behavior - Market Segmentation, Targeting & Positioning - Products & Pricing - Distribution Channels & Placement - Integrated Marketing Communications & Electronic Marketing - International Marketing, Compliance & Ethics

Role Of Marketing
Lecture one FOCUS: Introduction to Marketing & The Marketing Environment TOPICS: - Marketing exchange - Value - The market - Ethics - Stakeholders - Marketing mix - Marketing environment - Situational analysis Definition: The Process of marketing refers to set of institutions and processes aimed to communicate and deliver goods and services that have value and purpose for a range of customers, clients and overall society. Why study Marketing:
The exchange of a product is channeled and is produced through marketing. Marketing = offering = the way something Is marketed creates a total product offer i.e. prestige Companies that are marketing orientated are more financially successful marketing drives economic growth play a role in stimulating consumer demand. Currently in societal market orientation more environmentally aware e.g. low impact on society When a business is establishing its marketing plan, needs to distinguish between needs and wants this is consumer behavior the difference between the need and want of a customer. Marketing is constantly evolving in sync to the changes to society, technology, trends, sociocultural influences -marketers need to be on the cutting edge.

o In order to understand the changes that are affecting society and the
choices that influence their buyer behavior marketers must undertake market research.

Marketing EXCHANGE: The mutually beneficial transfer of offerings of value between the buyer and seller. Successful Marketing Exchange: - Two or more businesses (parties) each with something of value and is desired by the other party. - All parties must benefit from the transaction. - The exchange must meet both parties expectations e.g. quality or price VALUE: A customers overall assessment of the utility of an offering based on perceptions of what is received and what is given. o Utility is satisfaction how much happiness the product gives the customer. o Value refers to the total offering it evolves continually and is unique for each individual. o Value quality/ prices how much satisfaction per dollar. o Value goes to total offering The MARKET: A market is group of customers with heterogeneous (different) needs and wants. o Customers purchase goods and services for their own or other peoples use the one who purchased it but it is not necessarily the person who will use the product. o Consumers use the good or service is the ultimate end user of the product. o Clients are customers of the products of non-profit originations Ethics and corporate social responsibility Ethics, laws and regulatory bodies and corporate social responsibility. Ethics: Set of moral principles, that guides attitudes & behavior. - Each company are able to implement their own codes of conduct , which can effectively guide how they under go marketing practices. Laws: - Laws & regulatory bodies govern the conduct of individuals & businesses in order to ensure that their actions are beneficial or at least

acceptable to society. Social responsibility: - Refers to the obligation that businesses have to act in the interest of the society, which implementing practices that sustain the current an future societies. Stakeholders Individuals, organizations and other groups that have a rightful interest in the activities of a business e.g. owners, employees. MARKETING MIX: Framework describing the different elements that marketers needs to consider essential to a businesses successful implementation of a marketing plan. Product Price Promotion Place o Product, prices, promotion, place core structure of any marketing plan. o Taking a need and turning into a want successful marketing of a product o The marketing mix is a interrelated chain -that ensures the success and profitability of a product. MARKETING ENVIRONMENT: All the of internal and external forces that affect a marketers ability to create, communicate, deliver and exchange offerings of value. Internal within the company things that the business has reasonable control over. Strengths and weaknesses are internal factors that positivity affects the organizations ability to compete in market place. External outside the business marketers can only seek to influence the external environment but have no direct control of the people and behavior THUS through the marketing strategies, mix etc. they AIM to influence the external environment and there buying behavior towards the businesses desired product. The external environment faces opportunities and threats , which positively and negatively affect the organizations ability to serve the market.

Microenvironment industry level - it is not directly controllable by the organization the microenvironment consists of customers, clients, partners and competitors. Competition between microenvironment pure competition, monopolistic competition, oligopoly, monopoly, monopsony. Macro everything outside the industry customers and clients marketers must understand the current and future needs and wants of their target market totally external, beyond the businesses control e.g. interest rates. Political forces there are numerous political forces that influence our marketing decisions the political forces can be on a local, national or international level. Economic forces e.g. interest rates economic forces directly affect how much the marketing budget can be e.g.. Princes, level of savings, the level of debt. Sociocultural forces these are the forces such as beliefs, culture and behaviors that influence a buyers choice thus the company dose not have affect over these forces but must recognize them in order to cater to a certain groups of people. Demographics age, gender, race, ethnicity, educational attainment, martial status e.g. aging population marketing a supplement for the aging population as it is taking up large proportions of the overall population in Australia. Technology technology changes the expectation and behaviors of customers and clients and can have huge effects on how suppliers work. Laws/ regulations legislation has direct influence on the framework of marketing plan businesses and directors must adhere to the legislation in place for businesses. Outsourcing transferring an internal function to an external provider blurs the line between internal and external environments. SITUATIONAL ANALYSIS: SA is used to identify the key factors that will be the framework of the marketing plan. Marketing metrics: - Return on investment, - Customer satisfaction - Market share - Brand equity awareness, loyalty.

 These are ways to measure the success of the product. SWOT: Strength, Weaknesses (internal) Opportunities, Threats (External) When undergoing SWOT analysis you must remember to relate to the 4PS product, place, price, and promotion.

MARKET RESEARCH:
Learning Objectives:
Define research problem Discuss the importance of MR as a basis for marketing decision-making. Outline the issues in research design, the role of primary and secondary data, and the uses of quantitative and qualitative research Understand the key principles of data collection and analysis, and the subsequent reporting of market research findings to inform marketing decisions. Gathering and discovering information that is in in the interest of the business. Through market research, the business discovers vital information about the target market that allows the business to directly market their product to the target markets desires. - Market research needs to be relevant - Its helps solve a problem (Target market groups of customers with similar needs and wants, may share the same cultural beliefs, attitudes, needs etc.) UNDERSTAND CREATE COMMUNICATE DELIVER.

Market research is an ongoing process as things are always changing this is evident through technology, sociocultural influences etc. Through market research its helps to understand and make decisions on the following influences/ factors. o Market segmentation o Sales performance o Product o Distribution o Promotion o Pricing o Attitudes/ behaviors

MR involves 5 major components: 1. Defining the research problem 2. Designing the research methodology how we address the research problem e.g. focus groups, survey 3. Collecting data 4. Analyzing data & drawing conclusions 5. Presenting the results and making informed decisions & recommendations offering actionable solutions Key thing asking the right/ relevant questions aim of MR is to offer actionable

solutions. MR allows the business to identify trends and consumer trends. With MR you want to look into the future what might happen key reason for conduction MR. Before undertaking MR the following factors need to be considered: - Relevance - Timing - Availability of resources - Need for new information if you are small medium business and do no have a large funds directed to research secondary information e.g. ABS - can be used to find data e.g. average income in a certain area. - Cost benefit analysis.

Ethics in market research Slugging selling under the guise of research. Fugging fundraising under the guise of research

The Research problem

The research problem is a question that the market research project is intended to answer. - A clearly specified research problem ensure that the research will actually answer the question asked of It need to address exactly what is happening. - MR Brief: A set of instructions & requirements that generally states the research problem e.g. the information required, specifies the time frame, budget and other conditions of the project. Typical MR brief includes: Executive summary - Introduction Background Problem definition Time and budget Reporting schedule Appendices - Despite being a large company e.g. apple hiring an external company is extremely useful in order to get an objective view.

Research design/ Data Collection & Analysis

The detailed methodology created to guide the research project and answer the research question: Hypothesis a tentative explanation that can be tested when as a mythology is a direct question.

Research Methodology Exploratory

Info Gathers more information about a loosely defined problem

Research Descriptive Research Casual Research

focus groups, surveys is used for exploratory research. Solves a defined problem by clarifying the characteristics of certain phenomena. You have the data set. Where you are using a hypothesis you can test a hypothesis.

Other Types of DATA SETS Primary Data Data collected specifically for the cure MR project. Mining Data Processing large data sets - in doing this you can identify patterns and trends, which are not obvious or even discernible by observation this is time effective as there is so much data constantly going around this is a time effective method to collect and analyze data that would otherwise go undetected. Secondary Data Quantitative Data Qualitative Data You can utilize it without the research, cost effective, suitable for small medium businesses. Numerical data surveys are the most common quantitative research tool. Research intended to obtain rich, deep and detailed information about the attitudes and emotions that underlie the behaviors that quantities research identifies. this types of research helps to identify behavioral patterns. When studies and surveys are undertaken samples are taken as the population is to large. The sample comes from a specified demographic / population e.g. undergraduates. EQUALS Probability sampling e.g. 10/ 100 of Australian undergraduates. WITH Prob sampling every member of specified demographic has a chance of being selected. Non probability sampling only takes a certain group e.g. Sydney undergraduates dose not take a holistic approach to all undergraduates.

Sampling Probability Sampling

Non Probability sampling

WITH Non Prob sampling no way of knowing the chance of particular member of the population being selected. Survey Pilot Sampling is very expensive THUS businesses usually undertaken a survey pilot e.g. send out 50 surveys in order to see that the targeted group responds well to the survey and thus they do not waste resources and funds. DATA COLLECTION, ANALYSIS, REPORTING - Data must be collected according to the methods specified in the Research Design - This process can be conducted In house OR outsourced

Time & financial resources are limited so budgeting & scheduling need to be planned and managed to ensure that the most benefit is derived from the research investment. Process: 1. Data Analysis Filtering & organizing collected data 2. Quantitative Analysis the numerical data, is useful tool to make educated decisions. Statistics, based on one, two, or more variables show trends, patters and help to support or refute the hypothesis. 3. Qualitative analysis 4. Conclusions state what the data has shown, in terms of the original research question/ suggest courses of action. 5. Recommendations

CONSUMER BUYER BEHAVIOUR

- Phycology - Motivation - Consumer, buying behavior process In comparison to MR which sought to understand consumer, buyer behavior we seek to understand, why individuals chose certain products. Why they behave a certain way Why they have preference to particular brands e.g. iPhones Central Question: How do consumers respond to various marketing stimuli (marketing mix)? Consumer behavior Different motivations that are intrinsically linked to the marketing mix. E.g. might be price sensitive, or time sensitive.

FACTOR Situational (In the present)

INFLUENCES Why you purchase or not purchase. - Physical - Social interaction - Time Available - Purchase motivation - Consumer mood

Further Information Situational influences results in the circumstances a consumer finds themselves when making purchasing decisions. These influences can be divided into numerous components that are imperative to affecting purchase behavior: - Physical At a rugby game - Social With family VS friends - Time Running late VS time to ponder decisions. Once a marketer understands these influences they can strategically place certain things, to accommodate these situational influences. Purchase Motivation: - Social influences Having a social drink VS aiming to get drink - Mood Tense/ Time Cultural: Cultural factors includes: Tangible factors: E.g. Clothing, foods e.g. GOTHIC OR Intangible Elements: Such as Laws, religious beliefs, ethics, personable beliefs. These elements are constantly evolving and slowly shifting Which is IMPERATIVE for those studying C/B behavior as the Target Market, are slowly shifting through intangible elements which are not easily recognized. E.g. Laws, personal beliefs. VS Tangible influences, which are easily, recognized e.g. fashion trends. Influences: Subculture: Group of individuals who share common attitudes, values and behaviors that distinguish themselves them from broader culture in which they are immersed. Social Class: Similar rank, within social hierarchy it is defined by values, lifestyles, and often by indicators such as: Income, education. SOCIAL INFLUENCES Reference group: any group to which an individual looks for guidance for. Three types: - Member groups - Aspirational - Dissociative group Opinion Leader: Reference group member, who provides relevant & influential advice about specific topic of interest to group members. This links to Diffusion of Innovations. This is a theory explaining the way in which innovations are adapted. Opinion leaders

Group

Set of Characteristics that link us to a particular faction of society. TWO main SECTIONS: Cultural - Subcultural - Cultural - Social class Social - Reference - Groups - Family - Roles/ status

LEARNING THEORIES There are two main learning theories: - Behavioral Learning Theory - Cognitive Learning Theory Behavioral: Stresses the role of experience and reputation of behavior. RELEVANT In: Low cost purchases e.g. every day times, milk. Cognitive: High-end purchases thought making process = HIGH RISK The Cognitive learning theory is directly related to the decision making process. Decision Making Process: Habitual: Involving small, routine, low risk products. Limited: limited engagement, infrequently bought but familiar products. Extended: High engagement high price, high risk, and or/ infrequent, unfamiliar products. AIM: Marketers generally want habitual making process. As this dose NOT result in comparison-shopping they are just automatically picking your product. CONSUMER, DECISION, MAKING PROCESS: 1. Recognition of a need or want 2. Information search 3. Evaluation of options 4. Purchase 5. Post purchase evaluation 6. Cognitive Dissonance. Cognitive Dissonance: This occurs when consumer has second thoughts or doubts about original purchase. A marketer needs to manage cognitive dissonance if businesses fail to manage this; it acts as critical element in the success of their product. If CD occurs need to reassure the consumer has made the right decision. You want to retain customer and loyalty and repeat customers.

Business Buying Behavior

Learning objectives: - Explain the characteristics of different types of business markets - Understand the major issues involved in marketing to business customers - Discuss the characteristics of demand, in business markets - Analyze business buyer behavior and decision-making.

Business Markets: Individuals or organizations that purchase products for resale, use in the production of other products or for use in their daily business operations.

TYPES OF Business Markets:

Reseller markets e.g. retail Coles. Supplier Shelves. All the steps between the producer and the consumer are intermediaries. There are often many intermediaries within the reseller markets. Wholesaler sell to other intermediaries. Retailers DIRECT to consumers. Producer markets: Markets in which business organizations purchase products for use in the production of other products or in their daily business operations. E.g. buying raw materials, office supplys, professional services. Government markets: The market fro selling products to national (commonwealth), state (provincial) and local (municipal) governments for use in providing services for citizens. These market are subject to extensive rules and regulations which are designed to ensure that government businesses are conducted ethically and legally. Institutional markets: Usually NGOs in which non-public, not for profit organizations buy & sell products. Despite being not for profit they fundamentally have the same structure and require the same capital input to set up and run there non profit business.

Marketing to Business Customers:

Two Types for, Business to Business: High value: Businesses purchasing decisions frequently involve very large sums of money for high value products or high volume purchases. High volume e.g. Coles High Volume high volume purchases is common in the reseller market. Relationships in B-to-B market are extremely important as there are so few buyer and sellers in the B-to-B market. Price Competition & Negotiation: In the business market, price competition is intense, as price is open to negotiation based on purchase volumes B to B you have that incentive. Number of buyers & sellers: there are far fewer buyer and seller in the business market than in the consumer market. This makes long-term stable relationships crucial and can possibly give some organizations enormous market power. Formal assessment of purchase alternatives: Business customers demand extensive product information businesses use this information along with price, distributional and promotion factors to compare relative S & W of alternatives. Ongoing relationships: Close ongoing relationships provide a degree of security for both parties.

Demand for Business Products:

Ultimately it is the C (Consumer) in the overall market where the demand comes from in the reseller market. The derive demand comes from the C in the B-to-B market. B-B-C. (Overall the demand is ultimately being determined and will be affected by change in the demand from the END consumer). Derive Demand = C B B (Knock on effect) Derive demand = Demand in the business markets that is due to demand in consumer markets. Derive demand has a knock on effect at all levels of the value chain. Fluctuating Demand: Business customers make purchase decisions infrequently and based on expectations of: Long run demand resulting in demand that fluctuates more so than in customer market. Deals / purchases are done less often and infrequently in B-B market. Joint Demand: Interdepend demand for products that are used together in the production of another product. That the product is not ready unless all these components are ready at the same time for the product to be complete. In B-B market especially in manufacturing this is HUGE. Pricing & Demand: Inelastic Demand not price response / Elastic price sensitive Inelastic Demand in B-B is then passed onto consumer.

Business Buying Behavior:

Straight rebuy usually for little purchases common goods that businesses need e.g. paper reliable source of income for suppliers. Modified rebuy the purchase of a product that is similar, but not identical to one previously purchased after evaluating a small range of alternatives e.g. Windows XP to windows 7. If where B-to-B (Microsoft to UTS) have to modify and see how compatible the new windows is for C (Students). New Task Purchase: Never purchased something like this before as a business, they are required to do a lot of research. Underlying aim for a new task purchase is to increase efficiency and PROFIT. As Marketers you want to introduce something new to the market in a specific market. You want to target the business at the top e.g. fast food market you want to target McDonalds as they are one leading the market and influencing the others.

Purchasing Decisions:
They INVOLVE: - Negotiation price, supply, agreements, volumes etc. - Description meet your technical specifications - Inspection when description and specification are not enough

Sampling a sample may be inspected or analyzed for quality (receiving inspection) Buying center collective group of people that make purchase decisions in a company, larger the company, more complicated this structure gets. ROLES include: o Initiators o Users o Influencers o Decides o Buyers o Gatekeepers

Business Decision Process: - Problem recognized by initiator - Research / information search - Evaluation for options - Purchase - Post purchase evaluation Internal Environmental factors: - This helps to explain why each organizations makes different purchase decisions. In B-B purchasing need to no who to target when trying to sell your product to B. Factors Include: - Nature of organization size, location, objectives, resources - Organization structure - Individuals within the organization!! The individual buyers are KEY to when wanting to target a business to purchase your product. (B2B). External environmental factors: include macro environment PESTAL: - Political - Economic - Sociocultural - Technological - Legal forces These are not directly controllable by the organization

Markets: Segmentation, targeting & positioning

Objectives:
Explain the broad concept of market Understand the target marketing concept Identify market segmentation, variables for consumer and business markets and develop market segment profiles Select specific target markets based on evaluation of potential market

segments Understand how to effectively position an offering to a target market in relation to competitors and develop an appropriate marketing mix.

Market: A group of buyers who have the opportunity, willingness and ability to purchase a product or products. This include: - Consumer markets - Business markets o Reseller markets o Producer markets o Government markets o Institutional markets TARGET MARKETING: Markets have a variety of characteristics, with common needs and wants within these common characteristics there is the development of market segments. This refers to the subgroups within the total market that have relatively similar characteristics. Target Marketing: Refers to the approach of marketing that is based on: - Identifying - Understanding - Developing an offering for the particular segments.

Strategy
Mass Marketing Buyers have common wants, needs and demands A single product will meet the needs of the majority with an undifferentiated product. Production: Large volumes, at a low cost achieve economies of scale and capture large % of market = high profitability.

One to One marketing

Differentiated targeting strategy

Product and Market Specialization Small organizations with limited financial resources, usually adopt one of the following specialized approach to target marketing.

Provides a unique, customized offering to meet individual needs. - More restricted market higher unit costs - The one to one marketing approach forms basis of niche strategy. - Example hair dressing. - A marketing strategy that involves developing different marketing mix for each TM segment. - Market Segmentation FORMS BASIS OF TARGET MARKETING. - Production: entails high costs to achieve high profit, requires, higher retail prices high market share and strong customer loyalty. Product Market efforts are concentrated on offering a Specializatio single product range to a number of market n segments e.g. Nikon pure focus on cameras. Market Marketing efforts are focus on meeting wide Specializatio range of needs within a particular market n segment. Product Marketing efforts are concentrated on Market offering a single product to a single market specializatio segment. n

TARGET MARKETING PROCESS: The TM process is fundamental component of the marketing strategy for any organization. The process involves three main stages: 1. Segmentation Identify segmentation variables Profile market segments 2. Targeting Evaluate potential segments Select target markets 3. Positioning Determine positioning for each segment e.g. A, B, C Determine the marketing mix for each segment. STAGE Market Segmentat PROCESS Characteristics that buyers have in common and that might be closely INFO Geographic Segmentation Based on variables of geography

ion

elated to there purchasing behavior. The variables for consumer markets fall into 4 broad categories: - Demographic - Geographic - Psychographic - Behavioral

Climate, local population, market density, region, urban/ suburban/ rural footprint. Combines Demographic & geographic areas to profile a very small area e.g. suburbs.

Demographic Segmentation Based on variables, which are the vital Effective Segmentation = choosing social characteristics of the variables that are easy to measure & populations e.g., age, education and income. readily available linked closely to - These variables are the most the purchase of product in question. commonly used variables for market segmentation. Physiographic Segmentation: Based on the psychographic variables of lifestyle, motives and personality attributes. - This segmentation based on the NEED to understand not who you are but HOW you live your life. - This is reflected in hobbies or choice of entertainment. - In contrast to demographics alone this variable seeks to understand consumers by identifying their mindsets and how this is expressed in their lifestyles. Behavioral: In contras to the above variables this segment is NOT based on consumer characteristics; it is based on ACTUAL PURCHASE / and or consumption behavior. Therefore better indicator on market segments and their purchasing behavior in comparison to generalized consumer characteristics. Variables include: - Benefit expectations - Brand loyalty - Occasion - Price sensitivity - Volume usage Segmenting Business Markets (Continued from Segmentation) As a business markets are often characterized by a small number of buyers who might display a very close relationship with the seller, customized or one to one marketing is a good approach to use.

Business marketers isolate business customers by using commercial/ industrial directories that contain detailed information on companies. Effective Segmentation involves ensuring: - Measurability abstract variables can be difficult to measure - Accessibility through distribution and communication channels - Substantiality the segment must be sufficient size to allow profitability - Practicability segments are only of use if they can be identified and serviced - Stability segment stays stable & long enough for the marketing strategy to produce results. Market Segment Profile: Market Segment profile refers to the description of the typical potential customer in the market segment (i.e. the common variables shared by members of the MS and how the variables differ between segments). - Market segments must be different from each other for a distinctive offer to be created for each segment. - Otherwise this will create overlapping segments or send confusing images and messages do not want to confuse the consumer. 2. The selection of target markets MARKET resulting from a evaluation of TARGETING identified market segments. Segmentation Targeting (evaluate segments then select) Positioning. Evaluating Potential Segments: Involves analysis of sales potential, the competitive situation and cost structure. Market Potential: The total sales of a product category which all organizations in the industry are expected to sell in a period of time, assuming a specific level f marketing activity. Maximum possible sales in the total market of the product category. Sales Revenue: Total Vol of Sales X the average selling price. The total Vol of sales is determined by market share. Market Share: The proportion of the total market held by an organization. Company Sales potential: An estimate of the maximum sales revenue and market share that an organization can expect to achieve for a specific product. The potential is influenced by the market potential Level of marketing activity, and the effectiveness of orgs promotional spending. 3. POSTIONIN G Refers to way to in which the market perceives an organization, its products and its brands in relation to Organization can peruse positioning for following reasons: - How it, as whole perceived In

competing offerings. The organization must determine how offer is positioned in the mind of each of it target market segments and develop its marketing mix accordingly.

The crucial fact is how the potential buyers see the brand this requires the organization to undertake qualitative and quantitative research to obtain an accurate understanding of the position it occupies in the mid of (Look at picture) its target customers. Correlates b/w high-perceived quality and status, related to extensive personalized services. Low perceived quality and status linked to limited service and less personal.

relation to competitor. - How its brand are seen focusing on distinguishing brand attributes e.g. Between Mac Books - How the market distinguishes its offering firm those closely competitive brands. Brand positioning: A positioning strategy designed to create a market perception of a particular brand, usually based on product attributes.

When the knowledge of the optimal practicable, positioning of our brand the final step with the TM process it to determine appropriate marketing mix for each target market segment.

PRODUCT
Objectives: - Define product and understand different ways to view and analyze products - Describe the product lifecycle, new product development and the product adoption process - Outline how an organization can differentiate its product to obtain a competitive advantage - Explain how the value of branding and the major issues involve in brand management - Describe the functional and marketing roles of packaging - Explain key aspects of product management and positioning through the product life cycle. A good service or idea offered to the market for exchange. Good Tangible Service Intangible Idea concept / Philosophy Total Product Concept: Describes the CORE product Four layers: - Core basic function

Expect expected result the simple expectations/ result of the product Augmented something that you might get, however not expected this is a positive Potential things that might be in the future release however not in the present.

Once you get down to the augmented and potential product differentiation starts to come into play. Product: Product item: particular version of a product Generalize that to Product line: A set of product items that are related by characteristics, such as end use, target market, raw materials. Bigger spectrum: Product Mix: The set of all products that an organization makes available to customers. They are all a subset of one another within the product mix. Consumer Product: Those products purchased by individuals and households for their own private consumption. Types:

Shopping products e.g. washing machine Convenience products (fast moving consumer goods) e.g. milk There are substitutes of these products Specialty products e.g. Ferrari Unsought products e.g. emergency situation

Depending on the type of product the frequency of purchase behavior changes: - High involvement Low Frequency e.g. Specialty products - Low involvement High frequency e.g. convenience products Business 2 Business product Those products purchased by individuals and organizations for use in the production of other products or for use in their daily business operations.

TYPES: - Part and Materials B2B products that form part of the purchasing business products - Equipment Capital equipment and accessory equipment used in the product of the businesses products. - Supplies and services B2B products that are essential to business operations do not directly form part of the production process. PRODUCT LIFE CYCLE: Refers to the typical stages a product progresses through: - New Product Development - Introduction

New -

Growth Maturity Decline product Development: Idea generation Screening Concept Evaluation Marketing Strategy Business Analysis Here the product is killable Product Development Test marketing Commercialization

PRODUCT ADOPTION PROCESS

Awareness With the explosion of mass media, it now commonly used to create interest and buzz about products. Interest Evaluation Trial Adoption

Diffusion of Innovations This is the theory that social groups, influence the decisions that individuals make in such a way that innovations are adopted by the market in a predictable pattern over time. These are used in the PA process to gain momentum for the product. 2.5% Innovators 13.5% early adaptors 34% Early Majority 34% late majority 16% Laggards PRODUCT DIFFERENTIATION The creation of products and product attributes that distinguish one product from another, this starts to take place at the augmented and potential layer of the product. ISSUE: If you differentiate your product to much the consumer becomes confused. Which forces them to look at the price attribute of the marketing mix and purchase what eve is cheapest. This is a NEGATIVE. BRANDING The collection of logos, slogans, and design. Which is intended to create an image in customers mind, that differentiates their product from the competing market. Brand Image The set of beliefs that a consumer has regarding a particular brand. Brand Name Brand Mark Part of the brand that be spoke, including words, letters, and numbers. The part of the brand NOT made up by words, it consists of symbols or designs.

Trade Mark Brand equity Brand Loyalty Brand Metrics:

Individual Branding Family Branding Brand Extension Manufacturer Brands Private Label Brands Generic Brands Licensing Franchising

Co-Branding PACKAGING Packaging of a product can be essential to create free promotion creating awareness through people having stylish, innovative, fresh packaging. used to differentiate product. Labeling - Part of the package - Provides identifying, promotional, legal and other information. EXISTING PRODUCT EXPANSION:

A brand name/mark that has been registered secure exclusive use of brand. Added value that a brand gives to a product. Customers highly favorable attitude and purchasing behavior towards a brand. Measure the value of brands and include: - Brand assets - Stock price analysis - Replacement cost - Brand attributes - Brand loyalty A branding approach in which each product is branded separately Most popular. A branding approach that uses the same brand for several of the organizations products. E.g. Arnotts Giving an existing brand name to new product in a different category e.g. BMW making 4WD. Brands owned by producers and clearly identified with the product at the point of sale. Brands owned by resellers, such as wholesalers or retailers and not identified with the manufacturer. E.g. Home brand Products that only indicate the product category. - working off price target hose who are price sensitive look at price. The brand owner permits another party to use the brand on its product. Agreement to use an establish business model. Benefits: - Coordinated promotional activity - Reduced risks and effort. Use of two or more brand names on the same product.

Line extensions Taking existing product/ item, placing a new twist on it e.g. VB pale Ale In contrast to: Brand expansion: Where you are moving into a new product category you do this when you want to invigorate the brand. Product Modifications: Changes to the characteristics of a product that results in a product that supersedes the original. The main are: - Functionality - Quality

Aesthetics. POSITIONING Product positioning is achieved through altering the product and overall marketing mix e.g. new product, new price, new promotion.

PRICE
Understand the objectives that guide pricing strategies Analyze demand to inform the development of an appropriate pricing strategy Describe the principles of pricing based on costs Explain the role of competitive analyze in determining pricing Appreciate the issues involved in pricing for business markets Understand how to manage prices as part of the marketing mix.

Price most flexible out of all components It is the most important, out of the marketing mix. Price = value that the buyer gives in exchange for the product in a marketing transaction. It is the major determinant of sales volume. It is directly related to profitability. PRICING Price can be indicative of the true quality of the product -- > however this is not always true e.g. higher price, higher value. Buyer Benefit Satisfaction derived from the consumption or ownership of the product. Seller Benefit The revenue the sale derives. Pricing how you manage the price e.g. different pricing across different geographical locations e.g. City VS the suburbs.

When a product is regarded as homogenous the only thing you can compete on is pricing. Businesses do not want to get stuck on this.

PRICING OBJECTIVES Determining price objectives Should be: - Specific - Measurable - Actionable - Reasonable - Timetabled Profits Generated when total rev exceed total costs. Prices must exceed costs. Want Return on investment.

Objectives:

Tend to focus on the following issues. - Profitability Profit VS Profitability this is referring to the long-term price in such a way that ensures long run profitability not just a short-term profit. - Long term Prosperity - Market Share - Positioning o Prestige pricing Very important for positioning charging an artificial higher price create prestige around the product only certain sections of society can afford it. This is not driven by the forces of supply and demand they are targeting those can afford this higher artificial price. Not for Profit Pricing: - While not for profit pricing organizations do not seek to make profits they do seek a return on their activities and many charge for their products. - There OBJECTIVES INCLUDE: o Generating enough funds to sustain activities o Make products/ activities appealing to TM. o Encouraging a change in attitude or behavior among a TM. The legal Environment includes areas subject to legal restrictions: - Essential services these are regulated e.g. Monopoly monitored by Government e.g. Australia Water. - Misleading and deceptive conduct Bait and Switch (Come in for a cheap product, and switch it for more expensive product they really never intended to sell you the cheap car this is illegal. - Price Collusion When companies get together to set the prices act as a monopoly so then they set the price within the market = illegal. - Price Discrimination B2C Market this is legal Price Discrimination is not allowed in B2B market it is illegal. - Comparability and clarity of pricing. Government sometimes, intervene in markets to control prices (e.g. medical care). Trade Practices Act (Australia) and Fair Trading Act (NZ) Prohibit deceptive advertising. Selling the Pricing Method: Pricing decisions should be based on an understanding of the customer and should reflect the value of the product to the customer. - Pricing needs to consider INTERNAL AND EXTERNAL factors. - Prices need to appeal to target customers. DEMAND CONSIDERATIONS Demand = The relationship between the price of a particular product and the quantity of the product that consumers are willing to buy. Demand Based Pricing: Have to look at the pricing through each segment. This is an approach to pricing, in which prices are set based on the level of

demand within the market. SUCCESS depends on orgs ability to predict fluctuations in demand. Peoples response to different prices create segments within the market = price sensitive = elasticity. The demand schedule and demand curve: LOOK AT SLIDE Insert notes Demand Curve = the other three Ps are still embedded in However the demand curve only reflects the price in relation to quantity. When price is low with prestige products the prices go low, as it is too common. Not responding to the product/ price = inelastic this occur to needed common goods e.g. water/ toothpaste you are going to purchase it, regardless of price. Increasing price goes along the curve if the curve shifts changing other Ps. Inelastic Not really responding the product is inelastic to changes of the price within the market happens with / specialized and common goods. Elastic Very responsive to price changes Luxury goods This is very important when businesses cant cover costs generally respond through increasing prices if they Elastic they could further alienate their consumer base the right decision could be to lower the price to increase consumer base. COST CONSIDERATIONS: The cost mix include: - Fixed costs o Do not vary with changes in output - Variable Costs o Do not vary with changes in output. - Marginal Costs o Additional or one more. o Variable costs expressed in cost per extra unit of production. Shelling out money VS how much is coming in. - Shared Costs o Costs shared across products. o However this is not even., - Price Floor o Price floor Cannot go below a certain price. o A minimum price that must be charged to cover cots. o While a business may sell at a loss for a short time, it cannot maintain this approach. Low prices may generate high sales volume, but may conflict with high quality differentiated positioning. In relation to the product life cycle the price will change within different stages. Mature Stage sales and profits are beginning to decline prices will need to be lowered in order to keep sales this is when outsourcing comes into play in order to reduce manufacturing costs, allowing them to charge low price.

Price Leader o A high volume product priced NEAR cost to attract customers into the store. Where it is expected they will buy other normally priced products. o Trying to get you in. o Not making any profit not losing. - Loss Leader o High volume product priced BELOW cost to attract customers into the store, where it is expected they will buy other, normally priced, product. WHY: Because in general people buy bundles of goods thus they use these pricing strategies in order to get people into the store at the first place then attract people to other normally priced or higher priced products. E.g. leading you in with the milk as they assume you are going to buy complementary products e.g. cereal which could be priced higher then, normal with the milk being a loss leader. THEY DO this through PLACEMENT / LOCATION put it at the back of the store advertisement at the front, product at the back so they have to walk through the store. Evaluating cost structure requires a detailed understanding of relationships between price, demand and costs and the link to profits. Break Even Analysis o Need to find out before they go to produce the product that will they even make enough to cover all costs they need to do this through market research. How many do they need to sell to even break even. o An analysis designed to estimate the volume of unit sales required, to cover total costs. o Important to test price and volume sensitivity. - Contribution Margin o Different between the price and the variable cost per unit. - Marginal Analysis o An Analysis designed to determine the effect on costs and revenue when an organization produces and sells one more unit of the product. Look at Slides TYPES OF PRICING Pricing can be based upon: - Costs including profits and margins - Demand - Competition Cost Based Pricing: An approach to pricing in which a % or dollar amount is added to the cost of the product in order to determine its selling price. Can be: - Cost Plus Pricing - Mark Up Pricing -

Competition Based Pricing: An approach to pricing based on prices charged by competitors or on the likely response of competitors to the organizations prices. This is undesirable unless seller has cost advantage, which arises through: - Economies of scale as the amount of units produced increases the cost to produce each unit decrease. - Low cost production - Price competition can result in Price Volatility e.g. Petrol Retailing - Price Wars can break out as Competitors try to match low prices. This can ultimately force weaker competitors form the market. This is the worst possible scenario for businesses as businesses are cutting prices all the way to floor where costs are not being covered. - In Developed countries long term price competitors can create oligopolies. COMPETITON CONSIDERATIONS Oligopoly Where the market is dominated by a small number of large suppliers.

Look at slide, for the rest. You dont want to make pricing the fundamental way of your marketing strategy marketing of last resort. You really want to differentiate your product in terms of promotion, place, product. As you can easily change price however it is much harder for other.