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BUSINESS STUDIES> MARKETING

Students learn to:



o examine contemporary business issues to:

explain why goods and/or services are central to both marketing and
operations
examine why ethical behaviour and government regulation are important in
marketing
assess why a mix of promotional strategies is important in the marketing of
goods and services

o investigate aspects of business using hypothetical situations and actual business case
studies to:

evaluate the marketing strategies for a good or service analyse a marketing
plan for a business explain how globalisation has affected marketing
management

Students learn about:

o role of marketing

Marketing is traditionally the means by which an organization communicates to, connects with,
and engages its target audience to convey the value of and ultimately sell its products and services.

strategic role of marketing goods and service
- Strategic goal of marketing is to produce profit maximisation (working towards a maximum
difference between cost and revenue)
- Marketing can be used as a strategy to help Bs achieve their goals
- Marketing plan: document that lists activities aimed at achieving particular marketing
outcomes in in B. Provides a template for future action aimed at reaching B goals

interdependence with other key business functions
- Marketing concept: all sections of the B are involved in satisfying a customers needs and
wants whilst achieving B goals. The Bs policies, plans and operations should all be directed
towards achieving customer satisfaction
- For marketing to be effective, the marketing concept must be embraced by all employees of
the B

- production, selling, marketing approaches
- Production approach (1820s-1920s): focused Bs on the production process of goods and
services.
- Sales approach (1960s): emphasised selling because of increased competition. Involved
producing what the company could make, rather than researching what the customer
wanted, and getting salespersons to create demand.

The Marketing approach:
1. Stage one (1960s-1980s): focuses on finding out what customers want (through market
research) and then satisfying that need prior to production.
2. Stage two (1980s-present): modifications to the initial marketing approach include-
- Corporate social responsibility (CSR): growing public concern over pollution, resource
depletion customers wanting to purchase from ecologically sustainable Bs.
- Customer orientation: collecting customer info and basing production on their wants and
practices
- Striving for customer satisfaction, relationship marketing: long-term, cost-effective
relationship with individual customers

types of markets:
- market: group of individuals / organisations that need, want, are willing, have the money or
are socially and legally authorised to purchase the product or service.

Resource
- resource market: consists of those individuals or groups engaged in all types of primary
production (mining, agriculture, fishing, forestry)

Industrial
- industrial market: includes industries and Bs that purchase products to use the production
of other products or in daily operations

Intermediate
- intermediate market: consists of wholesalers and retailers who purchase finished products
to resell them to make a profit

Consumer
- consumer markets: consists of individuals who plan to use or consumer products they buy

Mass
- mass markets: the seller mass produces, mass distributes and mass promotes one product
to all buyers

Niche
- niche market: (concentrated or micro market) a narrowly selected target market segment

o influences on marketing

factors influencing customer choice :
- consumer choice (buying behaviour): decisions and actions of customers when they search
for, evaluate, select and purchase goods and services

Psychological
- psychological factors: influences within an individual that affects his or her buying
behaviour

5 main influences-
- perception: the process through which people select, organise and interpret info to create
meaning (relates to product image e.g. luxury, classy, fun, rebellious)
- motives: reason that makes an individual do something (e.g. comfort, health, safety, taste)
- attitudes: persons overall feeling about an object or activity
- personality: collection of all the behaviours and characteristics that make up that person
(e.g. style of clothing representing personality). Self-image: self-image relates to how a
person views themselves ( i.e. we reinforce who we are through our purchases
- learning: changes in a individuals behaviour caused by info and experiences

Sociocultural
- sociocultural influences: forces exerted by other people and groups that effect an
individuals buying behaviour.

4 main factors:
- Social class: persons relative rank in society based on education, income or occupation (e.g.
purchasing a Mercedes-Benz to illustrate status, luxury and financial comfort.
- Cultural and subculture: infiltrates our daily activities (e.g. clothing, food choice)
- Family and roles: influences our purchases (e.g. most women still make buying decisions
based on healthcare, laundry and food supplies)
- Peer groups: an individuals buying behaviour may change to match the rest of the groups
beliefs and attitudes (e.g. friend tells of a bad experience at shop, friend may not go there
and vice-versa)

Economic
- The economy influences a Bs capacity to compete and a customers willingness to spend
(e.g. growth or recession)

Government
- Policies directly or indirectly influence Bs activity an d customers spending habits

consumer laws :
- Governments have introduced laws to improve the protection and rights of consumers and
clarify the rights and responsibilities of Bs.

Deceptive and misleading advertising
- (e.g. fine print difficult to read, unsubstantiated claims- special offer, packaging in
comparison to amount of product)

Price discrimination
- Price discrimination: setting of different prices for a product in separate markets
- (e.g. electrity process for domestic and B users)

Implied conditions
- Consumer guarantees: comprehensive set of rights and remedies for defective goods and
services
- Implied conditions: unspoken and unwritten terms of the contract
- Acceptable quality: product is fit for purpose, acceptable in appearance, free from defects,
safe and durable.

Warranties
- Warranty: promise by the B to repair or replace faulty products
- Government legislation has made it necessary for a B to state, clearly and simply, the T&Cs
of warranty
- Refunds/exchanges are required by law if the product is faulty, doesnt match the
description or fails to do the job supposed to do.

Ethical
- B ethical criticisms for Bs include: the creation of needs through materialism, stereotypical
images of males and females, use of sex to sell products, product placement (i.e. inclusion of
advertising in entertainment e.g. can of Coca-Cola when a fridge door opens)

Truth and Accuracy
- Advertising can be false or misleading (e.g. special could be interpreted by the consumer as
being sold at a lower price, whereas the marketer claim special means different for the
ordinary or unusual). If a marketer deliberately attempts to mislead consumers, this is
unethical behaviour
- E.g. concealed facts, exaggerated claims, vague statements, invasion of privacy.

Good taste in advertising
- Some consumers may view a product as offensive, whilst others may view it an inoffensive.

Products that may damage health
- E.g. Junk food advertisements during childrens shows and on social networking sites are
criticised in a context of increasing childhood obesity

Engaging in fair competition
- Marketers can use a corporate ethical marketing policy to help ensure the B is engaging in
fair competition

Sugging
- selling under the guise of a survey raises several ethical issues incl. invasion of privacy and
depletion (although is not illegal).

o marketing process

situational analysis
SWOT
- SWOT: strengths, weakness, opportunities, threats
- Used to develop a clearer understanding of
external and internal influences

product life cycle
- At each stage of the products lifecycle a different
marketing strategy is necessary

market research
- market research: the process of systematically
collecting, recording and analysing info
concerning a specific marketing problem.

Three steps of the market research process:


establishing market objectives
- marketing objectives: realistic and measurable goals to be achieved through the marketing
plan

Three common marketing objectives:
- market share: the Bs share of the total industry sales for a particular product
- expanding the product mix: total range of products offered by a B
- maximising customer service: responding to the needs and problems of the customer

identifying target markets
Target market: group of present and potential customers a B intends to sell its products.
- primary target market: market segment at which most of the marketing resources are
directed
- secondary target market: smaller and less important
- mass marketing approach: seeks a large range of customers (e.g. one type of product with
little or no variation, one promotional program, one price and one distribution system)

Market segmentation: total market is subdivided into groups of people who share 1+ common
characteristics.
- niche market: narrowly selected target market segment.

developing marketing strategies
marketing strategies: actions undertaken to achieve the Bs marketing objectives through
marketing mix
- marketing mix: combination of the 4 Ps- product, price, promotion and place (distribution
pathways).

Implementation of the marketing plan
Implementation: the process of putting the marketing strategies into operation
- Involves daily, weekly and monthly decisions that have to be made to ensure the plan if
effective

monitoring and controlling the marketing plan
- monitoring: checking and observing the progress of the marketing plan
- controlling: involves the comparison between planned performance and actual performance
(incl. assessment of KPIs)

Developing a financial forecast
- details the sales potential and revenue forecasts (benefits) for each strategy vs. the
anticipated expenditures (costs) to determine the most appropriate course of action

Comparing actual and planned results
- sales analysis: comparing of actual sales with forecast sales to determine effectiveness of
marketing strategy
- market share analysis: evaluation of the Bs marketing strat6egies compared to its
competitors (reveals whether changes in total sales have resulted from the Bs marketing
strategies or due to an uncontrollable external factor).
- Marketing profitability analysis: method in which the B breaks down the total marketing
costs into specific marketing activities (e.g. transport, admin, advertising)

Revising the marketing strategy
Based on info gained after revising the marketing strategy, the B can:
- Modify the marketing mix (4 Ps)
- New product development
- Product deletion ( elimination of some product lines)

o marketing strategies

- extended marketing mix: people, processes and physical evidence with the four main Ps of
marketing mix

market segmentation
- segmentation variable: characteristics of individuals or groups that are used by marketing
managers to divide a total market into segments

Common variables for segmenting customer markets
Demographic Geographic Psychographic Behavioural
Age
Gender
Education
Region
Urban
Suburban
Lifestyle
Personality
Motives
Purchase occasion
Benefits sought
Loyalty
Occupation
Income
Social class
Religion
Ethnicity
Rural
City size
Climate
Landforms
Socioeconomic group
Consumer opinions and interests
Usage rate
Price sensitivity

- demographic segmentation: dividing the total market according to particular features of a
population (incl. age, sex, income, culture)
- geographic segmentation: process of dividing the total market according to geographic
locations.
- psychographic segmentation: dividing the total market according to personality
characteristics, motives, opinions, SES and lifestyle
- behavioural segmentation: dividing the total market according to the customers relation to
the product

Product/service differentiation and positioning
- product and service differentiation: process of developing and promoting differences
between the Bs products/services with those of its competitors (to increase market share)

points of differentiation:
- value for money: desire to obtain the best quality, features and performance for a given
product price
- customer service
- ethical consumerism: buying products that arent harmful to environment, animals or
society
- convenience

Product/service positioning
- product/service positioning: technique in which marketers try to create an image or identity
for a product compared with the image of competing products

products:
goods and/or services
- products: goods or services that can be offered in exchange for the purpose of satisfying a
need or want
- total product concept: tangible and intangible benefits (attributes) a product possesses

branding
- brand: name, term, symbol and/or design that identifies a specific product and
distinguishes itself from its competitors
- brand name: part of the brand that can be spoken
- trademark: signifies that the brand name or symbol is registered and the B has exclusive
right of use
- brand symbol (logo): graphic representation that identifies a B or product

Branding strategies:
- manufacturers bran (national brands): owned by a manufacturer
- private (house brand): owned by a retailer or wholesaler
- generic brands: products with no brand name

packaging
- involves the development of a container and the graphic design for a product.
- Well-designed packaging will give a positive impression of the product and encourage first
time customers

Practically, packaging:
- preserves the product
- protects the product from damage or tampering
- attracts consumers attention
- divides the product into convenient units
- assists display the product
- makes transportation and storage easier

- packaging also acts as a form of communication (e.g. Dishwashing liquid in a yellow
container is usually considered lemony)

price including pricing methods

PRICING METHODS:
Cost-based (mark-up) pricing
- derived from the cost of producing or purchasing a product and then adding a mark-up

Market-based pricing
- setting prices according to the interaction between levels of supply and demand whatever
the market is prepared to pay

Competition-based pricing
- where the price covers costs (of raw materials and the cost of operating the B) and is
comparable to the competitors price

PRICING STRATEGIES:

Bundle pricing
- customers gain a package of goods and services in addition to the tangible good they
purchased

Price Skimming
- when a B charges the highest possible price for the product during the introduction stage of
its lifecycle

Price Penetration
- when a B charges the lowest price possible for a product/service so as to achieve a large
market share

Loss leaders
- product sold at / below cost price
- the B can recover the loss on the low-price item from the sale of other items/services the
consumers buys

Price points (price lining)
- selling products only at certain predetermined prices

Price and quality interaction
Prestige (premium pricing)
- A high price is charged to give a product an aura of quality and status (perceived image)
- Expression: You get what you pay for

Promotion
- Promotion: methods used by a B to inform, persuade and remind a target market about its
products

Promotion attempts to:
- attract new customers - heightening awareness of a particular product
- increase brand loyalty - reinforcing product image
- encourage existing customers to continue purchases
- provide info so customers can make informed decisions

Elements of the promotion mix
Advertising
- Advertising: Paid, non-personal message communicated through a mass medium

- Advantage: provides Bs with the flexibility to reach an extremely large audience or focus on
a small, distinct target market segment

Six main advertising media includes:
- mass marketing: TV, radio, newspapers and magazines
- direct marketing catalogues: catalogues mailed to individual households
- telemarketing: telephone to personally contact a customer
- e-marketing: internet to deliver advertising messages
- social media advertising: online advertising using social media platforms (e.g. Facebook,
Twitter)
- billboards: large signs placed at strategic locations

personal selling
- Personal selling: activities of a sales representative directed to a customer in an attempt to
make a sale

Three main advantages of personal selling:
- message can be modified to suit individual circumstances.
- individualised assistance can create a long-term relationship resulting in repeat sales.
- sales consultant can provide after-sales customer service in relation to product features,
installation, warranties and servicing.

relationship marketing
- relationship marketing: development of long-term, cost-effective and strong rleationships
with individual customers

- Aim: create customer loyalty by meeting the needs of customers on an individual basis
thereby creating reasons to keep customers coming back

Bizfact:
- The 8020 principle says that 80 per cent of sales come from 20 per cent of a businesss
customer base. Therefore, a strong relationship with this loyal group of customers should be
developed and maintained.

sales promotions
- Sales promotion: activities / materials as direct inducements to customers

Aim:
- entice new customers
- encourage trial purchase of a new product
- increase sales to existing customers and repeat purchases.

Examples of special promotions include:
- Coupons: offer discounts of a stated amount on particular items at the time of purchase.
- Premiums: a gift that a business offers the customer in return for using the product
(e.g. a food producer may offer customers a cookbook as a premium)
- Refunds: Part of the purchase price is given back to those customers who send in a voucher
with a specific proof of purchase
- Samples: free item or container of a product
- Point-of-purchase displays: Special signs, displays and racks are supplied and installed by
the manufacturer in retail outlets. They are usually located at the end of aisles in
supermarkets to gain consumer attention and make more efficient use of floor space.

Publicity
- Publicity: free news story about a Bs products

Aims:
- enhance product image
- raise product awareness
- highlight the Bs favourable features
- help reduce any negative image that may have been created

public relations
- Public relations (PR): activities aimed at creating and maintaining favourable relations
between a B and its customers PR exposes a business or idea to an audience by using
often unpaid third parties as outlets

Main ways PR can assist in increased sales:
- Promoting a positive image: reinforcing the favourable attitudes and perceptions
consumers have regarding the businesss reputation
- Effective communication of messages: e.g. advertising, sales promotions
- Issues monitoring: protecting sales by providing an early warning of public trends that
could affect B sales
- Crisis management: protecting the Bs reputation as a result of negative / unfavourable
rumours and adverse publicity

The communication process
- Channel: any method used for carrying a message
- Noise: interference / distraction that affects any or all stages in communications process

opinion leaders
- opinion leader: person who influences others > respected opinion (e.g. actors, athletes)

word of mouth
- word of mouth communication: occurs when people influence each other during
conversations

place/distribution
distribution channels
- Channels of distribution (marketing channels): routes taken to get the product from
B>customer.

4 most commonly used channels of distribution:
1. Producer to customer
2. Producer to retailer to customer
3. Producer to wholesaler to retailer to customer
4. Producer to agent to wholesaler to retailer to customer
[Agent: distributes products to wholesalers but never owns the product > are paid a
commission by the producer > Bs without sales representatives often use an agent instead]

Innovative distribution methods
- Telemarketing
- Internet marketing

channel choice
Intensive
- Intensive distribution: when the B wishes to saturate the market with its product > the
product is available at local outlets
- (e.g. milk, lollies and newspapers)

Selective
- Selective distribution: available in a moderate proportion of all possible outlets.
- (e.g. Clothing, furniture and electrical appliances)

Exclusive
- Exclusive distribution: use of only one retail outlet for a product in a large geographic area.
- (E.g. exclusive, expensive products Audi cars)

physical distribution issues
- Physical distribution: the movement of the products themselves through their channels of
distribution (incl. transportation, warehousing and inventory control)

Transport
- Transportation: any device used to move an item from one location to another
- The four most common methods of transportation are rail, road, sea and air.

Warehousing
- Warehousing: set of activities involved in receiving, storing and dispatching goods > acts
as a central organising point for the efficient delivery of products.

Inventory
- Inventory control is a system that maintains quantities and varieties of products
appropriate for the target market.

Three additional Ps
- established due to increase in service Bs

people
- People element: quality of interaction between the customer and those within the B >
critical importance > can determine success or failure
- Consumers base their perceptions and make judgements about B based on how the
employees treat them

processes
- Processes: flow of activities that a business will follow in its delivery of a service.
- Without a tangible product, the processes must be highly efficient to achieve customer
satisfaction
- Any business that has inefficient processes will lose customers and damage its reputation

physical evidence
- Physical evidence: environment where service is delivered, including materials needed to
carry out the service (e.g. signage, brochures, calling cards, letterheads, business logo,
website)
- B should provide high-quality physical evidence to create an image of value and excellence

e-marketing
- Technology not only provides a faster, more efficient way of doing business, it can also be a
very effective way of attracting new customers.

Webpages
- web page makes use of the world wide web to convey information in the form of a
combination of text, graphics, animation and video
- powerful marketing tool

Podcasts
- Best used for marketing and advertising purposes
- Many independent podcasters sell advertising time in the same way as commercial radio
stations > effective way of reaching target market

SMS
Advantages:
- messages are delivered automatically to 1+ recipients without the need for them to dial in or
log on
- can be used to alert regular customers of any special deals on offer or notify suppliers of the
arrival of a goods shipment.

Blogs
- Allows for communication between the business and its existing and potential customers.
Advantages:
- allows B owner / employees to establish a reputation for expertise, by providing detailed
information on products and services
- can include new ideas for products and services to gain public comment and feedback
- can present a human face to the public and build trust with customers (through informality)


WEB 2.0
- transformation of the world wide web into a more creative and interactive platform for
information sharing, rather than just a means of retrieving information
- (e.g. Facebook, Twitter, Wikipedia)

Social media advertising (SMA)
Advantages:
- inexpensive compared to traditional advertising methods
- easy to use and monitor
- effectively gains exposure

Disadvantages:
- marketer does not have control over what online consumers write about B (neg/pos)
- difficult for a marketer to accurately measure the reach (number of people exposed to
message) and frequency (average number of times someone is exposed)


global marketing
global branding

Global branding: the worldwide use of a name, term, symbol or logo to identify the sellers
products.

Usage:
- It can be cost effective because one advertisement can be used in a number of locations.
- It provides a uniform worldwide image.
- The successful brand name can be linked to new products being introduced into the market.
- Global branding equates to global recognition, irrespective of the language barrier

Examples: McDonalds M symbol and Nikes swoosh (tick) is known worldwide

Standardisation

Standardised approach: assumes the way the product is used and the needs it satisfies are the
same worldwide > the marketing mix will be the same in all markets: one marketing plan fits all

Cost savings:
- Production runs can be longer = economies of scale
- R&D costs reduced
- Spare parts and after-sales service are simplified
- Promotion strategies can be standardised
- Any evaluation and modification of the plan is simpler

Examples: mobile phones, movies, cosmetics

Customisation

Customised approach (local approach): assumes the way the product is used and the needs it
satisfies are different between countries
- The marketing plan is customised according to the economic, political and sociocultural
characteristics of the target country

The middle path:
- A combination of the standardised and customised approach.
- Example: McDonalds standardised: name, logo and production methods customised:
serves beer in France and Germany, sake in Japan and noodles in the Philippines.

Global pricing

Global pricing: how Bs coordinate their pricing policy across different countries

- Price is the only element of the marketing mix that generates revenue > thus, a Bs global
pricing strategy is a major determinant of profits

Three global pricing strategies:
1. Customised: whenever consumers in different countries are charged different prices for the
same product. Example: many global businesses practise the cost-plus method to cover the
added costs of exportation, incl. transportation, taxes, warehousing and tariffs.
2. Market-customised: sets prices according to local market conditions. This strategy allows
for varying price depending on the level of demand and competition.
3. Standardised pricing: charging customers the same price for a product anywhere in the
world.
Risks of standardised pricing:
- A domestic business may undercut the standardised price
- Changes in the exchange rate may negatively impact on the exported price

Competitive positioning
Competitive positioning: how a business will differentiate its products

- Global B must clearly show how its products are better than competitors > without
differentiation it takes more time, money and effort to encourage potential customers to
purchase
- The B must strive to develop product leadership, positive customer relationships and
operational excellence through deep understanding of their dynamic environments