Marketing Foundations

UTS 2014 Marketing Foundations
Lecture 1 INTRODUCTION and the MARKETING

ENVIRONMENT
Chapter 1 Introduction to Marketing
DEFINITION OF MARKETING
Marketing is the activity, set of institutions and processes for creating,
communicating, delivering and exchanging offerings that have value for
customers, clients, partners and society at large. (American Marketing
Association AMA)
THE
The definition refers to activity, set of institutions and processes,

recognising the broad scope of marketing that it is not just a function
that exists as a marketing department within an organisation, and that
marketing is about much more than advertising.
Creating, communicating, delivering and exchanging offerings that have
value recognises that marketing must involve an exchange that benefits
both the customer who buys the product (a good, service or idea) and the
organisation that sells the product.
Customers, clients, partners and society at large recognises that
organisations need to conduct their marketing in such a way as to provide
mutual benefit, not just for the users of their products, but also for
partners in the supply chains, and that marketers must consider their
impact on society.
MARKETING EVOLUTION
Increasing importance of service-dominant logic in the progression of
marketing thinking.
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Over the past 100 years marketing has evolved through the following
stages:
Trade orientation people exchanged what they have for what they
wanted.
Production orientation (late 1800s/early 1900s) new technology +
infrastructure = firms were able to produce greater volumes of everincreasing range of products (where demand was strong). Marketers
offerings were largely determined by what could be made & what people
bought was largely determined by what was available. (Henry Ford
philosophy)
Sales orientation (1930s) which focused on increasing profits through
advertising and one-to-one selling. As competition increased, companies
could no longer rely on consumers to want + buy everything they make.
AMA definition in 1935: Marketing is the performance of business
activities that direct the flow of good and services from producers to
consumers.
Market orientation (mid to late 1900s) approach to marketing in which
businesses worked to determine what potential customers wanted and
then made products to suit. In second half of 20th century, customers had
so many products to choose from that they could not buy them all. When
they did want to buy a particular product, they could choose from many
similar items. In a new era of increased competition, firms realised that
customers would not automatically buy any devised product (essential to
respond to markets needs and wants).
Societal market orientation (2000s) is where companies implement
practices and policies that seek to minimise their negative impact on
society and maximise their positive impact. Today businesses are
increasingly faced with not only satisfying customer wants but ensuring
they are socially responsible corporate citizens. Businesses face wellinformed customers with an enormous number of competing products
vying for their attention. The market is now viewed as not just customers,
but also broader society. This is reflected in marketers consideration of
issues such as the sustainability of their products and the benefits their
products might bring to society generally.
The future of MARKETING? The most recent advancement in marketing
is the idea of service-dominant logic, which represents a shift from a
goods-dominant mentality.
Marketing inherited a model of exchange from economics, and
traditional definitions of marketing refer to the exchange of goods or
manufactured output.
Service-dominant logic focuses on intangible resources, the co-creation
of value, and relationships. Today, the dominant logic for marketing is that
service provision, rather than a traditional goods focus, is fundamental to
market exchange.
Co-creation is the process whereby consumer experiences are used to
drive organisation improvement and change, resulting in enhanced
market performance drivers for the firm (loyalty, relationships,
customer word of mouth).
Service-dominant logic embraces concepts of value-in-use and the cocreation of value, rather than the value-in-exchange and embedded-value
concepts that were characterised in more traditional marketing.
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-
Thus, instead of firms being informed to market to customers, they are

instructed to market with customers, as well as other value-creation
partners in the firms value network.
- Companies following service-dominant logic have co-created product
flavours, improved software, advertisements and marketing campaigns
with their customers.
THE MARKETING APPROACH TO BUSINESS
Marketing is an approach to business that puts the customer, client,
partner and society at the heart of all business decisions. Marketing is
used by:
- Small businesses and large multinational corporations
- Businesses selling goods and businesses selling services
- For-profit and not-for-profit organisations
- Private and public organisations, including governments
MARKETING A SCIENCE, A LEARNING PROCESS AND AN ART
Marketers need to learn what customers, clients, partners and society
want.
This is an ONGOING process as customer preferences are continually
evolving.
Customers needs and wants change with each product purchased,
magazine read, conversation had or television program watched.
Marketers must use information to maintain their understanding.
Marketers must be creative and able to develop new ideas.
Marketers are cluttered and there are many options available to
consumers.
The best marketers are able to offer something that is unique or special to
consumers.
THE MARKETING PROCESS
The marketing process is a process that involves understanding the
market to create, communicate and deliver an offering for exchange.
The marketing process is an ongoing cycle and often marketers will be
undertaking multiple tasks simultaneously.
As this cycle is ongoing, marketers need to constantly monitor and
understand their effectiveness in all aspects of this process (understand,
create, communicate and deliver).
THE MARKETING EXCHANGE THE EXCHANGE OF VALUE
o The aim of marketing is to develop mutually beneficial exchanges.
Exchange refers to the mutually beneficial transfer of offerings of value
between the buyer and seller.
o For a successful marketing EXCHANGE, the transaction must satisfy the
following conditions:
- 2 or more parties must participate, each with something of value desired
by the other party.
- All parties must benefit from the transaction
- The exchange must meet both parties expectations (e.g. quality, price)
o Exchange can occur for all different types of organisations large and
small, for-profit and not-for-profit and private and public.
o Exchange is a value-creating process because it leaves both parties
better off.
VALUE A PERCEPTION
Value is a customers overall assessment of the utility of an offering
based on perceptions of what is received and what is given.
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Value=
Quality
Benefits Expected
Value=
Price
Benefits Received
o Some marketers view this simply as a ratio between quality and price.
This is the ECONOMIC view of value.
According to this view, value is a comparison between what a customer
gets and what a customer gives; i.e. the benefits, a customer receives
from a product in relation to its price.
o Other marketers view value as unique and determined by the beneficiary.
According to this view, value is idiosyncratic, experiential, contextual and
meaning laden.
When value is viewed this way, it is not thought of in terms of one
transaction. Rather value is thought of in a way that helps to promote
customer loyalty and to consider the lifetime value of the customer/client
to the firm what does the firm offer in exchange for loyalty?
However, the quality-price ratio view is simplistic as value refers to the
total offering.
This includes all aspects, from the reputation of the organisation to how
the employees act, the features of the products, the after sales service,
quality and price.
Most companies have competitors and value is relative to the competition
as the competing offerings influence how a customer perceives value.
o Value evolves continually as it changes with each purchase, experience
and a conversation that a person has. Furthermore, value means different
things to different people.
o Value is unique for each individual. Some customers perceive value when
there is a low price while others perceive value when there is a balance
between quality and price.
It clear that then that value is a matter of individual perception (marketing
is complicated).
THE MARKET
A market is a group of customers with heterogeneous (different) needs
and wants.
Examples include geographic markets (e.g. Malaysian), product markets
(e.g. smartphone) and demographic markets (e.g. age, gender, education,
income).
- Markets can also cover different types of customers according to most
recent AMA definition; marketing is aimed at customers, clients, partners
and society at large.
- Different marketers have to market to different groups.
- The group that the marketer has to market to is the focus of all marketing
activities.
- Successful marketers are those who view their products in terms of
meeting customer needs and wants.
CUSTOMERS
Customers are those people who purchase products (goods and services)
for their own or other peoples use. While, consumers are people who use
the good or service.
- E.g. Mother purchases item but her children also uses item. Children =
consumers.
CLIENTS
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Clients refer specifically to customers of the products of not-for-profit

organisations or social marketers (i.e. those seeking to encourage social
changes).
- E.g. customers of Medicare, Centrelink, or a public hospital and viewers
of anti-drug ads.
PARTNERS
Partners are organisations or individuals who are involved in the
activities and processes for creating, communicating and delivering
offerings for exchange.
- E.g. an advertising consultant who is hired to develop marketing
communications, a supplier or raw materials or a retailer in the distribution
channel.
- Marketers need to understand how their relationship will benefit the
partner.
SOCIETY
Society is a body of individuals living as members of a community.
- Society is a highly structured system of human organisation for largescale community living that normally furnishes protection, continuity,
security and an identity for its members.
- Marketers must understand the needs of the societies in which they
operate.
- Successful marketers demonstrate an awareness of community concern
about the natural environment, responsible use of resources, sustainable
practices and social equity.
- Studies suggest that companies with CSR have higher profits + market
capitalisation.
ETHICS, CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABLE
MARKETING
For businesses, it has long been debated just where the balance should be
between profit-motivated activities and secondary purposes (e.g. creating
employment) and whether it is appropriate to consider them secondary
at all.
ETHICS
Ethics refer to a set of moral principles that guide attitudes and
behaviour.
More simply, ethical behaviour involves doing what is right.
- Ethics is subjective and depends on social, cultural and individual factors.
- Many marketing decisions involve ethical issues, in which a choice must
be made between multiple possible courses of action, which each involve
different ethical, legal, social, economic and environmental considerations.
Competing priorities are the source of many ethical dilemmas in
business.
Some of the most common that arise in marketing are truth in
advertising, the marketing of products that may be dangerous or
contribute to poor health and engaging in fair competition with rival
businesses.
Responsible businesses often implement a code of ethics or code of
conduct to help govern their actions and guide the decisions of those who
work in the business.
- The Australian Marketing Institute, a peak body representing marketers,
has developed a code of conduct to guide marketing activities.
LAW
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In addition, the way individuals and organisations conduct themselves in

society is governed by law. Most law is derived from ethics, but it is quite
possible to act unethically within the law, and to act illegally but
nonetheless ethically.
Laws (and regulatory bodies) represent societys attempt to ensure
individuals and organisations act in a way that society deems beneficial, or
at least acceptable.
In Australia, business conduct is governed by numerous laws, including,
for example, the Competition and Consumer Act (formerly the Trade
Practices Act) and the Privacy Act.
In addition, there are regulatory bodies e.g. the various STATE Offices of
Fair Trading and federally, the Australian Competition and Consumer
Commission (ACCC).
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Corporate social responsibility is simply the obligation of businesses to
act in the interests of the societies that sustain them.
This is an overarching responsibility that affects all aspects of a businesss
operations and involves all of its stakeholders, including:
Owners business must generate long-term wealth by acting profitably
+ sustainably.
Employees businesses and not-for-profit organisations provide jobs
that ensure wealth is shared among members of society, and provide
employees with reasonable working conditions.
Customers (and clients) the business must attract and retain
customers by offering products of value.
Partners business must act in such a way toward its partners that
those partners can achieve their own business aims + meet their own
corporate social responsibilities.
Government business must abide by laws and regulations.
Stakeholders are the individuals, organisations and other groups that
have a rightful interest in the activities of a business.
At the heart of CSR is a businesss obligation to act ethically, lawfully and
in the best interests of all its stakeholders, including the society in which it
operates.
Devoting resources to ensure their operations act in the interest of all
stakeholders.
Firm that meets its CSR can expect benefits from good PR/absence of
restrictive regulations.
CSR activities extend philanthropic (giving) actions to make them of
strategic benefit to the business voluntary acts benefit parts of society
AND benefit the business.
Conversely, a business that acts with disregard for its society can expect a
customer backlash and the imposition of rules to force it to comply with
societys expectations.
This is demonstrated by the ongoing public debate about (junk) food
advertising during childrens television programming.
Current regulation does not protect children from being bombarded with
ads for junk food.
Around 54% of TV food ads aired between 6am and 9pm are for unhealthy
foods.
Various organisations are, thus, lobbying governments to introduce
regulations that restrict or ban the advertising of certain types of food
during childrens television broadcasts.
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Figure The Triple Bottom Line (comprised of social, environmental and

profit considerations).
A popular way of thinking about good corporate citizenship is the Triple
Bottom Line.
- For example, the use of the earths resources, in particular the natural
environment, has emerged as a major consideration for businesses trying
to meet corporate social responsibility requirements.
A key issue faced by any manager in the 21 st century is potential for
corporate greed.
- When banks such as Commonwealth, NAB, Westpac or ANZ increase the
interest rates on home loans by more than any increase announced by the
RBA, there is usually public outcry of corporate greed.
- Accusation is generally that banks are putting profits/shareholders ahead
of customers.
SUSTAINABILITY
Sustainability is currently being widely debated as a business philosophy
that is needed to ensure our future.
Sustainable development is the development that meets the needs of
the present without compromising the ability of future generations to meet
their own needs.
- Achieving sustainable development includes strategies to reach economic
(profit), social (people) and environmental (planet) goals.
- These include factors such as a reduction in consumption (purchasing
less), changing purchasing (moving from finite energy resources to
renewable energy resources), downsizing of the products consumed (e.g.
purchasing smaller houses/cars), the reuse of materials (e.g. recycling
shopping bags into furniture) and the marketing of green products.
- Until recently, sustainability was the primary focus of a companys CSR
department. But as the global community struggles with the issues of
over-population, increasing energy demands, loss of bio-diversity and the
wide-ranging impacts of climate change, the sustainability issue is now a
priority across boundaries political, cultural and professional.
- For many companies, operating in an ethically and environmentally
responsible way is proving to be a cost-effective hit with customers.
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Sustainable marketing is the way and means for combining ecological

and economic elements through innovative products and systems.
The concept of sustainable marketing refers to the marketing
professions obligation to change marketing processes in which the
exploitation of resources, the direction of investments, the orientation of
technological development and institutional change are made consistent
with future as well as present needs.
- In practice, sustainable marketing is simply about looking at your
products, assessing how your products impact the environment, and then
taking steps to minimise those impacts.
E.g. Dell employs a variety of sustainable marketing practices,
including the use of an average of 50% recycled paper for its pushing
needs in marketing materials, and up to 90% in some cases.
- There are many ways that marketers can implement sustainable practices
e.g. printing using only environmentally friendly inks and recycled paper,
reducing the use of direct mail and increasing online communications,
creating online catalogues instead of printed catalogues, using more
virtual communications (e.g. Skype) and webinars where possible.
IMPLEMENTATION OF CSR AND SUSTAINABILITY
Requires implementation of policies, processes and a culture guided by
ethics + consideration of all stakeholders.
Business must also empower stakeholders to achieve the ideas in its
policies and processes.
- Careful though as marketers are often accused by consumer rights groups
for greenwashing.
- Greenwashing is the dissemination of questionable or potentially
misleading information by an organisation in relation to its products, in
order for the organisation and its products to be perceived as
environmentally friendly.
- The International Organisation for Standardisation (ISO) develops
guidelines for marketers describes a general evaluation and verification
methodology for self-declared environmental claims, and specific
evaluation + verification methods for selected claims in this standard.
THE MARKETING MIX
The marketing mix is a set of variables that a marketer can exercise
control over in creating an offering for exchange.
Various frameworks for the marketing mix have evolved over time:
- From the traditional 4Ps (product, price, promotion and place) to the 7Ps.
- Introduction of people (5Ps), followed by process (6Ps) then physical
evidence (7Ps).
To frame their thinking, marketers often choose to target certain types of
customers.
- Markets are heterogeneous made of up of different people with differing
needs/wants.
A target market is a group of customers with similar needs and wants.
Marketers cannot act with complete freedom in determining marketing
mix governed by costs of implementing various marketing mix options,
as well as the forces at play in the marketing environment. They are also
governed by the people in their organisation.
PRODUCT
A product is a good, service or idea offered to the market for exchange.
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A brand is a collection of symbols such as a name, logo, slogan and

design intended to create an image in the customers mind that
differentiates a product from competitors products.
Bundle of attributes are the features and functions of a product that
benefit the customer.
- In the marketing mix, the product variable is concerned with creating an
offering that anticipates and meets the needs and wants of customers.
Needs are day-to-day survival requirement: food, shelter and clothing.
Want is a desire, but not necessary for day-to-day survival.
Demand is a want that a consumer has the ability (money) to satisfy.
- Consumers choose among demands by finding the product that offers the
most value in exchange for their money.
Good is a physical (tangible) offering capable of being delivered to a
customer.
Service is an intangible offering that does not involve ownership.
PRICE
Price is the amount of money a business demands in exchange for its
offerings.
Pricing is a complex marketing decision that must take account of many
factors, including:
Production, communication and distribution costs
Required profitability
Partners requirements
Competitors prices
Customers willingness to pay
Marketers need to understand the relationship the price and quality to
understand value from a customers point of view.
WTP They need to understand what customers would like to get and
what they are prepared to give in return.
PROMOTION
Promotion describes the marketing activities that make potential
customers, partners and society aware of and attracted to the businesss
offerings.
The product might be already established, modified, new and
information or education.
Examples of promotion include advertising, loyalty schemes, product
trials, sales promotions, public relations campaigns, personal selling
efforts and online communications.
PLACE (DISTRIBUTION)
Distribution (or place) refers to the means of making the offering
available to the customer at the right time and place.
It is largely a logistics function and marketers need to understand how
logistics impact their ability to deliver a product at a time and place that
suits customer needs or wants.
The marketer must ensure products are available to the TARGET MARKET
in the right amount and at the right time while managing the costs of
making the products available.
Such costs include inventory, storage and transport.
Many businesses sell their products directly to the public but distribution,
especially for larger businesses, usually also involves partners such as
wholesalers and retailers.
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Logistics is the part of the marketing process concerned with supply and
transport.
Supply chain refers to the parties involved in providing all of the raw
materials and services that go into getting a product to the market.
PEOPLE
People refer to any person coming into contact with customers who can
affect value for customers.
PROCESSES
Process refers to the systems used to create, communicate, deliver and
exchange an offering.
PHYSICAL EVIDENCE
Physical evidence refers to the tangible cues, including the physical
environment that customers use to evaluate products, particularly
services prior to purchase.
Includes architectural design, furniture, dcor, shop fittings, colours,
background music, staff uniforms, brochures, service or delivery
vehicles and stationery.
HOW MARKETING IMPROVES BUSINESS PEFORMANCE
Firms with a market orientation perform better than firms without a market
orientation.
They have better profits, sales volumes, market share and return on
investment when compared to their competitors.
Every employee is a stakeholder in the success of their organisation.
Marketing drives economic growth; marketers play a role in stimulating
consumer demand.
Developing social change programs to influence the voluntary behaviour
of target audiences to improve the welfare of the society.
Social marketing is a process that uses commercial marketing principles
and techniques to influence target audience behaviours that will benefit
society, as well as the individual.
Chapter 2 The Marketing Environment and Market Analysis

THE MARKETING ENVIRONMENT
The marketing environment refers to all of the internal and external
forces that affect a marketers ability to create, communicate, deliver and
exchange offerings of value.
Environmental analysis is a process or analytical approach that involves
breaking the marketing environment into smaller parts in order to gain a
better understanding of it.
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INTERNAL ENVIRONMENT
The internal environment refers to the parts of the organisation, the
people and the processes used to create, communicate, deliver and
exchange offerings that have value. The internal environment is directly
controllable by the organisation.
- A thorough understanding of the internal environment ensures that
marketers understand the organisations strengths and weaknesses.
- Strengths and weaknesses are internal factors that positively and
negatively affect the organisations ability to compete in the marketplace.
The main parts of a typical organisation include:
Senior management responsible for making decisions about the
overall objectives and strategy of the organisation.
Middle management typically responsible for a department or a
geographic region.
Functional departments their aim is to make sure the objectives for
their department (e.g. marketing, HR) are aligned with the broader
organisational objectives and to manage their departments to ensure
departmental objectives are achieved.
Employees responsible for carrying out work required to meet
departmental objectives
External Vendors (outsourcing) outsource functions + roles if they can
be done more efficiently by specialist external providers. This
represents a shift of function from the internal environment to the
micro environment and thus reduces the level of control.
INTERNAL MARKETING
Internal marketing is a cultural framework and a process to achieve
strategic alignment between front-line employees and marketing.
- More specifically, internal marketing is a collection of activities, processes,
policies and procedures that treat employees as members of an internal
market who need to be informed, educated, developed and motivated in
order to serve clients more effectively.
- Thus, these satisfied employees are more likely to deliver to a customers
satisfaction.
Internal marketing is practised in three main ways.
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-
INTERNAL COMMUNICATIONS First, the primary role of internal marketers

is to manage internal communications to ensure that employees actions
are aligned with company goals.
- INTERNAL MARKET RESEARCH second, internal marketing managers use
market research to understand employees needs and demands.
- Then, they provide the training needed by employees to reach the
companys goals.
EXTERNAL ENVIRONMENT
The external environment refers to the people and processes that are
outside the organisation and cannot be directly controlled.
- Concerned with things that are outside of the organisation.
- Marketers can only seek to influence the external environment.
The process of outsourcing (transferring an internal function to an
external provider) has gone through waves of popularity over the past few
decades.
- It represents a blurring of the line between the internal and external
environment.
Opportunities and threats are EXTERNAL factors that positively and
negatively affect the organisations current and future ability to
successfully serve the market.
External environment includes the MICRO and MACRO environments.
MICRO ENVIRONMENT
The micro environment refers to the forces within an organisations
industry that affect its ability to serve its customers and clients target
markets, partners and competitors.
- Unlike the internal environment, the micro environment is not directly
controllable by firm.
- The organisation can, however, exert some influence on the customers,
clients, partners, competitors and other parties that make up its industry.
CUSTOMERS AND CLIENTS
Marketers must understand the current and future needs and wants of
their target market.
They must:
Understand what their customer(s) value now.
Be able to identify any changes in customer preferences.
Be willing and able to respond to changes.
Anticipate how needs and wants might change in the future.
Be able to influence customer preferences.
PARTNERS
Marketers need to understand their partners, how each partners
processes work and how their partnerships benefit each party. Partners
include the following:
Logistics firms logistics is the term used to describe all the
processes involved in distributing products; it includes storage and
transport.
Financiers provide financial services such as banking, loans and
insurance, and the financial systems infrastructure facilitates
electronic payment transactions with partners and customers.
Advertising agencies tend to be used by larger businesses since small
firms tend to devise their own advertisements with the help of
publication, radio station, etc.
Retailers retailers are the businesses from which customers
purchase products.
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Wholesalers wholesalers are an intermediary acting between the
producer and the retailers to provide storage and distribution
efficiencies to both.
Suppliers suppliers provide the resources that the organisation
needs to make in products. They are a crucial business partner + they
must be monitored for the continuity of supply and price.
While the word partner suggests a mutually beneficial relationship, there
are also many risks involved in working with partners and often the
balance of power can be skewed.
SUPPLIERS marketers must identify, assess, monitor and manage risks
to supplies and risks to the price of supplies.
Marketers need to know their existing + potential suppliers costs,
availability, time frames and planned innovations to determine how
they can best create value.
Also need to know + manage risks involved in their dependency on
their suppliers.
Firms need to be aware of and pre-empt any problems (e.g. labour
strikes or stock shortages) with the supply of resources they need to
ensure they can fulfil demand.
COMPETITORS
To succeed, marketers must ensure their offerings provide their target
market with greater value than their competitors offerings.
Marketers seek to understand their competitors marketing mix, sales
volumes, sales trends, market share, staffing, sales per employee and
employment trends.
Table Types of Competition
Competitive Structure
Description
Example
Pure Competition
Numerous competitors offer
Agricultural goods
undifferentiated products.
market
No buyer/seller can exercise
market power.
Monopolistic Competition Numerous competitors offer
Laptop computers
similar products, prompting
market varied
the competitors to strive to
features like
differentiate their product
packaging, price,
offering from others.
memory, processing
speed, etc.
Oligopoly
A small number of
Australian airline
competitors offer similar, but
industry (heavily
somewhat differentiated,
dominated by Qantas
products. There are
and Virgin AU).
significant barriers to new
competitors entering the
market.
Monopoly
There is only 1 supplier and
Many government
there are substantial,
services are
potentially insurmountable,
essentially monopoly
barriers to new entrants.
industries such as
road + rails
provision.
Monopsony
The market situation where
Federal government
there is only 1 buyer.
is only buyer of
submarines
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manufactured in SA.
Level of competition
Total Budget Competition
Generic Competition
Product Competition
Brand Competition
Table Levels of Competition

Description
Consumers have limited
financial resources and
therefore must make
choices about which
products to consume and
which to forgo. In these
sense, organisations are
competing against all
alternative ways the
consumer can engage in an
exchange of value.
Consumers often have
alternative ways to meet
their product needs. The
same or need can be
satisfied by quite different
products. This is known as
substitutability.
Some products are broadly
similar, but have different
benefits, features and prices
that distinguish them from
competing products.
Some products are very
similar, offering the same
benefits, features and price
to the same target market.
Example
Opportunity cost for
university students.
Bus, train and taxi

rides are quite
different but meet the
same need.
Soft drinks, water,

alcohol, coffee and
juice = all beverages.
Westpac, ANZ, CB and
NAB all offer savings
accounts with similar
interest rates, internet
banking facilities,
fees, etc. There is not
a lot to intrinsically
distinguish these
products from each
other. This is in
contrast to other
options for investing
savings, such as
shares.
THE MACRO ENVIRONMENT

The macro environment encompasses the factors outside of the industry
that influence the survival of the company; these factors are not directly
controllable by the organisation.
- In practice, the macro environment can be at any geographic level
including local, state, country or regional (e.g. Asia Pacific or the EU).
- In some cases, it is possible for marketers to INFLUENCE macroenvironmental factors.
- However, these factors will always remain beyond a marketers CONTROL.
- The macroenvironmental framework has been called the PESTEL
framework.
POLITICAL FORCES
Political forces describe the influence of politics on marketing decisions.
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Politics is directly relevant to the marketing organisation through:
Lobbying for favourable treatment at the hands of the government.
Lobbying for a light touch approach to regulation.
The very large market that the government and its bureaucracy
comprise.
The ability of political issues to affect efforts at international marketing.
- Many organisations, particularly smaller ones, monitor political issues, but
do not actively engage in politics. Larger organisations, or the bodies
created to represent smaller ones, can engage directly in politics by
seeking to influence lawmakers.
ECONOMIC FORCES
Economic forces refer to all of those factors that affect how much people
and organisations can spend and how they choose to spend it.
Components of this are income, prices, the level of savings, the level of
debt and the availability of credit.
Currency fluctuations affect the prices of exports and imports.
Interest rates have significant impact on consumer/business spending
or investment.
SOCIOCULTURAL FORCES
Sociocultural forces describe the social and cultural factors that affect
peoples attitudes, beliefs, behaviours, preferences, customs and
lifestyles.
Demographics describe statistics about a population characterised
by age, gender, race, ethnicity, educational attainment, marital status,
parental status and so on.
One of the sociocultural themes to become a key issue for the marketing
organisations over the past couple of decades is the NATURAL
ENVIRONMENT.
TECHNOLOGICAL FORCES
Technological forces refer to a broad concept based on finding better
ways to do things.
Technological change can change the expectations and behaviour of
customers + clients and can have huge effects on how suppliers work.
ENVIRONMENTAL FORCES
Environmental forces describe the environmental factors that affect
individuals, companies and societies.
Ecological/environmental aspects such as natural disasters, weather and
climate change.
Growing ecological awareness and social changes influence how firms will
operate.
Environmental factors can have more influence in certain industries, and
marketers need to be mindful of the factors likely to influence their
particular industry (e.g. tourism, farming).
LEGAL FORCES
Legal forces refer to the influence of laws and regulations on businesses
and organisations.
Laws and regulations are intimately tied to politics.
Regulations tend to deal with more minor or more specific issues than
legislation.
Laws refer to legislation enacted by elected officials.
Regulations refer to rules made under authority delegated by legislation.
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Laws and regulations govern what marketing organisations can and
cannot legally do.
Laws and regulations fall into the following categories privacy, fair
trading, consumer safety, prices, contract terms and intellectual
property
MACRO-ENVIRONMENT SUMMARY
POLITICAL political arena has a huge influence upon businesses and the
spending power of consumers. Marketers must consider:
1. The stability of the political environment.
2. Influence of government policy, laws and regulation.
3. Government trade agreements such as ASEAN.
4. Taxation and government rebate policies.
ECONOMIC marketers need to understand the economy in the short and
long terms. Marketers must consider:
1. Interest rates, economic growth (GDP) and consumer confidence.
2. Income levels, savings, credit and spending levels.
3. Level of inflation, employment and unemployment.
4. Exchange rates and balance of trade (i.e. BOGS).
SOCIOCULTURAL Social and cultural influences have a large influence on
businesses. Marketers must understand:
1. Religion, culture, subcultures, values, attitudes and beliefs.
2. Population trends including age, household size and composition,
marriage and divorce trends, places lived, ethnicity and health.
TECHNOLOGICAL is vital for competitive advantage. Marketers must
consider:
1. Whether offerings can be made more cheaply and to a better standard
of quality using new technologies.
2. Whether technology can be used to innovate.
3. Whether distribution or communication can be improved using
technology.
ENVIRONMENTAL marketers need to understand environmental
influences including ecological and environmental aspects such as
weather, climate and climate change.
Emissions Trading Scheme (ETS) and carbon tax proposals are
generally based on the theory that the price of products that generate
more carbon pollution will increase as a result of the scheme/proposal,
reducing demand; whereas carbon-friendly products will fall to be
relatively low in price, increasing demand.
LEGAL marketers need to understand legal and regulatory influences
such as:
1. Laws including the Competition and Consumer Act, the Privacy Act, the
Spam Act, The Sale of Goods Act, and the Prices Surveillance Act.
2. Regulations from industry bodies such as the Advertising Standards
Bureau.
SITUATIONAL ANALYSIS AND MARKETING PLANNING
Situation analysis is an analysis that involves identifying the key factors
that will be used as a basis for the development of marketing strategy.
Situational analysis involves assessing the current situation in order to
clearly state where the company is now.
- Situation analysis consists of company, market, environmental and
competitive analysis.
Company analysis goals, objectives, service quality, HR policies,
financial status, etc.
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Market analysis size, growth, customer segments/needs, buyer

behaviour, etc.
Environmental analysis PESTEL.
Competitive analysis major competitors, competitive positioning,
market share, etc.
Together with organisational objectives, situation analysis is used as the
platform for marketing planning, as illustrated below:
Marketing planning is an ongoing process that combines organisational

objectives and situation analyses to formulate and maintain a marketing
plan that moves the organisation from where it currently is to where it
wants to be.
MARKETING PLAN
Executive summary brief overview, outline main features, communicate
key issues.
Introduction brief details on the internal environment e.g. history,
employees, etc.
Situation analysis analysis on micro/macro environmental factors, SWOT
analysis.
Objectives Specific, Measurable, Actionable, Reasonable, Timetabled =
SMART.
Target market market segments, their characteristics and rationale for
selecting.
Marketing mix strategy the 7 Ps.
Budget budgetary requirements, available resources.
Implementation control mechanisms, milestones, etc.
Evaluation outline specific metrics used to evaluate success.
Conclusion/future recommendations brief summary, recommendations,
approval, etc.
MARKETING METRICS
Marketing metrics are the measures that are used to assess marketing
performance.
The Australian Marketing Institute offers a framework to guide marketers
choice of metrics.
- The frameworks underlying principles are that metrics should be linked to
strategy and should include, as a minimum, four key elements:
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Return on marketing investment, customer satisfaction, market share
in targeted segments and brand equity.
It is important to remember that there is no one best marketing metric. In

practice, different strategies require different metrics and marketers need
to select metrics accordingly.
- Marketers need to be able to articulate the return on investment for a host
of reasons.
1. Provide solid rationale for continued funding for successful
marketing programs.
2. ROI metrics can help marketers allocate resources where they are
most effective.
3. They can build/share a database of returns on investment that
should assist in evaluating the relative effectiveness of various
programs.
SWOT ANALYSIS
SWOT analysis is an analysis that identifies the strengths and
weaknesses and the opportunities and threats in relation to an
organisation.
Strengths are those attributes of the organisation that help it achieve its
objectives competitive advantages and core competencies.
Weaknesses are those attributes of the organisation that hinder it in
trying to achieve its objectives.
Strengths and weaknesses are internal factors, directly controllable by
the organisation.
Opportunities are factors that are potentially helpful to achieving the
organisations objectives.
o Only beneficial if the organisation responds effectively to them.
Threats are factors that are potentially harmful to the organisations
efforts to achieve its objectives.
Threats and opportunities are beyond the organisations direct control.
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A SWOT analysis helps marketers minimise the effect of weaknesses in
their business, while maximising their strengths. Ideally, marketers will
seek to match their strengths against market opportunities that result
from competitor weaknesses or voids.
Example of a SWOT analysis for a retail shop
Lecture 2 Market Research

Chapter 3 Market Research
THE ROLE OF MARKET RESEARCH IN MARKETING DECISIONS
Formally, market research is a process that links the consumer,
customer, clients, partners and public to the marketer through information
information used to identify and define marketing opportunities and
problems; generate, refine and evaluate marketing actions; monitor
marketing performance; and improve understanding of marketing as a
process.
Market research is a business activity that discovers information of use
in making marketing decisions.
Market research is an essential component of understanding the
market.
Market research is only of value if the information it provides can
contribute to improved performance.
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Market research informs many different types of decisions, including the

following:
Market segmentation, sales performance, product, distribution, promotion,
pricing and attitudes and behaviours.
MARKETING INFORMATION SYSTEMS
A marketing information system (MIS) is the structure put in place to
manage information gathered during the usual operations of the
organisation.
In addition, to specific market research projects, organisations

continuously collect data as part of everyday activities such as sales,
purchases, enquiries and accounting.
Well-organised marketing organisations systematically collect and
organise this information so that it can be used for future marketing
decisions.
An MIS and market research can help support or invalidate marketing
decisions that are based on intuition, insight and gut feel.
OVERVIEW OF THE MARKET RESEARCH PROCESS
Market research involves five major components:
1. defining the research problem
2. designing the research methodology
3. collecting data in accordance with the research design
4. analysing data and drawing conclusions
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5. presenting the results and making recommendations
Upon implementation of any market research recommendations, careful
monitoring is necessary to ensure the organisations marketing goals are
being achieved.
Market research is an ongoing process and is constantly evolving.
In practice, a market research project does not always occur in a strict
sequence.
At every stage, the effectiveness of the market research process and how
it is being conducted should be monitored and assessed, not just at the
end.
WHEN MARKET RESEARCH IS APPROPRIATE
Before understanding a market research project, the following factors
should be considered:
RELEVANCE market research must be able to address the problem at
hand.
TIMING market research is only of use if the information it generates can
be analysed ahead of the time at which the market decision needs to be
made.
AVAILABILITY OF RESOURCES depending on the type of information
needed, the market research process can consume considerable time and
money.
NEED FOR NEW INFORMATION market research should not be conducted
if the information needed is already available or the decision to be made
does not require or will not benefit from the type of information that
market research can provide.
COST-BENEFIT ANALYSIS the decision to invest in market research can
only be justified if the potential outcomes are more valuable.
ETHICS IN MARKET RESEARCH
Market researchers have an ethical responsibility to their clients or
employers and those who participate in the research (just as clients,
employers and participants have an ethical responsibility to researchers).
- The market research industry attempts to self-regulate its activities in
Australia through the Australian Market and Social Research Society
(AMSRS).
The AMSRS has a detailed code of practice in place to govern the
activities of market researchers. The main principles of the code are
shown below.
GENERAL RULES
Research must be objective, based on scientific methods, and conducted in
compliance with the law.
RESPONSIBILITIES TO RESPONDENTS
Respondents identities must not, without their consent, be revealed to
anyone not directly involved in the market research project or used for
any non-research purpose.
Nobody shall be adversely affected or harmed as a direct result of
participating in a market research study.
Respondents must be able to check without difficulty the identity and
good faith of researchers.
Respondents cooperation in a market research project is entirely
voluntary at all stages; they must not be misled when being asked for
their cooperation.
No child under 14 years shall be interviewed without responsible
adults consent.
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RESEARCHERS PROFESSIONAL RESPONSIBILITIES
Researchers must not, whether knowingly or negligently, act in any
way that could bring discredit on the market research profession or
lead to a loss of public confidence.
Researchers must always strive to design research that is cost-efficient
and of adequate quality, and then to carry this out.
Researchers must not undertake non-research activities (e.g.
telemarketing or list building) and research activities simultaneously.
DEFINING A MARKET RESEARCH PROBLEM
Before starting a market research project, it is crucial to know and able
to communicate precisely what the purpose of the research is.
The research problem refers to the question that the market research is
intended to answer.
- A clearly specified research problem will ensure that the research will
actually answer the question asked of it.
- A poorly defined research problem will lead to research that does not
generate the information required to enable the marketing organisation to
make marketing decisions.
- As the research proceeds, the original questions asked may be re-defined
as further information comes to light or new questions or issues arise.
- Once the purpose for the research is known, it is necessary to write a
market research brief to specify the information needed.
PREPARING A MARKET RESEARCH BRIEF
Market research brief is a set of instructions and requirements that
generally states the research problem and the information required, and
specifies the timeframe, budget and other conditions of the market
research project.
- The market research brief will not necessarily propose a methodology or
approach for the market research.
- Rather, it can communicate the marketers needs to the market
researcher, leaving the researcher to bring their own expertise as to how
to best obtain the information needed by the marketer. The more complex
the research project, the more important this becomes.
- The more specific the problem, the more specific the answer will be.
A typical market research brief will include the following:
Executive summary provides an overview of the research brief.
Outlines the research requirements + includes sufficient information to
enable reader to have basic understanding of proposed project. Important
in obtaining approval for research project from management and for
enabling potential researchers to determine whether the project is a
suitable one for them.
Introduction explains why research needs to be conducted and who is
proposing it.
Background details marketing problem that is currently faced,
providing all known facts and referencing related research projects that
are known to the organisation.
Problem definition effective research briefs clearly state the question
that is to be addressed, including any objectives that have been set for the
market research project. The information in the research brief is used by
researchers to design the research project.
Time and budget the amount of money the marketer is able to spend,
when the results are needed. For complex projects various milestones
specified and info on contingencies.
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Reporting schedule specifies the precise dates on which preliminary,

interim and final reports are required. May also include details about the
format of the reports.
Appendices may be included to provide additional detailed background
information to further assist the design stage for the market research
project.
KEY RESEARCH DESIGN ISSUES
The method to be used by a market researcher depends on the
information required and the information already contained within the
organisation.
Different problems require different methods.
The research design is the detailed methodology created to guide the
research project and answer the research question.
It must include a research question or hypothesis for testing + a
description of the type(s) of research to be used.
- Decline in traditional surveys and interviews.
- Challenges in using social media
- Use the method that best does the job.
TYPES OF RESEARCH
Exploratory research is research intended to gather more information
about a loosely defined problem.
Descriptive research is research used to solve a particular and welldefined problem by clarifying the characteristics of certain phenomena.
Casual research is research that assumes that a particular variable
causes a specific outcome and then, by holding everything else constant,
tests whether the variable does indeed affect that outcome.
- E.g. if Dominoes wants to determine the impact of different coupon offers
(cause) on pizza sales (effect), it needs to conduct casual research.
The degree of knowledge about the research problem at hand affects the
type and amount of research that is required.
- Exploratory research is required when management is UNCERTAIN about
what actions should be taken and has little knowledge about the research
problem.
It is used in these situations to generate ideas to help management
decide on an appropriate form of action and to increase managements
knowledge.
- When management is aware of the problem but lacks some important
piece of knowledge, descriptive research is undertaken.
- Casual research is used for sharply-defined problems.
In casual research, a hypothesis is generated for testing.
A hypothesis is a tentative explanation that can be tested.
The hypothesis is generated from existing knowledge and from
expectations about what the research project will discover for
example, a marketer expects increasing expenditure to lead to greater
brand awareness and conducts research to test this.
More complex research projects may combine approaches.
- E.g. a market research project might start with EXPLORATORY research to
identify reasons for a fall in sales that has occurred for no apparent
reason.
- After discovering possible reasons for the decline in sales, the market
research project may continue by undertaking descriptive research to
confirm which factors have contributed towards the decline in sales. An
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outcome may be that the packaging/advertising have contributed to the
decrease in sales.
- Finally, casual research may be used to test whether consumers will buy
more if the packaging is larger, and to determine which of two potential
advertising campaigns will be more effective.
TYPES OF DATA
Insights can be gained from information that is already available
secondary data. Where information is not already available or is not up to
date, marketers will need primary data.
Secondary data refers to data originally gathered or recorded for some
purpose other than to address the current market research problem.
Info may be held by the organisation (e.g. sale records, customer
profiles generated from business documents) as part of its MIS, or by
some external organisation (e.g. a market research company such as
Nielsen Company or a stats organisation like the ABS).
Government agencies, international organisations, media, market
research providers, MIS, databases and industry bodies are the most
useful sources.
Primary data refers to data collected specifically for the current market
research project.
Data observed/collected directly from respondents as part of the
current project.
- Because it already exists, secondary data is cheaper, more quickly
available and readily accessible, and often all that is required.
- Primary data only comes about through a dedicated market research
effort.
- Thus, marketers should always assess whether their research question can
use secondary before embarking on primary data collection.
- Electronic records + internet much contemporary market research now
has the potential to come from secondary sources. However, in drawing on
a secondary source, the researcher must be able to assure themselves
that the source is trustworthy.
- A technique known as data mining involves processing large data sets to
identify patterns and trends that would not be obvious or even discernible
upon observation.
- Conversely, primary data collection tends to be more time-consuming,
expensive and difficult than using secondary data.
- Also, firms can contract specialist research organisations such as Roy
Morgan or CoreData.
QUANTITATIVE RESEARCH METHODS
According to a Greenbook research industry trends report, which surveyed
over 1300 market research providers GLOBALLY, market research recently
has shifted towards QUANTITATIVE methods.
Quantitative research refers to research that collects information that
can be represented numerically.
Data that can be analysed statistically. It often collects data by asking
questions about how much/many/often usually via online, telephone,
and mail or in-person surveys.
- Generally, if you respond to the researcher by providing a number, ticking
a box, or circling an option in a list or scale, you are participating in
quantitative research.
- SURVEYS ARE THE MOST COMMON QUANTITATIVE RESEARCH TOOL.
Quantitative research is useful for:
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Assessing the market size
Identifying market segments
Predicting the success of proposed marketing campaigns
Finding out about customer perceptions of existing products
- Quantitative approaches are usually used for descriptive or casual
research.
Quantitative research methods SURVEYS
Method
Description
Major Advantages
Major
Disadvantages
Interviewer-led survey
ComputerIn-person survey
o Comparatively
o Lack of
assisted
administered by
high response
anonymity can
personal
an interviewer
rate
distort
interviews
e.g. door-to-door,
o Interviewer can
responses e.g.
(CAPI)
shopping centre
respondents
ask more
ComputerAdministered by
may be
questions based
assisted
an interviewer
reluctant to
on responses
telephone
over the
honestly
given
interviews (CATI) telephone
answer
o Props and visual
questions
aids can be used.
about sensitive
o May be the best
topics.
option for long or
o
Potential for
detailed surveys
interviewer and
o Speed
respondent
bias
o Comparatively
expensive
Self-response survey
Mail Surveys
Survey form is
o Comparatively
o Poor response
mailed to
cheap
rate easy for
potential
o May provide a lot
potential
respondents along
respondents to
of information
with instructions
ignore
o Suited to
on how to
o
Delay in
obtaining closed
complete and
receiving
responses e.g.
return the form.
responses
yes/no.
Online Surveys
Email or web(mail)
o Potential
based surveys,
o
Email surveys
anonymity can
completed and
may be
lead to less
returned online.
intercepted by
respondent bias.
Mobile Surveys
Android,
spam filters
o Wide geographic
Blackberry or
o
Poor response
reach
iPhone survey,
rate can lead
o Convenient for
completed and
to an
respondents
returned on a
unrepresentati
o Speed of
handheld device.
ve sample.
response (online
o
Mobile surveys
+ mobile).
have to be
short.
Other quantitative market research approaches are experimentation,
observation (in person or automated response/people metrics) and
biometrics.
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Other Quantitative Research Methods
Method
Description
EXPERIMENTS
OBSERVATION
Manipulation of
variables of interest
while holding
everything else
constant in a bid to
determine just what
and how particular
things affect
behaviour.
The variable of
interest is the
independent variable
& variable of
influences is the
dependent variable.
Studying peoples
behaviour and the
circumstances
surrounding it.
Major
advantages
o Allows
researchers
to establish
cause and
effect
o Tracks
actual
behaviour
(e.g. what
people do)
rather than
relying on
consumers
self-reports.
o
Measures
actual
behaviour
as opposed
to intended
or reported
behaviour.
Major
disadvantages
o The artificial
setting may not
truly reflect
real-life
settings.
o Variables other
than the one
being studied
could be
influencing the
outcome.
o
o
BIOMETRICS
Can be
expensive
Results can be
significantly
affected by the
subjectivity of
the observer.
May provide
shallow data
(e.g. it may
reveal a lot of
descriptive
information,
but little about
the motivation
or cause of
observed
behaviours)
Cannot explain
how a
consumer
thinks or what
they
remember.
The science is
still evolving.
Very expensive.
Can be
uncomfortable
for
respondents.
Determining a
o Measures
o
participants
actual
psychological
response as
response to certain
opposed to
stimuli. Examples
intended or
include heart rate,
reported
respiration
behaviour.
o
(breathing), muscle
activity, brain
o
activity (e.g.
o
neuromarketing) and
oculometric (e.g. eye
tracking) activity.
QUALITATIVE RSEARCH METHODS
Qualitative research is research intended to obtain rich, deep and
detailed information about the attitudes and emotions that underlie the
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behaviours that quantitative research identifies through techniques such
as interviews and focus groups.
- Rather than identifying numerical patterns, qualitative research aims to
get to the reasons behind behaviour.
- It provides the why that can be missing from the how much/many/often
questions.
Qualitative research is useful for:
Understanding customer needs
Evaluating potential new products
Testing promotional campaigns
Understanding customers
- Qualitative research approaches are usually used for exploratory research.
- Because they involve in-depth discussion, a skilled researcher can elicit
detailed responses from participants.
Qualitative research methods
Method
Description
Major Advantages
Major
Disadvantages
Depth
Researcher driven
o Elicits rich, deep
o Expensive
interview
with questions to
and detailed info
o Can be difficult
guide the interview. o Interviewer can
to obtain
explore responses
participants
with further
o Time-consuming
questioning to
o Difficult to use
ensure as much
for sensitive
information is
topics
gained from the
o Interviewer can
process as
bias results
possible.
o Cannot
necessarily
generalise
results to the
wider population
FOCUS
A group of
o Provides multiple
o Expensive
GROUP
respondents are
perspectives
o Can be difficult
brought together,
o Elicits rich, deep
to obtain
introduced to an
and detailed
participants
idea, concept or
information
o Time-consuming
product, and their
o Focus groups often o Group setting
interactions
give rise to
makes it difficult
observed.
responses or
to use for
issues not
sensitive topics
foreseeable in
o Researcher or
survey design
moderator can
the
bias results
researcher/mediat o Cannot
or can explore
necessarily
these issues by
generalise
asking additional
results to the
questions.
wider population
OBSERVATIO Recorded notes
o Potentially higher
o Expensive
N
describing actual
insight into actual
o Time-consuming
events.
behaviour patterns o Can be difficult
o Can be
to implement
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unobtrusive
ethically (e.g.
privacy
concerns)
In addition to deciding the appropriate method for a research project, the
market researcher must decide on the participants done through process
of SAMPLING.
SAMPLING
Population means all of the things (often people) of interest to the
researcher in the particular research project.
- It is rarely possible to conduct market research directly on the entire
population, so market researchers try to study a smaller number of
representative members of the population using a statistical principle
known as SAMPLING.
Sampling is the process of choosing members of the total population.
Sample is the group chosen for the study.
Probability sampling is a sampling approach in which every member of
the population has a known chance of being selected in the sample that
will be studied.
Results obtained can be considered to represent the entire population.
Nonprobability sampling is a sampling approach that provides no way
of knowing the chance of a particular member of the population being
chosen as part of the sample that will be studied.
Sample results obtained unlikely to be representative of the population.
Sampling error is a measure of the extent to which the results from the
sample differ from the results that would be obtained from the entire
population.
Because sampling error is directly related to the extent to which
findings from a sample can be generalised to the population of interest,
marketers must take steps to ensure that sampling error is minimised.
Sample Methods
Sample Method Type
Description
Example
Random
Probability
Each member of the If the population of
sampling
entire population to
interest is the
be studied has an
members of your
equal opportunity of marketing course,
being selected for
then a random sample
the sample.
of every 10th student
from an alphabetical
list of all students
enrolled in the course
is needed.
Stratified
Probability
The population is
Consider morning and
sampling
divided into different night classes. Morning
groups based on
= people with no
some characteristic
children and night =
(e.g. age, sex, home people with children.
state) and then from Divide into 2 groups
each of those groups and then choose a
a random sample is
sample from each.
chosen.
Stratified
sampling is used
when you expect
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there to be
variations in
characteristics
between groups
within the
population.
Quota
Non-probability Divides the
Study seeks 50 female
population into
and 50 male
groups based on a
participants. People
number of
are approached to
characteristics and
participate in the
then arbitrarily
study until the quota
chooses participants is roached.
from each group.
The findings cannot
be generalised.
Convenience
Non-probability Participants are
Fans at a cricket game
selected on the
are surveyed on their
basis of
beverage preference.
convenience. The
simplicity of this
approach makes it a
tempting option, but
the findings cannot
be generalised.
DATA COLLECTION, ANALYSIS AND REPORTING
- LEARNING OBJECTIVE Understand the key principles of data collection
and analysis, and the subsequent reporting of market research findings to
inform marketing decisions.
Data must be collected according to the methods specified in the research
design.
The whole market research process needs to be managed according to
project management principles to ensure the market research is delivered
in accordance with the research brief.
The data collection process can be conducted in-house or it can be
outsourced.
MANAGING DATA COLLECTION
Time and financial resources are limited, so budgeting and scheduling
need to be planned and managed to ensure the most benefit is derived
from the research investment.
A number of tools exist to help project managers maintain control of
projects.
1. Gantt charts are a visual representation of who is doing what and when.
2. The critical path (analysis) method involves dividing the research process
into parts, estimating the time to complete each and arranging them so
that a stage cannot proceed until all of the prerequisite parts are
complete.
Very useful for seeing the effect of a delay in one part of the project on
the overall progress of the project.
DATA ANALYSIS
Once data has been collected, it needs to be FILTERED and ORGANISED.
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Depending on how the data was collected, it may be necessary to perform
some quality control techniques to eliminate invalid data (e.g. interviewer
recorded response incorrectly or a nonsensical answer from respondent).
Once cleaned up, the results need to be analysed.
Quantitative Analysis
- To be converted into knowledge that can be used to inform decision
making, the quantitative (numerical) data that has been collected must be
analysed and understood.
- Using software such as SPSS or Excel. Statistics based on one, two or more
variables show trends and patterns, to support or refute the hypothesis.
Qualitative Analysis
- Qualitative data are usually in the form of interview transcripts, video
recordings, observation record sheets and lengthy narrative responses to
questions.
- Procedures such as reduction and coding are available to interpret and
organise qualitative data to allow meaningful conclusions to be drawn.
Researchers REDUCE qualitative data by categorising concepts and key
variables in the study according to their properties or dimensions.
CODING involves developing a series of propositions about the
relationships between key concepts identified in the study.
DRAWING CONCLUSIONS
After data analysis, conclusions must be drawn and recommendations
made.
Conclusions should state what the data has shown in terms of the original
research question.
- The set of conclusions from the data will suggest one or more courses of
action.
- The alternatives will usually be formulated by drawing on more
information than just that generated by the market research process.
REPORTING THE FINDINGS
After data is analysed and conclusions draw, the findings must be
presented in a format that will enable the marketing decision makers to
use the information.
- A written research report should include the following sections:
Cover page title of study, date of preparation, marketing org and
researcher name.
Executive summary research objectives, findings, conclusions and
recommendations.
Table of contents enabling readers to easily find areas of interest in
report.
Methodology summarising research plan, any variations from the plan
in the implementation and rationale for the approach taken.
Findings making clear how the research has been answered the
research questions. Supported by tables and graphics as required.
Statement of limitations research findings to be assessed in context
of any limitations that arose during the course of the research.
Conclusions and recommendations conclusion from findings and
recommendation of possible courses of action.
Appendices to present detailed, often technical information.
RESPONDING TO THE RESEARCH PROBLEM THE VALUE OF MARKET
RESEARCH
Market research results in decisions that take the form of marketing plans
and strategies.
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Market research begins with an issue, discovers information, results in
informed decisions about how to respond to the issue and ultimately
results in outcomes that match the marketing goals.
ASSESSING THE EFFECTIVENESS OF THE MARKET RESEARCH
The effectiveness of market research undertaken is evaluated in order to
prove a return on the investment.
The ultimate test is whether the research answers the research problem
and leads to decisions that contribute towards achieving the organisations
marketing goals.
- This will be captured by marketing metrics such as brand awareness,
customer satisfaction and product sales.
The market research process itself should also be measured for
effectiveness.
Suitable measures include whether the project was completed within
the specified budgets and timelines, the quality of information
generated, the depth of the analysis, and whether management could
make an informed decision with research findings.
Lecture 3 Consumer Behaviour

Chapter 4 Consumer Behaviour
WHAT IS CONSUMER BEHAVIOUR?
To formulate a marketing mix that best serves our potential customers, we
need to know the reasons and motivations behind the decisions
consumers make.
Consumer behaviour describes the analysis of the behaviour of
individuals and households who buy goods and services for personal
consumption.
- An understanding of consumer behaviour informs every decision made
about the marketing mix (the 4Ps or 7Ps).
- The range of possible consumer behaviours is almost limitless however,
we can identify a range of consumer decision-making behaviour along a
continuum from simple habitual decision-making behaviours at one end to
high complex extended decision-making behaviours at the other.
We know our target market, now we want to find out:
- Why they behave in a certain way.
- Why they have preference for particular brands.
The central question is:
- How do consumers respond to the various marketing stimuli the marketing
organisation might use?
Question to ask about CB?
When consumers express interest in buying a product there are a
number of questions we might ask.
- Why?
- What is the person really seeking?
- What needs is he or she trying to satisfy?
A person has many needs at any given time.
INFLUENCES ON CONSUMER BEHAVIOUR
These influences may be:
Specific to a situation in which the consumer finds themselves.
Related to group (social or cultural) factors.
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-
Unique to the individual.

Refer to the figure below for a summary of key influences.
SITUATIONAL INFLUENCES
Situational influences are simply the circumstances a consumer finds
themselves in when they are making purchasing decisions and/or
consuming the product.
- The principal situational influences may be classified as:
Physical location characteristics of location in which purchase
decision is made.
Social interaction interactions with others at time which purchase
decision is made.
Time available for a purchase decision
Motivational the reasons for purchase
Consumer mood the mood of a person at the time of the purchase
decision.
GROUP FACTORS
Group influences comprise SOCIAL FACTORS and CULTURAL FACTORS.
CULTURAL FACTORS
Cultural factors are those influences on behaviours that operate at the
level of the whole society or of major groups within society.
The study of human behaviour at the cultural level has traditionally
been the focus of sociology + anthropology, and a no. of key concepts
used by marketers and behavioural researchers were originally
discovered and studied by sociologists/anthropologists.
CULTURE
Culture is the system of knowledge, beliefs, values, rituals and artifacts
by which a society or other large group defines itself.
Culture is multi-dimensional and includes both tangible and intangible
elements.
Tangible elements include housing, technology, clothing, food and
artworks.
Intangible elements include laws, beliefs, customs, education and
institutions.
Hofstede, in his original landmark studies, found that national cultures
could be distinguished by variations across four core dimensions that he
described as follows:
Power distance is the degree of inequality among people that is
acceptable within a culture.
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Western societies tend to score low on power distance, reflecting
egalitarian culture, while Asian societies score high, reflecting greater
extent of social inequality.
Uncertainty avoidance is the extent to which people in a culture feel
threatened by uncertainty and rely on mechanisms to reduce it.
Individualism is the extent to which people focus on their own goals over
those of the group.
Western societies are generally individualistic, Asian ones are more
collectivist.
Masculinity is the extent to which traditionally masculine values (e.g.
assertiveness, status and success) are valued over traditionally feminine
values (e.g. solidarity, quality of life) within a culture in Hofstedes cultural
dimensions.
AU, NZ and UK = more masculine cultures, while Scandinavian +
Thailand = feminine.
Follow-up research in Asia identified a fifth dimension long-term
orientation and more recently, Hofstede and Minkov have added a sixth
dimension indulgence versus restraint.
Long-term orientation is the extent to which a pragmatic, long-term
orientation is valued over a short-term focus.
Indulgence is the extent to which a relatively free gratification of basic
and natural human drives related to enjoying life and having fun is
allowed.
Restraint is the extent to which gratification of needs is supressed and
regulated by means of strict social norms.
SUBCULTURES
Subculture refers to groups of individuals whose members share
common attitudes, values and behaviours that distinguish them from the
broader culture in which they are immersed.
Subcultures are usually identified based on differences in key
demographic characteristics such as age, ethnicity, geographic location
or religious affiliation.
Multiculturalism is the existence of diverse cultures within a society.
- Subcultures are important to marketers when their shopping and
purchasing behaviour are significantly different from the remainder of the
population, and they represent a distinct and commercially significant
marketing opportunity.
SOCIAL CLASS
Social class is a group comprising individuals of similar rank within the
social hierarchy.
An individuals social class is defined by values and lifestyles, and often
by indicators such as income, occupation and education.
- In AU and NZ, some aspects of consumer behaviour can be attributed to
social class, but often those behaviours are better attributed to more
specific underlying indicators of social class.
E.g. marketers would often be better served paying attention to the
economic indicators of purchasing power such as income and perhaps
occupation or educational background.
- For this reason, socioeconomic status can often be a useful concept for
marketers studying consumer behaviour, where the primary focus is on
purchasing power.
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Conversely, social marketers often need to understand the behaviour of
people at lower levels of socioeconomic status as this has been
identified as a reliable predictor of individuals or groups who engage in
high risk behaviour such as crime or gambling.
SOCIAL FACTORS
Is focused on understanding how the group influences the behaviour of its
individual members, typically through group pressures on the individual to
conform with group norms.
A reference group is any group to which an individual looks for guidance
as to what are appropriate values, attitudes or behaviours.
The influence of reference groups is particularly strong when the
individual lacks previous experience as a guide for behaviour, and
where that behaviour carries a level of social risk.
Social risk is the belief by a consumer that a particular choice of product
may have potentially negative social consequences.
- Three major types of reference groups have been identified:
Membership reference groups are the groups to which the individual
belongs.
Individuals will commonly identify strongly with membership reference
groups and take on the values, attitudes and behaviours that define
members of the group.
For example, most individuals will seek to confirm to the expectations
of their employer or professional group.
Aspirational reference groups are groups to which the individual would
like to belong.
In these circumstances, the individual is likely to mimic the values,
attitudes and behaviours of the aspirational group.
Such groups can therefore become important role models and
marketers may seek to have their products adopted by members of
aspirational groups, especially where the product is new and socially
conspicuous, such as fashion or cars.
Dissociative reference groups are groups with which the individual
does not wish to be associated or which the individual may wish to leave.
- A reference group can therefore help the individual in their purchase
behaviour through suggesting information sources, the range of product
alternatives and appropriate ways of evaluating and choosing between
alternative products.
An opinion leader is a reference group member who provides relevant
and influential advice about a specific topic of interest to group members.
In a marketing context, opinion leaders often influence group members
in relation to appropriate purchases of products.
Marketers will often attempt to identify opinion leaders and to influence
them in their product attitudes and purchase behaviour.
- New products take time to develop popularity in the market. The way in
which innovations are adopted can be described by the theory of
diffusion of innovations.
Innovators introduce innovations, early adopters including opinion
leaders then drive adoption by the early majority, before it reaches
the late majority and the laggards.
There may be nonadopters.
- Diffusion of innovations process is primarily driven by social networks and
communications.
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Because the role of the opinion leader is so important, the model
suggests the existence and logic of a two-step flow of communication
in which information can be directed to or focussed on the opinion
leader who will communicate it to the broader population.
For most people, the social group with the most influence over their
behaviour is FAMILY.
- From a marketing perspective, the nuclear family parents and siblings
teach the individual appropriate behaviours relating to purchasing and
consuming products.
The family life cycle is a series of characteristic stages through which
most families pass.
Stage
Description
Example of marketing
consequences
Young Singles
Single person living apart Important target market for
from parents.
home furnishings, cars and
entertainment products.
Young marrieds
Young married couple
Target market for new house
without children
construction, functional
furniture and whitegoods.
Parenthood
A married couple with
Heavy consumers of household
children at home.
products such as detergents,
food and pharmaceuticals.
Post-parenthood
An old married couple
Important buyers of luxury
with no children at home. goods, packaged tours,
investment products and health
care products.
Dissolution
A single surviving spouse. Buyers with a focus on health,
physical security and
continuing financial
independence.
While family roles are changing, family consumption decisions can still
largely be categorised into four types:
- Autonomic decisions most household products are typically purchased by
either the husband OR wife.
- Wife-dominant decisions although role of women has changed in recent
decades, women still make the majority of household purchasing decisions
related to food, health care, laundry and bathroom products, childrens
clothing and kitchen products.
- Husband-dominant decisions a small range of products are traditionally
purchased by men, including hardware and garage products.
- Syncratic decisions some products are purchased by husband AND wife
acting jointly. Typically such decisions would be the major household
purchasing decisions.
Phenomenon of pester power can be a powerful influence on family
consumption decisions.
Pester power is the influence of children on their parents purchasing
decisions.
ROLES AND STATUS
Each individual in a society plays a number of roles, each of which entails
a complex set of expectations parent, child, neighbour, employee,
employer, customer, friend, etc.
The influence of individuals within the decision-making social group will
frequently be based on the perceived status of the individual, which
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reflects the position occupied by an individual in a notional hierarchy of
group members.
Such status can be based on a range of criteria, including formal role,
age, length of group membership, technical competence, access to
resources or social popularity.
INDIVIDUAL FACTORS
Individual factors refer to the personal and psychological factors that
influence consumer behaviour independently of social circumstances.
PERSONAL CHARACTERISTICS
Personal characteristics refer to the demographic, lifestyle and
personality factors that influence consumer behaviour.
These personal characteristics, in some ways, constitute an individuals
identity and, in this sense, are objective and relatively stable in the short
term (although they will inevitably change as the individual ages and
develops).
This short-term stability is attractive to marketers in that these
characteristics are relatively easy to observe and measure.
DEMOGRAPHICS
Demographic factors are the vital and social characteristics of
populations, such as age, education and income.
They describe the general make-up of the population in terms of
existing objective, measurable characteristics that are either assumed
or demonstrated to be related to the purchase or consumption of the
products. E.g. occupation
In a strict sense, demographic characteristics do not cause shopping or
choice behaviour (since the individual will always have free will +
choices), but rather they vary systemically and predictably with the
observed behaviour.
LIFESTYLE
Persons lifestyle is defined by how they spend their time and how they
interact with others.
- There may be a significant difference between an individuals actual
lifestyle and their preferred lifestyle.
- Lifestyle is typically measured through a lengthy series of questions, the
outcome of which is frequently used in psychographic (or lifestyle-based)
market segmentation.
PERSONALITY
Personality refers to the set of unique psychological characteristics and
behavioural tendencies that characterise an individual, formed through a
complex combination of genetics and experiences.
Perhaps the most distinctive characteristic that defines an individuals
behaviour, yet it is notoriously difficult to measure reliably.
Marketers are interested in understanding those aspects of personality
that are linked to an individuals purchasing behaviour.
PSYCHOLOGICAL CHARACTERISTICS
Psychological characteristics refer to the internal factors, independent
of situational and social circumstances, which shape the thinking,
aspirations, expectations and behaviours of the individual.
MOTIVATION
Motivation is an individuals internal drive to satisfy unfulfilled needs or
achieve goals.
Motivation is often made up of individual motives.
A motive is specific to a particular drive, such as hunger.
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While motivation is often specific to the individual and situation, some

motives are consistent over time and across the population. E.g. most eat
breakfast in the morning.
Understanding motives presents an opportunity for marketers who wish to
promote consumption of their products and brands, and also to social
marketers, who are interested in discouraging consumption.
Maslows hierarchy of needs is a theory of motivation that suggests
that people seek to satisfy needs according to a hierarchy that places
lower order needs before higher order needs.
1. Lower order, physiological, needs are the most basic: food, water, shelter,
clothing, sleep and sex.
2. The need for physical and emotional safety and security.
3. Social needs such as the desire for love, affection and belonging.
4. Ego or esteem needs which relate to self-esteem and the individuals need
to be recognised and respected by others. E.g. owning a prestige car.
5. Self-actualisation needs refer to an individuals need for self-improvement,
achievement, fulfilment and success.
PERCEPTION
Perception is the psychological process that filters, organises and
attributes meaning to external stimuli.
- The first stage of the process of perception filtering enables the
individual to deal with only those inputs that are relevant to their
particular needs and circumstances.
- In this sense, perception is selective and can result in the following:
Selective exposure the tendency to actively seek out messages
with which the audience already agrees or those that are pleasant and
to avoid messages that are threatening or disagreeable.
Selective attention the process by which an individual chooses to
take in only those messages which are relevant to their needs. E.g.
particular brands, price, etc.
Selective distortion an individuals tendency to perceive messages
that are inconsistent with existing beliefs or attitudes in such a way as
to reduce the inconsistency.
Selective retention the tendency to remember only that
information which is consistent with other beliefs and which is relevant
to an individuals needs.
- The ultimate outcome of the perceptual process is the assigning of
meaning.
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Individuals strive for cognitive consistency, so messages that are
unexpected or with which the individual disagrees are likely to be
distorted or disregarded.
Two people might act differently in the same situation.
This may be caused by differing perception of the situation
Big Mac meal with carrots perceived as less calories than just Big Mac
meal alone i.e. adding a healthy element to an unhealthy meal will make
people perceive the meal as less calories. (SciAm, Dec 2010)
BELIEFS AND ATTITUDES
Beliefs comprise descriptive or evaluative thoughts that an individual
holds regarding their knowledge or assessment of a person, idea, product
and so on. Beliefs may be based on objective knowledge, opinions or faith.
When they involve a judgemental or emotional component, they can
form the basis of a strong brand image.
An attitude describes an individuals relatively stable and consistent
thoughts, feelings and behavioural intentions towards an object or idea.
- Attitudes, along with beliefs, therefore form the background against which
new products or ideas are evaluated.
- Attitudes clearly relate to reputation, brand image and brand equity and
negative attitudes can destroy reputation, brand image and brand equity,
especially through negative word-of-mouth.
Attitudes and beliefs also display inertia they do change, but usually only
gradually.
- They also exist as, and within, a gestalt (i.e. as a sum total or
configuration), and it is natural for individuals to strive for consistency in
the pattern of their attitudes and beliefs.
- Brand Loyalty is a particular, and important, manifestation of this
generalised psychological tendency.
Three components that make up an attitude are:
1. The cognitive component, which comprises the persons awareness of
knowledge about the object or issue.
2. Affective component, which refers to feelings towards, or approval of,
the object or issue.
3. The behavioural component, which reflects the individuals actions or
intentions towards the object or issue.
Tracking studies ask the same set of questions regularly over an extended
period, enabling organisations to measure long-term changes in consumer
attitudes and to benchmark these attitudes against competitors.
LEARNING
Learning is the process by which individuals acquire new knowledge and
expertise that they can apply to future problems, opportunities and
behaviour.
In the context of consumer behaviour, learning relates to acquiring
knowledge about new products, ideas or problems that have some
potential application to fulfilling a need or want.
Behavioural learning theories stress the role of experience and
repetition of behaviour. At the simplest level, classical conditioning,
originally identified by Russian physiologist Ivan Pavlov, describes learning
in which behaviour that results in a pleasant experience is likely to be
repeated.
Classical conditioning is most relevant in low-involvement purchases
that is, where the product is relatively unimportant to the consumer
and the cost of being wrong is equally minimal. In behaviour learning,
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consumers learn from experience, frequently with very little deliberate
thought or reflection.
Cognitive learning theories describe learning that takes place through
rational problem solving, and that emphasises the acquisition and
processing of new information.
The emphasis is on reasoning (rather than experience), and so decision
making is likely to be protracted, deliberate, rational and well-informed.
Cognitive learning is generally more relevant in high-involvement
purchasing decisions, which are typically for high-cost, important and
infrequent purchases that involve significant levels of uncertainty and
risk for the consumer in the event of making a wrong decision.
CONSUMER INVOLVEMENT AND THE DECISION-MAKING PROCESS
The consumer decision-making process is the process of need/want
recognition, information search, evaluation of options, purchase and postpurchase evaluation that are common to most consumer buying decisions.
Involvement is the level of engagement undertaken by a consumer
when considering perceived consequences of a purchase.
Habitual decision making are low-involvement purchasing decisions,
usually involving small, routine, low-risk products.
Consumer minimises search and shopping efforts for routine + habitual
purchases.
Limited decision making are limited-involvement purchasing decisions,
usually involving infrequently bought, but familiar, products.
Extended decision making are high-involvement purchasing decisions
involving high-price, high-risk and/or infrequent, unfamiliar products.
In such purchases, consumers will seek to gather comprehensive
information concerning the nature of their or want, the product
category, the available brands, their relative merits and the specific
details of the purchase.
Impulse purchases are made with very little involvement and, arguably,
no planning or even forethought. In such instances, the purchase decision
is taken before the buyer has even recognised a need.
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Need/Want Recognition
Need/want recognition typically occurs when a buyer becomes aware of
a discrepancy between a desired state and the actual state.
- Often, an individual will become aware of an unsatisfactory state of affairs
such as poor physical or emotional wellbeing.
Information Search
- After the recognition, the buyer searches for information about how to
solve the problem.
Typically, an information search will begin with the individual examining
their knowledge and memory for appropriate solutions.
Once this first stage has been done, decision makers look externally for
more information.
Evaluation of Options
A successful information search will usually yield a range of alternative
solutions for consideration.
From the range of evaluative criteria, the potential buyer rates and
eventually ranks the alternative solutions.
Purchase
In the purchase stage, the particular product and specific brand are
chosen.
It is important to recognise that the purchasing decision may, in fact, be to
not purchase.
Post-Purchase Evaluation
After the purchase, the buyer continues to evaluate their purchase
decision.
- In fact, once the purchase decision is made, the consumer is in a much
better position to evaluate their choice and so they will continue to assess
whether the product matched their expectations.
Cognitive dissonance refers to a purchasers second thoughts or doubts
about the wisdom of a purchase they have made.
- For example, a computer purchased today was $500 then 2 days later, it
was $350. Regrets?
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Lecture 4 Business Buying Behaviour
Chapter 5 Business Buying Behaviour
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
Analyse business buyer behaviour and decision making.
BUSINESS MARKETS
Business markets are made up of the individuals or organisations that
purchase products for resale, use in the production of other products, or
for use in their daily business operations.
- The overall business market comprises four major categories:
1) Reseller markets
2) Producer markets
3) Government markets
4) Institutional markets
Reseller Markets
Reseller markets are the market of retailers, wholesalers and other
intermediaries that buy products in order to sell or lease them to another
party for profit.
Generally, the reseller does not make any substantial change to the
products.
- The distribution of products usually involves various marketing
intermediaries:
Wholesalers purchase products from suppliers and producers for resale
to other intermediaries, including retailers (and sometimes directly to
organisational buyers and consumers).
Industrial distributors purchase products from producers and sell them
on to organisational buyers (retailers, producers, governments and
institutions).
Retailers purchase products from suppliers, manufacturers or other
intermediaries (including wholesalers and distributors) for resale to
consumers.
- Resellers and producers share a common interest in developing successful
partnership arrangements in which both parties sales and profit
objectives can be met.
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-
Purchasing, or procurement, is a crucial role in resellers businesses.

Procurement role is becoming increasingly specialised as resellers
source more and more supplies from offshore, leading to establishment
of so-called e-procurement specialists.
- On the demand side, resellers estimate the level of demand for a product
in order to determine whether to deal in it, the likely volume and the
appropriate resale price.
Producer Markers
Producer markets (also known as industrial markets) are the markets
in which business organisations and professionals purchase products for
use in the production of other products or in their daily business
operations.
The following are all examples of transactions that take place in the
producer markets:
- Buying raw materials to make other products.
- Buying component parts to include in other products.
- Buying finished and semi-finished items to produce other products.
- Buying professional services to aid the production of other products.
- Buying office supplies to use in daily operations.
Government Markets
Government markets refer to the market for selling products to national
(Commonwealth), state (provincial) and local (municipal) governments for
use in providing services for citizens.
- Because governments have such an enormous responsibility for the
wellbeing of their citizens, government markets are subject to extensive
rules + regulations designed to ensure that government business is
conducted legally and ethically.
- In particular, government purchases are closely monitored by government
financial authorities, which are formally responsible for ensuring
transparency and contestability so that the government achieves the best
value for the taxpayer.
- Because of the time, cost and uncertainty involved in government tenders,
many companies are reluctant to do business with government, regardless
of the potential sales revenues.
Institutional Markets
Institutional markets are the business markets in which non-public, nonfor-profit organisations buy and sell products.
- They compete with other community service organisations for market
share and share of mind (just like any business).
- However, not-for-profit organisations typically have different goals and
fewer resources than commercial organisations.
- They often rely on volunteer members, public donations and bequests.
- Many such organisations are increasingly used by government to deliver
frontline welfare services, usually as a result of competitive tendering
processes.
MARKETING TO BUSINESS CUSTOMERS
High-value/High-volume Purchases
Business purchasing decisions frequently involve very large sums of
money (potentially billions of dollars) for high-value products or highvolume purchases.
High-value products are relatively common in the producer, government
and institutional business markets.
High-volume purchases are common in the reseller market.
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For example, because of the total value of their purchases, resellers
such as supermarkets can negotiate significant volume discount on
prices.
High-volume purchases are also relatively common in the producer
market.
Price Competition and Negotiation
Prices directly affect business costs and, ultimately, profitability. In the
business market, price competition will be intense and sellers profit
margins will be minimal.
Price is often much more open to negotiation than in consumer markets,
particularly based on purchase volumes.
Beyond the initial purchase price, business purchasers consider other
factors related to the lifetime cost of the purchase, including service costs,
running costs, consumables and depreciation.
Number of Buyers and Sellers
There are far fewer buyers and sellers in business markets than in
consumer markets.
The smaller number of buyers + sellers makes long-term and stable
relationships crucial.
The smaller number of players can also give some organisations enormous
market power.
Another consequence of the smaller number of buyers + sellers is that
business markets tend to be concentrated in major centres such as
Sydney, Melbourne and Auckland.
Formal Assessment of Purchase Alternatives
Business customers often demand extensive and detailed information
about product features and specifications to ensure that the products fully
meet the organisations needs.
Firms use this information, along with price, distribution, and promotional
factors to more thoroughly and formally compare the relative strengths
and weaknesses of alternatives.
It is common in business markets for discussions and negotiations
between buyers & sellers to take place over an extended period of time
and to involve considerable marketing effort.
Ongoing Relationships
Organisational buyers and their suppliers often seek to develop very close
and ongoing relationships. In some cases, this develops into a formal
partnership or joint venture.
To ensure ongoing quality of products in long-standing purchasing
arrangements, buyers and sellers often establish statements of minimum
levels of performance, particularly in relation to high-volume and highvalue purchases.
Long-term supply agreements are often best incorporated into preferred
supplier and preferred customer arrangements that offer a degree of
certainty to both parties.
- Business buyers place especially high importance on the ongoing service
they receive from suppliers. As in consumer markets, service often
involves a warranty.
- There are often numerous additional aspects of after sales service in
business markets:
Transport, JIT delivery, returns, repairs, technical help desk support and
dedicated account and relationship managers.
Demand Characteristics
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Because any particular product a business purchases is usually just one of
many, businesses tend not to adjust their consumption of it in relation to
price changes.
Rather they pass the cost on to their customers, or, over time, seek to
identify substitute products.
In business markets, demand is much more likely to be affected as a
consequence of some change in demand of the buyers products.
CHARACTERISTICS OF BUSINESS DEMAND
DERIVED DEMAND
Derived demand refers to the demand in business markets that is due to
demand in consumer markets.
- Derived demand has a knock-on (or even snowball) effect at all levels of
the value chain.
- E.g. micro-processor manufacturers = dependent on demand in computer
consumer market.
Demand Fluctuations
Business products are prone to fluctuating demand much more so than
products in consumer markets.
Business customers usually make purchase decisions based on
expectations of long-run demand. When combined with the long economic
life of products and the volatility of demand, this results in purchase
decisions occurring infrequently, and also being subject to reversal or
deferment.
Business customers make purchase decisions infrequently and based on
expectations of longrun demand, resulting in demand that fluctuates
more so than in consumer markets.
JOINT DEMAND
Joint demand refers to the interdependent demand for products that are
used together in the production of another product.
- Business buyers usually make purchasing decisions based on the total
purchasing and running costs + benefits, rather than evaluating the
individual items.
PRICING AND DEMAND
Inelastic demand is the demand that is relatively independent of price, a
common characteristic of demand within industries in business markets.
Inelastic demand is an economic concept that describes demand that is
relatively insensitive to changes in price.
A large change in price will result in only a small change in demand.
- Generally speaking, industry demand tends to be price inelastic in
business markets, while company demand can be highly elastic.
BUSINESS BUYING BEHAVIOUR
Business purchases usually take the form of a straight rebuy, a modified
rebuy or a new task purchase.
The form depends on the businesss purpose for the purchase and reflects
the level of involvement the business has with the purchase decision.
This level of involvement is also reflected in the buying approach the
business takes, which may involve some or all of negotiation, description,
inspection or sampling.
A straight rebuy is the low-engagement purchase of the same products
as previously purchased from established vendors under established
terms.
- Typical of the majority of business purchases (routine) often through an
automated or semi-automated ordering system.
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Businesses generally want straight rebuys to be efficient and
convenient.
For suppliers, straight rebuys can offer a relatively reliable source of
income, provided they offer that convenience and efficiency.
- Straight rebuys occur when a firm has found a satisfactory product + its
needs are stable.
Modified rebuy is the purchase of a product that is similar, but not
identical, to one a business has previously purchased, after evaluating a
small range of alternatives.
New task purchase is a first purchase in a product category in response
to a new problem, process or product.
- The business will need to engage in an extended information search to
develop an understanding of technical alternatives, product specifications,
possible vendors and likely price, including consumables and servicing
arrangements.
Typically, business purchasing decisions involve one or more of the
following:
1. Negotiation business purchases that involve large volumes of products,
high-value products, infrequently purchased products or custom-built
products are often subject to extensive negotiation between the buyer and
the seller.
2. Description some products can be described by a set of technical
specifications and, given a level of trust between the buyer and seller, this
may be sufficient to form the basis of a business purchase.
3. Inspection some products do not lend themselves to description or
specification.
4. Sampling for high-volume, standardised purchases a sample of the
product may be inspected or analysed. The sample is taken to be
representative of the quality of the product. This method is most
appropriate for bulk purchases of commodities.
The Organisational Buyer
In most organisations, important business decisions are made by groups or
must be approved by a number of levels in the organisational hierarchy.
Buying centre refers to the groups and structures within an organisation
that make business buying decisions.
- The various roles undertaken by members of the buying centre are as
follows:
Initiators are those who recognise the need for the purchase.
Users are those for whom the product is being purchased.
Influencers are those who develop the product specification and who
are responsible for formally evaluating alternatives. They are often
technical experts.
Deciders are those with the authority to make the final decision to
purchase.
Buyers are those in the organisation that ultimately make the
purchase. They in collaboration with the other members of the buying
centre choose between suppliers, deal with the seller, and negotiate
purchase terms and conditions.
Gatekeepers are those who control information relevant to a
purchasing decision.
- Each role may be undertaken by one person or several people, and some
people may fulfil multiple roles.
- The crucial tasks for the potential supplying organisation are to identify:
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Those individuals who play the key roles such as the decider and
gatekeeper.
The stages in the decision process.
The criteria upon which the decision is likely to be made.
THE BUSINESS DECISION-MAKING PROCESS
1. Problem/Need Recognition
- Business purchase decisions begin when a problem or unfulfilled need is
recognised.
- In the business buying centre model, the person who recognises the
problem = initiator.
2. Information Search and Specification Development
- Second stage involves seeking information on the problem/need and
possible solutions, and formalising the product requirements.
- This stage requires extensive input from the members of the buying
centre, especially the users and influencers, who are often best placed to
describe how the product meets needs.
3. Evaluation of Options
- Once the product specification has been developed, the buying centre
searches for potential suppliers and specific product solutions.
- New task purchases are likely to involve extensive evaluation of potential
suppliers and solutions. This will often involve inviting expressions of
interest or more formal proposals from potential suppliers.
4. Purchase
- The detailed evaluation of suppliers + their offerings leads to a decision
about whether to purchase, which product to purchase and which supplier
to choose.
5. Post-Purchase Evaluation
- Following purchase, the organisation especially the users within the
organisation buying centre can fully evaluate whether the product meets
expectations.
- If performance of product/supplier is below expectations, the business
purchaser may choose to seek corrective action or compensation from the
supplier. Alternatively, they may choose to search for a new supplier,
particularly for recurrent or service product purchases.
ENVIRONMENTAL INFLUENCES
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Business purchasing decisions are influenced by the organisations internal
environment (the nature of the organisation, and the power structures and
individuals within it) and the external environment (the micro or industry
environment and the macro environment).
Refer to Chapter 2 (or lecture 1).
Internal Environmental Factors
Internal environmental factors can explain why each organisation may
make different purchasing decisions in different ways.
o The nature of the organisation its size, location, industry, objectives and
resources. These characteristics are fundamental to the types of products
the business will require.
o The structure of the organisation and its buying centres how
responsibilities and authorities are arranged within the organisation and,
more specifically, the buying centres. The complexity of the buying centre,
purchasing processes and organisational policy can influence an
organisations willingness and ability to respond to purchasing demands or
opportunities. For the marketer, it is important to understand status, roles
and the relative influence of members of the buying centre (essentially,
building relationships).
o The individuals within the organisation and its buying centre those
personal characteristics of members of the buying centre that may affect
their decisions, including their personality and status within the
organisation. For example, marketers, generally, might expect younger
members to be more technologically informed and more open to
innovative products, but to encounter resistance from older members who
might be more risk averse.
Individual factors are a power influence on business purchasing
decisions. They make developing trust and confidence between
customers and suppliers which is the key to success in long-term
business-to-business relationships extremely challenging.
External Environmental Factors
External environmental factors are not directly controllable by the
organisation this means that there is a greater level of risk involved in
decisions made in relation to the external environment.
This can, in turn, lead to organisations deferring or avoiding business
purchasing decisions, particularly in times of uncertainty.
Sometimes, decisions not to purchase can involve high penalty costs.
Conversely, economic optimism, which follows after a period of sustained
economic growth, may encourage organisations to make ambitious longterm purchasing decisions.
Technological breakthroughs or improvements can also stimulate purchase
decisions.
Competitors actions are also crucial influences on how firms make
purchasing decisions.
Lecture 5 Markets: Segmentation, Targeting and

Positioning
Chapter 6 Markets: segmentation, targeting and
positioning
LEARNING OBJECTIVES:
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explain the broad concept of a 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.
KNOWING THE MARKET
A market is a group of customers with heterogeneous needs and wants.
- Consumers and businesses vary considerably in their needs, wants and
demands, and it is virtually impossible for an organisation to successfully
appeal to every consumer or business.
To overcome this problem, the marketer seeks to identify and
understand those parts of the total market to which it can offer the
most value.
The organisation then makes use of its knowledge of these market
segments to develop the most effective marketing mix, or offer, for
each segment it chooses to target.
This approach is known as the target marketing concept
identifying smaller, more targetable market segments, and then
tailoring marketing mix to best appeal to those segments.
TARGET MARKETING
Markets can have a variety of characteristics and perspectives:
1. Buyers have common wants, needs and demands.
2. Buyers who have unique wants, needs and demands.
3. The market contains subgroups known as market segments who
share common or similar needs in regards to certain characteristics.
Market segments are the subgroups within the total market that are
relatively similar in regards to certain characteristics.
The marketer can make an undifferentiated offer to the market as a
whole (mass marketing).
The market can make a differentiated offer to each individual buyer
(one-to-one or customised marketing).
The marketer can make an undifferentiated offer to groups of buyers
with common wants or needs, but differentiate the offerings it makes to
different groups.
Target marketing is an approach to marketing based on identifying,
understanding and developing an offering for those segments of the total
market that the organisation can best serve.
- Target marketing is based on THREE PREMISES:
1. Individual buyers or groups of buyers can be identified.
2. Sellers understand the needs of buyers.
3. Sellers will seek to shape their offer to meet the needs of target buyers.
MASS MARKETING
A mass marketer sees buyers as having common wants, needs and
demands.
Creating, communicating and delivering a single product offering to meet
the needs of most people in the market.
This represents an undifferentiated approach ideally, offering can be
produced in large volumes + at a low cost per unit (taking advantage
of economies of scale).
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Low cost makes it possible to sell at low price (expansion of market
share).
In this way, organisations that practise mass marketing can capture very
large markets at very low cost per unit, ensuring high levels of
profitability.
Strategy is characteristic of commodity products for example.
The market for government service also displays a high level of
homogeneity.
ONE-TO-ONE MARKETING
The one-to-one marketer seeks to appeal to each customer by providing
a unique, customised offering that will meet their individual needs.
Seller builds close relationship with customer then, brand loyalty (i.e.
repeat purchasing) and positive word-of-mouth follows.
This approach usually results in higher unit costs and a more restricted
market.
These conditions typically form the basis of a focus or niche strategy.
Many small services businesses take a onetoone marketing approach, for
example, hairdressers.
Also common in industrial business markets, where the size of purchases
often dictates customisation of the marketing mix for each potential
customer.
TARGET MARKETING BASED ON SEGMENTS
The third marketing option market segmentation is the logical and
common choice for many organisations that want to meet the needs of
large numbers of customers more closely, but that lack the resources to
address each customer as an individual.
When choosing target markets, the organisation will generally consider
three factors.
1. Its own resources financial, marketing and other resources to cover
entire market.
2. Market demand do all customers look for the same attributes + benefits
in product?
3. Competition have competitors already segmented market or are they
mass marketing?
Differentiated targeting strategy is a marketing approach that
involves developing a different marketing mix for each target market
segment.
- Approach is favoured by most market leaders, which are able to serve
almost all viable market segments with a product and offer designed
specially to meet their needs.
- Entails higher costs, whereby achieving high profits through this strategy
generally requires a combination of higher retail prices, high volume sales,
strong market share and strong customer loyalty.
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PRODUCT AND MARKET SPECIALISATION

Small organisations with limited financial resources frequently adopt one
of the following specialised approaches to target marketing.
Product specialisation is a target marketing strategy in which all
marketing efforts are concentrated on offering a single product range to a
number of market segments.
Market specialisation is a target marketing strategy in which all
marketing efforts are focused on meeting a wide range of needs within a
particular market segment.
Product-market specialisation is target marketing strategy in which
market efforts are concentrated on offering a single product to a single
market segment.
Specialisation approaches usually only succeed if the following five
conditions are met.
1. Market is characterised by a wide range of needs and product preferences.
2. Clear market segments, or product categories, are identifiable, each with
its own distinctive preferences or characteristics.
3. Market is clearly divisible into segments so that each can be evaluated
and compared.
4. Individual market segments, or product categories, are sufficiently large to
represent profitable sales volume.
5. Organisation is able to reach individual market segments within a
particular marketing offer and mix.
Organisations that pursue a specialisation strategy seek to establish a
dominant position in their chosen market niche.
Such an approach enables an organisation to concentrate all its limited
financial and other resources while achieving a strong market
reputation and a secure position among its loyal customers.
At the same time, such an approach limits a companys grown potential
in longer term.
THE TARGET MARKETING PROCESS
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MARKET SEGMENTATION
The first stage of the target marketing process is market segmentation.
There are two steps in the market segmentation phase: identifying
variables that can be used to define meaningful market segments; and
profiling the market segments so they can be assessed in the second
stage of the target marketing process.
IDENTIFY SEGMENTATION VARIABLES
The target marketing process aims to identify groups of buyers (market
segments) who have wants or needs in common that are a good match
with the organisations ability to deliver products of value.
Segmentation variables refer to the characteristics that buyers have in
common and that might be closely related to their purchasing behaviour.
- The key to effective segmentation is to choose segmentation variables
that are:
Easy to measure and readily available (e.g. demographic data available
from census)
Linked closely to purchase of the product in question.
- Market research plays a crucial role in the process of understanding the
link between segmentation variables and consumers purchasing
behaviour.
SEGMENTING CONSUMER MARKETS
- The range of possible variables for segmentation falls into four broad
categories geographic, demographic, psychological and behavioural
variables.
GEOGRAPHIC SEGMENTATION
Geographic segmentation is market segmentation based on variables
related to geography.
Useful geographic variables include:
Climate, local population, region, topography, urban, suburban and
rural location.
Geographic segmentation is particularly relevant to a country that is both
large and diverse, such as Australia.
The number of buyers or potential buyers in any given geographical area
is an important measure of market potential.
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An emerging trend in segmentation is geo-demographics, which
combines demographic variables and geographic variables to profile very
small geographical areas (suburbs).
DEMOGRAPHIC SEGMENTATION
Demographic segmentation is market segmentation based on
demographic variables, which are the vital and social characteristics of
populations, such as age, education and income.
Quantifiable social characteristics
- They are the most commonly used variables for market segmentation.
- Age can be linked to the emergence of market segments such as
generation X, Y, Z.
The Baby Boomer generation Baby Boomers were born in the prosperous
years after World War II (1946 64) and are now beginning to retire from
the workforce. Overall, the BBs have been one of the most powerful
generations: relatively wealthy, in positions of power in society, politics
and the workplace and willing and able to say active as prominent
members of society in their older years.
Generation X people born between 1965 and 1980. Their formative years
in Australia were during a period of high unemployment, high inflation and
high interest rates. The generation is characterised by a strong work ethic,
loyalty and frustration with Baby Boomers.
Generation Y Born from 1980 to 2001 and sometimes also known as
Nintendo Generation is characterised by comfort with technology,
strong, almost tribal, friendships and loyalties; and high expectations in all
spheres of their lives.
Generation Z Born after 2001, was born digital. The internet, video
games, mobile phones, wireless networks, social media and friends
theyve never met are all second nature.
- Ethnicity is a useful segmentation variable for marketers of some
products.
- Household composition is an umbrella variable that is influenced by a
number of other demographic variables, including age, income, marital
status and the number of members in the household.
Complicated by changes occurring in composition such as increasing
divorce rates, increasing no. of single-parent households, increasing
non-children families, etc.
- Income is a strong determinant of what people can buy.
- Sex has obvious implications for marketers of clothing, beverages,
pharmaceuticals and magazines.
PSYCHOGRAPHIC SEGMENTATION
Psychographic segmentation is market segmentation based on the
psychographic variables of lifestyle, motives and personality attributes.
- Psychographic segmentation is based on the need to understand not who
you are, but how you live your life. This is reflected in activities such as
hobbies or choice of entertainment.
- Psychographics seeks to understand consumers by identifying their mindsets and how they are expressed in their lifestyles.
- Psychographics combines insights of psychology with demographics to
give a more precise description of consumer groups.
- People who share common demographics may lead very different
lifestyles.
- While some psychographic systems suffer because they are conceptual in
nature, do not reliably measure personality or do not effectively link
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relevant personality traits with consumer behaviour, other psychographic
systems are grounded in empirical research and do effectively measure
and link personality to purchase decisions.
BEHAVIOURAL SEGMENTATION
Behavioural segmentation is market segmentation based on actual
purchase and/or consumption behaviours.
In contrast to geographic, demographic and psychographic
behavioural is not based on consumer characteristics.
It is therefore likely to be a better indicator of market segments and their
purchasing behaviour than segmentation based on generalised consumer
characteristics.
- Behavioural variables include:
Benefit expectations, brand loyalty, occasion, price sensitivity and
volume usage.
Segmentation based on EXPECTED BENEFITS represents the most
convincing basis for market segmentation, in that it is based upon the
marketers concern with a deep understanding of purchase and
consumption motivations.
It is a means to better understand why consumers purchase particular
products and brands, and to base market segmentation around this
understanding.
Such approach is likely to prove rigorous, but time-consuming and
expensive, as the consumer benefits sought for any particular purchase
are likely to be specific to that particular product or product category.
OCCASION is an important variable in products such as entertainment,
wine, travel and high-fashion. The assumption behind occasion-based
segmentation is that it is the occasion that dictates the decision to
purchase and the final choice of product.
Segmentation based on VOLUME USAGE seeks to identify heavy, medium
and light users of a product category, helping an organisation identify and
target, for example, the 20% of buyers who typically account for up to
80% of profits, volume purchase or value.
SEGMENTING BUSINESS MARKETS
Business markets are often characterised by a small number of buyers,
each of which might display a very close relationship with the seller.
Under such circumstances, traditional market segmentation variables may
be less relevant, and customised or one-to-one marketing may be the
most logical approach.
Business marketers often isolate business customers by using commercial
industrial directories that contain detailed information on companies.
- Segmenting based on factors such as the size of the business customer is
roughly equivalent to the demographic segmentation approaches that
were described for consumer markets.
- Another demographic type of approach in business markets relates to
industry (sometimes known as vertical markets or segments).
- A final commonly used method of segmentation in business markets is
based on geography.
EFFECTIVE SEGMENTATION CRITERIA
To ensure that segmentation is effective, the segments should be
evaluated against the following criteria.
- Measurability. Variables used to define the market segment must lend
themselves to be accurate and comprehensive measurement.
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Segments based on demographic variables are highly measureable and
extensive data are available through commercial databases and
organisations such as the ABS.
More abstract variables, such as personality, can be difficult to
measure.
- Accessibility. Segments must be able to be clearly identified, reached
and served through distribution and communication channels.
- Substantiality. Market segments must be of sufficient size and
purchasing power to make them a profitable target market.
Ideally, segments should be as large as possible, but still be
homogeneous in their purchase preferences and behaviour.
- Predictability. Segments are only of use if marketing programs can be
formulated to identify, communicate with and service those chosen market
segments.
Segmentation based on personality or psychological variables, while
theoretically sound, might be incapable of easy or successful
implementation, particularly if no relevant and recent data are
available.
PROFILE MARKET SEGMENTS
Market segment profile is a description of the typical potential
customer in the market segment; that is, a description of the common
variables shared by members of market segments and how the variables
differ between market segments.
With all the range of possible segmentation variables that can be used,
it is usual for segments to be constructed in a multivariate and
hierarchal fashion.
To develop an intimate understanding of market segments will usually
require comprehensive qualitative and quantitative market research.
Describes the typical potential customer in the segment and how the
variables differ from other segments.
Market segments must be sufficiently different from others so a
distinctive offer can be created for each segment, without risk of
overlapping or sending confusing messages.
The number of possible segments multiplies with each extra variable.
MARKET TARGETING
Market targeting refers to the selection of target markets resulting from
an evaluation of identified market segments.
Second stage of the target marketing process.
Involves a systematic examination of the range of possible market
segments, their potential sales volumes and revenues, and the relative
ability of the organisation to satisfy the expectations of members of
these market segments.
This step also requires a close understanding of competitors, and how
their offerings are seen by potential target market segments.
- The choice of appropriate targeting strategy ultimately depends on:
An understanding of the size and attractiveness of the market
segments that have been identified.
An assessment of the organisations ability to service and compete for
the chosen market segments.
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EVALUATE POTENTIAL SEGMENTS

SALES POTENTIAL
Market potential is the total sales of a product category that all
organisations in an industry are expected to sell in a specified period of
time assuming a specific level of marketing activity.
Sales revenue is the total volume of sales multiplied by the average
selling price.
The total volume of sales is determined by the organisations MARKET
SHARE.
Market share is the proportion of the total market held by the
organisation.
Company sales potential is an estimate of the maximum sales revenue
and market share that an organisation can expect to achieve for a specific
product.
- Several factors influence the organisations ability to achieve its sale
potential in a given market segment:
Market potential (i.e. maximum possible sales in total market for
product category)
Organisations served market (i.e. market segments for which
organisation chooses to compete)
The level of industry marketing activity, which directly influences the
market potential.
The effectiveness of an organisations promotional spending, which
depends on the organisations share of voice (i.e. organisations
promotional spending relative to total industry promotional spending)
and the use of effective tactical promotional spending designed to
maximise impact.
- One approach to estimating sales potential is to look at total market size,
current market share, planned marketing activities and environmental
factor.
- Another approach to estimating sales potential is to examine individual
parts of the market, take into account the size or population of each
territory and the organisations relative share of total marketing activity,
and then sum each territorys estimates to produce a sales figure for the
total market.
COMPETITIVE SITUATION
- The activities of competitors already in the marketplace and their relative
market shares.
- Without a competitive assessment, sales estimates can be misleadingly
optimistic especially where an organisation is entering an established
competitive market.
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COST STRUCTURE
- The organisation needs to consider the costs involved in creating,
communicating and delivering an offering to meet the needs of each
potential market segment.
- The organisations cost structure includes production costs, administrative
overheads and all associated promotion and distribution costs.
- When considering an organisations cost structure, it is important to
distinguish between fixed and variable costs.
SELECT TARGET MARKETS
- With a detailed evaluation of potential market segments based on sales
potential, the competitive situation and the organisations cost structures,
the organisation can proceed to decide which market segments it will
target.
Having identified a range of potential target market segments, the
organisation needs to undertake a rigorous analysis to choose between
the range of possible segments.
Assuming that several segments offer sufficient revenue opportunities,
the organisation must decide which and how many of these segments
to target.
Estimating market potential in each segment is important in
determining whether the chosen target market strategy will lead to
healthy sales volumes and sustainable profitability.
This step requires estimation of market potential for individual market
segments and, in this process, it is important that the organisation
develops sales forecasts based on systematic, objective and reliable
methods, and that forecasts are sufficiently accurate.
POSITIONING
- The organisation must determine how its offer is positioned in the minds
of each of its target market segments and develop its marketing mix
accordingly.
Positioning describes the way in which the market perceives an
organisation, its products and its brands in relation to competing offerings.
- The organisation can pursue positioning to manage:
How it, as a whole, is perceived relative to competitors in the minds of
its stakeholder groups.
How their brands are seen, typically focusing on distinguishing product
attributes.
How the market distinguishes its offerings from those of closely
competitive brands.
- Position is fundamentally important for organisations, because it describes
how the organisation is perceived by the market, relative to its
competitors on the attributes that customers regard as important in their
decision making.
- Positioning involves two steps firstly determining the position that the
company wishes to occupy in the minds of buyers and secondly,
developing a marketing mix to reflect the expectations of the target
market segment and which reflects that positioning.
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Company positioning is a positioning strategy designed to create a

single market perception of the entire organisation in relation to
competitors.
Brand positioning is a positioning strategy designed to create a market
perception of a particular brand, usually based on product attributes.
DETERMINE POSITION FOR EACH SEGMENT
o A common technique for determining positioning is called perceptual
mapping, which typically produces two-dimensional map showing how
each of the competing brands relate to each other in terms of a range of
product attributes.
This assumes that consumers in the target segment are already
familiar with the brand and its competitions and are able to
subjectively or objectively compare them on attributes that they
believe to be important.
ANALYSING CURRENT POSITIONING
- Process of establishing organisations current positioning is clearly of
strategic importance and, as such, should be undertaken based on
rigorous analysis and market research.
- First step in determining current positioning of brand is to identify those
attributes that consumers use to distinguish between competing products
or brands (salient attributes).
Qualitative research methods are commonly used to ascertain salient
attributes.
- Then the organisation needs to assess how its own product or brand, and
competitors products or brands are positioned in relation to those
attributes.
Typically done through quantitative survey research using rating
scales to establish how each competing brand scores on each of the
product attributes within each of the target market segments.
- The next step is to devise some concept of the ideal position of the
organisations product or brand.
This may need to be adjusted on the grounds of practicability the
desired position may not be technically feasible or attainable given the
resources available.
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-
Finally, the organisation needs to develop a plan to move to the desired

position.
COMPETITIVE POSITIONING AND REPOSITIONING
- A further attribute which is not represented in the perceptual map, but
which is present in almost all consumers mental maps, is PRICE.
- Positioning is fundamentally important in the marketing of individual
brands and in the organisations long-term competitive success.
- It should be apparent that, once established, a competitive position should
be protected and nurtured for the long term.
BRAND POSITIONING and BRAND RE-POSITIONING
DETERMINE THE MARKETING MIX FOR EACH SEGMENT

The marketing mix for each segment should:
- Be consistent with the desired positioning.
- Be internally consistent each element of the marketing mix should be
coordinated and supportive of the other elements.
- Be sustainable in the long term.
Lecture 6 Product
define product and product attributes
describe the product life cycle, new product development and the product
adoption process
outline how an organisation can differentiate its products to obtain a
competitive advantage
explain value of branding brand management
describe the roles of packaging
explain key aspects of product management and positioning through the
product life cycle.
Chapter 7 Product
PRODUCTS: GOODS, SERVICES AND IDEAS
A product is a good, service or idea offered to the market for exchange.
Goods are physical, tangible offerings that are capable of being delivered
to a customer.
Purchase of goods usually involves transfer of ownership from marketer
to consumer.
As they are intangible, a service cannot be touched or tasted and does
not involve ownership; instead, you experience a service.
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An idea can also be offered to the market in the form of a concept, issue
or philosophy.
Ideas are often the products of community organisations, charities and
political parties.
TOTAL PRODUCT CONCEPT
- To understand how a products value is perceived by potential customers,
TPC is useful.
Total product concept is a view of the product that describes the core
product, expected product, augmented product and potential product in
order to analyse how the product creates value for the customer.
It is crucial for marketers to understand that when customers choose a
product, they do not purchase some thing; rather, they buy a solution to a
problem.
TPC = way of viewing a product as a totality of value and benefits it
provides to a customer.
THE
THE
THE
-
Analysing a mobile phone using the total product concept:

Core provision of communications
Expected e.g. conveniently sized phone, long-lasting battery, etc.
Augmented e.g. web connection (4G compatible), camera/video, GPS
maps, etc.
Potential e.g. digital television, contactless payment capability
CORE PRODUCT
The core product comprises the fundamental benefit that responds to
the customers problem of an unsatisfied need or want.
Regardless of other changes made to a product; core product generally
remains the same.
EXPECTED PRODUCT
The expected product describes those attributes that actually deliver
the benefit that forms the core product.
They are the attributes that fulfil the customers most basic expectations
of the product.
Marketers generally try to differentiate their offering using fundamental
characteristics such as branding, packaging and quality standards at the
expected product level.
AUGMENTED PRODUCT
At the augmented product level, the product delivers a bundle of
benefits that the buyer may not require as part of the basic fulfilment of
their needs.
The augmented product level allows marketers to significantly
differentiate their offerings from those of competitors.
It is often the augmented product features that form the main reason for
choosing a particular brand. This can include support services, such as
guarantees.
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THE POTENTIAL PRODUCT
- Comprises all possibilities that could become part of the expected or
augmented product.
- This includes features that are being developed, planned or prototyped, as
well as features that have not yet been conceived. Over time, many
potential product features become part of the augmented product or even
the expected product.
PRODUCT RELATIONSHIPS
Product item is a particular version of a product.
That can be differentiated from the organisations other product items
by characteristics such as brand, ingredients, style or price.
Product line is a set of product items related by characteristics such as
end use, target market, technology or raw materials.
Product mix is the set of all products that an organisation makes
available to customers.
PRODUCT CLASSIFICATION
Consumer products are those products purchased by households and
individuals for their own private consumption.
Business-to-business products are those products purchased by
individuals and organisations for use in the production of other products or
CONSUMER PRODUCTS
- The main categories are SHOPPING, CONVENIENCE, SPECIALTY and
UNSOUGHT products.
Shopping products are consumer products that involve moderate to
high engagement in the decision-making process, in the purchase decision
being based on consideration of features, quality and price.
Shopping products exhibit characteristics such as they are expected
to last a long time, purchased relatively infrequently, stocked by a
small number of retail outlets, sell in low volumes and have reasonably
large profit margins.
Examples include electrical appliances, furniture, cameras and clothing.
Convenience products (fast-moving consumer goods) are inexpensive,
frequently purchased consumer products that are bought with little
engagement with the decision-making process.
Available from wide range of retailers, usually cheap, high volumes and
are often self-service products so packaging plays role in grabbing
consumers attention.
1. Staple products e.g. milk, bread, rice and soap.
2. Impulse products bought with little planning, often purchased only after
seeing the item at the retail store. Often positioned immediately next to
the cash register in a store.
3. Emergency products bought when the product is needed in an
emergency e.g. umbrella.
Specialty products are highly desired consumer products with unique
characteristics that consumers will make considerable effort to obtain.
Purchaser is not interested in comparing brands or considering
alternatives.
Characteristics pre-selected by consumer, no close
substitutes/alternatives, available in limited no. of outlets, purchased
infrequently, sell in low volumes, high profit margins.
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Unsought products are goods or services that a consumer either knows

about but doesnt normally consider purchasing, or doesnt even know
about.
For category (a) a sudden, unexpected need may arise for consumers.
BUSINESS-TO-BUSINESS PRODUCTS
- Classified into three categories parts and materials, equipment, and
supplies and services.
Parts and materials are business-to-business products that form part of
the purchasing businesss products.
Raw materials unprocessed natural materials that are used in the
production process.
Components processed items that form part of a businesss product.
Equipment refers to capital equipment and accessory equipment used in
the production of the businesss products.
Capital equipment installation such as buildings and machinery.
Accessory equipment items that support production but do not form
part of product.
Services and supplies are business-to-business products that are
essential to business operations, but do not directly form part of the
production process.
Business services e.g. financial, legal, market research and office
cleaning services.
Maintenance, repair and operating (MRO) supplies e.g. oil (for
maintenance), rivets (for repair) and paper (for operations).
PRODUCT LIFE CYCLE
The product life cycle refers to the typical stages a product progresses
through: new product development, introduction, growth, maturity and
decline.
- The PLC has five stages:
1. New product development discussed later.
2. Introduction first appearance of product in marketplace. Market knows
little about product and so the organisation must often make considerable
investment in promotional activities to build awareness. Sales start at zero
and must offset promotional costs associated with product launch and
recoup the R&D costs occurred in the NPD stage.
3. Growth increasing popularity, sales and profits.
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4. Maturity as competitors enter market with similar products, the novelty
of the product wears off, alternative products become available and the
products sales + profitability peak and start to fall. There will be changes
to the marketing mix, in expectation that this will allow product to enter
the growth stage again.
5. Decline sees sales and profits fall. The marketer must decide whether to
reduce its investment in product, drop the product from its product mix or
change the product.
NEW PRODUCT DEVELOPMENT
New product development occurs when the organisation develops the
idea, undertakes research, prepares prototypes, pre-test the product and
make modifications before the product launch.
What may be classified as a new product includes:
1. New to the market new technology that has never been seen before.
2. New to the company a product already in the marketplace but first time
produced by a certain company.
3. New to the product line extension of whatever the company currently
produces.
4. New to the product modifications, enhancements and improvements to a
specific product.
NEW PRODUCT DEVELOPMENT PROCESS
1. Idea generation is the phase in which ideas for new products are
created. Most new product ideas are the result of a planned approach to
generating innovations.
2. Screening may involve analysing the organisations ability to produce
the product, the target markets potential interest, the market size,
product cost, break-even point, etc.
3. Concept evaluation designed to determine whether product could
satisfy a customer need or want and to identify those attributes that
provide most value to potential customers.
4. Marketing strategy includes describing the projected sales and profits,
market positioning, potential target market, marketing mix strategies and
long-term goals.
5. Business analysis reviews how the new product will affect the
organisations costs, sales and profit projections.
6. Product development if business analysis finds new product to be a
good fit with overall objectives developing prototype and often
additional R&D will result in optimum product.
7. Test marketing activities that enable a real world assessment of the
entire marketing mix that supports the product.
8. Commercialisation launching the new product into the market.
PRODUCT ADOPTION PROCESS
Product adoption process is the sequential process of awareness,
interest, evaluation, trial and adoption through which a consumer decides
to purchase a new product.
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THE DIFFUSION OF INNOVATION

Diffusion of innovations is the theory that social groups influence the
decisions made by individuals in such a way that innovations are adopted
by the market in a predictable pattern over time.
Innovators usually adventurous, interested in new tech/ideas and willing

to take risks.
- Early adopters careful choosers of new products and are often opinion
leaders.
- Early majority more deliberate in their choice of new product and try to
avoid taking risks.
- Late majority more cautious and sceptical but eventually adopt due to
economic necessity or social pressure.
- Laggards often wary of new products and ideas, generally prefer
products that are familiar.
PRODUCT DIFFERENTIATION
Product differentiation refers to the creation of products and product
attributes that distinguish one product from another.
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Most of the differentiating features are part of the augmented product
layer of the TPC.
Some characteristics that customers may perceive to be differentiators
include design, brand, image, style, quality and features.
Any of these can potentially give the organisation a competitive
advantage.
Warranties, installation, in-home training and free phone helplines are
examples of add-on services that some organisations can use to
differentiate their products.
BRANDING
Brand is a collection of symbols such as a name, logo, slogan and design
intended to create an image in the customers mind that differentiates a
product from competitors products.
Brand image is the set of beliefs that a consumer has regarding a
particular brand.
Positive or negative image depends on things like past experience or
word-of-mouth.
BRAND NAME
A brand name is part of a brand that can be spoken and can include
words, letters and numbers.
A brand mark is the part of a brand not made up of words it often
consists of symbols or designs.
A trade mark is a brand name or brand mark that has been legally
registered so as to secure exclusive use of the brand.
BRAND EQUITY
- For marketers, the brand:
Identifies the organisations products.
Differentiates the organisations products from competing products.
Attracts customers.
Helps introduce new products.
Facilitates the promotion of same-brand products.
Brand equity refers to the added value that a brand gives a product.
All of the value in products arises from the choices that consumers
make among those brands offered to them for purchase; brand equity
is thus a consumer-based concept.
BRAND LOYALTY
Brand loyalty is a customers highly favourable attitude and purchasing
behaviour towards a certain brand.
Some firms encourage brand loyalty by having a loyalty program,
whereby customers are given an incentive to continue to make repeat
purchases of a particular brand.
BRAND METRICS
Brand equity metrics include brand assets (e.g. trade-marks and
patents), stock price analysis, replacement cost, brand attributes, brand
loyalty, willingness-to-pay analysis.
BRAND STRATEGIES
- Strategies are INDIVIDUAL BRANDING, FAMIILY BRANDING or BRAND
EXTENSION.
Individual branding is a branding approach in which each product is
branded separately.
Giving each its own specific identity.
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Individual branding can help position a product in the market place,
help reach a different market segment and avoid confusion with
existing branded products.
Family branding is a branding approach that uses the same brand on
several of the organisations products.
Effective way to introduce new products when a brand has an
established reputation.
Brand extension is giving an existing brand name to new product in a
different category.
E.g. Virgin music, air travel, mobile phones and credit cards.
BRAND OWNERSHIP
Manufacturer brands are brands owned by producers and clearly
identified with the product at the point of sale.
Private label brands are brands owned by resellers, such as wholesalers
or retailers, and not identified with the manufacturer.
E.g. Coles has its Farmland and Savings brands.
Generic brands are those products that only indicate the product
category.
Usually found in supermarkets.
LICENSING
Licensing is an agreement in which a brand owner permits another party
to use the brand on its products.
FRANCHISING
Franchising is basically an agreement to use an established model.
Franchisor permits the franchisee to use its business model. Franchisee
pays fees to the franchisor, agrees to abide by the systems and rules
set out in franchisee agreement and assumes the responsibility for the
success of the individual franchise.
CO-BRANDING
Co-branding is the use of two or more brand names on the same product.
The use of co-branding has grown recently as organisations try to
capitalise on the brand equity of multiple brands, improved the
perceived value of a product, and maintain existing branding after
another organisations brands are acquired.
Co-branding can be source of competitive advantage in assisting the
product to increase distribution, reputation and differentiation.
PACKAGING
Packaging is a bag, wrapper or container for the product.
- There are three main types of packaging.
1. The primary package holds the actual product. E.g. bottle
2. The secondary package is the material used to hold or protect the
product. It can be removed and discarded after purchase. E.g. seal on the
bottle to prevent leakage.
3. The shipping package is the material used to carry the product out of
the factory, and through the channel of distribution (e.g. wholesalers and
transporters) to the retailer.
LABELLING
Labelling usually forms part of the package and provides identifying,
promotional, legal and other information.
Compulsory label information (legislation) may include:
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Brand name + logo, product name, size of packaging, quantity, origin of

goods, nutritional information, ingredients list, use-by-date or date of
packaging and bar code.
MANAGING PRODUCTS
APPROACHES TO MANAGEMENT
- Traditional approach to organisational structure allocates different
business functions to different groups within the business. E.g. HR
department, finance department.
- A business may choose to employ one or more managers to take
responsibility for the management of particular products or product lines,
or the management of a particular brand within the organisations
portfolio of brands.
- Another alternative is to appoint a market manager who will be
responsible for managing the marketing activities aimed a particular part
of the target market.
PRODUCT/MARKET GROWTH STRATEGY MATRIX
Igor Ansoffs product/market growth strategy matrix is illustrated below.
Current Products
New Products
Current Markets
Market penetration
Product development
New Markets
Market development
Diversification
Market penetration occurs when a business increases market share
within the existing marketplace.
Involves selling more of the current product/service to existing
customers, or finding new customers within the current markets. LEAST
RISK option.
Product development involves developing new products for the current
market.
This can mean the development of new capabilities, modifications or an
entirely new product. RISKY option.
Market development is when a business finds new markets for its
existing products.
This strategy can involve market research and segmentation of
potential markets to identify new markets. RISKIER option.
Diversification is when a business introduces new products into new
markets.
A lot of uncertainty (RISKIEST) but if successful, it can be very
profitable.
MANAGING PRODUCTS THROUGH THE LIFE CYCLE
- New product development (NPD) involves idea generation, screening,
concept evaluation, marketing strategy, business analysis, product
development, test marketing and commercialisation.
- By understanding the PLC, the marketer can determine which stage their
product is in and decide on appropriate decisions for the next stage, be
they related to packaging, pricing, advertising, positioning or some other
element of the marketing mix.
Line extension is a new product that is closely related to an existing
product in a product line.
The development of line extensions is a less risky and less expensive
way to introduce a product.
Product modifications refer to the changes to the characteristics of a
product to supersede the original. The main types of product modification
relate to:
FUNCTIONALITY, QUALITY and AESTHETICS
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Repositioning
Product positioning is the way in which the market perceives a product
in relation to competing offerings.
Creation and maintenance of a certain perception of a product in
customers minds.
One purpose of repositioning is to move product into a NEW growth
phase.
Positioning comes in 2 forms AGAINST competitors and AWAY from
competitors.
Product obsolescence
- Obsolescence may be either PLANNED or UNPLANNED.
- E.g. planned is when Apple introduces new iPhones. Unplanned
obsolescence occurs when a product becomes superseded by another,
often through technological or social change.
Product deletion is the process of removing a product from the product
mix.
THE ROLE OF LAW
To define acceptable versus unacceptable behaviour
Marketing law includes any regulations that attempt to draw the line
between acceptable competitive business conduct and unacceptable
business practices.
MARKETING LAWS
- Designed to protect:
Consumers
Traders
The competitive system that underpins the free market Australian
economy.
Consider the application of the Competition and Consumer Act 2010
and the Australian Consumer Law.
PRODUCT LAWS
1. Intellectual property:
o Patents for new inventions
o Registering a trade mark
o Registering a design
o Copyright
2. Packaging and labelling:
Designed to standardise information and protect against misleading or
deceptive information, e.g.:
Weight
Content of goods
Food ingredients
3. Product liability:
Minimum acceptable product safety and quality standards, such as:
Food hygiene regulations
Manufacturer liability for defective or negligent products
PRODUCT PACKAGING AND LABELLING
- Common law protection
- Statutory protection:
Australian Consumer Law
Misleading and deceptive conduct
Unfair trade practices
Product safety and information standards
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Trade measurement legislation
National Measurements Act 1960 (Cwlth)
Lecture 7 Price
Chapter 8 Price
Understand the objectives that guide pricing strategies
Analyse demand to inform the development of an appropriate pricing
strategy
Describe the principles of pricing based on costs
Explain the role of competitive analysis in determining pricing
Appreciate the issues involved in pricing for business markets
Understand how to manage prices as part of the marketing mix.
FUNCTIONS OF PRICE
- Management of price is called PRICING and is based on organisational
objectives.
Price is a measure of value for buyers and sellers.
Sellers need prices to cover their costs (short and long term) and to
provide sufficient returns to justify the risk of business and invested
capital.
Buyers need prices that reflect what they think the product is worth
and what they can pay.
Price is directly related to profitability Profit = (Price x Sales
Volume) Total Costs
PRICING OBJECTIVES
Pricing benefits are essentially two-way.
For the BUYER, the benefit is the satisfaction derived from the
consumption or ownership of the product.
For the SELLER, the benefit is primarily the revenue derived from
purchases. In normal circumstances, a seller will only engage in an
exchange if that benefit is in excess of the cost of creating and delivering
the product.
Price serves as a visible expression of the value of the product to be
exchanged and enables buyers and sellers to negotiate and agree on that
value.
DETERMINING PRICING OBJECTIVES
More specific pricing objectives tend to focus on various combinations of
the following:
Profitability, long-term prosperity, market share, positioning and what
the customer is prepared to pay.
Pricing objectives should be SMART specific, measurable, actionable,
reasonable and timetabled.
PROFITABILITY
Profits are generated when total revenues exceed total costs.
Prices must exceed costs.
Return on investment (ROI) is the profit required to justify investment in
a particular product or project.
LONG-TERM PROSPERITY
Ongoing survival is a fundamental goal of all businesses and brings a longterm perspective to the setting of pricing objectives.
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MARKET SHARE
Many firms use aggressive pricing in an effort to increase or defend
market share.
Higher sales volumes and market leadership generate a number of
benefits for a business, including high levels of customer awareness and
preference and economies of scale.
POSITIONING
Pricing is a fundamental tool of positioning, whereby CUSTOMERS
INTERPRET PRICE DIFFERENTLY:
Some = motivated by higher prices believing these reflect higher
quality (price seeking)
Others seek lower prices for greater value (price aversion)
Prestige pricing involves setting prices high to convey an image of
prestige, quality and exclusivity.
Low prices may generate high sales volume, but may also conflict with a
high-quality, differentiated positioning approach.
Product-line pricing is setting a range of prices in a product line based
on differences in manufactured costs, customer perceptions of product
features and competitors prices.
NOT-FOR-PROFIT PRICING
While notforprofit organisations do not measure success by profits, they
do generally seek a return on their activities and many of them charge for
their products.
Notforprofit pricing objectives include:
Generating enough funds to sustain activities
Making products/activities appealing to a target market
Encouraging a change in attitude or behaviour among a target market.
THE LEGAL ENVIRONMENT PRICING AND THE LAW
- The areas subject to legal restrictions include essential services,
misleading and deceptive conduct, price collusion, comparability of prices,
clarity in pricing and price discrimination.
- At various times, governments have chosen to intervene directly in
markets to control prices for such products as pharmaceuticals and
services such as public transport or medical care.
- In other instances, government approval is necessary when setting prices
(e.g. water).
The Competition and Consumer Act (formerly the Trade Practices Act)
in Australia and Fair Trading Act in New Zealand prohibit misleading and
deceptive advertising.
Comparison discounting is the practice of explicitly quoting a
discounted price and the regular higher price together.
Bait and switch pricing occurs when the seller has no intention of
selling the lower-priced item and merely uses the bait price as a
pretext to lure shoppers into the store, after which to switch them to
the more normally priced items.
Captive pricing involves offering a low entry price for a basic product,
then charging more for desirable additional parts or functions
(technically, not illegal).
Price discrimination can occur when price differentials between
business customers give one business customer an unfair advantage
over another, thus reducing competition.
Secondary-market pricing involves setting different prices for different
target markets.
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PRICE
LAWS
Protect against practices such as:
Price fixing
Price discrimination:
Different prices to different customers
- Predatory pricing:
Selling below cost for an extended period
- Resale price maintenance:
Recommended Retail Price
PRICE SURVEILLANCE
- The ACCC:
Undertakes price surveillance
Holds inquiries into the supply of specified goods or services
Monitors the prices, cost and profits of any industry or business.
SELECTING THE PRICING METHOD PRICING DECISIONS
o Pricing decisions should be based on an understanding of the customer
and should reflect the value of the product to the customer.
o Pricing decisions need to consider internal organisational factors and
external environmental factors.
o Prices generally need to appeal to target customers, yield acceptable
profit margins and provide a competitive market offer.
Theoretically impossible to set optimal prices across the 3 pricing
dimensions (demand, costs and competition), in practice it is
crucial to seek price which yields a satisfactory outcome (or
compromise) across all 3.
DEMAND CONSIDERATIONS
Demand is the relationship between the price of a particular product and
the quantity of the product that consumers are willing to buy.
Demand-based pricing refers to the influence of demand on pricing
decisions.
Demand-based pricing sets prices according to the level of
aggregate or individual customer demand in the market.
- The success of demand-based pricing fundamentally depends on the
organisations ability to accurately forecast fluctuations in demand and to
accurately predict consumers price sensitivity.
THE DEMAND SCHEDULE AND DEMAND CURVE
Demand schedule is a table showing actual or estimated quantity
demanded for a particular good at particular prices.
Demand curve is a graph showing the relationship between price and
volume sold.
- For the vast majority of products, there is an inverse relationship between
price and quantity sold; that is, as price rises, the quantity sold falls, and
VICE VERSA.
Hence, the demand curve has a downward slope. Prestige products =
exception.
- Ceteris paribus relationship is based on the assumption of all else
remaining constant.
- A change in demand due to a change in price alone is known as a
movement along the demand curve.
- A shift in the demand curve to the right means greater quantities will be
demanded at all prices than was previously the case.
Example increase in the price of substitute goods would increase
demand.
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PRICE ELASTICITY OF DEMAND
Price elasticity of demand refers to the sensitivity of quantity

demanded to changes in price.
Price elasticity of demand ( e d ) =
Percentage changequantity demanded

Percentage change the price
Price elastic is the demand for which price elasticity is greater than 1
(i.e. the percentage change in quantity demanded exceeds the percentage
change in price).
I.e. price reduction leads to an increase in revenue.
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Price inelastic is the demand for which price elasticity is less than 1 (i.e.
the percentage change in quantity demanded is less than the percentage
change in price).
I.e. price increase leads to a revenue increase.
When
ed
= 1 it is uniform elasticity.
COST AND REVENUE ANALYSIS

o To effectively manage pricing based on costs, organisations must
understand the composition of their total costs (COST MIX).
Fixed costs do not vary with changes in output.
Variable costs vary with changes in output.
Marginal costs VCs expressed in terms of the cost per extra unit of
production.
Shared costs shared across different products e.g. advertising,
distribution, etc.
Price floor is a minimum price that must be charged to cover costs.
While a business may sell at a loss for a short time, it cannot sustain
this approach.
Low prices may generate high sales volume, but may conflict with highquality, differentiated positioning.
- There are two pricing approaches used to establish MARKET SHARE.
Price leader is a high-volume product priced near cost to attract
customers into the store, where it is expected they will buy other, normally
priced, products.
Loss leader is a high-volume product priced below cost to attract
customers into the store, where it is expected they will buy other, normally
priced, products.
Such pricing is typically designed to attracted customers (generate
store traffic) and make firms pricing more competitive.
COST CONSIDERATIONS
- Evaluating cost structure requires a detailed understanding of
relationships between price, demand and costs, and the link to profits.
BREAK-EVEN ANALYSIS
A break-even analysis is an analysis designed to estimate the volume of
unit sales required to cover total costs.
Determines the volume of unit sales at which total costs = total
revenues.
Important to test price and volume sensitivity.
Total revenue is the product of:
- TOTAL SALES VOLUME the number of units sold.
- UNIT PRICE the price charged per unit.
Break even point ( volume )=
costs
Costs
=
Price Per UnitVariable Costs Per Unit Contribution Margin
Contribution margin is the difference between the price and the

variable cost per unit.
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MARGINAL ANALYSIS
Marginal analysis is an analysis designed to determine the effect on
costs and revenue when an organisation produces and sells one more unit
of product.
Marginal analysis is useful in pricing individual units of output or to
individual buyers.
- Costs must be examined in terms of the following:
Average cost the total cost divided by volume of production.
Marginal cost represents the cost to produce and sell one more unit of
output.
- Revenues must be examined in terms of the following:
Average revenue the total revenue divided by unit sales volume.
Marginal revenue the revenue obtained by selling one more unit of the
product.
Profit is maximised by selling the quantity at which marginal cost =
marginal revenue
Marginal cost < marginal revenue, firm can increase profits by
selling more units.
When marginal cost > marginal revenue, business starts to incur a
loss.
PRICING BASED ON COSTS
Cost-based pricing is an approach to pricing in which a percentage or
dollar amount is added to the cost of the product in order to determine its
selling price.
Usually either COST-PLUS pricing or MARKUP pricing.
o Cost-plus pricing is often used when it is difficult or impossible to
determine the costs of the product until it has been made of completed.
o Mark-up pricing is used by wholesalers and retailers and involves adding
a percentage of their purchase cost to determine the resale price.
COMPETITION CONSIDERATIONS
Competition-based pricing is an approach to pricing based on the
prices charged by competitors or on the likely response of competitors to
the organisations prices.
Undesirable unless seller has a cost advantage arising through:
Economies of scale in purchasing as the amount of unit produced
increases, the cost to produce each unit decreases.
Low-cost production often based on the country of origin.
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-
Price competition can result in price volatility, (e.g. petrol retailing)

Price wars can break out as competitors try to match the low prices. This
can ultimately force weaker competitors from the market.
- In developed economies, longterm price competition can create
oligopolies.
UNDERSTANDING COMPETITORS PRICING
The likely response of competitors to the organisations pricing will be in
part be determined by the competitive structure of the industry.
Within the Australian marketplace, there is a growing tendency towards
greater levels of economic concentration industry sectors are dominated
by fewer, but larger players.
Oligopoly is a market dominated by a small number of large suppliers.
Monopoly is one supplier who can determine price without regard for
competition, i.e. electricity and gas markets.
Perfect competition is a large number of buyers and sellers for
undifferentiated (commodity) products.
Monopolistic competition refers to when there are numerous
competitors whose product offerings are differentiated by design, quality,
brand image and product features.
ALTERNATIVES TO COMPETING ON PRICE
The strategy of non-price competition is an approach to competition
based on factors other than price; that is, based on differentiation of
product, promotion and distribution.
Organisations differentiate by product attributes (e.g. product quality,
innovation, brand image, customer service).
Nonprice competition can build loyalty among customers, which can
insulate organisation from competitors price offers.
- Pricing for STABILITY places a greater emphasis on non-price competition
among industry participants in the marketplace.
BUSINESS-TO-BUSINESS PRICING
BUSINESS MARKETS
- Buyers purchase products for use in the production of other products, for
resale, or for use in daily business.
- Businesstobusiness marketing relationships between suppliers and
organisational buyers tend to be close, longterm and formal in nature.
- Pricing is more complex in business markets (compared to consumer
markets).
PRICING FOR INTERMEDIARIES (DISCOUNTS)
Discounts are a reduction in price in return for some other benefit.
- To ensure the profitable operation of the various partners involved in
getting products from the producer to the consumer or organisational
buyer, various discounts apply to transactions in business markets.
Functional (trade) discounts are a percentage reduction off the list
price and are provided by suppliers to marketing intermediaries or
business customers in return for the various functions they perform such
as retailing, transport and providing credit.
Forms the basis of the intermediarys profit margin.
Quantity discounts are provided to business customers that purchase
large volumes.
Seasonal discounts are provided to buyers who purchase products
outside the peak selling period the year.
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Cash discounts offered to customers who pay promptly and who thus
save the supplier time and money in managing and collecting account
receivable.
PRICING FOR DISTRIBUTION
Geographic pricing is a pricing strategy that includes price differentials
based on those costs that vary with distance between the buyer and seller.
- A seller may charge:
A freight on board destination (FOB destination) price which means
the seller has built the transport costs in to the price.
A freight on board origin (FOB origin) which means the price
excludes the delivery costs, which must then be met by the buyer.
PRICE MANAGEMENT
THE PSYCHOLOGY OF PRICING
- Consumer purchasing behaviour is USUALLY based on a rational evaluation
of value.
- While all customers will ultimately be concerned with value, what
customers regard as value is personal and, at times, idiosyncratic.
- The relative importance of price varies between individual customers,
market segments and product categories.
- Perceptions of price also vary with time, especially over economic cycles
between booms and recession.
CUSTOMER VALUE PERCEPTIONS (PRICE MANAGEMENT)
- All customers will have a notional price range or specific price in mind
when contemplating a purchase.
Customers often use reference prices to help them form an impression of
value and price.
Internal reference price is the price expected by consumers, largely
based upon their actual experience with the product.
External reference price is a price comparison provided by the
manufacturer or retailer.
- Buyers sensitivity to price fall into three categories;
valueconscious, priceconscious, prestigesensitive.
As previously mentioned, productline pricing is an approach to pricing
that sets prices for groups of products in a product line rather than for
individual products.
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PRICING THROUGHOUT THE PRODUCT LIFE CYCLE

Pricing New Products
- Two broad pricing strategies for new products are SKIMMING and
PENETRATION.
Penetration pricing is a pricing tactic based on setting a low price in
order to gain rapid market share and turnover for a new product.
Encourages consumers to at least TRIAL the product.
Price skimming involves charging the highest price that customers who
most desire the product are willing to pay, and then later lowering the
price to bring in larger numbers of buyers.
Used to quickly offset product development and launch costs.
However, there is the risk of customer backlash (damaging customer
relationships).
Pricing Established Products
Differential pricing is the practice of charging different buyers different
prices for the same (or equivalent) product.
- For differential pricing to be effective, the organisation must be able to:
Identify market segments that have different price sensitivities,
administer it in such a way as to avoid confusing or antagonising
customers and prevent the development of a secondary market (lowpaying customers resell to those charged with higher price).
- Common approach to differential pricing is to use discounts to vary the
price over time.
E.g. an organisation may offer periodic discounts by temporarily
reducing prices.
Promotional pricing is the combination of a pricing approach with a
promotional campaign.
- Approaches include price/loss leader, comparison discounting and
special-event pricing.
Comparison discounting quoting discounted price and regular higher
price together.
Special-event pricing links discounted prices with some special or
seasonal event.
Everyday low prices setting a low and relatively fixed price for
products.
SETTING AND MANAGING THE FINAL PRICE [TABLE 8.3 in textbook pricing
tactics SUMMARY]
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Lecture 8 Promotion
Chapter 9 Promotion
Explain promotion and its role in the marketing mix
Understand the IMC approach to marketing promotion and the major
elements of the promotion mix
Describe different types of advertising and the steps in creating an
advertising campaign
Outline the role of public relations in promotion
Explain how sales promotion activities can be used
Understand the nature of personal selling
Discuss a range of marketing communication options additional to the
traditional promotion mix.
WHAT IS PROMOTION?
Promotion is the marketing activities that make potential customers,
partners and society aware of and attracted to the businesss offerings.
Promotion is the creation and maintenance of communication with
target markets.
Marketing communication is a term for promotion that refers to
communicating a message to the marketplace.
- Further, when carefully combined and coordinated to achieve a consistent
and effective message, the promotional approach is known as integrated
marketing communications.
- The idea behind IMC is that the planning of each part of the promotion mix
advertising, public relations, sales promotion and personal selling
should not be done in isolation; rather, strategies should be planned so
that they work together to achieve greater clarity and consistency, and a
better overall result.
COMMUNICATION PROCESS A MODEL OF COMMUNICATION
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A message is encoded and sent by a sender or source, via a message

channel or medium, to a receiver or target audience, who decodes the
message and responds by some form of feedback.
- Anything that interferes with the effectiveness of the communication
process is referred to as noise. Noise is any factor that creates a barrier
to communication.
- The communication process is also influenced by the fields of experience
that is, what the participants in the communication process know about
each other and how that influences the way they encode and decode
messages.
In the case of promotion, the message is about the organisations market
offering.
OBJECTIVES OF PROMOTION
Main objective of promotion is to support the organisations overall
marketing objectives.
Promotional activities do this by influencing the consumer + business
decision-making processes (consumer behaviour and business buying
behaviour).
This involves influencing the target markets awareness, attitudes and
behaviours towards the organisations offerings.
Aims to demonstrate that the features and benefits of the organisations
products offer more value than competing offerings.
To persuade potential customers to trial its product (and thus creating
demand) through persuasive information or perhaps by providing a sample
of the product.
Marketing communications aimed at existing customers reinforce the
product or brand and encourage repeat purchases or the purchase of
other products offered by the organisation.
Loyalty programs are a common approach to retaining existing
customers.
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For a genuinely new product that is unfamiliar to the market, the
marketer will first need to create demand for the product itself, rather
than its brand specifically.
Marketing communications can be designed to increase general
awareness about and goodwill towards an organisation.
Builds a relationship between the customer and the brand.
Cause-related marketing are philanthropic activities tied to the
purchase of a product.
Sponsorship is another way that a firm can build awareness and
positive associations.
Effective promotional efforts can increase the level of support offered by
retailers.
INTEGRATED MARKETING COMMUNICATIONS
Integrated marketing communications (IMC) is the coordination of
promotional efforts to maximise the communication effect.
The goal of IMC is to consistently send the most effective possible
message to the target market. The best return on promotional efforts is
achieved when there is a high degree of consistency, and hence
synergy, across the four areas of promotion.
THE PROMOTION MIX
The promotion mix refers to the combinations of promotional methods are
used to promote a specific product.
Four elements advertising, public relations, sales promotion
and personal selling.
Advertising
Advertising is the transmission of paid messages about an organisation,
brand or product to a mass audience.
- Advertising = worth over $13 billion a year in Australia.
The main benefit of advertising is the ability it offers to reach a lot of
people at a relatively low cost per person.
While advertising is expensive, its ability to reach a lot of people makes
it cost effective based on price per exposure. It is also possible to aim
advertising at particular target markets by choosing appropriate media.
The main limitations of advertising are the difficulties in measuring its
effectiveness.
Because of its mass market approach, there is very limited
presentation and personalisation of the market message carried by
advertising.
Public relations
Public relations refer to communications aimed at creating and
maintaining relationships between the marketing organisation and its
stakeholders.
- Effective PR messages are timely, engaging, accurate and in the public
interest.
The main benefits of PR promotions are credibility, the resulting word-ofmouth communications, their low or no cost nature, and their
effectiveness in combating negative perceptions of events.
PR strategies have some limitations, however, including that many
efforts are seen by the news media as attempts to obtain free
advertising and are thus rejected.
This can result in poor exposure of the organisations PR message.
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Another limitation is that a marketing-savvy public is increasingly
cynical about the motivations of businesses when they involve
themselves in activities other than the direct marketing of their
products.
Sales promotion
Sales promotions offer extra value to resellers, salespeople and
consumers in a bid to increase sales.
- They are often used on an irregular basis to smooth demand.
The main benefits of sales promotions are to smooth out sales in periods
of low demand and to facilitate retailer support.
While sales promotions targeted at consumers are familiar and obvious,
many sales promotions are aimed at the resellers and salespeople,
rewarding them for selling the companys products or particular
volumes of products.
The main limitations of sales promotions are that they can lose
effectiveness if overused, they are easily copied and the public is
becoming increasingly cynical about whether they offer any real value or
whether they just highlight that the usual price and conditions under
which a product is purchased has a great deal of extra margin built in.
Personal selling
Personal selling refers to personal communication efforts that seek to
persuade consumers to buy products.
- Certain industries/types of products tend to favour personal selling as a
promotional activity, such as expensive, high-involvement or industrial
products.
Personal selling benefits include that the message can be very specifically
and personally tailored to the individual customer thus having greater
influence than other 3 strategies.
Personal selling also enables the marketing message to be adjusted
based on feedback given by the target of the selling effort.
Personal selling also has limitations, including that it is expensive and has
a limited reach.
During personal selling, the potential customer consumes all of the
salespersons time and effort. Personal selling is labour intensive and
time consuming.
Additionally, as consumers become more educated and informed,
efforts at personal selling are viewed with increasing cynicism.
At its worst, consumer can know more about product than does the
salesperson.
INTEGRATING PROMOTION MIX ELEMENTS
All marketing organisations have different promotional needs and finite
financial + other resources, and so must choose from competing options in
the promotion mix.
Organisations with very LARGE promotion BUDGETS will usually use
MULTIPLE promotional strategies while those with SMALLER BUDGETS will
rely on FEWER and SIMPLER strategies.
The appropriate promotion mix is likely to CHANGE OVER TIME as the
effectiveness or otherwise of the current promotional mix is evaluated.
Pull policies and push policies
A pull policy is an approach in which a product is promoted to consumers
to create demand upward through the marketing distribution channel.
Usually through advertising and sales promotion.
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This approach often reflects the business-to-consumer (B2C)
relationship.
A push policy is an approach in which a product is promoted to the next
organisation down the marketing distribution channel.
This approach emphasises a business-to-business (B2B) relationship.
Often the guide to which strategy to use is based on discovering where the
consumer decides on obtaining more information or buying the product.
ADVERTISING
Advertising is the paid promotion of a business, product or brand to a
mass audience.
- Advertising can be designed to promote either a product or an
organisation.
- Organisational or institutional advertising is aimed at promoting ideas and
images.
Competitive advertising is using advertising to promote the features
and benefits of a product relative to competing products.
Comparative advertising is using advertising to directly compare a
product against a competing product.
CREATING AN ADVERTISING CAMPAIGN
- Within the IMC strategy, the overall advertising plan is known as the
advertising campaign.
- The key steps in creating an advertising campaign are:
1. Understand the market environment
2. Know the target market (audience)
3. Set specific objectives
4. Create the message strategy
5. Allocate resources
6. Select media
7. Produce the advertisement
8. Place the advertisement (in the media)
9. Evaluate the campaign
UNDERSTAND THE MARKET ENVIRONMENT

- Marketing organisations should not view advertising in isolation, so before
major decisions are made on the advertising campaign it is important to
review the marketing environment.
- Emerging issues in the marketing environment may affect the advertising
campaign.
Refer chapter 2 MARKETING ENVIRONMENT + MARKET ANALYSIS
KNOW THE TARGET MARKET (AUDIENCE)
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-
A solid knowledge of the target market underpins all of the decisions to be

made in formulating an advertising campaign.
- Simply, if you are sending a message, it is important to know about who
you are sending the message to.
SET SPECIFIC OBJECTIVES
- A marketing organisation contemplating an advertising campaign will
probably know the overall aim of the campaign often simply to increase
sales but a successful advertising campaign needs to be based on
narrower specific communication objectives that will help contribute to the
broader overall goal.
CREATE THE MESSAGE STRATEGY
- The creation of the main message or issue to be presented in the
advertising campaign is intimately linked to knowledge of the target
market and to the specific objectives of the advertising campaign.
- To check that the message strategy is on target and likely to be effective,
many organisations pre-test their campaigns using focus groups before
committing any further resources.
ALLOCATE RESOURCES
- Marketing organisation will determine a budget for its advertising
campaign based on its financial and other resources, the objectives of the
campaign and what it expects on the return on the investment to be
(which should be achievement of objectives).
- Firm also needs to allocate human resources and time to the advertising
campaign.
SELECT MEDIA
- Options include television, radio, interne, email, newspaper, magazine,
direct mail and outdoor media (e.g. billboards).
- Two of the most important considerations in choosing media are reach and
frequency.
Reach measures the proportion of the target audience exposed to the
advertisement at least once.
Frequency measures the number of times each target market member is
exposed to the advertisement.
There can be a trade-off between reach and frequency as both cost
money to increase.
PRODUCE THE ADVERTISEMENT
- In creating and producing an advertisement, the marketing organisation
must create content (based on the message strategy) and then work out
how best to present that content.
AIDA model is a simple model that represents the response a customer
can take when engaging with an advertisement: Attention > Interest >
Desire > Action
PLACE THE ADVERTISEMENT
- The implementation of the advertising campaign involves the buying and
placement of media space and time, dedicating people and other
resources to ensuring the campaign proceeds and monitoring the
effectiveness of the campaign so that it can be improved based on initial
feedback.
EVALUATE THE CAMPAIGN
- Advertising campaigns can be evaluated before (pre-tests), during and
after (post-tests) the campaign is run.
LEGAL ISSUES IN ADVERTISING
The main regulatory issues relate to the need to be truthful and honest in
all forms of advertising and promotion, and come under the jurisdiction of
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the key provisions of the Competition and Consumer Act (2010) in
Australia.
- While some promotions undoubtedly stretch the truth or add puffery
(exaggeration), outright lying is not only illegal, but damaging to customer
relationships.
- Some industry bodies have guidelines for their members, such as for the
alcohol, health and financial sectors.
Recently, there has been growing pressure for greater regulation of
advertising.
E.g. in recent years growing calls for junk food advertisements to be
banned/strictly limited during childrens programming.
- Subliminal advertising on television is banned by the Australian
Communications and Media Authoritys Commercial Television Industry
Code of Practice.
PUBLIC RELATIONS
Public relations describe promotional efforts designed to build and
sustain good relations between an organisation and its stakeholders.
APPROACHES AND METHODS
Publicity is the unpaid exposure in the media.
More specifically, publicity is the exposure a marketing organisation
receives when it obtains free coverage in the media.
Organisations can generate publicity by promoting something
newsworthy to news media this is often done with a media release,
which is a short article written in news format and sent to news
organisations.
A related approach is to call a press conference, which is essentially the
same strategy on a grander scale, where media reporters are invited to
attend a presentation involving a speech, written materials,
demonstrations and the opportunity for questions + photos.
- Besides publicity, marketing organisations can generate good public
relations through written communications directly with stakeholders.
- Briefly, sponsorship is a paid association with an event or person.
- A further PR tool is the involvement of the company in charitable
donations or acts.
- Another major role of PR, apart from proactively presenting good news
stories, is to be reactive, countering negative publicity or managing a
crisis.
- In an economic downturn, many organisations become more subject to
negative media coverage.
SALES PROMOTION
Sales promotions refer to short-term incentives to encourage purchase
of a product by either resellers or consumers.
- They offer some extra benefit or incentive above and beyond the intrinsic
value of the product (e.g. bonuses with purchase, discount on the price
and opportunity to trial).
- Sales promotions are often used in combination with advertising.
CONSUMER SALES PROMOTIONS
- Free samples
- Discounts
- Premium offers
- Refunds
- Loyalty programs
- Rebates
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FREE
Contests
Point of purchase promotions
Coupons
Event sponsorship
SAMPLES
Free sample is a sample of a product provided for free to consumers so
they can experience the benefits and features of the product without
having to commit to a purchase.
Free samples remove any monetary disincentive to trial a product.
PREMIUM OFFERS
Premium offers are bonus products given for free or sold at a heavily
discounted price when another product is purchased.
LOYALTY PROGRAMS
Loyalty programs refer to schemes that reward customers based on the
amount they spend.
The rewards can be discounts, vouchers, free gifts and so on.
CONTESTS
- Contests are effective in promoting product benefits and allow
organisations to build a database of members of their target market.
COUPONS
- Coupons are vouchers that offer consumers a discount price on a product
or service.
E.g. Shop-A-Docket.
DISCOUNTS
Discount offers provide a certain amount off the regular price.
REBATES
Rebates are the return of some of the purchase price to consumers upon
presentation of proof of purchase.
- To the consumer they result in a similar price to a discount, but they offer
several advantages to the marketer over discounts:
Any regret or second thoughts the consumer might experience after
purchase is softened by the receipt of cash.
The consumer needs to apply for the refund ad usually has to give up
some personal information when making the application.
Some consumers will not bother to claim the refund (whereas no
consumers turn down a discount and ask to pay full price).
POINT OF PURCHASE PROMOTIONS
Point of purchase (POP) promotions includes signage and displays in
stores and free product trials or demonstrations in stores.
EVENT SPONSORSHIPS
- E.g. Exclusive merchandise deal, where sponsor has sole right to sell
products at venue.
TRADE SALES PROMOTIONS
- Trade sales promotions present products to business customers and
stimulate the products movement through the marketing channel.
- Examples include:
Conventions and trade shows
Sales contests offer rewards to marketing intermediaries that sell at a
certain level or sell the most of a particular product in a particular
timeframe.
Trade allowances aim to encourage marketing intermediaries to stock
and push the marketers products. They essentially give marketing
intermediaries price discounts, refunds or contributions towards
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promotional efforts in return for stocking and promoting a producers
products.
Gifts and premium money free merchandise or monetary rewards
given to resellers once they purchase and/or sell a particular volume of
product.
Cooperative advertising cooperative advertising shares the media
costs between manufacturers and retailers for advertising the
manufacturers products.
Dealer listings these involve the manufacturer promoting the
retailers that carry their products, thus influencing retailers to stock the
products, building traffic at the retail level, and encouraging consumers
to shop at participating dealers.
PERSONAL SELLING
Personal selling is the use of personal communication with consumers to
persuade them to buy products.
Most expensive form of promotion but has strong advantages over
impersonal strategies
A MODEL OF PERSONAL SELLING
- INPLCF information, needs, product, leverage, commitment or close,
follow-up.
Information
- Gathering information includes developing a list of potential customers, a
process known as prospecting.
Needs
- In finding out the needs of the customer, the salesperson should begin to
build a relationship with the customer.
Product
- Once salesperson knows what customers needs are, they should present
the product in such a way as to highlight how the product features match
those needs.
Leverage
- The salesperson should highlight comparative and competitive advantages
for product.
Commitment or Close
- The stage in the selling process when the salesperson asks the prospect to
buy the product.
Follow-up
- Customer loyalty can be encouraged by following up with customers.
- Follow-up should determine if the delivery + setup of the order was
completed to the customers satisfaction.
- Follow-up also helps reduce post-purchase dissonance.
MANAGING A SALES FORCE
Salespeople are the public face of a business.
The following are the key tasks that a sales manager will likely need to
undertake:
Establish sales force objectives and targets
Determine the appropriate size + location of the sales force
Recruit and train sales people
Assist sales people to effectively manage their time
Monitor and motivate performance
Compensate salespeople
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ADDITIONAL FORMS OF PROMOTION

AMBUSH MARKETING
Ambush marketing is the presentation of marketing messages at an
event that is sponsored by an unrelated business or a competitor.
The aim is to grab attention away from the official sponsor, and be
newsworthy.
Marketers considering sponsoring events need to defend themselves
against ambush marketing, including assessing risk and sponsorship
value.
Major events will take steps to reduce impact and protect sponsors.
- Although similar in that they are trying to get attention, there is a
difference between ambush marketing and guerilla marketing.
Ambush marketing is usually related to an event and official sponsors,
while guerilla marketing is more about getting the attention of
customers.
GUERILLA MARKETING
Guerilla marketing is the use of an aggressive and unconventional
marketing approach to grab attention.
Its aim is simply to grab the attention of consumers when they are
unaware, and create some goodwill and publicity in both traditional and
social media.
Its effectiveness relies on its ability to take it target unawares they
dont expect it, so they dont filter it out.
The use of flash mobs has been a successful guerilla tactic.
PRODUCT PLACEMENT
Product placement is the paid inclusion of products in movies, television
shows, video games, songs and books.
The product is portrayed or mentioned in context as part of the story
line of the show, usually in a positive or at least neutral way.
Product placement of one product/brand often also involves the
exclusion of competitors products and brands.
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- Somewhat related to a product placement is a plug.

A plug is when the media overtly promotes a product within a program
rather than as a separate advertisement.
E.g. Better Homes & Gardens recommends a type of paint to use for a
DIY project.
VIRAL MARKETING
Viral marketing is the use of electronic social networks to spread a
marketing message.
- Spreading can occur via word-of-mouth, the sharing of links, and so on.
- The flipside of viral marketing is that it can go very wrong (i.e. backfire).
Viral marketing campaigns can also be hijacked.
- Commercial benefits are difficult to measure.
PERMISSION MARKETING
Permission marketing is the marketing that aims to build an ongoing
relationship with customers.
Term given to the activities that are centred around/on obtaining
customer consent to receive information and marketing material from a
company.
With permission-based marketing, marketers actually ask and gain
permission to contact the customer. This reduces waste and may
encourage genuine customers who want to opt-in and be informed
about new stock or sales.
SPONSORSHIP
Sponsorship is the paid association of a brand with an event or person.
- Australasian Sponsorship Marketing Association member Jann Kohlmann
has warned potential sponsors to be aware of four emerging issues with
sponsorship:
1. Media fragmentation
2. Consumer cynicism
3. Social consciousness
4. Environmental awareness
STATUTORY REGULATION OF ADVERTISING AUSTRALIAN CONSUMER
LAW
ACL Section 18: prohibition on misleading and deceptive conduct or
conduct likely to mislead and deceive by persons engaged in trade or
commerce
Relevant examples may include:
Comparative advertising
Use of celebrities in advertising
Similar or identical brands or business names.
Matters to consider:
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THE
What is the relevant target audience of the advertisement?

What message is being conveyed to the target audience?
Is the message true or false?
COMMON LAW AND ADVERTISING
Law of contract:
Breach of contract (where purchaser can show he or she entered a
contract based on a false statement)
Law of torts:
Tort of deceit
Negligence
Tort of injurious falsehood
Passing off
Defamation
Right of privacy
Right of publicity
Lecture 9 Distribution (Place)

Chapter 10 Distribution (Place)
Understand the concept of place and how distribution channels connect
producers and buyers
Describe the major activities involved in the distribution of goods
Describe the major activities involved in the distribution of services
Understand the major aspects of retailing
Explain the role of agents and brokers in the distribution channel
Explain the role of wholesalers in marketing distribution.
MARKETING CHANNELS
- Many manufacturers and service businesses deal directly with the
consumers of their products.
This approach to marketing is known as DIRECT distribution and it is
particularly common for service products, as services are directly tied
to the service provider.
- Conversely, many producers, especially makers of physical products, rely
on other organisations and individuals to help them get their product to
end users.
This approach is known as INDIRECT distribution and the main
organisations and individuals who act in the distribution chain between
the producer and end user are known as marketing intermediaries.
Marketing intermediaries refer to the individuals or organisations that
act in the distribution chain between the producer and end user.
The key marketing intermediaries are industrial buyers, wholesalers,
agents and brokers, and retailers.
- The path from the manufacturer or service provider to the end user is
known as the distribution channel or marketing channel.
Distribution channel refers to a group of individuals and organisations
directing products from producers to end users.
INTERMEDIARIES
- When they are well managed, effective intermediaries operating in
distribution channels achieve the following benefits.
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1. Time utility make products available to the consumer at the time that
the consumer wants to purchase them.
2. Place utility make products available in the locations that the consumer
wants to purchase them.
3. Form utility customise products to the consumers particular needs.
4. Exchange efficiencies make transactions as efficient, simple and
cheap as possible for consumers, producers and other intermediaries by
establishing and managing efficient exchange processes.
- Conversely, when poorly managed, or inappropriately chosen, marketing
intermediaries can add to costs, reduce efficiency, create delays and
cause frustration.
Consumers are often wary of intermediaries, believing they are
middlemen who add no value but increase the price they must pay for
products.
Some producers blame intermediaries for every problem they face and,
like consumers, can feel they add little value to the marketing process.
Figure the benefits of using distribution channel intermediaries

DISTRIBUTION
In choosing a distribution channel, the producer needs to first consider the
way in which its product can best be marketed, so that the supply chain
from producer to consumer effectively becomes a VALUE chain.
Market coverage decision takes into account nature of the product and its
target market.
Intensive distribution is an approach to market coverage that
distributes products through every suitable intermediary.
Exclusive distribution is an approach to market coverage that
distributes products through a single intermediary in any given geographic
region.
Selective distribution is an approach to market coverage that
distributes products through intermediaries chosen for some specific
reason.
INTENSIVE distribution is an obvious strategy for everyday purchases such
as milk.
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EXCLUSIVE distribution is generally used for products that are only

purchased after a great deal of deliberation by the consumer of where
exclusivity adds to the appeal of the product.
SELECTIVE distribution falls somewhere between intensive and exclusive
distribution.
It is most appropriate for goods that require some degree of
deliberation by the consumer and where the consumer might visit
multiple stores to compare prices and products. SELECTIVE distribution
is often chosen when the intermediary can provide some specific valueadding function to the producers offering.
PLACE LAWS
- Prevent suppliers from imposing unreasonable restraints on distributors,
e.g.
Exclusive dealingrestricting products that a distributor may sell
Territorial restraintsrestricting the area in which a distributor may
operate
Customer restraintsrestricting the customers with which a
distributor may deal
CONSUMER PRODUCT DISTRIBUTION CHANNELS
In distribution channel 1, the producer deals directly with the consumer.

E.g. Dominos Pizza.
This model has increased in use in recent years and is expected to
continue to grow as more consumers use the web to research and
ultimately purchase products.
o In distribution channel 2, producers provide their products directly to
retailers for sale to consumers. Both Dell and Apple use this strategy as
well as the strategy in channel 1.
Many small boutique producers use this strategy.
o In distribution channel 3, producers sell to wholesalers who then sell on to
the retailers.
This is a common choice for goods that are sold in high volumes
through numerous retailers.
o Distribution channel 4 is a common choice for exports, where the
complexities of dealing with different legal, regulatory and cultural factors
suggest an experienced and skilled agent will be able to more effectively
deal with intermediaries in the foreign market.
o
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It is also used for mass marketed products where the producer believes
an agent can more effectively sell the products to wholesalers.
o Distribution channel 5 is commonly used in the financial services industry.
BUSINESS-TO-BUSINESS PRODUCT DISTRIBUTION CHANNELS
Strategy in distribution channel 1 accounts for the majority of B2B product

transactions.
Business buyers often want to deal directly with the producer so they
can be sure of direct access to information and assistance. Also, for
customised products.
o Distribution channel 2 features an industrial distributor.
Industrial distributors play roughly the same role in the B2B product
channel as retailers do in the consumer product distribution channel.
o Distribution channel 3 features an agent.
An agent in the B2B products market is an intermediary who plays
matchmaker between producers and organisational buyers and is paid
a commission on the sales they bring to the producer.
o Distribution channel 4 combines channels 2 and 3.
The agent takes a commission on sales it secures with industrial
distributors.
The industrial distributor then sells to organisational buyers.
SUPPLY CHAIN MANAGEMENT
Supply chain management is an approach to managing marketing
channels based on ongoing partnerships among distribution channel
members that create efficiencies and deliver value to customers.
Reduce costs, eliminate redundant processes, and develop new ways to
deliver value to customers.
- Formally, the supply chain consists of the producer and marketing
intermediaries as well as all of the other parties that play direct or indirect
roles in getting products to consumers, wholesalers and retailers.
DISTRIBUTION CHANNEL PARTNERSHIPS
Distribution channels work most effectively when the different parties
agree on goals and processes and then cooperate to implement them.
When one member of the distribution channel can exert power over the
ability of other members of the channel to achieve their goals, that
powerful member is known as the channel captain and is said to have
channel power.
A distribution channel is only effectively when all channel members
benefit from their involvement.
o
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-
Disagreements, misunderstandings and miscommunication all have the

potential to create conflict within a marketing channel.
The more parties that are involved in a marketing channel, the greater
the potential for conflict.
E-commerce benefits and detractions
The emergence and rise of online selling, in particular, has unsettled
many formerly stable marketing channels.
The web provides a relatively easy way for producers to sell directly to
consumers.
CHANNEL INTEGRATION
Within any existing channel, it is possible to redistribute particular
responsibilities and obligations between different channel members. This
is known as channel integration.
Horizontal channel integration is bringing organisations at the same
level of operation under a single management structure.
E.g. horizontal channel integration occurs when a retailer buys out a
competitor.
Vertical channel integration is bringing different stages of the
distribution channel under a single management structure.
E.g. vertical channel integration occurs when a wholesaler buys a
retailer or a transport business.
Vertical marketing system is a distribution channel in which all stages
occur under a single management structure.
Australia Post is an example of a VMS.
FRANCHISING
Franchising is an approach to business in which one party (a franchisor)
licenses its business model to another party (a franchisee).
- In franchising, the franchisor:
Licenses the right to use its business model or to sell its product.
Provides services such as advertising, business know-how and supplier
networks.
Stipulates standards and rules by which the franchise business must
operate.
Sometimes promises exclusive rights to a particular geographic area.
- And the franchisee:
Pays the franchisor a fee and/or percentage of sales receipts.
Supplies labour and capital.
Operates the business in accordance with the conditions of the
franchise agreement.
DISTRIBUTION OF GOODS
Physical products need to be moved from producers to consumers via a
number of activities that are collectively known as physical distribution.
Physical distribution involves ORDER PROCESSING, INVENTORY
MANAGEMENT, WAREHOUSING and TRANSPORTATION.
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ORDER PROCESSING
Order processing is the term used to describe all of the activities
involved in managing the information required to receive, handle and fill a
sales order.
Efficient order processing is important to minimise costs and ensure
customer satisfaction.
Order processing is usually most efficient when computerised systems
are involved, but paper-based order systems are still common and their
relative simplicity and low cost are significant advantages for smaller
businesses.
Order processing begins when a customer or salesperson (on behalf of a
customer) places an order.
The next step is order handling, which involves checking that the terms
of the purchase are acceptable and that the product is in stock.
When order details and product availability are verified, the order will
be assembled and shipped, and the company records will be updated
to reflect completion of purchase.
INVENTORY MANAGEMENT
Inventory management involves managing stocks of products to ensure
availability to customers while minimising holding costs.
- Most businesses manage inventory by developing a trigger to reorder (the
reorder point). This is based on:
Order lead time the usual time between placing an order and
receiving the stock.
Usage rate how much stock is sold during a particular period of time.
Safety stock a quantity of stock held to cover unexpectedly high sales
and/or unexpectedly long order lead times.
Just-in-time (JIT) is an approach to inventory management that involves
holding only that stock that is about to be used or sold.
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This requires a high level of supply chain visibility, which refers to the
availability of comprehensive and up-to-date information about all
aspects of the supply chain.
WAREHOUSING
Warehousing is the use of facilities (generally a building) to store and
move goods.
Effective warehouse operations enable businesses to hold surplus stock
until customers require it and to hold a level of safety stock to ensure
unexpected demands can be met.
Appropriate type of warehousing facilities is determined by the nature
of the products, the location of suppliers and customers, and the types
of transportation to be used.
- The increasing incidence of DIRECT links between producers &
consumers (due to internet), increasing DEMAND for CUSTOMISED
products and the increasing speed for innovation that quickly
renders products obsolete are all factors working against the use of
company-owned warehouses.
Distribution centre is a warehouse focused on moving rather than
storing products.
Cross-docking is the practice of expediting the movement of goods from
receipt to shipping.
Materials handling is the physical handling of goods.
At its best, CROSS-DOCKING eliminates the storage component of
warehousing.
As such, it is most suited to fast-moving consumer goods do not
require safety stock.
- Cross-docking is facilitated by:
Products designed with cross-docking in mind
Protective packaging that reduces or eliminates the need to check the
state of the products on receipt
Packaging that is suitable for sale, eliminating the need for repacking.
Labelling that can be computer-read and is suitable for retail use
Close cooperation, communication and coordination between the
suppliers, distribution centre and customer.
Material handling strategies include efficient unloading, storing, packing,
labelling & loading.
- Issues to be considered in materials handling include:
The use of standard pallets to enable machinery to efficiently move
products
Use of standard containers to hold many small items to enable their
efficient transport
Special demands due to the nature of the product such as safety
measures.
TRANSPORTATION
Transportation is the process of moving products from their place of
manufacture to their place of consumption.
The key modes of transportation are:
ROAD transports, RAIL transports, SEA freight, AIR freight and
PIPELINES.
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-
Most distribution channels coordinate multiple modes this is intermodal

transportation which relies on the use of standard shipping containers and
container handling equipment.
Freight forwarders refer to specialist transportation businesses that
combine cargo from different businesses in order to achieve efficient load
sizes.
TECHNOLOGY IN PHYSICAL DISTRIBUTION
E-distribution is often used to describe the full implementation of
advanced telecommunications technologies in the physical distribution
process.
Offers efficiencies internally and externally.
Radio frequency identification (RFID) technology involves attaching
small electronic tags to items or containers, enabling their movements
within a goods handling facility to be tracked down to a matter of
centimetres.
DISTRIBUTION OF SERVICES
There are some key differences and similarities between service
distribution and physical distribution:
Physical distribution is required for the physical inputs used in
producing and delivering the service product.
Some services are delivered using infrastructure.
Service businesses must ensure that the labour is available at the right
time and in the right quantities to ensure customers can be served.
PHYSICAL INPUTS
o Creation & delivery of most service products requires physical inputs. The
service business must ensure that the various physical inputs it needs to
deliver the service are available.
DELIVERY INFRASTRUCTURE
o Some services are distributed via a physical infrastructure.
For example, the electricity supply to your home is delivered via an
extensive network of above-ground, underground and under-sea
cables.
SCHEDULING
o Scheduling in service businesses is designed to smooth demand.
Service businesses must manage their capacity to ensure customers
can be served but that there is not excess labour.
RETAILING
Retailing refers to any exchange in which the buyer is the ultimate
consumer of the product.
Retailing excludes transactions in which the buyer intends to resell
the product or use it in the making of another product.
RETAILING STRATEGY
There are two aspects to retailing strategy:
1. The marketing organisation must decide what retailing approach (or
approaches) is suitable for its products.
2. The retailer must decide on location and positioning.
LOCATION
For traditional stores, location is critical as it determines the following:
The natural geographic area from which customers will be drawn
retailers should locate their store close to their target customers.
Proximity to competitors retailers might try to choose to be removed
from competitors or to be close to them.
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Proximity to complementary retailers groups of stores, if they are

the appropriate mix, can draw more customers overall than any of the
stores could manage by themselves.
Customer access to public transport and public parking
convenient for the customer.
- Options tend to be:
The CBD offers a high density of people and a degree of prestige, but
also very high tenancy costs and parking problems.
Free-standing structures.
Neighbourhood shopping centres in residential areas and comprise a
small cluster of convenience and specialty stores.
Community centres designed to serve few suburbs, includes department
+ specialty stores.
Regional centres in major metropolitan or regional areas but targets
people from afar.
RETAIL POSITIONING
Retail positioning refers to the practice of identifying a gap in the
market and targeting it by creating some distinguishing feature in the
mind of customers.
A stores image is an important factor in attracting customers and
positioning the store against competitors.
BENEFITS OF RETAILERS
- Marketing intermediaries are useful when they add value to the
distribution chain.
Retailers add value for customers and producers by creating or
providing the following:
time utility (e.g. 24hour supermarket)
place utility (e.g. corner shop)
form utility (e.g. hifi store)
some retailers can customise products to the consumers particular
needs + preferences
advice and personal service (e.g. Harvey Norman)
retailers are geared to deal with customers 1-on-1, providing advice
and personal service
exchange efficiencies (e.g. David Jones)
Retailers reduce the number of the parties that producers +
wholesalers must deal with and reduce the number of sellers that
consumers must deal with.
Retailers can offer consumers a wide range of products from numerous
producers all in 1 place.
Can be a mixture of time, place, form, advice/personal service.
TYPES OF RETAILERS
Specialty retailers usually carry just one or a small number of different
types of products, but within that product line, they carry a great deal of
variety.
The main specialty retailers are specialty stores, category killers, offprice retailers and pop-up shops.
General-merchandise stores offer a variety of products.
The main general-merchandise retail stores are convenience stores,
showrooms, department stores, discount stores, supermarkets,
superstores and hypermarkets.
THE WHEEL OF RETAILING THEORY
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The wheel of retailing is the theory that retailers enter the market with
low costs, low margins and low prices, but move to high costs and high
prices as they seek to compete with copiers, only to then have to compete
with new low-price entrants.
- According to the wheel of retailing theory:
Retailers enter the market using some innovation to achieve low costs
and use that to charge low prices.
Other new + existing retailers copy the low-cost innovation and
compete directly with the new entrants.
To distinguish itself, the retailer adds extra services, improves its
location and store image, and so on, which results in higher costs +
prices.
New retailers enter the market using some new innovation to achieve
low costs and then compete with the original, now high-priced, retailer.
ONLINE RETAILING
Online retailing (or e-tailing) involves selling to customers via the
internet.
There are generally 2 types of online retailers those that exist only
online or online in combination with other direct marketing avenues;
and those that operate an online store as a complement to their
physical store.
Mobile e-commerce refers to the use of a mobile phone to make
purchases.
OTHER FORMS OF RETAILING DIRECT MARKETING
Direct marketing is a type of non-store retailing that promotes and sells
products via mail, telephone or the web.
Mobile ecommerce is an example of direct marketing.
The main types of direct marketing are online retailing, telemarketing,
catalogue marketing, television shopping and direct response
marketing.
TELEMARKETING
Telemarketing is the performance of marketing-related activities over
the telephone.
CATALOGUE MARKETING
In catalogue marketing, the marketing organisation provides a
catalogue to customers who then place their orders by mail, telephone or
the internet.
Catalogue marketing offers customers all the convenience of online
shopping.
DIRECT-RESPONSE MARKETING
Like catalogue marketing, direct-response marketing requires
customers to use the mail, internet or telephone to make a purchase.
The difference is that instead of catalogues, direct-response
marketing uses advertising, such as a brochure in a mailbox, spam or
a television advertisement.
ONE-TO-ONE OR NONE-TO-ONE?
DOOR-TO-DOOR SELLING
Door-to-door selling, sometimes known as direct selling, is an approach
taking its name from the old practice of a salesperson walking door to
door to promote products to people at home.
Today a modified version, whereby potential customers are more
strategically selected, is more common.
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Usually, customers are identified through some other means and then
an appointment is made for a visit by a salesperson.
AUTOMATIC VENDING
Automatic vending refers to the use of machines to dispense a product;
used for small, routinely purchased products.
The main benefits of automatic vending are that the product can be
bought by the consumer without any immediate interaction with staff
of the marketing organisation.
However, vending machines are expensive, require regular
maintenance and restocking. They are subject to vandalism and they
are impersonal no sense of loyalty is involved.
AGENTS AND BROKERS
AGENTS
Agents refer to the marketing intermediaries engaged by buyers or
sellers on an ongoing basis to represent them in negotiations with other
parties in the marketing channel.
The main types of agents are:
Manufacturers agents act in a similar way to a salesperson for
multiple producers, selling specified, non-competing products in a
particular region under standard terms + conditions.
Selling agents commonly used by small producers that cannot afford a
salesforce or marketing department. They usually work for multiple
producers, but do not take on competing products.
Buying agents make specialist purchases and handle goods for longterm partners, such as retailers.
Commission merchants receive goods on consignment and negotiate
the best possible price in centralised markets.
BROKERS
Brokers are the marketing intermediaries engaged by buyers or sellers on
a short-term or one-off basis to represent them in negotiations with other
parties in the marketing channel.
They have a more limited role than agents, but their value is in their
specialist knowledge and well-established contacts in the industries in
which they work.
- Well known examples of brokers are real estate salespeople, insurance
brokers, mortgage brokers and stockbrokers.
- Business of many brokers has changed over past decade due to
emergence of e-commerce.
WHOLESALING
Wholesaling comprises the exchanges in which products are bought for
resale, for use as inputs in other products, or for some other use in a
business.
MAJOR WHOLESALING FUNCTIONS
Wholesaling tasks include (for the producer, retailers):
Act as a salesforce, promoting and selling its products to retailers.
Hold and manage inventory, relieving the producers warehousing and
transport burden
Assume the risk when retailers are given products on credit
Provide cash flow by paying for and taking possession of inventory
shortly after it is produced
Communicate producer and market issues to retailers
- For the retailer, wholesalers:
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Manage distribution
Help choose and source appropriate inventory
Have bulk buying power and the ability to negotiate good deals with
producers
Provide access to a wide range of goods through one business
partnership
Can provide sophisticated technology solutions to manage ordering
Can provide credit
Communicate market and retail issues to producers
TYPES OF WHOLESALERS
MERCHANT WHOLESALERS
Merchant wholesalers are independently owned wholesaling businesses
that take title to products.
They take ownership of the product from producers and sell it on to
retailers.
Merchant wholesalers are either full-service wholesalers or limitedservice wholesalers.
FULL-SERVICE WHOLESALERS
Full-service wholesalers perform the full gamut of wholesaling
activities, and retailers and producers rely heavily on them for numerous
services. They are one of the following:
General-merchandise wholesalers wholesalers that carry a wide
variety of product lines, but relatively little depth within those product
lines.
Limited-line wholesalers wholesalers that carry only a few different
product lines, but have considerable depth in each line.
Specialty-line wholesalers wholesalers that carry a single product line
and only a few items within that line.
LIMITED-SERVICE WHOLESALERS
Limited-service wholesalers specialise in a narrow range of wholesaling
services, leaving it to producers and retailers to perform for themselves
any of the functions provided by full-service wholesalers. For example:
Cash and carry wholesalers wholesalers that supply a limited number
of lines of high-turnover products to small businesses, which pay in
cash and transport the products themselves.
Drop shippers wholesalers that purchase from producers and sell to
retailers, but organise shipment directly between these two parties
rather than take possession of the products.
Mail-order wholesalers wholesalers that use catalogues and mail or
courier-services rather than salespeople and their own transport to
promote, sell and deliver goods to retailers.
MANUFACTURERS WHOLESALERS
Manufacturers wholesalers are wholesalers owned by the producer.
- Also known as manufacturers sales branches or sales offices.
- Owned by the producer itself and thus, represent a form of VERTICAL
INTEGRATION.
Lecture 10 Services Marketing

Chapter 11 Services Marketing
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Explain the importance of the service sector to the Australian and New
Zealand economies.
Describe how to develop and manage an effective marketing mix based on
the unique characteristics of services.
Appreciate the major challenges in the marketing of services.
SERVICE-DOMINANT ECONOMIES
- Service industries generate about 70% of the national incomes of Australia
and NZ.
Accordingly employ the majority of the workforces of both countries.
SERVICES AND SERVICE
Services are the activities, performances or benefits that are offered for
sale, but which involve neither an exchange of tangible goods nor a
transfer of title.
Service is the act of delivering a product (whether it is a good or services
product) involving human, intellectual or mechanical activity that adds
value to the product.
Service-dominant logic
- All products should be seen as means to an end that of providing value
to the consumer.
- The value derives from the use of the product that is, the service the
product provides the value in use.
- The value is co-created in the interaction between customers, service
providers, suppliers, distributions and other participants in the service
interactions.
SERVICE PRODUCT CLASSIFICATION
CONSUMER SERVICES
Consumer services refer to those services purchased by individual
consumers or households for their own private consumption.
E.g. airlines, banking, finance, hairdressing, hotel accommodation and
restaurants.
- During periods of economic growth, demand for services tends to
increase.
- During tougher economic times, demand for many services drops away.
Some services, however, are counter cyclical e.g. during periods of
higher UE, the demand for higher education and training services tends
to increase.
- Lifestyle changes over the years have also created demand for new
services.
E.g. emergence of dual income families has created demand for child
care services.
- Technological change = opportunity for service providers (e.g. eBay)
BUSINESS-TO-BUSINESS SERVICES
Business-to-business services refer to those services purchased by
individuals and organisations for use in the production of other products or
They include services provided by lawyers, accountant, advertising
agencies, engineers and management consultants.
- For many organisations, an important question in the delivery of their core
service products is whether or not to rely on their permanent full-time
workforce.
- Alternatively, they can use specialist outside service providers as
contractors. Outsourcing tends to go hand in hand with downsizing.
UNIQUE CHARACTERISTICS OF SERVICES
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4 characteristics intangibility, inseparability, heterogeneity and
perishability.
INTANGIBILITY
Intangibility refers to the characteristic of lacking physical form.
Services cannot be easily perceived by the five physical senses.
Most products contain elements of both goods AND services
therefore, products are better described as sitting on a continuum with
purely tangible goods at one end and purely intangible services at the
other.
- The inability of a customer to examine a service before they purchase it
increases their feelings of uncertainty and risk about the purchase.
There are several strategies that marketers can employ to reduce the
uncertainty that potential customers feel.
1. Marketers can use tangible clues (such as logos, staff uniforms,
architecture and dcor) to communicate the desired image of the
intangible service. This tangible evidence will serve as both a promise and
a reminder of the otherwise intangible service.
2. Reduce the level of risk perceived by customers through techniques such
as service guarantees, testimonials and positive word-of-mouth.
A service guarantee offers the potential customers the knowledge that
they can obtain some course of redress should the service not live up
to expectations.
Testimonials provide potential customers with the confidence that other
individuals or organisations have been happy with the service provided.
3. Take the time to engage with clients.
The intangible nature of services, in many cases, makes them more
difficult for customers or clients to imagine and understand.
INSEPARABILITY (OR SIMULTANEITY)
Inseparability refers to the characteristic of being produced and
consumed simultaneously.
Buyers and sellers are frequently co-producers.
Service has to be provided when and where the client needs it.
Services are specific and cannot be massproduced.
Providers need to be concerned with their technical skill and customer
service delivery; may need to promote via personal selling.
Delivering services facetoface promotes trust.
- Because the service cannot be separated from the person who provides it,
this implies that many service organisations depend on their people for
their existence.
- The inseparability of services means that, usually, the service provider and
consumer have close interpersonal interaction.
- An implication of the simultaneous production and consumption is that
many services, particularly professional services, are provided
INDIVIDUALLY.
HETEROGENEITY
Heterogeneity refers to the inevitable, but minimisable, variations in
quality in the delivery of a service product.
Impossible to guarantee PERFECTION every time.
Quality perception depends on the relationship.
Key strategies to overcome heterogeneity include:
To develop service delivery systems. E.g. MacDonalds
To manage the expectations of customers
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To invest heavily in staff training
To select customers carefully
For service marketers, the challenge is to provide a product with a
reasonably consistent level of quality that matches customers
expectations.
PERISHABILITY
Perishability refers to the ability to store services for use at a later date.
The challenge that perishability presents to marketers is to balance
supply and demand over time in such a way as to maximise
profitability.
Strategies that allow marketers to balance supply and demand include:
Managing demand over time (levelling demand) because services cant
be stored to match the expected fluctuations in demand over time, it is
appropriate for the organisation to seek to level out the fluctuations in
demand over hours in the day (e.g. energy consumption), days in the
week (e.g. parking in city) or months in the year (e.g. holiday travel).
This may be best achieved by persuading customers to change the
time at which they use the service.
Stimulate demand it is appropriate to stimulate demand when the
organisation has excess capacity to deliver services.
Restrict demand the objective is not so much to reduce demand but
rather to manage when it occurs.
Increase or decrease supply capacity particularly suitable approach if the
periods of high and low demand are reasonably predictable.
In circumstances where demand would otherwise fluctuate over time,
FLEXIBLE PRICING can be employed to ensure that demand and supply are
balanced as far as possible.
THE EXTENDED SERVICES MARKETING MIX
PEOPLE
People are those coming into contact with customers who can affect
value for customers the organisations staff; the customer or client being
served; and other customers or clients either directly or indirectly involved
in the service experience.
Most controllable factor in service delivery is the organisations STAFF.
- It is essential that the organisation chooses staff who are:
Technically competent
Able to deliver high standards of customer service
Able to promote products through personal selling.
PROCESS
Process refers to the systems used to create, communicate, deliver and
exchange an offering.
- The key concern is that the process delivers the service in a way that at
least matches the customers expectations ideally, performance should
exceed the customers expectation.
- As a generalisation, customers usually have two kinds of expectations:
Functional expectations expectations of technical delivery of the
service transaction.
Customer service expectations expectations that relate to the
service experience and the social interaction between the customer
and service provider.
PHYSICAL EVIDENCE
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Physical evidence refers to the tangible cues that can be used as a

means to evaluate service quality prior to purchase.
Physical environment includes architectural design, floor layout,
furniture, dcor, shop or office fittings, colours, background music and
even smell.
SERVICES MARKETING CHALLENGES
There are three key issues which, arguably, make the marketing of
intangible services more challenging than the marketing of tangible goods.
1. Achieving a sustainable differential advantage in marketing services.
2. Managing profitable customer relationships.
3. Delivering consistently high levels of customer service.
MANAGING DIFFERENTIATION
Innovations can be immediately replicated by competitors.
Services cannot be protected by legal patents.
Thus, it is difficult to achieve lasting product differentiation in service
industries.
THE POWER OF RELATIONSHIPS
- Developing and maintaining profitable relationships with target customers
of customer segments is the key to longterm survival for organisations.
Professional service providers manage their customers closely as
individuals.
Consumer service providers (i.e. restaurants) typically provide a
consistent and standardised service offering.
Churn refers to high customer turnover.
For many service providers, the problems of CHURN together with low
average transaction volumes and values mean that many customers
may never be profitable.
Contracts reduce customer churn by locking consumers in.
- Acquisition Costs
Cell Phone $150$300, credit card $50$100
DELIVERING CONSISTENT CUSTOMER SERVICE QUALITY
Search qualities can be evaluated prior to purchase, such as colour, size
and smell.
Experience qualities are evaluated during and after the service delivery
include a theatre performance, hairstyling or restaurant service.
In delivering high levels of customer service, organisations need to
consider 4 key issues:
1. Understand customers expectations
2. Establish service quality standards
3. Manage customers service expectations
4. Measure employee performance.
UNDERSTAND CUSTOMERS EXPECTATIONS (EVALUATING QUALITY 5
DIMENSIONS)
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CREDENCE QUALITIES
- Based on evaluation of the service providers trustworthiness, integrity
and professionalism.
In some circumstances, consumers cannot even assess the quality of
the service after they have consumed it.
Examples medical surgery, legal advice, investment advice.
The below figure illustrates the use of search, experience and credence
qualities in the evaluation of products.
MANAGING EXPECTATIONS
ESTABLISH SERVICE QUALITY STANDARDS
- Based on what factors the customers hold most important (fast versus
perfect?).
MANAGE CUSTOMERS SERVICE EXPECTATIONS
- Because services are typically intangible and frequently variable in quality,
it is important that service marketers actively manage customers
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expectations so that customer service delivery will consistently fall
within customers zone of tolerance.
- In instances of poor service, management needs to ensure service
recovery. Ideally, ensuring that, as far as reasonably possible, no
customer leaves a service providers premises dissatisfied and in a mood
to tell their friends.
MEASURE EMPLOYEE PERFORMANCE
- Having established expectations, management needs to ensure customer
service staff members can meet these expectations consistently.
Lecture 11 Digital, Social and Non-profit Marketing

Chapter 12 Digital Marketing
identify digital marketing activities
explain the unique characteristics of digitalmarketing
explain specific digitalmarketing methods
appreciate ethical and legal issues relating to digitalmarketing
discuss the role of digitalmarketing in an overall marketing strategy
DIGITAL MARKETING
Digital marketing refers to the activities involved in planning and
implementing marketing in the electronic environment.
- Examples of digital marketing include:
Sale of products via an e-commerce website
The texting of potential customers about a new offer or sale
Email sent to an existing customer asking them to click a link to
participate in a survey for the opportunity to win a prize.
Provision of info, examples and testimonials via social networks
Use of magazine advertising to encourage consumers to subscribe to
an SMS horoscope service.
Inclusion of discount vouchers on takeaway food websites that
encourage people to visit the website, knowing they will be able to
access a lower price as a result (e.g. Dominoes)
DIGITAL MARKETING CONSUMERS
- Main advantage to consumers is convenience e.g. 24/7 internet access.
- Disadvantages for the consumer are the inability to physically examine the
product before making the purchase, risk of credit card fraud and lack of
personal service.
DIGITAL MARKETING ORGANISATIONS
- Advantages for organisations:
Access to global market
Reduced costs.
- Disadvantages for organisations:
Potentially much greater competition.
Some specific target markets (e.g. remote areas) have low rates of
internet access.
Consumers concerned about security and the possibility of online fraud
or deception.
CHARACTERISTICS OF DIGITAL MARKETING
PROFILING
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Profiling refers to the process of getting to know about potential

customers before they make a purchase and to find out more about
existing customers.
- Marketing organisations can gather information about their customers in
the digital environment through the following methods:
Requiring registration to access a website.
The use of cookies on websites small pieces of software written to
a users computer when they visit a website. They send info back to the
website operator.
Competitions these usually require personal information.
Information is usually stored in a database or data warehouse.
INTERACTION (AND COMMUNITY)
Interaction refers to the ongoing exchange of information between
marketer and customer (or potential customer).
- Interactivity can occur in many ways, including the following:
Virtual customer service officer responds to customers enquiries
and comments with tailored answers.
Real customer service officer responds to the website visitor in
real time.
Email newsletters and RSS feeds helps maintain brand awareness
in customers mind.
Survey participation surveys help marketers find more about their
target market.
Online communities virtual meeting place for customers and
potential customers.
CONTROL
Control is the ability of the customer to determine how they interact with
the marketing message and to influence the presentation and content of
the marketing message.
Push advertising refers to advertising sent from the marketer to the
customer.
For example, banner advertisements on websites.
Pull advertising refers to advertising that the customer actively seeks
out.
For example, subscription SMS services (more sophisticated digital
marketing).
ACCESSIBILITY AND COMPARABILITY
Customers can easily research different product options, and read
independent product reviews, online, and are more informed than ever
before.
Some online services actually prepare detailed comparisons for
customers.
Online environment offers the choice of completing transaction online or
instore, which in turn gives the consumer the choice of many more
retailers.
DIGITALISATION
Digitalisation refers to the ability to deliver a product as information or
to present information about a product digitally.
- Some products can be completely digitalised for example, music.
- For those that cant, the service can be digitalised e.g. grocery stores
offering online shopping and delivery.
DIGITAL MARKETING METHODS
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BANNER AND POP-UP ADVERTISEMENTS
Two popular forms of online advertising are as follows.
1. Banners advertisements appear on websites, much like newspaper
advertisements.
They are relatively cheap on most websites but popular websites can
charge significant sums for advertising space.
2. Pop-up advertisements are advertisements that open in a new web
browser window.
BROCHURE SITES
Brochure sites are websites that are essentially an online advertisement
for the organisation.
They usually present product and contact details, but offer little other
functionality.
SOCIAL MEDIA
Social media are the various websites using technologies and
experiences that involve online communities where members contribute to
and build the community and the content, and where users can
substantially control their own online experience through customisation
and interactivity.
- For example social networking, podcasting and video/photo sharing sites,
as well as those which facilitate blogs, wikis and question-answer
databases.
- Businesses can use social media to build communities around their
products and cement loyalty.
- Lack of control of social media is a challenge for businesses.
VIRAL MARKETING
Viral marketing is the use of social networks to spread a marketing
message.
- Online, relies on forwarding of emails, links to websites, or word of mouth
in discussion groups and communities.
- Viral marketing is controlled by the online community.
- Not reliable for businesses as they have little control.
- Businesses can pay a heavy price (negative consequences) for trying to
manipulate online wordofmouth, or use social networking sites for
commercial purposes.
PORTALS
A portal is a website that is designed to act as a gateway to other related
sites.
The portal itself either carries advertising or is intended to serve as an
advertising tool for the portal business itself.
SEARCH ENGINE OPTIMISATION
Search engine optimisation (SEO) means tailoring features of a
website to try to achieve the best possible ranking in search results
returned by a search engine.
The theory behind this approach is that consumers will be most likely to
click through to the first sites listed among the search results.
SEARCH ENGINE MARKETING
Search engine marketing refers to paid advertising that appears similar
to a search result on a search engine page.
MOBILE MARKETING
EMAIL, SMS AND MMS MARKETING
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While spam is an unwelcome and illegal approach to marketing, legitimate
email and SMS marketing can be an effective way to build customer
relationships.
The capabilities of contemporary smartphones also provide additional
opportunities for marketers via multimedia message services (MMS).
APPS
- Applications enable brands to be displayed and information accessed
readily on users mobile phones.
QR (QUICK-RESPONSE) CODES
- Quick response codes are 2D barcodes that can encode text, URLs or
data so it can be quickly read by a QR code scanner.
A barcode on adverts and posters read by smartphones to provide
further information.
E-COMMERCE
Marketing exchange via the internet, mobile phone or other
telecommunications technology.
Attractive to small, niche businesses.
SPECIFIC CONTRACT ISSUES IN THE ONLINE ENVIRONMENT
Ecommerce and agency
Consumer protection
ACL (Australian Consumer Law) applies within Australian jurisdiction
Misleading and deceptive conduct
Nonexcludable guarantees
Legal enforcement
The borderless nature of the online world makes it difficult to determine
which laws or apply.
SPECIFIC INTELLECTUAL PROPERTY ISSUES IN THE ONLINE
ENVIRONMENT
Copyright
Trademarks
Patent
Domain names:
Registration does not give proprietary rights
Party holds a licence to use the domain name, for a specified period of
time and subject to certain conditions
Once registered, the domain name cannot be registered by any other
person in Australia or elsewhere.
Internet Corporation for Assigned Names and Numbers (ICANN)
.auDomainAdministrationLimited (auDA)
Uniform DomainName DisputeResolution Policy (UDNRP)
SPECIFIC ISSUES IN THE ONLINE ENVIRONMENT
Cyberstuffingthe embedding of meta-tags in a website
Deep hyperlinkingthe practice of linking directly to the contents of
another website.
SPAMunsolicited commercial electronic messages
SPAM ACT 2003 (Cwlth)
Australian Communications and Media Authority (ACMA) = responsible
for enforcing the provisions of the SPAM Act.
ETHICAL AND LEGAL ISSUES
PRIVACY
- With the exception of spam laws and the PRIVACY ACT 1988, there are few
laws aimed directly at regulating privacy protection online.
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MISLEADING OR DECEPTIVE CONDUCT
- The COMPETITION AND CONSUMER ACT, the FAIR TRADING ACT and the
COMMERCE ACT prohibit anti-competitive behaviours (e.g. collusion),
unconscionable conduct, unsafe products and practices, some aspects of
trade mark infringement, making false or misleading statements and
misrepresentation of product characteristics.
SPAM
Spam refers to unsolicited commercial electronic messages.
- In Australia, the relevant legislation is the SPAM ACT 2003.
INTELLECTUAL PROPERTY
- Broader relevance to business potential theft of intellectual property
assets such as trademarks or the misuse of trade marks.
- Online, it is quite simple to copy logos, designs and other corporate
branding materials and essentially recreate an online facsimile of a real
business.
CONSUMER PROTECTION
- Methods consumers can take to protect themselves online include:
Anti-virus, firewalls, email filters to delete spam, never give personal
details to strangers.
DIGITAL DOWNSIDES
TECHNOLOGY BURNOUT
- An interesting counter-trend has emerged in the aftermath of the
technological evolution in recent times professionals seeking to literally
switch off or unplug.
- People are working far beyond the traditional 9 to 5 because they are
constantly connected to work.
LEGAL ENFORCEMENT
- The borderless nature of the online world makes it difficult to determine
which laws or apply. IP protection may be difficult.
DIGITAL MARKETING AND MARKETING STRATEGY
TARGET MARKETS
The online community is extremely diverse. Online users can be divided
into segments or niches based on particular characteristics in the same
way they can offline.
The pull nature of online marketing means some of the target market will
actively seek out the marketing organisation, but this is not a sufficient
plan in itself.
Organisation should generate awareness of its existence and its
offerings.
CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
Customer relationship management (CRM) refer to the processes and
practices put in place to identify, track and use customer information and
preferences to provide superior customer service and sustain long-term
relationships.
Online environment provides the opportunity to address customer
needs at the individual level, which is the concept at the heart of CRM.
THE DIGITAL MARKETING MIX
Products that can be completely digitalised are particularly suited to online
purchase, followed by products that can be partly digitalised.
The online environment enables consumers to easily compare price.
Online marketers must find ways to offer more value than their
competitors.
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The internet and other telecommunications technologies, such as mobile
phones, can act as a distribution platform.
The internet provides opportunities for promotion, but those opportunities
are also available to all competitors.
The challenge for marketers is to offer a better value proposition than
competitors.
EVALUATING DIGITAL MARKETING EFFECTIVENESS
Some online marketing efforts are much easier to evaluate.
Online advertising is one area that offers further potential for marketers to
assess effectiveness.
Deciding on a particular metric that quantifies as aspect of marketing
performance can be invaluable info for the online marketer to know how
successful a marketing activity is.
The interactive nature of the online environment also offers opportunities
for detailed qualitative information from consumers.
ELECTRONIC BUSINESS
SUPPLY CHAIN MANAGEMENT
Electronic data interchange (EDI) refers to the comprehensive, secure
and realtime data exchange between partners such as for supply chain
management.
Technology plays a crucial role in managing the supply chain.
Because the web provides EDI, organisations can remain connected
with partners, ensuring stock is managed in real time.
INTRANETS AND EXTRANETS
Intranet is an internal website for the use of staff.
Extranet is a private website for sharing information securely between
different organisations.
THE VIRTUAL ORGANISATION
- Virtual organisation can come together easily and cheaply.
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-
Telecommunications technologies + internet for organisations it has

become cheaper and more efficient to bring together specialist teams or
individuals to maintain different functional areas within one organisation.
Chapter 14 Social Marketing and Not-For-Profit Marketing

discuss how social marketing aims to change behaviour for social good
understand the social marketing benchmark criteria
understand the three streams of social marketing
distinguish between social marketing and other forms of marketing
Understand the nature of notforprofit marketing.
SOCIAL MARKETING VERSUS COMMERCIAL MARKETING
Commercial marketing is concerned with profit.
Commercial marketing is about immediate rewards
Social marketing is about changing or maintaining behaviours to achieve
social good.
The behavioural change is the bottom line.
May be no apparent rewards for the individual from this change.
WHAT IS SOCIAL MARKETING?
Social marketing is a process that uses commercial marketing principles
and techniques to influence target audience behaviours that will benefit
society, as well as the individual.
Translating complex educational messages and behavioural change
techniques into concepts and products that will be acted upon by a large
population.
A means to change voluntarily behaviour in individuals and to influence
policy.
Used to influence behaviour that benefits individuals and communities for
greater social good.
Integrates marketing concepts with other approaches.
A rapidly evolving field.
BENCHMARK CRITERIA FOR SOCIAL MARKETING
Alan Andreasens 2002 paper six social marketing criteria.
Behaviour change reminds social marketers that their goal is to change
behaviour, not just educate or inform.
Audience research and segmentation require clear thoughts about who
the efforts are aimed towards, while formative research helps ensure
an understanding of the consumer and orientation of the social
marketing intervention towards target market.
Next, creating an exchange requires consideration of what has to be
given up by the target audience in order to undertake the desired
behaviour, while the marketing mix pushes social marketers to present
holistic solutions (valuable and attractive), assisting to induce both trial
and repeat behaviour.
Consideration of the competition provides social marketers with the
awareness that they must consider the competing pressures faced by
consumers.
SOCIAL MARKETING FRAMEWORKS
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Lets consider each of Alan Andreasens six benchmark social marketing

criteria.
BEHAVIOUR CHANGE
Behaviour change refers to the modification of behaviour targeted by a
social marketing intervention.
- In many cases, social marketers want people to increase a desired
behaviour or to decrease an undesirable behaviour.
- Often aiming to change attitudes, awareness and behavioural intentions
rather than focusing on the actual behaviour itself.
- Best practice evaluation of social marketing involves the inclusion of
baseline measurement and a control group to effectively evaluate change
in the desired behaviour.
Use of a control group permits confounding factors to be examined,
ensuring that a comprehensive understanding of what caused the
behaviour change is gained.
AUDIENCE RESEARCH
- According to Andreasen, audience research is essential to any social
marketing intervention.
Audience research refers to the use of market research to understand
target stakeholders at the outset of interventions (e.g. formative
research), routinely pre-test intervention elements before they are
implemented, and monitor interventions as they are rolled out.
SEGMENTATION
- Andreasens third benchmarking criterion states that careful segmentation
of target audiences is necessary in order to ensure maximum efficiency
and effectiveness in the use of scarce resources. Recall the definition of
segmentation.
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Segmentation is the process of dividing a total market (population) into

groups with relatively similar needs to design a social marketing
intervention that addresses the needs of each group identified.
EXCHANGE
- Exchange has been debated widely by social marketing researchers,
because it is not always present in social marketing campaigns.
SOCIAL MARKETING MIX
Marketing mix is a set of variables that a marketer can exercise control
over in creating an offering for exchange.
- The 4Ps framework does not always apply but is always more than 1P
communications for social marketing efforts.
- Social marketers need to adopt a FULL marketing mix of techniques that
include pricing, sensory appeal, product bundling, promotions,
packaging and retail displays to influence behaviour change.
Similar to commercial marketing, PRODUCT refers to the bundle of
benefits received by the target audience following exchange.
The use of dollar pricing in social marketing interventions is rare. Some
social marketers explain that PRICE is viewed in terms of the cost or
sacrifice exchanged for the benefit (product) that the target market will
incur.
PROMOTION is the most widely adopted aspect of the marketing mix in
social marketing.
PLACE refers to where and when the target audience enters into an
exchange.
COMPETITION (IN THE CONTEXT OF SOCIAL MARKETING)
Competition refers to direct and indirect competing behaviours as well as
other factors (e.g. resources, perceptions and attitudes) affecting the
targeted behaviour.
THREE SOCIAL MARKETING STREAMS
DOWNSTREAM SOCIAL MARKETING
Downstream social marketing is focused on individual behaviour
change and is the predominant stream in social marketing literature.
The majority of downstream marketing considers behaviour change as
voluntary, and seeks to provide offerings of greater value than
continuation of the risky behaviour by the individual being targeted.
It may fail if ENVIRONMENTAL ISSUES in relation to target market are
not accounted for.
MIDSTREAM SOCIAL MARKETING
Midstream social marketing targets behavioural change at the
community level.
Measuring target behaviour change at the COLLECTIVE level.
Considered preferable over downstream because it has the potential to
affect a larger number of people.
UPSTREAM SOCIAL MARKETING
Upstream social marketing involves marketing to policy makers to
enact change at the policy level, in addition to influencing the way people
think.
Essentially, changing contexts by influencing the environments within
which people act can change behaviour.
Aims to change the counteracting environment.
- Upstream is concerned with influencing:
Public policy, budget allocation and prioritisation
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-
It is concerned with the casual agents and determinants of social

problems, and focuses on creating change within policy or regulations to
make environments more conducive to the desired behaviour.
Notion that successful programmes use ALL THREE STREAMS.
TEXTBOOK DEFINITIONS
Integrated social marketing communication involves communication
of the brand promise consistently across the different elements of the
communication marketing mix (e.g. advertising, public relations, sales
promotion and social media), integrated with the other 3 Ps of product,
price and promotion.
Public health refers to understanding health needs and intervening to
improve the health of the population.
NOT-FOR-PROFIT MARKETING
Not-for-profit marketing refers to the marketing activities of individuals
and organisations designed to generate funds or awareness for charitable
causes.
o Two broad categories:
Activities of notforprofits organisations like The Smith Family.
Social marketing, such as antismoking campaigns.
While trying not to generate profits (core objective is not related to
financial objectives), not-for-profit organisations do need to remain
financially viable and do compete with other organisations (including forprofit organisations) for fund, members and clients.
Many, though not all, not-for-profit organisations enjoy strong community
support, but this is coupled with strong community expectations about
how they conduct their activities, including their MARKETING efforts.
Lecture 12 International Marketing

Chapter 13 International Marketing
understand the concept of globalisation and its consequences for
organisations seeking to engage in international marketing
discuss the political, economic, sociocultural, technological and legal
forces at play in international markets
understand why and how organisations internationalise
Explain how marketers create, communicate and deliver a product in an
international market.
GLOBALISATION
Globalisation is the process through which individuals, organisations and
governments become increasingly interconnected and similar, with
consequences for national identity, national sovereignty, economic
activities, laws and culture.
Barriers have diminished, facilitating greater interconnections between
different countries and their people. This has resulted in a close
interdependence in terms of trade, finance, living standards and security.
STANDARDISATION versus CUSTOMISATION
Standardisation refers to applying a uniform marketing mix across
international markets, with only minor modifications to meet local
conditions.
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Customisation refers to carefully tailoring the marketing mix to the

specific characteristics and wants of each market.
Standardisation
Customisation
Similarities between different
Social, cultural, economic, political and
countries/convergence
legal differences between countries
Economies in research + development
Creation of competitive advantage
Uniformity and ease of control of
Competition from local marketers in
marketing approach
the foreign market
Economies in marketing
Facilitation of innovation in the foreign
market
Economies of scale in production
Comparison between standardisation and customisation
GLOBAL TRADE
A large proportion of total production and consumption is sent overseas or
sourced from overseas.
Many governments run export promotion programs to help domestic
organisations succeed in international markets:
Australian Trade Commission (Austrade)
New Zealand Trade and Enterprise Agency
THE INTERNATIONAL MARKETING ENVIRONMENT
POLITICAL FORCES
Political forces may be broadly categorised as:
Political alliances and agreements between countries
Political factors within a target market country.
- Some alliances favour trade between countries, enhancing the chances
of success, while others can work against international marketing goals.
International trade agreements are formal agreements between
countries to encourage and facilitate trade between them.
- They aim to:
Streamline paperwork.
Reduce or eliminate trade barriers (e.g. tariffs)
Create preferred zones of trade among their member countries (often,
incidentally, to the detriment of non-members)
Bilateral trade arrangements involve two countries, whereas multilateral
arrangements involve more than two countries, often located in a region.
COUNTRY/MARKET-SPECIFIC POLITICAL FACTORS
Democratic systems see regular changes of government, which result in
policy changes.
Multiparty systems often suffer an inability to implement policy.
Dictatorships see infrequent changes, but when change does happen, it
often fundamentally alters the state of the country.
ECONOMIC FORCES
International marketers understanding of the economic forces in the
international marketplace must encompass:
The global economy
The economies of the specific countries of interest to them.
Exchange rate is the value of a countrys currency relative to others.
- Market-specific economic factors include levels of income and wealth,
exchange rates, the availability of credit and the quality of national
infrastructure.
SOCIOCULTURAL FORCES
- Each international market is likely to have sociocultural variations within it.
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-
Marketers need to be aware of the different cultural meanings of symbols

such as colour in different countries.
TECHNOLOGICAL FORCES
Technology has been an enabling force in international marketing for the
past 20 years:
Cheap communication technologies enable easy transfer of information
between countries
Technology has created, revolutionised and destroyed entire industries.
Marketers cannot assume potential target markets will have the same
technological infrastructure as the home market.
ENVIRONMENTAL FORCES
- Overfishing, poor resource management, climate-induced acidification,
coral bleaching these are problems for the GLOBAL ECONOMY.
LEGAL FORCES
- Some countries restrict trade practices through laws and regulations. It is
important for international marketers to be aware of trade barriers such
as:
Tariffs are the duties charged on imports that effectively increase the
price of imports relative to domestically made products.
Quotas are the annual limits on the amount of particular types of goods
that can be imported.
Embargoes are the bans or restrictions on imports from a particular
country.
Limits or bans on foreign ownership for example, AU imposes limits on
the amount of Australian assets that can be foreign owned.
WHY AND HOW ORGANISATIONS GO INTERNATIONAL
In many ways, the imperative for international marketing is
straightforward:
World holds many more potential customers than does the home
market.
Communication + transport technologies make international marketing
a realistic option
Increasingly free trading environment makes international marketing
easier and at the same time, increases competition within the domestic
market.
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Faced with increasing competition at home, a marketer may be able to
find a market that does not currently have access to its product.
Greater economies of scale achieved by increasing the scale of overall
operations.
SELECTING OVERSEAS MARKETS
- A two-step process for researching international markets screening then
in-depth research
Screen markets using secondary data to generate a short list of
countries to consider.
More detailed primary research to permit a thorough examination of
short-listed markets prior to selecting the preferred country or
countries to enter.
METHODS OF MARKET ENTRY
EXPORTING
Exporting is the sale of products into foreign markets from a home
market base.
Direct exporting is an approach to exporting in which the marketing
organisation deals directly with the international market.
Indirect exporting is an approach to exporting that relies on the use of
specialist marketing intermediaries.
The main types of export intermediaries are:
Export agents which bring together buyers and sellers from different
countries and charge a commission on the sale.
Trading companies, export houses and export merchants which
purchase products from businesses and then sell them into
international markets.
CONTRACTUAL AGREEMENTS
Licensing is an agreement in which a brand owner permits another party
to use the brand on its product.
A business (the licensee) in a foreign country manufactures and sells
the products of a home country business (the licensor) and pays a
commission on the sales it makes.
Franchising is an approach to business in which one party (a franchisor)
licenses its business model to another party (a franchisee).
A business (the franchisee) pays a fee in return for the right to use the
marketing and business plan of another business (the franchisor).
CONTRACTUAL MANUFACTURING
Contract manufacturing is an approach to international marketing in
which a business pays a foreign business to manufacture its product and
market it in the foreign country under the domestic businesss name.
STRATEGIC ALLIANCES AND JOINT VENTURES
International strategic alliance is a cooperative arrangement between
a business and another business in a foreign market.
Only make sense and can only succeed when each partner brings value
to the alliance and each partner stands to benefit.
International joint venture is an approach to international marketing in
which a marketing organisation forms a new business with an existing
business in the target foreign market.
DIRECT INVESTMENT
Foreign direct investment is the outright ownership of a foreign
operation.
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Greenfields operation a new business established in a foreign market
from the ground up.
Multinational corporations businesses that develop extensive directly
owned assets in numerous foreign countries.
Directly owned subsidiaries may operate with little/considerable
autonomy, depending on the foreign market and the business products.
BORN GLOBAL
Born global is a business that views the whole world as its market from
the outset.
This model is not suitable for all industries or products.
Businesses that can successfully pursue global markets from Day One
offer:
Intellectual property or data services (where transport is irrelevant)
Very highend products where price is of little consequence
A unique or desirable product (e.g. a new pharmaceutical).
- The emergence of e-commerce has been important facilitator of born
global business and most global born marketing organisations are internetbased.
THE INTERNATIONAL MARKETING MIX
PRODUCT
The product mix must respond to customer preferences.
Different levels of disposable income/wealth across the world may require
changes in quality, size and packaging.
Branding or global branding is important many try to develop a
consistent, global brand, but this can create difficulties.
Sociocultural differences may require changes to the way service is
delivered.
PROMOTION
Marketers may confront issues including language barriers, advertising
regulations, different media infrastructure, and differences in market
maturity.
These differences may require changes to promotional efforts.
PLACE
Range of distribution challenges:
Need to transport products over larger distances
Exchange rate fluctuations that substantially and quickly affect costs
Appropriate use of marketing intermediaries facilitating distribution into
foreign markets essentially, international marketer can choose to sell
directly to international customers using its local sales force or via ecommerce, or it can use independent intermediaries within the foreign
market.
PRICING
Pricing must be sensitive to local market conditions and reflect the costs
involved in the marketing effort.
Influenced by exchange rates, trade barriers, government regulations,
level of competition, and specific marketing goals for each market.
International marketers with little or no experience must rely on market
research to understand the target market.
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Lecture 13 REVISION
The Pareto principle was covered in the mid-semester exam.
FINAL EXAM STRUCTURE

Chapters 114 will be examined with a higher percentage ( 60%) coming
from material covered since the midsemester
EXAMINATION LAYOUT
PART A 20 multiple choice questions
PART B 10 short definitions
PART C 1 short essay question relating to a case study that is provided in
the exam
PART D 1 course overview essay question relating material covered in
lecture, tutorials and the textbook
PART C was a case study extract on VB.
PART D should be on the 7Ps for a seafood restaurant.
Jimmy Ngo
Page 119

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UTS 2014 Marketing Foundations

Lecture 1 INTRODUCTION and the MARKETING

The definition refers to activity, set of institutions and processes,

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

Thus, instead of firms being informed to market to customers, they are

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

Clients refer specifically to customers of the products of not-for-profit

UTS 2014 Marketing Foundations

In addition, the way individuals and organisations conduct themselves in

UTS 2014 Marketing Foundations

Figure The Triple Bottom Line (comprised of social, environmental and

UTS 2014 Marketing Foundations

Sustainable marketing is the way and means for combining ecological

UTS 2014 Marketing Foundations

A brand is a collection of symbols such as a name, logo, slogan and

UTS 2014 Marketing Foundations

Chapter 2 The Marketing Environment and Market Analysis

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

INTERNAL COMMUNICATIONS First, the primary role of internal marketers

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

Table Levels of Competition

Bus, train and taxi

Soft drinks, water,

THE MACRO ENVIRONMENT

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

Market analysis size, growth, customer segments/needs, buyer

Marketing planning is an ongoing process that combines organisational

UTS 2014 Marketing Foundations

It is important to remember that there is no one best marketing metric. In

UTS 2014 Marketing Foundations

Lecture 2 Market Research

UTS 2014 Marketing Foundations

Market research informs many different types of decisions, including the

In addition, to specific market research projects, organisations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

Reporting schedule specifies the precise dates on which preliminary,

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

Lecture 3 Consumer Behaviour

UTS 2014 Marketing Foundations

Unique to the individual.

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations

While motivation is often specific to the individual and situation, some

UTS 2014 Marketing Foundations

UTS 2014 Marketing Foundations