Marketing

 The nature and role of markets and marketing

The role of marketing in the firm and in society

What is marketing?
• Marketing is a system of business activities designed to plan, price, promote and distribute
want-satisfying products, services and ideas to customers in order to achieve business
objectives.
• The process is customer-focused; it focuses on the needs and wants of customers, providing
goods and services at the right price, place and time.

Marketing’s role in the firm

• By continually researching customers and monitoring the business environment, marketing
provides the information the business needs in order to change direction or adjust its tactics by
providing new products or changing existing productions.
• Marketing continues to become more competitive; many goods and services are similar, so
business needs to understand its target market to stand out and better serve its customers.

Marketing’s role in society

• Maximises customer satisfaction and improves quality of life.
• Create jobs.
• To operate in a socially responsible way.
• Provide goods and services.

Types of markets

• Market – set of all actual and potential buyers of a product.

Resource market
• Identified as being where the factors of production (land, labour, capital, enterprise) are sold
or exchanged.
• The resources are used by firms to produce goods and services, which are then sold to
customers.
• Land: all the natural resources that go into production of goods/ services (forests, mineral
deposits, water).
• Labour: all the human physical and mental talents used to make products.
• Capital: tools, machinery, equipment and factories, as well as storage and transportation
facilities.

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 • Enterprise: initiates the combination of the other resources to produce a product, make
business policy decisions and bear any risk involved with the project.

Industrial market
• Made up of all the individuals and organisations who buy goods and services that go into the
production of other products.
• E.g. Ford buys components and parts from different suppliers and then assembles the car to
sell to others.

Intermediate market
• Businesses that buy goods for the purpose of reselling or renting them to others.
• Wholesalers act as a point of contact between manufacturers and small retailers,
distributing goods to a number of businesses.

Consumer market
• Made up of all the individuals and households who buy gods and services for personal use.

Mass market
• Refers to the market for goods and services that appeal to the vast majority of customers.
• E.g. power companies supplying electricity to households or businesses; product does not
have to be altered to cater for varying needs.

Niche market
• Small markets for more specialised goods and services that only a few people are interested
in or can afford.
• More expensive, as there are only relatively few buyers.

Production – selling – marketing orientation

The production orientation (1900s – 1920s)

• Idea that if a business built a better product, customers would naturally want to buy it.
• Focused on ways to increase production and lower the price of their goods.
• Not customer-focused.

The sales orientation (1930s – 1960s)

• To stand out from competition, business needed a big promotional effort, with large
amounts of advertising.
• Focus on persuading customers to buy their products, regardless of whether customer really
needs/ wants it.
• Only considers the customer after the product has been made.

The marketing orientation (1960s – present)

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 • Customers’ needs and wants must be established, and then the business must coordinate its
activities so the product satisfies these needs more efficiently than their competitors’ products.

The societal approach

• 1970s – customers unhappy with product quality and safety.
• 1980s – environmental damage and pollution control concerns.
• Marketers responded with products using recycled materials, were biodegradable, not tested
on animals and reduced the amount of packaging.
• Also took responsibility for packaging and disposal.

The marketing concept

• Emphasises the importance of understanding the needs and wants of customers, and
offering products that meet those needs.
Marketing Create customer
Understand needs value through
and wants of concept
satisfaction and
customers quality
Operate more
effectively and
efficiently than
competitors

Customer orientation
• When a business centres its activities around the needs of the customer.
• Goal is to build customer satisfaction – the overall rating of the experience with a business
and its products.
• Important aspect is customer value – the difference between the perceived benefits of
owning and using the product, and the costs of obtaining the product.
• Satisfaction and value closely related to total quality management, which focuses on
continual improvement.

Relationship marketing
• Business sales come from new customers and old customers.
• Focus on developing strategies to keep old customers and develop long-lasting
relationships.
• The process of developing a strong relationship with customers and other stakeholders.
 Promising and consistently delivering high-quality products, good services and fair prices.
• Customer loyalty is a measure of how often a customer buys a product from the same
business when they have a choice of who to buy from.

The marketing planning process

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1. Situation analysis
• Review of the business’s present performance and the current business environment.
• Information on all aspects of the business, its customers, its competitors, and the general
business environment; needed to prepare plans that can deal with current and future situations.
 Market: in terms of size and growth, needs and trends.
 Product: performance in terms of sales, profit margins and stage in product lifecycle.
 Competitors: identified and analysed in terms of marketing strategies, market share and
other criteria that will help to understand and predict their behaviour.
 SWOT analysis:
 Strengths and weaknesses defined by market share, loyal customers,
customer satisfaction, product quality and the things that business does better or
worse than its competitors.
 Opportunities are potential new markets or new conditions in existing markets.
 Threats describe competition, new technology, and other disadvantageous factors.

2. Establishing marketing objectives

• General marketing objectives include:
 To increase market share.  To expand existing markets.
 To develop new products or services.  To enter new markets.
• Objectives should be:
 Specific – clearly stated.
 Measurable – to determine whether or not objective can be achieved.
 Achievable – with the resources and capabilities available to the business.
 Realistic – in terms of time frame, current technology and current business environment.
 Timed – period set for objective to be achieved.
• Major aspects of the external business environment:
 Economic conditions
 Government policy
 Competition
 Technology
 Social/ cultural patterns

3. Identifying target markets

• Market segmentation: breaking down the total market into smaller parts based on similar
characteristics.
• The target market is the particular segment on which a business will focus its marketing
efforts.
• The business must consider if the segment is large enough to generate revenues and profits.
However, bigger markets may not always be suitable as they can be subject to intense
competition.

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 • Business must be able to access the market through its normal marketing channels.

4. Develop marketing strategies

• Strategies should:
 Satisfy the needs of the target markets.
 Meet the objectives of the business and marketing plans.
 Capitalise on corporate strengths and minimise the effect of any weaknesses.
 Work together in achieving overall marketing objectives.
• Marketing mix must be designed to satisfy the wants of target markets and achieve
marketing objectives.
• Each element is interdependent and decisions made in one area affect operation of the
others.

5. Preparing a marketing plan

• Draws all the information discussed into a coherent and logical report that sets the business
direction and communicates the objectives/ strategies to other employees.
• Sets out how plan will be implemented, includes a financial analysis of what costs are
involved and what revenues will be generated.

6. Implementation, monitoring and adjustment

• Marketing plan must outline how its performance will be monitored, including controls that
will be used.
• If objectives are not being achieved, adjustments will have to be made in order to improve
performance.

Elements of a marketing plan

The executive summary

• Brief overview of the proposed marketing plan.
• Aim is to quickly identify the main points – overall strategy, major activities and expected
results.

Elements of the marketing plan

• Executive summary: main goals/ recommendations of the plan.
• Situation analysis: market description and business’s position in it, economic conditions,
performance, competition and a SWOT analysis.
• Marketing objectives: defines goals in terms of sales volume, market share and profit.
• Identify target market: in terms of demographic characteristics, lifestyle features and
buyer behaviour.
• Developing strategies: action plans that specify marketing mix tactics.

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 • Financial projections: forecasts of expected costs and revenues.
• Controls: how plans will be monitored and adjusted for future performance.

Situation analysis

Market analysis
• Internal/ external factors can have a direct impact on customers and marketing
opportunities.
• Environmental factors influence the business’s ability to make, promote and distribute goods
and services, and the target market’s ability and desire to buy goods and services.
• Opportunity for one business may be a threat for another.
• Operations can be adjusted to take advantage of opportunities arising from environment
changes.

External influences
• Economic conditions/ overseas • Demographic patterns/ technological
influences change
• Government policy and regulations • Changing consumer attitudes and
values

Internal influences
• Financial resources • Production facilities
• Human resources • Location

Product analysis
Product lifecycle
1. Introduction stage: 3. Maturity stage:
 Sales grow slowly  Rate of sales slow down
 Negative profits  Profits fall
 Little competition  Competitors fighting for sales
2. Growth stage: 4. Decline stage:
 Sales grow rapidly  Safes fall
 Profits rise quickly  Negative profits
 Competition increasing  Less competition

Competitor analysis
• Business needs to understand how competitors think by analysing their strategies, assessing
their strengths and weaknesses, and predicting their future actions.
• To analyse competitors’ strategies, managers look at competitors’ target markets, and all
the individual marketing mix tactics.
• Aim: to predict their likely future strategies, and how they may react to the introduction of
new products, price cuts or aggressive advertising.

SWOT analysis
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 Strengths • Poor competition?
• Sufficient financial resources to
operate freely? Weaknesses
• Good reputation with customers and • Outdated technology?
suppliers? • Poor reputation in marketplace?
• Competitive advantage in particular • Limited product/ service on offer?
areas? • Poor strategies?
• Well-developed management skills?
Threats
Opportunities • New competitors entering the market?
• Entering new market? • Changes in government regulation?
• Developing new products for growing • Increasing interest rates?
demand? • Cheaper substitute products?
• Improved economic conditions?

Establishing market objectives

• Objectives need to be specific, measurable, achievable, realistic and timed.

GENERAL OBJECTIVE SMART OBJECTIVE

 Increase market share
 Develop new products/
services
 Expand existing markets
 Enter new markets
 Market share to increase by 5% over next 2 years
 New aftersales service, customer support program
to be established in next 12 months to increase
satisfaction
 Promotion campaign introduced over next 6 months
to encourage present buyers to increase product
use by 10%
 Exports to grow by 5% per year over next 5 years

Identifying the target market

Selecting target markets

• Large enough to generate revenues and profits, and should be of greatest potential.
• Must be accessible through normal distribution channels and should be compatible with
objectives and resources of the business.

Target market strategies

Undifferentiated marketing
• When a business provides one standard product for the whole market (mass market
approach).
• Same marketing mix for all customers (e.g. water, electricity and gas).
Differentiated marketing
• When a business groups their customers according to different characteristics; age, income,
family size, etc.

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 • Different products designed for each of these groups and marketing programs are specific to
each group.

Concentrated marketing
• When a business selects just one part of the total market.

Niche marketing
• Identify a small part of the total market that is not really being catered for, and provide a
good or service that satisfies these customers.
• Can avoid direct competition with large businesses in the marketplace.
• Micromarketing: smallest possible niche – the individual customer.

Mass customisation
• Taking products traditionally mass marketed and making them appear to be targeted at the
individual.

Developing marketing strategies

OBJECTIVE
 Increase market share
 Develop new product/
service
 Expand existing market
 Enter new markets
STRATEGY
 Develop new products, reduce price of existing
product, increase promotional activities
 Research/ development, use of new technology
 Encourage present customers to buy more,
persuade new customers to try the product
 Change old products, develop new products,
exporting

Marketing mix tactics

1. Product:
 The range of goods and services offered to customers.
 The reputation, brand name and image.
 The perceived benefits provided, warranties, after-sales service.
2. Price:
 Cost – base price, discounts, credit terms and conditions, and other price tactics.
3. Promotion:
 Methods used to inform customers about product, to persuade them to buy it more than
once.
4. Place:
 Methods and channels that can be used to get the product to the marketplace.
 Transportation, storage, what types of stores will sell the product.

Implementation, monitoring and controlling

• Implementation: the process of turning plans into action, and involves all the activities that
put the marketing plan to work.
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 • Depends on how well the business blends its people, organisational structure and corporate
culture into a cohesive program that supports the marketing plan.

Developing a financial forecast

• Financial forecast: prediction of expected costs and revenue for a specified planning period.
• Costs of marketing plan estimated, then compared with estimates of revenue expected to
be achieved.
• Marketing costs:
 Research: find what customers wants and how well the products meet customer needs/
expectations.
 Product development
 Product: design and production of packaging, cost of providing warranties.
 Promotion: cost of running a sales force, advertising, sales and promotion expenses.
 Distribution: warehousing, transportation and order processing.
• Estimation of costs should be realistic, based on previous years’ expenses, plus an increase.
• Methods of forecasting revenue:
 Sales force composite: estimates of what individual sales people expect to sell.
 Buyer intentions: survey to measure what products are bought at a certain period in time.
 Executive judgment: opinions of experts.

Monitoring the marketing plan

• Controlling: actual performance compared with expected performance.
• Sales analysis:
 Breaks down total sales by different products, market segments, individual sales people and
sales territories. Strengths and weaknesses identified in each area.
• Market share analysis:
 Compares sales performance with that of its competitors.
 Assess competitive position, identifies strengths/ weaknesses of the marketing plan.
• Marketing profitability analysis:
 Profitability of products, sales territories, market segments and sales people.

Revising the marketing strategy

• Product: offering new products, change packaging of existing products, stop selling some
products.
• Price: discounts to increase sales.
• Promotion: recruit new sales representatives, new advertising program.
• Place: find new outlets (transport/ warehousing systems).

 The market research process

What is market research?

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 • Organised system of collecting and analysing information to help make marketing decisions.
• Helps managers analyse markets and opportunities, plan marketing activities, implement
plans and control use of marketing resources.

Process
• Determining information needs – problem identification.
• Data collection – primary and secondary.
• Data analysis and interpretation – analysis and presentation of results.

Determining information needs

• Define the problem and identify what information is most appropriate for solving the
problem.
• Explanatory research – clarifies problem and searches for ways to address it.
• Descriptive research – measures/ describes market potential for a product, characteristics of
target market.
• Causal research – cause and effect relationship.

Marketing information needs

• Competing products • Characteristics of the market
• Success of new products • Success of promotional activities
• Market share • Economic and business trends

Data collection

Primary data
• Collected specifically for a particular problem.

• Observational research: researcher observes peoples’ behaviour in certain situations (e.g.

reaction to advertisements).
• Focus groups: identifies issues with products, services, advertising, packaging and so on.
• Experimental research: attempts to prove a cause and effect relationship (e.g. test
customer responses by changing certain aspects of a product).
• Surveys: personal interviews, telephone surveys or mail surveys.

Secondary data
• Internal sources:
 Accounting (sales by customer, product, region)
 Marketing (sales reports, customer complaints, distribution).
• External sources:
 Media  Research firms
 Government  Company reports

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 Data analysis and interpretation
• Data is made up of facts and figures, whereas information is data that has been analysed
and put into a useful form.
• Conclusions must be drawn that are relevant to the problem.

 Customer and buyer behaviour

Types of customers
• Businesses need to categorise its customers, and analyse their needs, wants and other
characteristics to effectively service them.

People and households

• Make up the consumer market; the end-users of a product.
• Marketers are interested in relative roles and influences that family members have in
purchasing products.

Businesses
• All the individuals and organisations that acquire goods/ services for the production of other
goods/ services.
 Reseller markets
 Government market
 Institutional market

Government market
• Made up of federal, state and local government departments, agencies, boards, commission
and authorities.
• They rent or buy products in the course of their main functions.

Institutions
• Made up of art galleries, museums, schools, TAFE colleges, universities, hospitals, etc.

The buying process

For consumer markets
1. Need recognition
2. Information search
3. Evaluation of alternatives (brand image and reputation important at this stage)
4. Purchase decision (influenced by competitor releasing new product or reducing prices)
5. Post-purchase behaviour (level of customer satisfaction)

For businesses
Problem recognition Product specification
General need description Supplier search
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Proposal solicitation Order-routine specification
Supplier selection Performance review

Buyers and users

• Buyers: make the purchase of a good or service.
• Users: consume or use the product.
• Adoption process: through which a consumer passes from first hearing of a product to the
final purchase.
• In business, people who end up using the product are those on the production line.

Factors influencing customer choice

Psychological factors
• Motivation – forces that drive us to satisfy a need.
• Perception – how we receive, organise and interpret information.
• Lifestyle – used to group people according to their activities, interests and opinions.
• Personality and self-concept
• Learning – experiences with products affect their buying decisions.
• Attitudes – formed by experience, can be positive, neutral or negative.

Sociocultural factors
• Culture – society’s values, beliefs, customs and patterns of behaviour; developing ‘world
culture’.
• Subculture – subset of people with shared values and beliefs; defined by things such as
age or religion.
• Socioeconomic status – division of society based on income, occupation or education;
each group have particular product and brand name preferences.
• Family – focus product design and promotion on males or females.
• Reference groups – influence our behaviour because we want to fit in with values of the
group.

Economic factors
• Economic situation influences sort of products people buy.
• Determined by income, savings and ability to borrow.
• Disposable income – money left after taxes are paid.
• Discretionary income – anything left of disposable income after spending on necessities.
• Ability to borrow; influenced by general interest rates, income and other commitments.

Government factors
• Taxation policies – impact on consumer spending (e.g. GST).
• Influence level of economic activity, inflation and interest rates.
• Legislation regulates what sort of goods and services are available.

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  Developing marketing
strategies

Market segmentation

• To break the whole market down into parts and provide particular products for one or a
number of different segments.
• To suit target market – best price level, correct promotion, using appropriate distribution
channels.

Ways of segmenting markets

Geographic segmentation
• Location – climate, region, density and physical geography.

Demographic
• Age, gender, family size, income, occupation, education or religion.

Psychographic
• Socioeconomic status – education, income and occupation.
• Lifestyle – personality, activities, interests.

Behavioural
• Purchase occasion.
• Benefits sought, usage rate and loyalty.

Product/ service differentiation

• Differentiation: providing greater customer value and making the product stand out clearly
from that of its competitors. To achieve differentiation, make products:
 That do new things
 That work better and are cheaper to operate
 Closely suit the needs of target markets
 To specifications of individual customers
• Gain competitive advantage by offering fast and reliable delivery, after-sales service or
expert installation and customer training services,
• Quality, knowledge and experience of a business’s employees.

Product and service strategies

What is a product?
• Physical goods as well as services:
 Core product – what is being bought and the benefits gained.
 Actual product – all parts and features that combine to deliver the core product.

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  Augmented product – extra consumer benefits and services.

Positioning
• Process of creating the image a product holds in the minds of consumers, relative to
competing products.
• Helps customers understand what is unique about the products when compared with the
competition.

Strategies, positioning by:

• Benefit – focus on satisfying wants rather than simply describing the product itself.
• Price or quality – generic brand positioned on price, branded products positioned on quality.
• Direct comparison
• Usage occasion or users – how or when products are used.

Branding
• Distinguishing name or symbol which identifies products and differentiates them from
competing products.
• Sends strong message about what product represents; important part of total product.
• Famous/ trusted brand name promises quality, reliability and value for money.
• Trademarks – symbols or logos which provide instant recognition and credibility.

Strategies
Generic – ‘non brand’ name, very plain packaging.
Individual – specific name for each major product.
Family – all of business’s products grouped under one brand name.
Manufacturer’s – brand named after manufacturer.
Private – resellers place own names on products.
Hybrid – combination of two or more of above strategies.

Brand equity
• Value of a brand. There are four elements:
 Brand awareness – degree of customer recognition.
 Brand loyalty – when consumers regularly prefer one brand over another.
 Perceived quality – degree of customer satisfaction.
 Brand associations – attitudes and feelings.

Packaging
• Protects product during transportation, while it sits on shelf, and during use.
• Informs consumer about use of product.
• Promotes product and distinguishes it from competition.
• Protects against misuse and tampering.
• Labels – ensure informed consumers about ingredients, use and nutritional data.
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Price

• Important factor – it is the difference that pushes a customer to buy one product over
another.
• Determines amount of sales and profit per unit sold.

Pricing methods
Cost-based pricing
• Based on cost of production; adds a mark-up to the cost of the product.
1. Cost-plus pricing: adds a standard mark-up to the cost of the
product.
2. Break-even pricing: point where business makes neither a profit
nor a loss.

Market-based pricing
• Business sets price of its product only in relation to the competitive market price.
• Costs have no influence on price.

Competition-based pricing
1. Leader-follower pricing: smaller businesses charge prices based
on decisions made by the market leader.
2. Going-rate pricing: price set at same or similar level as its
competitors.
3. Discount or premium pricing: positions a product in relation to
price differences with its competitors, and premium pricing only tends to work if product is
distinctive or has some prestige value.
4. Sealed-bid pricing: businesses put in a tender for a job.

Value-based pricing
• Sets price based on buyers’ perceptions of value rather than on sellers’ costs.
• Perception of value – the product itself, services included, and the image customers
associate with it.

Factors to consider when setting prices

• Internal factors:
 Marketing objectives, marketing mix strategies and costs.
• External factors:
 Level of demand in the market, pricing policies of major competitors and reaction of
consumers to price changes.

Pricing strategies and tactics

Market skimming pricing
• One of a kind product; relatively high price as there is no substitute.
• Used to position product as an exclusive brand by making it more expensive.

Penetration pricing
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 • Price set below that of its competitors (to gain initial market share).
• Demand must meet expectations to generate enough revenue to make profits.
• Low price – little loyalty may be developed.

Loss leaders
• Products priced below their cost of production in order to attract customers.
• Usually heavily advertised brand or products with strong appeal.

Price points
• Psychological price references for consumers, and indicate relative quality.
• Marketers develop differences in quality, design or function to support price differences.

Discounts
Quantity discounts
 Reduces price per product as more units are purchased.
Seasonal discounts
 Demand for certain products and services fall at certain times of the year.
Cash discounts
 Businesses prefer lowering prices for cash in the till rather than having credit sales, lay-bys
or any other delayed payment.

Price and quality interaction

• Products’ price often associated with its quality.
• High prices indicative of certain degree of prestige or exclusivity.
• Price set must be consistent with its positioning and overall marketing strategy.

Promotion

• Informs, educates, persuades and reminds customers about a business’s products.

• Used to persuade customers to try a new product, or buy more of an old product.

Elements of the promotion mix

• Mix of personal selling, advertising, sales promotion and public relations that a business
uses.
• Combination of tools used depends on the nature of the product, target market
characteristics, the budget and its marketing objectives.

Personal selling
• Sales people interacting directly with customers or potential customers.
• Mainly used when product can be changed to meet individual wants, or to show potential
customers.
• Sales representative can pick up on consumer needs, questions and uncertainties about the
product.
• Closer customer-business relationship, but expensive.
Advertising
• Television, radio, transport, billboards, newspapers and magazines.

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 • Allows message to be repeated and capable of reaching many buyers at low cost per person.

Below-the-line promotion
• Above-the-line refers to mainstream advertising.
• Below-the-line promotions are activities including contests, coupons, free samples or
exhibitions.
• Attract customer attention and offer good incentives to buy the product.

Public relations
• Use of publicity and other non-paid forms of advertising to develop a good image.
• E.g. mentions in newspapers or magazines, product winning prize in design or quality, when
high-profile figures use the product or when the product is often talked about in news items.

Direct marketing
• Associated with letters mailed specifically to someone in the target market, or the
indiscriminate mailing of material to every household.
• Includes online shopping, telephone sales and home shopping channels on TV.

The communication process

• Marketers need clear understanding of their target markets, and the aims of message to be
communicated.
• Aims of marketing communication:
 Provide information to consumers
 Create demand for products
 Communicate value and uniqueness of product
 Build customer relationships and loyalty

Steps in developing effective communication

1. Identify the target audience – current users or potential users.
2. Determining the response sought – awareness, knowledge,
liking, preference, purchase.
3. Choosing a message – rational, emotional or moral appeal.
4. Choosing media – personal and non-personal communication
channels.
5. Collecting feedback – surveys, measuring sales after message
has been sent.

Place/ distribution

• Distribution – the ways of getting the product to the market.

Distribution channels
• A business or group of businesses, involved in moving goods and services from the
manufacturer to the point of final use.
• Connects a manufacturer or service provider with consumers.
• Most common channel is manufacturer to retailer to consumer.
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• Intermediaries – independently owned businesses that move products from the
manufacturer to end user.
1. Distribution channels – businesses involved in moving products
from manufacturer to final user.
2. Physical distribution – activities involved in moving products
from manufacturer to final user.
Reasons for intermediaries
• Needed because producers are separated from customers.
• Many markets are too small to make it economically viable for businesses to deal directly
with customers.
• Intermediaries buy merchandise from manufacturers and sell in small lots at a local level.
• Important role in matching supply and demand by providing customers with a variety of
products from different producers.
• Using wholesalers result in greater cost efficiencies as they are smaller in size and closer to
customers. They serve retailers; it is more cost effective than manufacturers delivering directly
to numerous retailers.
• Tend to take up less of the company’s resources than direct distribution.

Channel choices
Number of channel levels
• Direct channels:
 Producer distributes directly to the consumer.
 Involve the business using its own employees and assets to distribute the product to the
market; own sales people, delivery vehicles and warehouses.
• Indirect channels:
 Producer uses intermediaries to serve the market.
 Intermediaries include wholesalers, retailers, brokers and agents who operate between the
manufacturer and the final consumer.
• Multiple channel system:
 Use of more than one channel to access markets for same product.

Distribution intensity
• Intensive distribution – product available at every possible outlet.
• Selective distribution – manufacturer wants to widely distribute product, but does not want
to use intensive strategy.
• Exclusive distribution – products available at particular stores or outlets; usually expensive
product aiming to achieve a very elite image.

Physical distribution issues

• Physical distribution includes all the activities involved in the movement of finished products
to customers.
• Aim is to get the right products at the right locations at the right times at the lowest overall
cost.
• Major impact on level of customer service a business can provide.

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 • Costs (inventory, warehousing, order processing, transportation) need to be controlled to
maintain profits.

Order processing
• All activities used to handle and fill sales orders.
• Problems – delays, customers receiving goods they did not order, etc.

Warehousing
• Storing of goods while they wait to be moved or sold.
• Convenient location is important.

Material handling
• Deals with equipment used to physically handle the products.
• Ensure products are moved quickly, accurate and safely to the customer.
Inventory control
• Oversees quantity of a product that is available for sale at any point in time.
• Low stock levels – losing customers as they can buy it from a competitor instead.
• Excess stock – expensive.
• When to order, how much to order; must balance order-processing costs with inventory-
carrying costs.

Transportation
• Movement of products by air, rail, road, water, etc.
• Method depends on type of product, speed with which products need to be delivered,
distance to be covered.

Environmental effects on distribution

Technology
• Online shopping – the internet has significantly changed the business-intermediary
relationship.
• Increased security; people less reluctant when handing over credit card details.
• Automated warehouses; materials-handling systems, direct machinery to collect and load
products, etc.
• Errors reduced and orders processed far more quickly.
• Influencing transportation; GPS systems.
• IT used to control inventory costs, order electronically from suppliers, communicates
between stores, etc.

Local government
• Regulations limit where business can be set up, what sorts of activities are allowed, hours of
operation and signs that can be put outside the building.

 Ethical and legal aspects of marketing

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Environmentally responsible products
• Growing concern about damage caused by industrial activity, rapid consummation of natural
resources, waste from packaging and pollution.
• Significant trends on consumer attitudes and values forced businesses to change.
• Responses – ecologically safer products, recyclable or biodegradable packaging, cleaner
product methods.

Other ethical and legal aspects

Creation of needs
• Rather than responding to needs and wants of consumers, businesses use advertising and
changes in design to ‘create’ demand for products that people do not really need.
• Planned obsolescence – design of products to deliberately have a short life-span; encourage
more buying.

Impacts of retail developments

• Small shops find it harder to compete with lower prices that national chains can offer
customers, as well as the range of goods, and the convenience of ‘one-stop shopping’.
• Traffic congestion, parking problems, noise and air pollution.
Sugging
• Practice of using research as a disguise for selling.
• These ‘surveys’ contain questions designed to get answers that are favourable to the
business; business then uses the ‘results’ in promotional campaigns.

Higher costs
• Marketing activities create higher costs – high level of advertising, unnecessary packaging,
continual development of new products.
• These activities do not add any real value to the product, only psychological benefits.
• Range of intangible features encourages customers to buy products – marketing driving
consumer demand, not responding.

The role of consumer laws

• The Australian Competition and Consumer Commission (ACCC) enforces the Trade Practices
Act 1974 (Cth).
• State legislation also affects marketing activities.

Deceptive and misleading advertising

• Practices overstating product’s features or performance, misleading labels, rigged or unfair
contests.

Price discrimination
• TPA tries to ensure that sellers offer products at the same price.
• E.g. retailers should face the same price from a manufacturer regardless of anything.
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Implied conditions and warranties
• TPA ensures all products have certain conditions that are implied.
• Implied conditions – unwritten guarantees that the product/ service will do the job it is
intended to do.

Retail price maintenance

• Pricing policy where the manufacturer sets the retail price for a product.
• ‘Recommended retail price’ – manufacturer cannot make retailers charge a specific retail
price.
• However, law is intended to allow price competition between retailers of similar goods.

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