Marketing

What is a market?

A market can be defined as a meeting place for buyers (consumers) and sellers.
Markets can be set up in a shop, restaurant, over the telephone/ internet, at a car
boot sale, etc.

A market consists of the individuals or organisations who are actual or potential

buyers of a product or service. Markets may be classified as consumer markets or
industrial markets.

Consumer markets are made up of individuals who purchase goods or services for
personal or domestic use. They make most of their purchases from retailers and
buy a combination of consumable goods, such as food and durable goods such as
cars, televisions, and clothes. Consumable goods are bought more frequently than
durable goods.

Industrial markets are made up of organisations that purchase goods or services

to use in the production of other goods and services. They buy a combination of
consumable goods, such as raw materials and longer-lasting durable goods, such as
machinery and equipment.

Market share

The percentage of total sales of a product or service achieved by one organisation

is known as market share . It is often considered by businesses to be an indicator
of their success – the larger the market share, the larger the profits. The
advantages of having a large market share are:

• High market share companies have the power to buy their raw materials in bulk,
which will reduce costs. This may be passed on to the consumer in the form of
cheaper prices, thus edging smaller competitors out of the market. Otherwise,
the firm will make higher profits.

• High market share companies may be able to make special components or

ingredients for themselves, rather than buying them from other firms. This
again will prove to be a saving in costs.

• If larger profits are made, more can be reinvested in the organisation.

Additional research and development may give the company a competitive edge.

• Costs, such as marketing and transport, are spread over a larger output –
making expenditure on advertising, etc. much more worthwhile.
Market growth

An organisation may be selling in a high- or low-growth market. Markets that are

growing offer more potential for products to develop than declining or static
markets do. High-growth markets are attractive to organisations that wish to
increase their market share. It becomes very difficult to gain market share from
established market leaders when market growth has slowed down.

What is marketing?

Marketing Manager Required

Here is your chance to influence the spending habits of a discerning
sector of the population and manage a world-famous cosmetics
company. Reporting to Senior Management, you will develop and
implement a marketing strategy for a range of brands. You will have
responsibility for market research, promotion and advertising,
direct mail activity and preparation of publicity material.
Additional responsibility will be for new product development and
branding in order to expand our market base.

The marketing activities contained in the above job advertisement are italicised in
the text.
The Chartered Institute of Marketing defines marketing as ‘the process involved
in identifying, anticipating and satisfying consumer requirements profitably’.

The role and importance of marketing in organisations

• Identify
• Anticipate
• Satisfy

1 To identify consumers’ requirements

Businesses must identify what exactly a consumer wants from a product or

service. There is little point in providing something that does not meet consumers’
requirements – they simply will not buy it. Marketing departments aim to ensure
that consumers buy products or services and that they continue to do so (that is,
make repeat purchases).

Firms today face a lot of competition and consumers’ expectations are increasing
and becoming more sophisticated. Requirements change frequently and the
marketing department must make sure the product or service is developed or
altered to meet these requirements. The role of marketing is, therefore, an
increasingly important one in today’s business world.
Price and quality have always been important factors in whether or not a consumer
will buy, but so too have prompt delivery, attractive packaging and after-sales
service. Advertising and promotion play a big part in influencing consumers to buy.

2 To anticipate consumers’ requirements

The role of the marketing department is to find out what consumers want today
and will want in the future. Consumer trends must be considered in order to
anticipate future needs. This is especially important in markets where trends and
fashions change rapidly (e.g. clothing, toys), or where technological changes occur
frequently (e.g. computers). It may be necessary to develop new products quickly
to stay ahead of competitors.

3 To satisfy consumers’ requirements

The consumer is the most important consideration for most businesses today –
businesses are often said to be ‘consumer (or customer) focused’. Without
consumers the business would fail. Good service and quality products that offer
value for money are essential.

Prompt delivery and good after-sales service are also important, as are well
presented and packaged goods. It is vital that the product is available at the
right price and at the right time.

These three aims, for the majority of businesses, must be achieved profitably.
There is little point in spending large amounts of money on marketing if costs are
greater than revenue. However, organisations do exist where profitability is not
an objective. Schools, hospitals and charities also use marketing techniques in
order to become more effective in satisfying consumers’ requirements.

The importance of marketing

The importance of marketing can be illustrated by considering the contrasting

responses of the American car industry and the Swiss watch industry to changes
in market conditions.
The decline of the American car industry

For decades, motor cars manufactured by American companies were built on the
principle that the American consumer preferred a long, roomy vehicle with large
engine capacity. During the 1960s large heavy vehicles with names like Chevrolet
and Buick, produced by American manufacturers, dominated the market. Roads
were seldom graced by the sight of a foreign motor car and the American
manufacturers tended to ignore trends taking place in the rest of the world where
small, economical vehicles with lower engine capacities were capturing an ever-
increasing share of the market.

American manufacturers believed that small cars would never sell in the US
market. Japanese car manufactures, on the other hand, disagreed and recognised
a major opportunity for market growth in the US. Marketing strategies were
developed, research and development programmes carried out, factories built, and
a workforce was trained in order that Japan could enter the American motor
vehicle market.

During the 1970s world oil prices quadrupled, making fuel much more expensive.
Increasing labour and raw material costs also combined to make large American
cars expensive to buy and to run. American consumers rapidly switched their
preference to smaller, economical cars, and sales of Japanese vehicles such as
Datsun and Toyota rocketed because American manufacturers offered no
alternative.

Even while this process was taking place, American car manufacturers decided
against changing to small car production believing that the trend was only
temporary and that their market share would recover when world oil prices fell.
This never happened, and by the time American manufacturers finally changed to
small car production, the Japanese manufacturers had a powerful grip on the
market. They also faced severe competition from West Germany, Italy, France
and Korea where technological advances in car production enabled competitors
such as Volkswagen, Fiat and Renault to secure a market share.

Several American car producers went out of business and thousands of

manufacturing jobs were lost. This led to the United States having a large
balance of payments deficit with Japan due to the high volume of imported
Japanese motor vehicles. The domestic American industry failed to anticipate the
changes in consumer needs and never recovered.

The Swatch story

In contrast, the outstanding success of a Swiss watch manufacturer during the

1980s was the result of a careful and well-executed marketing plan, brought on by
necessity.
For years the Swiss were world leaders in the watch industry. In 1974 their
worldwide market share was 30%. Then the Japanese actively began to produce
and market quartz watches, which the Swiss viewed as a passing fashion. Quartz
digital watches were, however, no fad and by 1983 the Swiss share of world
markets for watches had fallen dramatically to 9%.

The Swiss manufacturer SMH carried out extensive research in its watch markets
and carefully analysed patterns of consumer behaviour. Marketing experts advised
the company that a turnaround was possible if an inexpensive, good-quality quartz
analog watch could be developed, since the market was saturated with digitals.
Gradually, a marketing plan was devised and implemented resulting in the
introduction of the Swatch in 1984, which has since revolutionised the world
watch industry.

Based on their extensive analysis of consumer behaviour and lifestyle, SMH

adopted a strategy that completely changed the concept of a wrist watch.
Watches were to be a fashion accessory first and a watch second. They would
also be analog rather than digital. Product planning developed a distinctive quartz
analog watch in a wide range of fashionable colours and designs. New models were
introduced rapidly and older ones quickly dropped. Because Swatches were sold as
fashion accessories, consumers were encouraged to buy more than one (to match
different sets of clothes or lifestyles). The average Swatch customer in Britain
today owns three different models.

In Britain, Swatch watches were distributed mainly through department stores

and speciality shops. They were not sold in high-street jewellery stores, which
the company believed were an inferior point of sale for the product. The
marketing strategy was based on carefully controlling distribution to avoid
flooding the market, which would have resulted in consumers losing their desire to
own a Swatch.

Today, Swatch watches sell for a relatively low price which appeals to a large
number of consumers and encourages multiple purchases. The watches are highly
distinctive. Extensive product promotion, which includes advertising on TV and in
magazines, together with sponsorship of various concerts and sporting events,
generates further sales.

Successful marketing has greatly increased market share and enabled the company
to introduce new product lines, such as clothing and telephones, using the Swatch
name.

ACTIVITY
In your own words compare the success of the American Car Industry with that of
Swatch.
The marketing function

In the case of Swatch, the strategic function of marketing was to attract and
retain a loyal group of consumers through a unique combination of market
research, product design, distribution, promotion and price factors.

Since many markets for goods and services have evolved to the point where the
consumer has become of prime importance, businesses have responded by
attempting to ensure that their products are produced to an appropriate standard,
at an acceptable price, and distributed in a convenient manner. Marketing
decisions, therefore, centre on four functional activities:

• product
• pricing
• distribution or place
• promotion (including advertising).

These decision areas, when combined, are known as the marketing mix .

CORPORATE BLUNDERS

Sotheby's and Christie's. The names oozed high culture and big checkbooks, until this
year. Now they sound more like Bonnie and Clyde. The two auction houses
conspired to fix prices so that they would not lose clients, or hefty profits, through
competition. Among the elite to get caught (and likely to face jail time) is Sotheby's
chairman Alfred Taubman. That's the same Taubman who chaired (until recently) the
mall development company that bears his name and brought International Plaza to
the Tampa Bay area.
Marketing as a strategic activity

Marketing is concerned with every aspect of an organisation’s product or service,

e.g. its design, price, distribution, selling and promotion, from its inception until it
finally reaches the hands of the consumer. Even after the sale, marketing still has
a job to do: it must ensure consumer satisfaction through the provision of after
sales service, such as maintenance, repairs, instruction booklets, spare parts and
quality guarantees. Marketing is far more than just selling the product. It is
concerned with what is to be sold, how it is to be sold, when it is to be sold and
where it is to be sold.

Amongst the most important functions of marketing is the assessment of the

market to discover

• where the consumers of the product are to be found

• how many consumers there are
• the attitudes and preferences of the consumer
• the effectiveness of distribution methods
• the strengths and weaknesses of competitors.

The current position must be looked at along with the future position – marketing
departments must anticipate what will happen in the future in order to allow
adjustments to goods and services to be made and new goods and services to be
produced. Profit is important to most organisations, but there may also be a need
to improve brands in order to obtain or retain brand leadership or increased
market share.

Today, marketing has come to be recognised as the discipline which coordinates

and manages the total business function. In a consumer society, marketing
decisions are often strategic decisions since they frequently determine the
overall direction of the organisation. Other business functions such as production
and human resource management are often influenced by marketing considerations.

Product-oriented organisations

These assume that the product or service being offered is the best on the market
and will be very easy to sell. It is felt that there is no need for product change or
development as there is no real competition. This might be the case with a new
invention or a highly technical unique product, or even when a very strong
advertising campaign can convince a consumer to purchase the product. Henry
Ford in launching his Model T car said ‘customers can have any color they want as
long as it is black’.
In today’s competitive business world, this approach may be seen as complacent.
Organisations operating like this may fail once competitors enter the market. An
example can be shown by the demise of the British Motorcycle industry. BSA,
Norton and Triumph, producing heavy, slow-revving, large capacity machines, were
superseded by Kawasaki, Honda and Suzuki – they had failed to look at what these
foreign competitors were producing and how they met the needs of the consumer
more successfully.

Product orientation was predominant in the UK in the 1930s and 1940s when there
was less competition, and customers’ expectations were not so sophisticated.
Consumers did not have such a large disposable income and their knowledge of
products was more limited. Pressure from the media was considerably less.

Customer-oriented organisations

These constantly modify their products or services in response to changes in the

market. They will make an effort to find out what customers want and what
influences their purchasing decisions. These organisations realise that their
profits and/or success depend on meeting the needs of the customer.

During the 1980s and 1990s, customers became increasingly aware of what is
available on the market and the amount of competition has greatly increased. This
has led to the customer being seen as the main focus of an organisation’s
activities.

Marketing ensures that the needs of the customer are considered before
production takes place.

The marketing of products and services

Marketing applies to both products and services. Consumer goods (i.e. ones bought
by end consumers for their own personal use) are commonly used to give examples
to illustrate marketing. It is important to remember, though, that marketing also
applies to industrial goods and to services. The main principles of marketing
(covered later in this text) apply in all cases, but the ways in which they are used
may differ between consumer goods, industrial goods and services. This section
considers industrial goods and services.

Industrial goods are distinguished from consumer goods according to the purpose
for which they are bought. They are purchased for use in a business, e.g. raw
materials and machinery. In some cases, the same goods can be both industrial
goods and consumer goods. Cars, for example, may be industrial goods when
bought by companies for use by sales representatives, but are consumer goods
when bought by private individuals for their own use. From a marketing point of
view, the marketing of industrial goods is influenced by several factors:

• Crucial considerations when buying industrial goods include product

performance and quality in terms of wider company requirements – the technical
specification of industrial goods may then be an important feature of marketing
them.
• The link between the seller and the buyer is usually much closer with industrial
goods – for this reason, mass advertising is not often used for industrial goods
and marketing tools such as branding may be less common.
• Personal selling tends to be more common for industrial goods than for
consumer goods.

Services (e.g. hairdressing, car repairs, bank accounts) are distinguished from
goods in the following ways:

• They are intangible – as a result, they cannot be displayed like products nor can
they be handled, tested etc. before they are bought.
• They are usually sold and consumed at the same time – products can be
produced, then stored and consumed at a later date, but the production and
consumption of services cannot usually be separated.
• They are perishable and, unlike products, cannot be stored.
• Their quality may be variable – products can be produced in constant conditions
so that quality can be closely controlled. Services are often provided on the
spot and quality may depend on the person providing the service. Although
people can be trained to follow very detailed job procedures (such as those
used by McDonald’s in their fast food restaurants), quality control of services
is generally more difficult than it is for products.

These factors mean that the marketing of services often concentrates on ensuring
that the quality of the service is as consistent as possible so that consumers get
the same experience wherever the service is provided.

Marketing myopia

Marketing myopia is a disease rampant among business people. It is the inability to

see 'down the road'. Many business people make their decisions based on current
circumstances. They do not think about what will likely occur in their industry in
the future. The reason that short sightedness is so common is that people feel that
they can not accurately predict the future. They are right, of course. But just
because we cannot accurately predict the future, that is no reason why we should
not use the whole range of business prediction techniques available to us to
estimate future circumstances as best we can.

The term was coined by Theodore Levitt in the 1960's.

Ansoff's Matrix - Planning for Growth.

This well known marketing tool was first published in the Harvard Business Review (1957)
in an article called 'Strategies for Diversification'. It is used by marketers who have
objectives for growth. Ansoff's matrix offers strategic choices to achieve the
objectives. There are four main categories for selection.

Ansoff's Product/Market Matrix

Market Penetration

Here we market our existing products

to our existing customers. This means
increasing our revenue by, for example,
promoting the product, repositioning
the brand, and so on. However, the
product is not altered and we do not
seek any new customers.

Market Development

Here we market our existing product range in a new market. This means that the product
remains the same, but it is marketed to a new audience. Exporting the product, or
marketing it in a new region, are examples of market development.

Product Development

This is a new product to be marketed to our existing customers. Here we develop and
innovate new product offerings to replace existing ones. Such products are then marketed
to our existing customers. This often happens with the auto markets where existing
models are updated or replaced and then marketed to existing customers.

Diversification

This is where we market completely new products to new customers. There are two types
of diversification, namely related and unrelated diversification. Related diversification
means that we remain in a market or industry with which we are familiar. For example, a
soup manufacturer diversifies into cake manufacture (i.e. the food industry). Unrelated
diversification is where we have no previous industry nor market experience. For example
a soup manufacturer invests in the rail business.

Ansoff's matrix is one of the most well know frameworks for deciding upon strategies for
growth.
Ansoff's Matrix Exercise.

Colorado Ricardo Mountain Bikes.

Colorado Ricardo Mountain Bikes was founded by Ricardo Francisco in 1992. He was a keen
cyclist who spent his weekends with many friends cycling and having fun in the mountains
of Colorado. He was very competitive and loved to take his bike off-road to test his
strength and endurance.

However he found that the bikes

themselves kept on breaking-down under
the strain. So Ricardo designed and built
a number of bikes to overcome this
problem. Many failed but eventually he
came up with the ultimate in off-road
bike, which he called the 'Colorado
Ricardo'.People liked Ricardo's bike and
he was asked to build and sell them to
other cyclists in the Colorado region. It went so well that soon he was able to give up his
own job as a DJ to focus on the construction of the bikes.

As the mountain bike sport took off, Ricardo's business grew to produce 10,000 units in
1996. However sales have fallen annually since then and forecasted sales for 2000 are
only 4,000 units. Ricardo's company needs strategies for growth before it is too late. Use
Ansoff's matrix to examine the options for Colorado Ricardo.

The marketing environment

Organisations operate in an environment that is constantly changing. It is vitally

important that marketing decisions take account of the forces that shape that
environment in order to compete more effectively.

The factors that determine and influence the marketing environment can be shown
as follows:

Consumer trends and behaviour

Competition Government

THE
MARKET

The economy Technology

They are the same kinds of factors that influence all aspects of the behaviour and
activity of an organisation.

The marketing mix

For marketing to be successful, an organisation has to combine all the marketing

activities to create a combination of benefits considered to be the most suitable
to meet the needs of a selected market. These factors can be split into the four
Ps:

PRODUCT
PRICE
PLACE
PROMOTION

Each of these factors has an influence on attracting the customer to the product.
Each can be varied to suit the needs of the consumer, e.g. place needs to be
considered when setting the price of a product – expensive meals can be sold in
up-market type restaurants, but not a local café.

Product/service

The product must meet the needs of consumers – actual and potential. Existing
products may have to be adapted to meet these needs. Products are not
necessarily tangible: the bank, travel agent, insurance company and architect all
offer products – normally referred to as services . The quality of a product is
capable of wide variation depending on how it is designed, the materials used in
manufacture, the method of manufacture and how it is packaged.

Products are the means by which a business provides benefits for its customers.
For example, what the consumer wants when buying washing-up liquid is clean
dishes; a gardener buying insecticide wants to get rid of insects. A product is
useless unless it provides a benefit for the user.

CORPORATE BLUNDERS

Cheers to Bud "Lite" Selig, commissioner of Major League Baseball, for whining all
year about MLB's red ink and the need to get rid of at least two major league
franchises. If the business of MLB is in such trouble, why did we just witness an
unprecedented bidding war, topping $700-million, to acquire the Boston Red Sox?
Does anybody smell a rat?
PRODUCT

For many a product is simply the tangible, phsysical entity that they may be buying or
selling. You buy a new car and that's the product - simple! Or maybe not. When you buy a
car, is the product more complex than you first thought? In order to actively explore the
nature of a product further, lets consider it as three different products - the CORE
product, the ACTUAL product, and finally the AUGMENTED product.

These are known as the 'Three Levels of a Product.' So what is the difference between
the three products, or more precisely 'levels?'

The CORE product is NOT the tangible, physical product. You can't touch it. That's
because the core product is the BENEFIT of the product that makes it valuable to you. So
with the car example, the benefit is convenience i.e. the ease at which you can go where
you like, when you want to. Another core benefit is speed since you can travel around
relatively quickly.

The ACTUAL product is the

tangible, physical product. You can
get some use out of it. Again with
the car example, it is the vehicle
that you test drive, buy and then
collect.

The AUGMENTED product is the

non-physical part of the product. It
usually consists of lots of added
value, for which you may or may not
pay a premium. So when you buy a
car, part of the augmented product
would be the warranty, the
customer service support offered
by the car's manufacture, and any
after-sales service.

STUDY QUESTIONS
1. Describe what you understand by a ‘Product’ 2
2. Describe the difference between the core and augmented product 2
3. Discuss the key features and benefits of an augmented product you 4
own
4. From watching Steve Jobs introducing the i-Pod, what were the main 4
features and benefits of the i-Pod?
5. Make a list of other elements you feel are important in creating a 4
product
6. Finally, be creative! As part of an upcoming group task you are going to
design your very own product. Brainstorm some ideas in your jotter
The Product Life-Cycle

When we buy a product we need to know how long it will last. Perishable goods, like fruit
and vegetables, have a short lifespan. Durables like a car have a longer lifespan. Different
products last for different lengths of time but their life-cycles have elements in common
and follow this curve:

Introduction

The product is tested and developed before it is

launched. Initial sales will be low until the consumer
starts buying. At this point, production costs are
much higher than the revenue from sales.

Growth
As sales increase production becomes more profitable. The early development costs can
be recovered. The success of the product can lead to brand loyalty and repeat sales.

Maturity
The product reaches its peak of sale and is at its most profitable point for the company.
Competitors have now entered the market that may reach saturation point.

Decline
As new models and designs come out, or fashions change, a product may become obsolete.
Sales fall, as does revenue. It is no longer profitable to produce it.

Applying the product life cycle to the marketing mix

Marketing teams watch for changes in the business environment and react to them. They
respond to consumer needs, the actions of competitors or government and use the
following strategies during each stage of the product life cycle.

Introduction
To make the target market aware of the new product it is important to heavily promote it.
A special introductory price may help push the product.

Growth
As sales and profitability increase, the selling price may be reduced to make the product
more attractive. Continued advertising around the brand name will help to sustain sales.
The marketing team may consider expanding its distribution, to reach more consumers.

Maturity
Competitors will usually have entered the market at this stage. If their products are as
good but cheaper the company may lose some of its market share. The pricing strategy
must be reviewed. Marketers may also put added value onto their product, by offering
accessories or insurance, for example.
Decline
Marketing cannot save a product at this stage, but targeting a different and smaller

segment can prolong its life.

Extending the Product Life

A product need not die. Through manipulation of the marketing mix the product cant

survive longer.

Product – a new version or generation of the product may be introduced. It may have

better features, or changes in packaging.

Price – the price may be lowered to reach a new market

Place – changes in where the product is sold can expand the lifecycle. For example

Brother typewriters are now sold in the Developing world, but are considered old hat in

the West.

Promotion – BOGOF and other deals may encourage more sales.

CORPORATE BLUNDERS

After Sept. 11, three major airlines (American, Delta and Northwest) said they would
lay off an estimated 100,000 employees. Citing the terrorist attacks as a "force
majeure," the airlines argued they could make the cuts without customary notice,
severance and early-retirement incentives. They later backed down.
Product Life Cycle Questions

1 Draw and label the product life-cycle diagram 8

2 Describe what happens in each of the 4 stages. 4

3 What stage of the product life cycle do you think these products 4
are at?

I-Pod Walkman
PS3 Cars
DVD CDs
Video PSP

4 Give 4 ways in which a product’s life may be extended 4

5 Describe what happens in the development stage 2

CORPORATE BLUNDERS

In a boffo move, Sony Pictures used "quotes" from an imaginary film critic in
Connecticut named David Manning, invented by a couple of Sony execs, in ads
promoting such Sony-backed movies as A Knight's Tale and The Animal. Oops.
A couple of moviegoers sued and several state lawmakers began
investigations.
PRODUCT FAILURES

THE PRODUCT – Name and the Developer

THE TARGET MARKET – Who it was aimed at

FEATURES AND KEY BENEFITS TO CUSTOMERS

REASONS FOR FAILURE

BRANDING

Originally branding meant anything that was hot or burning; by the European Middle Ages
it was commonly used to identify the process of burning a mark into a stock animal so as to
identify ownership. Today a brand is an identifying mark, image, name or concept, which
distinguishes a product or service. A brand name that has been given legal protection is
referred to as a trademark.

Brands are the personality attributed to products and/or services. Without the brand,
Coca-Cola is little more than sugared water; Domestos is just another detergent, and
Chiquita is a banana just like another.

Brands were born with the 19th century advent of packaged goods. Industrialization
moved the production of many household items, such as soap, from local communities to
centralized factories. These factories needed to sell their products nationwide, to a
customer base that was only familiar with local goods. It quickly became apparent that
their soap was a hard sell next to the familiar, local product. The packaged goods
manufacturers needed to convince the public that their product was just as trustworthy.

This is illustrated by many brands of that era, such as Uncle Ben's rice and Kellogg's
breakfast cereal. The manufacturers wanted their products to appear and feel as familiar
as the local farmers' produce. From there, with the help of advertising, manufacturers
quickly learned to associate other kinds of brand values, such as youthfulness, fun or
luxury, with their products. This kick-started the practice we now know as branding.

Examples of prominent brand names

The 2001 ranking of the 100 most valuable brands worldwide by Business Week magazine
contained 62 American, 30 European, and 6 Japanese brands.
Brands (United States):

Apple Boeing Coca-Cola Columbia Records

Ford Motor Company Hershey's McDonald's Microsoft
The Gap BP Cadbury Honda
Nestlé Nokia Orangina Canon
Sony Toyota Nintendo Brio
Ferrari Ikea Lego Mercedes-Benz

A good brand name should be:

• legally protectable
• easy to pronounce, remember and recognise
• attract attention
• suggest product benefits (eg.:Easy off) or suggest usage
 • suggest the company or product image
• distinguish the product's positioning relative to the competition

Brand Equity is the value built-up in a brand. It can be positive or negative. Positive brand
equity is created by a history of effective promotion and consistently meeting or
exceeding customer expectations. Negative brand equity is usually the result of bad
management. The value of a company's brand equity can be calculated by comparing the
expected future revenue from the branded product with the expected future revenue
from an equivalent non-branded product. This calculation is at best an approximation.
Positive brand equity can allow family branding, which makes new product introductions
less risky and less expensive.

Corporate Branding refers to the practice of using your company's name as a product
brand name. Disney, for example, includes the word 'Disney' in the name of many of its
products. So do IBM, Pepsi, and Coca-Cola. One advertising campaign can be used for
several products. It also helps new products being introduced because customers are
already familiar with the name. A corporate branding strategy should only be used if the
company is already well known by the target market and also has a very positive image in
their minds. If corporate branding is done well, the corporate name can become
synonymous with a product category (e.g.: Kleenex, Tampax). Even purchasers of Charmin
will refer to the product as Kleenex. The main disadvantage with corporate branding is the
products are not treated as individuals; hence there is not adequate focus on the
products' unique characteristics.

Questions

1. Explain the origin of the word branding.

2. Define what a brand is.
3. In your own words, describe how brands were born.
4. Which brand do you remember most? Why?
5. What is brand equity?
6. Explain the difference between positive and negative brand equity.
7. Choose an example of a brand with either positive or negative brand equity. Explain your
answer.
8. How is brand equity calculated?

CORPORATE BLUNDERS

Tobacco giant Philip Morris left no doubt it should be somewhere on this list for its
decision to swap its corporate name for the nonsense word Altria. The company topped its
naming blunder when it funded a report in the Czech Republic on the economic virtues of a
heavy smoking population. You see, the study said, people who smoke cigarettes tend to die
young, thus saving the country the extra costs of providing them with a pension in their
old age.
Brand loyalty

Some consumers are faithful to one particular product. A marketing department

must make sure that consumers believe the product to be better than all of its
competitors. It is difficult to persuade brand loyal customers to switch products.
A branded product may also command a higher price, but despite this brand loyal
customers are reluctant to change.

Manufacturers are able to launch new products much more easily if they use an
existing brand name. Consumers believe that the new product will meet the same
standards as the products they already know and like to buy.

Own brands

This is the term for products branded with the name of the store stocking the
product, e.g. Tesco, Sainsbury’s or Boots. The product may well be manufactured
by someone else. The responsibility for marketing the product is passed to the
retailer. Retailers can have products made to their own specification and it may
be offered as a cheaper alternative to the consumer.

Many organisations maintain a product portfolio with different products at

different stages of development.

CORPORATE BLUNDERS

James Broadhead, CEO of FPL Group (parent of Miami's Florida Power & Light),
obviously knows a good (personal) deal when he sees one. FPL's proposed $15.8-
billion buyout of New Orleans' Entergy was never consummated. But Broadhead and
other FPL honchos still walked away with $62-million in deal-related bonuses.
Broadhead, who is retiring at the end of this month, is quite used to remarkable
paychecks. Last year, he received more than $39-million.
The Unique Selling Proposition

In developing your marketing message, it's very helpful to develop a Unique Selling
Proposition, or USP.

What is a USP? The USP very clearly answers the question, "Why should I do business
with you instead of your competitors?"

The USP may be used repetitively in your marketing literature to build the customer's or
client's identification of your company with your product or service.

There are two major benefits in developing the USP. First, it clearly differentiates your
business in the eyes of your current and potential customers or clients. Second, it focuses
your team on delivering the promise of the USP, helping to improve your internal
performance.

USPs should focus on a real product characteristic, for example Irn Bru’s taste or quality
of Armani. Stronger still are USPs based on patented technical advantages like many car
manufacturers (GPS, airbags or ABS) or computer firms (DVD-Rs, Internet access etc.).
However many USPs are based on advertising imagery like Tango (wacky) or Levi jeans
(cool).

Who do you think of when you hear the phrase, "Fresh, hot pizza delivered in 30 minutes
or less, guaranteed"? Dominos virtually took over the delivered pizza market with that
USP. Notice Dominos didn't even promise the pizza tasted good.

Questions

1. What is a USP?
2. What are the two main benefits of having a USP?
3. What other examples of USP can you think of?
4. How do you think a Dominos delivery person would behave compared to a delivery
person who works for a competitor without this USP?
5. Do you think the team at Dominos made a considerable effort to develop systems
to assure the USP was met?

CORPORATE BLUNDERS

In Panama City, a Hooters restaurant boss told waitress Jodee Berry that a new
Toyota awaited the employee who sold the most beer in a month. After she won, the
blindfolded waitress was escorted to the parking lot to claim her "toy Yoda," a doll
of the Star Wars character. She sued.
STAGES IN NEW PRODUCT DEVELOPMENT

Brainstorming

Filter ideas

Ask customers

Formulate strategy

Estimate sales, costs and profits

Prototype created

Trial launch in a few areas

Putting into production

Memorandum
To: Business Management Students

From: Mr McGowan

Date: Today’s

Subject: Product Design

Firstly…

We will view Steve Job’s brilliant iPod launch to see how the very best in the world
present a product to market.

Then…

In your Apprentice Groups you are to come up with a new ICT Product.

Go through the processes of idea generation, screening and concept development.

Then…

You are required to create a 5 minute Presentation for your Product and to
prepare a 2 page brochure outlining the Target Market, the Competition, Features
and Key Benefits of your Product.

Finally…

A specially invited Judge will decide on the winning group. The losing teams will
have to fire the members they believe was least productive/cooperative.
The Boston Matrix - The Boston Consulting Group's Product Portfolio Matrix

Like Ansoff's matrix, the Boston Matrix is a well known tool for the marketing manager.
It was developed by the large US consulting group and is an approach to product portfolio
planning. It has two controlling aspect namely relative market share (meaning relative to
your competition) and market growth.
You would look at each individual product in
your range (or portfolio) and place it onto
the matrix. You would do this for every
product in the range. You can then plot the
products of your rivals to give relative
market share.

This is simplistic in many ways and the

matrix has some understandable limitations
that will be considered later. Each cell has its own name as follows.

Dogs. These are products with a low share of a low growth market. These are the canine
version of 'real turkeys!'. They do not generate cash for the company, they tend to
absorb it. Get rid of these products.

Cash Cows. These are products with a high share of a slow growth market. Cash Cows
generate more more than is invested in them. So keep them in your portfolio of products
for the time being.

Problem Children. These are products with a low share of a high growth market. They
consume resources and generate little in return. They absorb most money as you attempt
to increase market share.

Stars. These are products that are in high growth markets with a relatively high share of
that market. Stars tend to generate high amounts of income. Keep and build your stars.

Look for some kind of balance within your portfolio. Try not to have any Dogs. Cash Cows,
Problem Children and Stars need to be kept in a kind of equilibrium. The funds generated
by your Cash Cows is used to turn problem children into Stars, which may eventually
become Cash Cows. Some of the Problem Children will become Dogs, and this means that
you will need a larger contribution from the successful products to compensate for the
failures.

Problems with The Boston Matrix.

• There is an assumption that higher rates of profit are directly related to high
rates of market share. This may not always be the case. When Boeing launch a new
jet, it may gain a high market share quickly but it still has to cover very high
development costs
 • It is normally applied to Strategic Business Units (SBUs). These are areas of the
business rather than products. For example, Ford own Landrover in the UK. This is
an SBU not a single product.
• There is another assumption that SBUs will cooperate. This is not always the case.
• The main problem is that it oversimplifies a complex set of decision. Be careful.
Use the Matrix as a planning tool and always rely on your gut feeling.

Boston Matrix Exercise

Manor Way Tools

Manor Way Tools began life as a small steel company at the end of the 19th Century. It
was one of the first companies to put carbon into regular iron to create steel. It was
strong and flexible. Their first products were fish hooks which were made from the
flexible wire that they were able to produce.
Over the years the product portfolio grew to include anything that their operation could
turn its hand to such as javelins and railings. Today they focus their operations on the
manufacture of tools for the professional, production, and the enthusiastic amateur. Core
products include handsaws, drill bits, screwdriver, bowsaws etc.
The tool trade is very complex and competitive. Manor Way's main competitor is Oliver
Tools. They are the market leader in many similar areas of the market.

Analyze your product portfolio using the Boston Matrix.

• Oliver is the market leader in
handsaws with 40% of the market.
Manor Way has only 25%. There is
little house building and nowadays
many amateurs use power tools.
However is is still quite profitable.
• Manor way still make a range of
barbed fish hooks which are now
banned in some markets.
• Both Oliver and Manor Way have
invested heavily in gardening tools and expect sales to increase in the future since
people have more leisure time and a larger disposable income. Maner Way has 10%
of the new market, and Oliver has 15%.
• Manor Way has a high share in the new market for sandpaper replacement
products. Their Wayplate is a steel sandpaper replacement for which they have
sole rights. They have 5% of this growing market.
• What about the javelins?
Mass vehicle recall hurts Toyota

Toyota is already recalling more than a million vehicles

Toyota is recalling nearly 250,000 vehicles in Japan over concerns about engine parts, not long
after it had to take a million cars off the road.

The latest scare involves Crown sedan and Hiace van models in Japan.

Toyota will consider whether it should withdraw more than

a million similar models exported to Thailand, Indonesia,
India and Australia as well as Europe.

The Japanese firm recalled a record 1.41 million vehicles

last month to repair a separate electrical defect.

Corrosion worry

The latest recall came after drivers complained about unusual noise and vibration and vehicles
stopping unexpectedly.

No accidents have been reported.

Toyota said it was investigating possible corrosion of parts within the engines of certain models
manufactured between 1998 and 2005.

Affected models include the Crown Chaser Cresta and the Hilux and Dyna truck marques.

The company did not comment on the likely cost of the recall.

Toyota, the world's second largest carmaker, is expected to sell about 8.5 million vehicles this
year.

STUDY QUESTION

Discuss the implications for Toyota of recalling and not recalling the product.
PRICE

The price a firm sets for its products/services will affect demand.

Demand Curve Fig. 1

The Demand curve shows us the

relationship between price and the
quantity demanded.

As we can see when the price

increases from P1 to P2, then the
Quantity demanded falls from Q1
to Q2.
When goods or services respond
strongly to changes in price, they
can be deemed price sensitive.

Price is important for two main reasons:

1. Consumers will only pay what they can afford
2. Consumers use price as a measure of quality

How do small firms set their price?

Small firms usually use cost-based pricing methods called mark-ip and
cost-plus pricing. For example, A small clothes shop buys a dress for
£40.

Mark-up – adds a profit percentage onto direct cost of goods, so if the dress is to have a
100% mark-up, the £40 dress will be sold at £80.

Cost-plus pricing – this is similar to mark-up but adds overheads onto direct costs
before the profit percentage is added.

Long Term Pricing Strategies

Low Price – businesses may charge a lower price than those of competitors if the good is
price sensitive. This is when consumers respond positively to changes in price, and lower
may result in higher sales.

Market Price – when a business sets prices in line with competitors. This avoids a price
war, which is unbeneficial to all companies.

High Price – adopted by firms offering high quality, premium goods and services, where
image is all important.
Short Term Pricing Strategies

Skimming – when a new product is introduced the price is set high. At the beginning when
competition is low, consumers pay for the novelty value. As more competition enters the
price is lowered each time to ‘skim the cream’ off the market. This occurs in technological
markets. When DVD players first came out in the late 1990s they cost in excess of
£1,000. Today cheap DVDs can be bought for around £80.

Penetration Pricing – used when entering an established market, it allows sales and
market share to increase quickly. Prices are set low, sometimes at a loss. As the product
becomes established it can then increase the price. Stagecoach introduced low fares when
entering the Glasgow market in 1997 to take passengers from First Bus.

Destroyer pricing is when a firm sets a price low enough to drive competitors out of the
market. Once the competitor is forced out, prices can return to normal. It is deemed anti-
competitive by the Government. Rentokill advertised competitive prices nationwide, but
reduced prices occasionally at local level to put local firms out of business.

Promotional pricing is used in the short term to boost sales or create interest in a new
product. Supermarkets may lower the price of their best selling products in order to
attract customers who will buy other goods while in the store. This is also called a loss
leader - a product that has a price set so low that it acts as a promotional device and
draws customers into the store.

Demand-orientated pricing refers to varying the price for different groups of

consumers. For example telephone calls are less expensive off peak as there are less calls
made during that period. It is a way of generating more business. This is also called price
discrimination.

Questions

1. What does the demand curve show?

2. Explain the difference between mark-up pricing and cost-plus pricing?
3. Describe the three long term pricing strategies.
4. What is market skimming? What types of firms would use this strategy?
5. Compare and contrast penetration pricing and destroyer pricing.
6. Explain what promotional pricing is. Give an example of a good which you have
bought recently which would be priced in this way.
7. Describe demand-orientated pricing. Give an example of a good or service which
could use demand-orientated pricing.
DISTRIBUTION

The next P in the marketing mix is Place. This refers to where the product is sold, and
how is it distributed.

Channel of distribution – the route taken by product as it passes from producer to

consumer.

Wholesaler – they buy large quantities of product from suppliers and sell them on in
smaller volumes to retailers or business users. The wholesaler provides a link between the
producer and the retailer, saving the producer time and money in delivering direct to the
retailer.

Retailer – the shop which sells goods to the general public. Retailers offer a variety of
goods and services from a variety of producers. Goods are stored on their premises and
are prepared for sale and display them for sale.

Types of retailer

o Independent retailers – most common type and can be best illustrated as your local
corner shop.
o Multiple chain stores – a number of outlets across the country with a well-known
name. E.g. Marks and Spencers
o Supermarkets – offer a wide range of groceries, clothing and electrical goods. E.g.
Tesco, Sainsbury’s
o Department Stores – offer a range of goods within different departments.
Normally specialise in premium brands. E.g. House of Fraser, Debenhams
o Franchises – offer a new business a chance to trade using a successful formula, e.g.
McDonald’s.
o Mail Order – rather than having expensive shops to run they issue catalogues to
consumers who can select products in the comfort of their own home. Successful
due to the credit facilities offerd. E.g. Freeman’s
o Door-to-door – companies like Avon take orders from people’s doorstep.

Agent – an independent person or company appointed to handle sales and distribution

within a specified area. Agent’s income comes from commission they make on each sale.

Agents carry out promotional activities to attract customers and sell them the product.
Car manufacturer’s use agents to sell to local markets because they should have better
knowledge of the market. One drawback is that if an agent sells many different products,
yours might not be given the attention needed.

Importer/Exporter – they play a similar role to the agent but on an international scale.
They will have superior knowledge of the world markets, and can create sales through
their own promotional campaigns. Sometimes act as retailers too.
Direct Selling – This is when the manufacturer sells straight to the consumer. More
common in small, local businesses like a baker. It also occurs in the industrial market,
especially with highly technical machinery.

Choice of distribution channel – how the product gets to the consumer depends
on a number of factors.

The Product – Perishable products which have a limited shelf-life should select a direct
channel. However, some perishables like fish, fruit and vegetables sometimes go through
specialist wholesalers who buy from small producers in order to make up the bulk needed
fro retailers. Premium brands are selective where they are sold, and both Calvin Klein and
Levi’s have prevented Tesco selling them in their stores.

The Market – if the market is nationwide, then to save in distribution costs, then using
wholesalers and retailers are more efficient. If the market is small and local, direct
selling is more apt.

Legal requirements – some goods can only be sold through licensed premises such as
chemists, pubs and off-licenses.

Buying habits – consumers influence where products are distributed. The emergence of
out-of town retail parks have seen identikit sites open up nationwide. Each one contains
supermarkets, carpet stores, furniture stores, DIY stores, Garden centres etc. People
now expect these type of stores to be located in such places.

The business – some firms have their own distribution process with their own wholesalers
and retailers. Once common among large organisations, most of these functions have been
outsourced.

QUESTIONS

1. Why is distribution important to the marketing mix?

2. What is a channel of distribution?
3. Compare and contrast wholesalers and retailers.
4. Explain what an agent does.
5. Give one advantage and disadvantage of using an agent.
6. Explain why the choice of distribution channel is important in terms of:
a) the product
b) the market

7) Give two advantages of selling online

 A Distribution Channel
Manufacturer

Wholesaler

Retailer

Consumer

CORPORATE BLUNDERS

Viisage Technology of Massachusetts was happy to supply its face-recognition

software at this year's Super Bowl in Tampa so law enforcement could scan and
compare the face of every fan at Raymond James Stadium with a criminal database.
Too bad nobody told the fans. The company and law enforcement escaped rising
criticism after the Sept. 11 terrorist attacks changed the public's view on aggressive
security tactics.
Manufacturers
A B C D E

Company Wholesalers
warehouse

Company Retailers Retailers E-tailers

outlets

C o n s u m e r
s
CORPORATE BLUNDERS

St. Petersburg's Florida Power Corp. grossly underestimated the need for
meter readers, forcing Central Florida's dominant electric utility to "estimate"
an unusually large number of its residential customers' monthly bills. Many of
those whose power usage was underestimated got a nasty shock later when the
meter was finally read and a revised bill arrived.
PROMOTION

Who’s Advertising Slogans are these?

1. Whassup?
2. Australian’s wouldn’t give a _____________ for anything else
3. Make yourself at home.
4. Dangerously entertaining.
5. Bon voyage. Bonne destination.
6. Thank you very much
7. A ________ a day helps you work rest and play
8. You either love it or hate it
9. Hello boys
10.Making life taste better
11.The drive of your life
12.Original and best
13.Vorsprung durch technik
14.“Where do you want to go today?”
15.Finger lickin' good
16.Because I’m worth it
17.And all because the lady loves _____________
18.You can be sure of _______________
19.Be the Best
20.Your flexible friend
21.The world’s favourite airline
22.Put a tiger in your tank
23.You know, when you’ve been ____________
24.got your number
25.the world’s local bank

Methods of Promotion

The three main aims of promotion are:

• persuading – to persuade consumers to purchase the product;

• informing – to tell consumers about the product;
• reminding – to remind consumers that an established product still exists.

There are two main types of promotion:

• Above the line – Use is made of independent media such as television and
newspapers, enabling businesses to reach large audiences easily. Obviously
there will be those who are not really interested in the product at all so, to a
certain extent, the promotion can be said to be wasted.

• Below the line – This type of promotion is directly controlled by the business,
e.g. sales promotions, direct mail, trade fairs and personal selling. It allows
businesses to target the consumer they hope will be interested in their product
more directly.

Let us look at the individual components of the promotions mix in more detail. Remember
all of the elements are 'integrated' to form a specific communications campaign.

Advertising is a 'paid for' communication. It is used to develop attitudes, create

awareness, and transmit information in order to gain a response from the target market.
There are many advertising 'media' such as newspapers (local, national, free, trade),
magazines and journals, television (local, national, terrestrial, satellite) cinema, outdoors
advertising (such as posters, bus sides).

Informative Advertising – used to pass on information about new or improved products, or

to give information about a technical product. The government uses informative
advertising in the media. E.g. HEBS regularly run ads to change Scottish unhealthy
lifestyles and eating habits.

Persuasive Advertising – a hard sell by manufacturers to get us to buy their products.

Often used in competitive markets where there are few USPs between products. They use
powerful images and language to try and get us emotionally involved. E.g. in the lager
industry Carlsberg state: “Probably the best lager in the world.”

Corporate Advertising – like corporate branding, where the whole company is promoted
not just individual products.

Generic Advertising – When rivals come together and sell not their individual products,
but their market or industry as a whole. A recent example would be during the BSE crisis,
British Beef advertised in unison to try and allay consumer’s fears.

The effectiveness of advertising will often depend on selecting the most

appropriate media to reach the target segment of the market.

MEDIUM ADVANTAGES DISADVANTAGES

Television Exposure on a national scale Expensive
The advert reaches all socio-economic There may not be a
groups nationwide interest in
Sound, vision, movement and colour can the product, so TV
all be used advertising would not be
appropriate
Daily Exposure on a national scale Only read by particular
newspapers groups
People tend to believe what is in the Can be expensive
papers
They have high attention value
Market segments closely identified with
readership
Sunday Greater attention value since people have Expensive
newspapers more time to read them
Large circulation Difficult to define
Advertising in colour supplements is market segment of
attractive readership
Local Readers tend to scrutinise local papers Local papers do not have
newspapers more closely than they do the nationals the authority of national
papers
Greater density of readership on a local Newsprint is sometimes
basis of poor quality
Direct mail Good for targeting market used with Poor strike rate if target
mailing lists if audience is not
carefully selected
Good for exclusive products and Many consumers view it
particular interest groups as an ‘invasion of privacy’
Independent Less expensive than press and television Relies on messages being
radio communicated by voice –
high ‘noise’ factor
‘Captive’ audience Difficult to target
specific segments
Listeners tend to ‘switch
off’ when the adverts
come on
Cinema Messages can combine voice, image and Limited market coverage
colour
Effective for targeting local markets Expensive to produce
and segments ‘quality’ adverts
Outdoor media High visual impact May go unnoticed – i.e.
part of the scenery

The choice of advertising method will be affected by:

• cost
• the audience reached
• the advertising used by competitors
• the impact
• the law (restrictions on tobacco advertising)
• the marketing mix (may be used along with other promotions).

Controls on advertising

Advertising Standards Authority (ASA)

This is a voluntary body set up to monitor advertising in the UK. It is responsible
for making sure advertisers conform to the British code of advertising and sales
promotion practice. Advertisements must be legal, honest, truthful and not cause
offence.

Independent Television Commission (ITC)

This is a body which controls advertising on television and radio.

Sales promotion tends to be thought of as being all promotions apart from advertising,
personal selling, and public relations. For example the BOGOF promotion, or Buy One Get
One Free. Others include couponing, money-off promotions, competitions, free accessories
(such as free blades with a new razor), introductory offers (such as buy digital TV and get
free installation), and so on. Each sales promotion should be carefully costed and
compared with the next best alternative.

There are two main types of sales promotion:

Into the pipeline

This is a promotion designed to enhance sales of a product to trade outlets and to
help them sell the product to their customers. Examples include point of sale
(POS) material, such as displays, posters, promotional videos, etc., and sale or
return arrangements under which the supplier agrees to take back unsold stock.

Out of the pipeline

This is a promotion that helps trade outlets to persuade their customers to make
a purchase. Examples include free trial packs, bonus packs and money-off
coupons.

Personal Selling is an effective way to manage personal customer relationships. The sales
person acts on behalf of the organization. They tend to be well trained in the approaches
and techniques of personal selling. However sales people are very expensive and should
only be used where there is a genuine return on investment. For example salesmen are
often used to sell cars or home improvements where the margin is high.
Public Relations is defined as 'the deliberate, planned and sustained effort to establish
and maintain mutual understanding between an organization and its publics' (Institute of
Public Relations). It is relatively cheap, but certainly not cheap. Successful strategies
tend to be long-term and plan for all eventualities. All airlines exploit PR; just watch what
happens when there is a disaster.The pre-planned PR machine clicks in very quickly with a
very effective rehearsed plan.
Merchandising is an attempt to create an atmosphere or mood to attract customers into
stores via elaborate displays, posters etc. Layout of stores are designed for customers to
follow routes whereby to get to the popular selling products they have to pass less popular
ones, in the hope of making a sale. Similar products are stacked together for customer
ease. Prices for shelf space vary, the most expensive for producers to get is at eye-level.
Products at eye-level out perform other, similar products.

Direct mail is very highly focused upon targeting consumers based upon a database. As
with all marketing, the potential consumer is 'defined' based upon a series of attributes
and similarities. Creative agencies work with marketers to design a highly focussed
communication in the form of a mailing. The mail is sent out to the potential consumers
and responses are carefully monitored. For example, if you were marketing medical
textbooks, you would use a database of doctors' surgeries as the basis of your mail shot.

Trade Fairs and Exhibitions

Such approaches are very good for making new contacts and renewing old ones. Companies
will seldom sell much at such events. The purpose is to increase awareness and to
encourage trial. They offer the opportunity for companies to meet with both the trade
and the consumer. Expo has recently finish in Germany with the next one planned for
Japan in 2005, despite a recent decline in interest in such events.

Sponsorship is where an organization pays to be associated with a particular event, cause

or image. Companies will sponsor sports events such as the Olympics or Formula One. The
attributes of the event are then associated with the sponsoring organization.

The elements of the promotional mix are then integrated to form a unique, but coherent
campaign

Activity
For each of the various methods of promotion, think of advantages and disadvantages of
each.

Draw a T-chart if necessary.

CORPORATE BLUNDERS

In Miami, a dozen Burger King executives suffered serious burns to their feet after
walking across a bed of hot coals during a management training exercise. At the home of
the Whopper, it gives new meaning to "flame broiled."
Memorandum
To: Business Management Students

From: Mr McGowan

Date: Today’s

Subject: Design an Advert

Your task is to design a promotional advert and flyer.

Our clients will be one of the following:

a) Healthy Eating in Octagon

b) Mr McGowan’s Podcasting Club
c) HGS e-zine
d) Dangers of using Bebo/Facebook/My Space
e) Kazakhstan Tourist Board

I will select which one in class before we begin.

You need to make sure you are communicating the message of the product as well
as making it eye-catching enough so it will stand out from the crowd, or to use
advertising speak, ‘cut through the noise.’

The adverts will be judged by an expert!

The winning poster and flyer will be used for real!

Marketing Mix: The 4Ps and how they relate to each other

PRODUCT PRICE PLACE PROMOTION

PRODUCT - High Products should Ad campaigns
production be sold in relevant must use
costs may shops/locations appropriate
mean a high media
selling price

PRICE High price is - In different Low priced

perceived as locales prices may goods are often
high quality differ (think heavily
shopping malls or promoted via
internet) BOGOF (sales
promotion)
PLACE Where a High priced - Promotions need
product is goods are to be aware of
sold affects available in the ‘noise’ in
image and exclusive certain places
quality stores such as the
internet (pop-up
killers etc)
PROMOTION Campaigns High priced Competitive High -
must target goods are Streets or
right advertised Shopping Malls
consumers selectively may have to have
and regular
exclusively promotions to
attract customers
Market Segmentation: Introduction

There are three main approaches to marketing strategy:

1. Undifferentiated or mass marketing

2. Differentiated or product-varied marketing
3. Target, concentrated or niche marketing

Undifferentiated marketing

Firm Market

Marketing mix

Differentiated marketing

Marketing mix1 Segment 1

Marketing mix 2
Firm Segment 2

Segment 3
Marketing mix 3

Concentrated marketing

Segment 1

Firm Segment 2

Marketing mix
Segment 3
Perceptual Mapping

Perceptual maps are grids to help us understand consumers’ views and perceptions about
products and brands.
High
Quality

Low High
Price Price

Low
Quality

The above circles are products.

Market segmentation
Market segmentation is when a market is analyzed to identify all the different types of
consumer. Then products are matched to consumer categories.

Types of segments
Just as you can divide an orange up into segments you can divide the population as a whole
into many different groups of people or segments that have something in common.
Segmenting the market makes it easier to identify groups of people with the same
consumer needs and wants. Marketers therefore look for categories they can use to
divide up the population.

There are five commonly used categories:

• Gender
• Culture
• Age
• Income
• Lifestyle
Gender
Products may be targeted at a specific gender group. For instance, cosmetics have been
traditionally targeted at women while DIY has been targeted at men.

Culture
People's needs and wants as consumers will vary according to their religion, language,
social customs, dietary habits and ethnic background. In the UK businesses provide for a
wide range of different cultures. There are magazines and newspapers in many different
languages and Halal butchers in areas with large Muslim populations.

Age
The population can be divided by age in years (eg. 0-16, 17-25) or by the stage of life
reached (eg. schoolchild, teenager). For example, a pensioner will have similar needs to
those of other pensioners but different needs from those of a teenager.
Income
The population can be segmented according to annual salary (e.g. £15,000, £30,000 etc.),
or type of job and social class. Establishing a group's disposable income is important so
that products can be targeted to the relevant income group. This is called a socio-
economic segment. The socio-economic groups A, B, C1, C2, D and E describe how much the
head of the household earns.

A. Higher managerial, administrative or professional

B. Intermediate, clerical, administrative or
professional
C1. Supervisory, clerical, junior administrative or professional
C2. Skilled manual
D. Semiskilled and unskilled
E. State pensioners, widows, casual and lowest paid

Lifestyle
People are grouped according to the way they lead their lives and the attitudes they
share. For example, young professionals may drive a sports car because of the image they
want to project. Married parents might want the same things, but have to provide for
their children, which is a large extra cost. They will need a family car to suit their
lifestyle.

Market Segmentation Tasks

1. Outline the differences between the three marketing approaches.

2. What is market segmentation?

3. Describe the ways you can segment a market.

4. Create a perceptual map for running shoes based on quality and price. Place the
following brand sin your map: Reebok, Nike, Gola, addidas, Puma,

5. Create a perceptual map for jeans, again based on quality and price. Place the following
brands in the map: Levi’s, Pepe, Wrangler, Armani, Lee’s, Versace
6. Copy and complete the table to show the most likely target market for each product.

Detail Age Sex Socio-economic

group
Dyson vacuum cleaner
Shoot magazine
Audi TT
PlayStation 3
Filofax personal organizer
B&Q Power Drill
CK Obsession
IKEA coffee table
Westlife CD
Baby Annabelle doll
Robosapien
Rod Stewart CD
Gap Jeans
3G phone
4 week holiday in Portugal in January
Gold Rolex watch

7. Look at the top 10 films in the UK at present AND the top 10 albums. (You may have to
access the internet). Now place each film/album into a segment you create. You decide
how you are going to segment the market and justify why.
Niche Marketing Golf in Scotland

Golf Tourism - Introduction

Scotland boasts five of the nine Open Championship venues as well as hosting many other
major events that attract wide media coverage. Since the launch of the Scottish Golf
Tourism Strategy in 2000 there have been concerted efforts to further develop and
promote what is clearly a core product for the Scottish tourism industry.

In 2002, around 300,000 UK visitors took holidays in Scotland specifically for the purpose
of playing golf. This generated around £105 million in tourism spend. Around another 1
million visits where golf was part of the trip and this generated an additional £240 million
in tourism spend.

In addition, Scotland attracts approximately 100,000 golfing visitors from overseas,

bringing an additional £100 million into the Scottish economy.
For every £1 spent on a green fee in Scotland, a further £5 is spent elsewhere in the
Scottish economy, and with many types of business and all parts of Scotland benefiting
from this spend.

Despite Scotland’s obvious strengths, there are big challenges in the golf tourism market,
namely:
• Golfing visitors are now spoilt for choice, with more and more countries, resorts,
golf courses and hotels competing for their attention and business.
• Scotland has drawbacks to accompany its strengths – the weather deters some
visitors, there is little winter business and demand often outstrips the supply of
available tee-times at some of the courses visitors most want to play, thus driving
up prices.

Who are Scotland’s golf tourist customers and what are they looking for?
The key to success is to identify the different segments in the golf tourism market, the
requirements of each of these different types of visitors and match these with what you
can offer.

But first, here are a few key findings about Scotland’s golfing visitors from a survey
carried out as part of the National Golf Tourism Monitor in 2001

• Visitors found it easy to obtain information on golf holidays in Scotland and also
found it easy to book their accommodation and golf. (With more and more online
information and booking activity, it is probably now even easier.)
• Most visitors booked all their accommodation and (to a lesser extent) their golf
before leaving home, and most booked directly with accommodation establishments
and/or golf courses. However, a third of visitors booked all their golf after
arriving in Scotland.
• 40% of visitors made their holiday decision and 25% made their bookings, more
than six months before their visit, with only about 30% making their decision and
bookings within three months of their visit.
 • Visitors were typically experienced and competent golfers – 20 years’ experience,
mostly golf club members, and with an average handicap of 15.
• 80% of ‘golfing holidaymakers’ take at least one golf holiday a year with 50% taking
several such holidays every year.
• Scotland’s strongest features are the number and quality of its golf courses, and
the ease of access to them. Accommodation quality and value for money are less
highly rated than golf course quality and value.
• Overseas visitors are Scotland’s most critical customers – as well as being our most
valuable ones in terms of length of stay and spend per head.
• About 20% of visitors had considered visiting a country other than Scotland for
their holiday – with Ireland the strongest competitor destination.

Of course, different types of golf facilities and different parts of Scotland attract
different types of golfing visitors. The first step is therefore to recognise these
different segments in the golf tourism market and what each type of visitor is looking for.
You will then be able to decide which of these segments you can realistically target.

For instance, day-trip visitors can be a key part of the market mix for many golf courses,
but are obviously of no direct interest to accommodation operators, while most North
American golfing visitors tend to focus on Scotland’s famous courses.

A key distinction is between ‘golfing holidaymakers’ for whom golf is the main purpose of
their holiday, and ‘holiday golfers’ who play some golf as just one part of a more general
holiday.

Questions

1. What is meant by the term niche marketing?

2. What advantages does Scotland have in term of golf courses?
3. Why is golf tourism important to the Scottish economy?
4. Conduct a brief SWOT analysis for golf in Scotland.
5. What are the two major disadvantages of golfing in Scotland? How would you solve
this problem?
6. What evidence can you find that shows golf package deals have room for
improvement?
7. What golf segment would you target and why?
8. Golf is one of four key niche markets in Scotland. Can you work out the other
three?
Marketing Research Faux Pas

Pepsi in Taiwan

The advertising slogan “Come alive with the Pepsi generation” was translated as “Pepsi will
bring your ancestors back from the dead”.

Toyota’s Fiera

In Puerto Rico ‘fiera’ translates to ‘ugly old woman’.

General Motors’ Chevy Nova

People laughed at this car when released in Latin America, because ‘Nova’ means doesn’t go
in Spanish.

Schweppes Tonic Water

In Italy the name was translated at Schweppes Toilet Water.

Gerber in Africa

Baby food manufacturer Gerber began to sell products in Africa, using the same packaging
for Western markets. Low sales revealed that the other firms used pictures to show
what’s inside as many customers cannot read English.

KFC in Hong Kong

KFC’s ‘Finger Lickin’ Good’ slogan was translated as ‘eat your fingers off’.

Coors in Spain

Coors ‘Turn it loose’ slogan translated as ‘You will suffer from diarrhoea’!
Market Research

Market research involves collecting, recording and making sense of all the available
information which will help a business unit to understand its market.

Market research sets out to answer the following questions:

• who makes up the target audience?

• what do they want?
• when do they need it?
• where does it sell best?
• how can it be taken to them?
• why do they want/need it?
• what are our competitors doing?
• how is our market changing?
• Market research helps firms to plan ahead rather than to guess ahead.

In business, demand is always changing and therefore it is essential to know how things
are changing. Market research requires a special form of skill and therefore market
research companies are often employed because they have the necessary experience and
also because market research takes up a lot of time.
Methods used in marketing research

Data gathering involves collecting as much information as possible about the market,
usually before any further steps are taken. It relies on desk research and field research.
Data is divided into primary and secondary categories. Primary data are collected in the
field. Secondary data are gathered from all the material that is at present available on
the subject, and is always studied first when doing desk research.

Desk research. This method involves the search for secondary data, whether published
or unpublished. A good place to begin is with a company's records of items such as
production, sales, marketing, finance and other data. Other sources of secondary data are
government publications on the Internet such as the government's Expenditure and Food
Survey showing what typical households spend their money on, and Social Trends outlining
changes in social patterns in this country. Commercial research organisations such as
Mintel also provide market research reports, many of, which are accessible on the
Internet.

Field research involves the search for primary information.

Sampling/sample surveys: Is the most common way to gather field data. It involves taking
a census of a small sector of the population which represents all of a particular group, e.g.
married working women in Bristol aged 30-45 are taken to represent all urban, married
working women in the United Kingdom. Convenience sampling is taking information from any
group, which happens to be handy - walking down a high street for example. Judgment
sampling is slightly more refined: the interviewer would select high street respondents on
the basis of whether or not they appear to belong to a particular segment or the
population - say, middle-class business people. Quota sampling deals with specific types of
respondents - e.g. female students studying the social sciences.

Questionnaires: This is the most popular method of extracting information from people.
They are usually conducted by post, telephone or in person. Questionnaires are easy to
administer and easy for respondents to deal with. They simplify the analysis of results,
and can provide surprisingly detailed information. A useful way of delivering a
questionnaire is on-line. One way of doing this is to ask the public to fill in a questionnaire,
which then enables them to register for access to a website. However, questionnaires are
easy to 'cheat' on and a market research agency will ensure that 'control questions' has
been built in to check that the questionnaire has been filed in in a suitable fashion.

Postal questionnaires: These are easy to administer but unfortunately they yield a poor
response. They are rarely used on their own: more often they are used to support a
programme of telephone or personal interviews. Benefits include relatively low cost, no
interviewer bias, and reaching people who are otherwise inaccessible.

Telephone interviews: These are ideal when specific information is required quickly.
However, in the modern age many consumers are reluctant to 'waste' their time on
answering questions on the telephone. As the questioner has little evidence of whom they
are speaking to it is easy to get false information.

Personal interviews: In a structured interview, the interviewer has to follow a set pattern
of questions and responses (e.g. ticking boxes). In semi-structured interviews the order
and wording of the questions are laid out in an interview guide but the response is open
ended, and the interviewee is allowed to reply in his or her own words. Unstructured
interviews are what they sound like - certain topics are covered in a relaxed fashion.

Hall test: During this procedure, a number of respondents are invited to attend a fixed
location (traditionally a hall from which the term originates) and then are asked to
respond to stimuli, usually individually.

Observation: Observation is the collection of data through non-verbal means which can
stand alone as research on its own or compliment other relevant research. It is the
process of recognizing and recording relevant objects and happenings.

Quantitative market research - relates to methods such as questionnaires, which can be

used to gather a lot of information, but which often used fairly closed responses.

Qualitative market research - relates to more intensive methods involving small samples
such as a focus group who come together to discuss their feelings about a particular
product.

Study Questions
1. Compare any 2 methods of market research.
2. Investigate Sampling in more detail and highlight advantages and disadvantages of
each type of Sampling.
3. Investigate Hall Testing and Consumer Panels in more detail using either the
internet or other available resources and prepare a memo outlining the advantages
and disadvantages of each.
Surveys

Surveys are used to find out what people think about a wide range of things from food,
cosmetics, holidays and cars to politics and how you rate your daily newspaper – in fact,
anything at all.

Questionnaires, which are basically collections of questions, are carefully constructed for
use in surveys. Market research organisations are paid to use questionnaires on behalf of
companies that offer many different products and services. These companies need to
know customers’ views so that they can improve what they sell.

Sometimes interviewers stop people in the street and ask them to fill in questionnaires.
This can also be done by post, by telephone and on the Internet.

Questionnaires could be useful as part of a Business project. For example, you could use
them to:
• find out what potential customers think about something you are planning to sell
• find out what people think about a range of issues such as smoking, underage
drinking, vandalism, public transport.

Types of questions

There are basically two types of questions:

• closed – where you provide a range of answers and the person answering has to
choose one or more
• open – where the person answering has to make up their own answer.

There are several ways to construct closed questions, such as:

• yes/no
• multiple choice
• rating scales.

Yes/no questions
These are the simplest type of question as there are only two one-word answers, for
example:

Do you like chocolate?

Yes/no

Most of the population would be able to answer this question quite easily, and anyone
counting the answers would also find it an easy task.
Multiple-choice questions
Usually a question is asked and three or more options are given as possible answers. The
person answering chooses one or more of the answers. For example:

What kind of chocolate do you like?

• Milk
• Plain
• White
• Filled

Again, this type of question is fairly easy to answer and the results are easy to add up.

Rating scale
If you want to find out how strongly people feel about something, it is a good idea to have
a rating scale.

For example, you can ask:

How much do you like chocolate?

Like it a Like it quite Like it very

Don’t like it I’m addicted
little a lot much
1 2 3 4 5

The person answering would circle the number that is closest to how they feel about
chocolate.

Once more, this type of question is easy to answer and the results are easy to add up.

Open-ended questions
With this type of question you are inviting the person answering to give his or her own
feelings and opinions.

For example:

Can you describe your ideal chocolate bar?

You could get a very wide range of answers here. There is virtually no limit to the range
of flavours, textures and sizes the public could suggest. Chocolate manufacturers could
get some very valuable information from a question like this, but it would be a hard task to
make some kind of statistical sense out of the answers.
Stick to the rules
If you are compiling your own questionnaire, there are some basic rules to follow to make
things easier for you and the people answering your questions.

Do:
• introduce yourself and let people know what the questionnaire is for – i.e. part of a
school or college project
• say ‘please’ and ‘thank you’ – either on the form or in person
• start with the easy questions requiring the least thought – yes/no questions are
good
• keep it brief – no more than 10 questions so that people answering don’t become
bored
• keep it anonymous - you are more likely to get honest answers if you don’t ask for
names
• make sure all the questions are clear and easy to understand.

Don’t:
• ask irrelevant questions – for example, don’t ask for age and date of birth if you
only want to find out if they will buy your homemade cakes.

When you have written your questionnaire, try it out on one or two people first before you
make a lot of copies.

Results

When you have collected all of your completed questionnaires, you will have to add up the
answers and present them in a way that contributes something to your project.

There are several ways to express your figures.

Fractions
for example:
One third (1/3) of people answering started smoking before the age of 16.

Percentages
for example:
90 per cent (90%) of cats thought that our tuna and egg sandwich filling was delicious.
Surveys

Create your own questionnaire

If you would like some practice in writing questionnaires, choose one of the following
subjects and as a group make up a questionnaire of no more than 10 questions:

Internet shopping
Types of purchases – books, CDs, food, clothes, sites used, amounts spent per month.

Culture in your neighbourhood

Views on use of museums and galleries, attendance at concerts, plays.

Medical services
Use of doctors’ surgeries and clinics, use of hospitals, views on quality of service and
waiting times.

Try the questionnaire on three or four people, collate the results and show them to your
teacher.
Market Research Methods Summary

Face-to-face interview
A personal interview held in the street or home
Advantages Disadvantages
 2-way communication  Personal interviews can be
 researcher can encourage expensive
respondent to answer  Researchers have to be
 mistakes and selected & trained
misunderstandings can be  Home interviews unpopular
cleared up right away with consumers

Postal Survey
Market researcher sends questionnaire through the post
Advantages Disadvantages
 Inexpensive  Questions must be simple and
 No interviewer training easy to answer
needed  Response rate very low,
incentives sometimes needed

Focus group

Specially selected groups of people, usually led by a chairperson

(facilitator) who puts forward points to encourage open discussion
Advantages Disadvantages
 Qualitative information  Can be difficult to analyse
provided in the form of qualitative information
opinions, feelings and  expensive
attitudes
 Topics can be explored in
some depth
Questionnaire Design: Poorly Worded questions

Question Problem and Solution

What type of wine do you ‘Type’ is ambiguous: respondents could say ‘French’
prefer? or ‘Red’, depending on their interpretation. Showing
the respondent a list and asking ‘from this list…’
would avoid the problem.

Do you think that prices are Leading question favouring Asda: a better question
cheaper at Asda than at Aldi? would be ‘Do you think that prices at Asda are
higher, lower or about the same as at Aldi?’ Names
should be reversed for half the sample.

Which is more powerful and kind Two questions in one. Ariel may be more powerful
to your hands: Ariel or Bold? but Bold may be kinder to the hands. Ask the two
questions separately.

Do you find it paradoxical that X Unfamiliar word: a study has shown that less than a
lasts longer and yet is cheaper quarter of the population understand such words as
than Y? paradoxical, chronological or facility. Test
understanding before use.
Memorandum
To: Business Management Students

From: Mr McGowan

Date: Today’s

Subject: Pupil Questionnaire

Your task is to design a basic questionnaire to investigate the eating habits of S1

and S2.

Your questions should look at their current eating behaviour in school and what
potentially could be their new behaviour (what is it they would like to see?)

Remember the questionnaire design tips from the previous page and also
concentrate on healthy eating.

Good luck!
PAST PAPER QUESTIONS

1 At Christmas time, toy manufactures often face the problem of not being able to obtain stocks
of the most popular toys ( eg. PlayStation 2). Toy manufacturers produce updated versions in
order to extend their product life cycle. Identify and describe 4 other means of extending the
life of a new product.
(8 marks)

2 Discuss the factors which would contribute towards a good product mix for an organisation.
(5 marks)

3 How can the use of information and communications technology (ICT) support market
research? (10 marks)

4 Discuss how the Scottish Tourist Board could make use of the Internet to ‘market’ Scotland?
(9 marks)

5 Describe and justify the research method you would employ to find out if visitors to
Edinburgh Castle were satisfied with there experience. Your answer should refer to the reliability
of the information you have gathered. (10 marks)

6 Select 2 of the following methods of market research and describe each, discussing their
advantages and limitations:
(i) Face-to-face interviews
(ii) Postal survey
(iii) Focus group. (8 marks)

7 Distinguish between penetration and skimming pricing. (8 marks)