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Intro to BusinessChapter 10, Section 1 – Marketing Basics
Indiana University Marketing Program lists over 20 Undergrad Marketing classes
Marketing Research
Marketing Management
Retail Marketing Management
Database Marketing
Creativity and Communication
Consumer Behavior
Marketing Strategy
Tip of the iceberg…
What is Marketing?
Most visible business function…
…least understood business function
American Marketing Association definition
“process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives”
Marketing
Marketing DefinitionConfused??
Marketing is the process of planning and executing…
Marketing…piece by piece
Conception, pricing, promotion, distribution
Marketing – piece by piece
What are we going to sell
How much will we
charge
How will we
advertise our
product or service
How will we get
our product
or service to
customers
The obvious…
We watch, hear or see advertisements
We see brand names
We read product descriptions
We interact with salespeople
All of these are marketing
activities
Marketing Activities
…The not so obvious
Storing products in warehouses and moving them to the final point of sale (logistics)
Establishing/accepting credit
Arranging payment (online and in-person)
Data gathering
Marketing Activities
All businesses complete some marketing activities
Some business are directly involved in marketing
Advertising agencies
Research firms (Nielsen)
Shipping and delivery companies
Marketing Businesses
Marketing Functions
Developing, maintaining, and improving services that meet consumer needs
Marketing Functions Product/Service Management
Determining the best ways for customers to locate, obtain, and use the products/services
Marketing FunctionsDistribution
Communicating directly with customers to determine and satisfy their needs
Marketing FunctionsSelling
Obtaining and using market information to improve business decision making and the performance of marketing activities.
Market research
Databases with information regarding
Customer tastes, products, competitors
Marketing FunctionsMarketing Info. Management
Budgeting for marketing activities
Obtaining necessary funds for operating
Providing financial assistance to customers
Marketing FunctionsFinancing
Setting and communicating the value of products/services
Must be readily identifiable
Set low enough to get customers
but still make a profit
Consider competitor prices
Marketing FunctionsPricing
Communicating information about products and services to customers
Advertising
Last 5 commercials
Marketing FunctionsPromotion
Target Markets and Demographics
Next Time…
Intro to BusinessChapter 10, Section 1 – Marketing Basics
Product pricing promotion placement
Marketing – The 4 P’s
What are we going to sell
How much will we
charge
How will we
advertise our
product or service
How will we get
our product
or service to
customers
We know Every business engages in some form of marketing
Marketing activities often cost 50% or more of the selling price of a product/service
Marketing must be done RIGHT! Consumer knowledge increasing
Competition
Price constraints
Marketing Strategy (Pg. 238)
Aimed at satisfying customer needs better than competitors
MARKETING STRATEGY – plan that identifies how a company will use marketing to achieve its goals
Marketing Planning
Identify Target Market
Create Marketing Mix
Marketing Strategy – 2 Steps
TARGET MARKET – specific group of consumers that have similar wants and needs
Companies can not meet everyone’s needs with any one product
Focusing on a target market makes it easier to develop products people want
Target Market
No single product can meet everyone’s needs
Importance of target markets
More than 30 different varieties/flavors
“From a marketing management point of view, selection of the appropriate target market is paramount to developing successful marketing programs.” – Marketing Management 9th edition (Peter & Donnelly)
Importance of Target Market
Also called market segmentation
Relies on Demographics
See Moodle link for Sample Market Segments
Building a target market
Marketing Mix – blending of the four marketing elements: product, price, placement, promotion.
Should satisfy wants and needs of target market
AND provide a profit for the company
Marketing Mix
Inward focus (BAD )
Guessing/Assuming what consumer wants
Trying to convince consumer they want it
Outward focus (GOOD )
Marketing orientation considers customer needs first when developing marketing mix
Use research and study customers
Successful Marketing Strategy
Marketing Strategy – In Action
What customer group will we serve?
Determining a Target Market
• Get information into hands of prospective customers
• Persuade them!
• Meet the budgets of target market
• Provide profit for company
• Customer travel to dock
• Handling baggage
• Customer service
• Activities• Destinations• Theme
ProductPlacement
(Distribution)
PromotionPricing
Determining the Marketing Mix
Intro to BusinessChapter 10, Section 2 – Developing Effective Products and Services
4 P’s of Marketing
Marketing Strategy
Where we’ve been thus far…
Product pricing promotion placement
Marketing – The 4 P’s
What are we going to sell
How much will we
charge
How will we
advertise our
product or service
How will we get
our product
or service to
customers
Identify Target Market
Create Marketing Mix
Marketing Strategy – 2 Steps
Marketing Research
Today (Pages 243 – 245)
What is a “New” Product
Depends on who you ask
Dominos example…“New” pizza
Apple’s “New” forthcoming tablet pc
Many “new” products are simply improvements on existing products
Truly new products are rare
Truly new products do not have an existing substitute
What new products have been introduced in our lifetime?
Creating/Improving Products
Remember!
Companies should not assume what customers want and then try to convince them
Good companies are customer focused…they figure out what customers want and then try to provide it
(Marketing Orientation)
Creating/Improving Products
So…product creation should begin with researching what your target market desires
MARKETING RESEARCH – finding solutions to problems through carefully designed studies involving consumers
Creating a new product
Pros
Targeted to company’s needs
Cons
Time consuming
Costly
Pros
Can be cheaper
Quicker
Cons
May not be relevant
Open to all
Primary Research Secondary Research
Types of Research
Types of Research Studies
Customer Surveys
Focus Groups
Observations Experiments
Most common type of research study
Gather information using carefully planned questions Quantifiable is good
Can be conducted in-person, over phone, through mail or over internet
Customer Surveys
Taco Bell Customer Survey
Small number of consumers taking part in a group discussion
Discussion topics might include customer’s experiences with a
product reactions to new ideas suggestions for
product improvements
Focus Groups
Collect information by recording actions of consumers
Common questions answered by observation
How do customers interact with packaging?
What routes do customers take through store?
Observations
Experiments
Two carefully controlled alternatives
Examples
Compare sales of two products
with different size, packaging, etc.
Effect of promotions
Coupons
Customer “limits”
Experiments
1) Define the Marketing Problem1) Are we rolling out a new product?2) Trying to improve customer service?
1) Study the situation
2) Develop data collection procedure
3) Gather and analyze info
4) Propose a solution
Steps in Marketing Research
Product Planning/Creation
Next Discussion
Intro to BusinessChapter 10, Section 2 – Developing Effective Products and Services
Product pricing promotion placement
Marketing – The 4 P’s
What are we going to sell
How much will we
charge
How will we
advertise our
product or service
How will we get
our product
or service to
customers
Identify Target Market
Create Marketing Mix
Marketing Strategy – 2 Steps
Types of Research Studies
Customer Surveys
Focus Groups
Observations Experiments
Each part of marketing mix is important. Products/services must…
be available to consumer (placement)
have affordable/fair price (pricing)
demonstrate how they will meet consumer needs better than competitors (promotion)
But above all…
Product Development
The Product must be something
PEOPLE WANT!
Product – Tangible good a business offers to satisfy a customer need.
Basic Product
Simplest form of a product
Not unique…available from several companies
Example: Cell Phones
Product Terminology
Product Features
Additions and improvements to basic product
Options – customers offered choice of features
Product Terminology
Product Life Cycle
Unique Identification for a Company’s Products
Memorable and appealing
Simple is effective!
Brand Names
What purposes does packaging serve?
Packaging
Packaging
1. Idea Development
2. Idea Screening
3. Strategy Development
4. Production (and Financial Planning)
5. Test Marketing
6. Full-Scale Production
Product Planning Process
Activities consumed at same time they are produced Intangible – you can’t
touch a haircut
Inseparable – consumed at time produced
Perishable – You can’t sell tickets to a game once it is over
Heterogeneous –Differences in quality
Services
Intro to BusinessChapter 10, Section 3 (Part I) – Pricing
4 P’s of Marketing
Marketing Strategy
Market research
Product Development
Where we’ve been thus far…
Product Pricing
Product Placement
(Distribution)
Product Promotion
What’s Left?
Where do Prices come from?
Supply and Demand
Water vs. Gas
Uniqueness
Diamonds vs. Plastic Beads
Age
Product Life Cycle
Example: Video Game Consoles
Pricing Factors for a Business
Season
Jackets vs. Swim Trunks
Complexity
IPods vs. AM/FM radios
Convenience
Speedway vs. Target
Pricing Factors for a Business
PRICE – the money a customer must pay for a product or service
Not an exact science
Empowered Customers
Marketplace competition
Constantly changing variables
Pricing a Product
Product Costs
+ Operating Expenses
+ Desired Profit
Selling Price
Pricing Formula
Difference between selling price and product costs
Tells us how much money we have to pay our operating expenses and provide profit
Example: Best Buy pays $1,000 for a television and sells it for $1,500. What is the gross margin?
Gross Margin
Markup
Amount added to cost of product to set sell price
= to expected gross margin
Stated as % of product’s cost or selling price
Product cost $15. Marked up 100%. Sell Price = $30
$15 / $30 = .50 or 50%
Pricing Concepts
MarkdownReduction from original
selling price
Causes Can be planned (IPhone)
Product Maturation (Video Game Consoles)
Product Not Selling
Product Flaws
New Competition
Pricing Concepts
Pricing Tricks - Anchoring
Price Tricks - Anchoring
For each of the following, identify whether you believe the scenario will result in a higher or a lower price for a product.
Review
One customer purchases a very large quantity of a product
Scenario 1
A business provides a high level of customer service
Scenario 2
The product is very fragile and requires special handling
Scenario 3
The product moves through many middlemen before it reaches the customer
Scenario 4
A new oil discovery, estimated to contain 10 Billion barrels, was made off the coast of Alaska
Scenario 5
The main factory that makes frozen waffles was flooded and destroyed
Scenario 6
Intro to BusinessChapter 10, Section 3 (Part II) – Placement
4 P’s of Marketing
Marketing Strategy
Market research
Product Development
Produce Pricing
Where we’ve been thus far…
Product Placement
(Distribution)
Product Promotion
What’s Left?
How Did I Get Here?
Determining the best methods and procedures to use to allow customers to find, obtain and use a product/service
Distribution (Placement)
Route a product follows and the businesses involved in moving a product from producer to final consumer
Channel of Distribution
Conventional Channels
Differences in Quantity
Example: P&G Pantene Shampoo
Differences in Assortment
Consumers want variety of products
Example: Dell Computers
Need for Channels
Differences in Location
Reaching customers in different places
Example: Wal-Mart Hub & Spoke Network
Need for Channels
Take the large quantities produced and breaks them into quantities people want
Gather products from many producers to give customers variety they want in convenient locations
Move products efficiently from where they are made to where they are sold
Distribution Channels…
Channel Members – Businesses that take part in a channel of distribution
Channels
Direct: products move from producer straight to consumer with no other “help.”
Indirect: includes one or more other businesses between producer and consumer.
Channels and Channel Members
Other businesses, aside from producer, perform one or more marketing functions
Transportation
Sales
Financing
Indirect Channels
Retailers are the FINAL organization in an indirect
channel for consumer products
Coverage Required Intensive Distribution vs. Selective Distribution
Degree of Control Required Indirect – we are giving up control of marketing
to some degree
Cost Transportation, Processing, Carrying Costs,
Packaging, Handling
Channel Considerations
1). Identify a producer and product that uses a Direct Distribution Channel
2). Identify a producer and product that follows an Indirect Distribution Channel (include the various channel members)
Activity – Distribution Channels
Intro to BusinessChapter 10, Section 4 – Promotion (Part I)
4 P’s of Marketing
Marketing Strategy
Market research
Product Development
Product Pricing
Product Placement
Where we’ve been thus far…
Promotion
Finally…
Where can promotional messages be found?
A question
An Answer…Everywhere
Everywhere!
Everywhere!
Everywhere!
Everywhere!
Everywhere!
Everywhere!
Any form of communication used to inform, persuade or remind
Used by businesses, groups, organizations, and individuals
Purpose: to influence knowledge, beliefs, and actions about products, services or ideas
Promotion
Influence beliefs…
Relies on effective communication
Common Understanding
Telephone Activity
Promotion
Picking a promotional channel
Media
Salespeople
Importance of Target Market
Channel should reach target market
Communicating with Promotion
Most effective
Most expensive
Personal Selling – direct, individualized communication with prospective customer
Normally done face-to-face
Complex, expensive items
Types of Promotion - Personalized
Directed to many people at the same time
Target market = like needs
Little to no individualization
Low cost of message per set of eyeballs
Commercial can reach 100,000’s of people
Types of Promotion – Mass
Any paid form of communication through mass media directed at consumers to provide information and influence action
Advertising Media Television Radio Newspapers Magazines Mass Mailings Outside Displays Internet
Advertising
Advertising Media Pros/Cons
Groups of 2-4
Each member chooses a form of advertising media
In a PowerPoint presentation list the pros/cons for each form of advertising media chosen
Point out an example of a advertisement from each form of media chosen
Group will present PowerPoint (@ least one slide for each member)
Activity
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