AS Business Studies Marketing
Another definition Marketing is the management process responsible for identifying, anticipating and satisfying consumers’ requirements profitably
Marketing BasicsA market – a place or mechanism where
sellers and buyers meet to engage in exchange
Consumer Market – final user is the person (consumer) – buying yogurt at Metro
Industrial Market – goods and services bought by businesses to use in the production process - SABMiller (Perú) buys silica to make glass bottles for its beer production
Concepts (required) for understanding
Marketing Human needs and wants – Marketer´s goal is
to convert needs into wants. You need to eat, but you don´t need to eat an expensive steak Ruth Chris Steakhouse tries to get you to go to its restaurant
Value and Satisfaction – To maintain good long-term relationships with customers, businesses should aim to offer good value (and thus, satisfaction) at all times Mcdonald´s consitency of product so customers return
Beginning ConceptsMarketing Objectives (determined by
senior management!) – the goals of the marketing department which will help the company achieve its overall goals Examples: increasing market share, rebranding a product, or increasing total sales
Marketing Strategy – long term plan established for achieving marketing objectives (later we will learn about the marketing mix, product, place, promotion, price)
More on marketing objectivesAll departments within the business need to
work together in order to achieve the overall corporate objectives
Marketing objectives will impact upon other departments within the business
Marketing departmen
t
The impact of marketing objectives
Other type of MarketingSocietal Marketing – this approach considers
not only the demands of consumers but also the effects on all members of the public (society) involved when firms meet these demands
IT IS A BALANCE (don´t forget about profits but don´t forget about the environment, fellow humans either)
Impact of marketing (example)A firm sets itself a marketing objective to
increase its number of sales. Its strategy to complete this objective is through extensive promotion. How will this affect:
The Production Department: Responsible for producing the product
The Human Resources Department: Responsible for organizing employees
The Finance Department: In charge of the firm´s finances
Examples, Societal MarketingExample 1 - Green approaches – could help a
company win over many customers in the long run
Example 2 – paying good wages could build goodwill or simply help society
Superbowl Commercials, two types
Gets the brand in your head
Talks about specific characteristics of the product
(product differentiation)
AS Business Studies Marketing
Market share
Measure of Market Share: The firm´s sales as a proportion of total sales
Market share = Total number of sales of the firm x 100
Total number of sales in the market
Is Coca-Cola more successful than Pepsi?
In 2009, PepsiCo achieved a $42 billion revenue whilst Coca-Cola achieved $30 billion
This is because Pepsi operates in several markets other than soft drinks
The PepsiCo group also owns Lay´s, Gatorade, Lipton, Doritos, and also works in partnership with Starbucks and Ben and Jerrys
The value of knowing your company´s market share
The ´brand leader´ benefits from:Knowing they have higher sales than
competitorsRetailers want to stock and promote the best
selling brandsA higher price may be charged to retailersBeing brand leader can be used in promotionCompetitors benefit fromConsidering the strategies that have been
adopted by the brand leader
Market GrowthThe rate at which total sales are increasing in the market each year
Calculate market growth in the following markets
Market Total Sales 2008 Total Sales 2009
Sports Clothing 250,000,000 225,000,000
Sports Footwear 120,000,000 140,000,000
Sports Equipment 82,000,000 86,000,000
Market Growth Questions1. Explain two factors that may have increased
the size of the sports footwear and equipment markets
2. Explain one factor that may have lead to the decline of the sports clothing market
3. If a producer of sports footwear maintained constant annual sales over the period shown what would be happening to their market share?
Market GrowthDetermined by:General economic growth
Changes in consumer incomes
Development of new products, and markets that take sales away from existing markets
Changes in consumer tastes
technological change
Other Important Marketing Concepts
Adding Value – The marketer needs to add value in order to successfully charge a price higher than it cost to make the product
Create a luxurious shopping environment
High quality packaging
Promote the product as ¨must have¨ item
Make the product very unique
Mass Marketing and Niche Marketing
Niche Marketing – identifying a small segment of a larger market by developing products that suite it
Mass Marketing – selling the same products to the whole market with no attempt to target groups within it
Mass Marketing and Niche Marketing
http://www.youtube.com/watch?v=ktRWfHUQdUU
Other Important Marketing Concepts and Definitions
Product Differentiation – making a product different so that it stands out from the competitor´s products in consumers´ perception
USP (unique selling point or proposition) – the special feature of a producut that differentiates it from competitor´s products
Practice – Page 260Read and discusss number 16
2 Good house marks for 1st to finish with correct answers and analysis
AS Business Studies Marketing
?Review - Why do Market Research?
Why?Examples –
Reduce the risks associated with a new product
Predict future demand changes
Explain patterns in sales of existing products and market trends
Assess the most favored flavors, designs, promotions and packaging for a product
MARKET RESEARCH – KEY TERMSQualitative Research - research into the in-
depth motivations behind a consumer’s buying decisions or behavior
Quantitative Research – Research that leads to numerical results that can be statistically analyzed
Statistical TermsMean is the average
Mode is the most frequently occurring data point
1 3 5 4 3 4 3 4 4 4 4 4 1 2 4 4 5 4 4 4
Median is the middle data point
1234 5 6789
Statistical TermsRange – difference between the highest and
lowes
2 to 50 (48)
inter-quartile range - middle 50% of data
1 to 25 26 to 75 76 to 100
AS Business Studies Marketing
What is the marketing mix?The four key decisions that must be made for effective marketing of a product
Product, Price, Promotion, Place
The 4 Cs as an alternativeCustomer Solution – what the company must do
to meet the customers needs and wantsCost to customer - total cost including delivery
and packaging
Communication with customer – up-to-date information provided, much communication
Convenience to customer – easily accesible pre-sales info and easy to find place to buy the product
Customer Relationship MarketingCRM – using marketing activities to establish successful customer relationships so that existing customer loyalty can be maintained
More about Maturity Stage of the Product Life Cycle
Extension Strategies – these are marketing plans to extend the maturity stage of a product before a brand new one is needed
Examples - 1.Developing new markets for existing
products (exports)2.New uses for existing products and product
relaunches involving new packaging or advertising
AS Business Studies Marketing
Fixed Costs, Variable Costs, Per unit cost, and Economies of Scale
Fixed costs, rent for the factory the company has, insurance , salaries of senior management
Variable costs vary by the amount that is produced (number of units), examples are electricity, raw materials, labor costs
Fixed Costs + variable costs = total costs
Economies of Scale
…..the cost per unit declines as you make more units (spreading the fixed costs over more units)
Mark up PricingAdding a fixed mark-up for profit to the unit price (cost) of a product
Mark-up Pricing ExampleTotal cost to make your product = $40
50% mark-up over your cost
So you charge a price of ___________?
Answer$60
50% x $40 = $20
$40 + $20 = $60
Target PricingSetting a price that will give a required rate of return at a certain level of output/sales
Example – Target PricingTotal units 10,000, total costs $400,000 (or $40
per unit)
Required rate of return 20% (.2 x 400,000 = $80,000)
Total revenue needed to make required return
$480,000 which, divided by 10,000 units, gets you the price to charge of = $48
Full Cost Pricing Setting a price by calculating a unit cost for the product (allocated fixed and variable costs) and then adding a final profit margin
Full Cost PricingFirst find out the cost of productionAnnual fixed costs $10,000Variable costs per unit $5Currently producing 5,000 units per year
Fixed costs of $10,ooo + variable costs of $25,000 = total costs = $35,000 or $7 per unit
A price of $7 needs to be charged to break even
Full Cost Pricing If the company adds a 1% profit margin it
will charge $7.07
If it adds a 10% profit margin it will charge $7.70
If it adds a 100% profit margin it will charge $14
Contribution (marginal) cost pricingSetting prices based on the variable costs of making a product in order to make a contribution towards fixed costs and profit
Contribution PricingFixed costs are $40,000Variable cost per unit - $2
The company decides it wants the price of its product to allow it to contribute $1 per unit sold towards the fixed costs, so it makes the price $3
After it sells 40,000 units, it will have covered the fixed costs
If it sells 60,00 units, it will have a profit of $20,000, etc..
Competition Based PricingA company will set its price based on what the competitions’ prices are
Penetration PricingSetting a relatively low price often supported by strong promotion in order to achieve a high volume of sales
Psychological PricingSet price just below some key level, like at 99 cents, or $9.99
Also, rely on your market research to not set prices at levels which consumers view as inappropriate for the style and quality of the product
Market Skimming Setting a high price for a new product when a firm has a unique or highly differentiated product with low price elasticity of demand (inelastic)
Loss Leader strategyPrice some products very low, even below their variable costs…..the hope is that customers will also purchase other products
Example of Loss Leader Srategy Gillette razors – IT SELLS THE RAZOR AT
A LOSS BUT IT MAKES A LOT OF MONEY ON THE REPLACEMENT BLADES
Discrimination PricingAirline example (first class vs. economy or early purchasers vs. last minute purchasers)
Destroyer PricingA large, powerful company in the market lowers its price to the point where it will force some of the weaker competitors out of the market
Price – additional issuesPrice wars to gain market share – note that the
weak may not survive (remember destroyer pricing)
Non-price competition – there can be fierce and competitive promotional campaigns designed to establish brand identity and dominance
Collusion – almost always illegal
AS Business Studies Marketing
Promotion
Promotion
Promotion
Promotion – at a baseball game
Sports Stadiumshttp://en.wikipedia.org/wiki/
List_of_sponsored_sports_stadiums
Promotion http://www.youtube.com/watch?
v=RDiZOnzajNU
Fedexhttp://www.youtube.com/watch?v=MLnzF5NcAc
4
Fedex DID NOT pay for this movie to feature them, but the movie increased brand awareness
Other times, COMPANIES DO PAY FOR THEIR PRODUCTS TO BE IN SHOWS OR MOVIES
http://www.youtube.com/watch?v=pX4dTg-6YZA
Promotion / Ice Rink
Mcdonald’s ok to keep promoting toys…..
http://www.youtube.com/watch?v=wDTuOcmcUNE
http://abcnews.go.com/blogs/health/2012/04/06/mcdonalds-can-keep-happy-meal-toys-court-rules/
More Promotion during Sportsevents
How much did Fedex pay ?A $10 millionB $50 millionC 0D $10,000E The movie producer paid Fedex $5 million
While there is an interview / Champions League / 2013
http://www.youtube.com/watch?v=fO3H6syCJJk
Soccer - many companies advertising!http://www.youtube.com/watch?v=wEhniGlF
DtA
746
Promotion – Sponsoring Athletic events, like a 10K run, etc..http://www.jpmorganchasecc.com/
events.php?city_id=4
Societal Marketing? Promotion?http://www.youtube.com/watch?
v=KXD7VgavogE
Promotion The use of advertising, sales promotion, personal selling, direct mail, trade fairs, sponsorshi, and public relations to inform consumers and persuade them to buy
Promotion Mix The combination of prmotional techniques that a company uses
Advertising Paid for communication with consumers to inform and persuade (TV commercial for example)
Also called Above the line promotion. The company is paying to have access to consumers
From all the commercials we saw…. Advertising – Informative vs. Persuasive (brand image building)
Advertising DecisionsWhich media to use?
Will depend on:CostSize of AudienceProfile of the target marketThe message to be communicatedThe other aspects of the marketing mix
(price, place, product)
Sales PromotionIncentives such as special offers or special deals directed at consumers or retailers to achieve short term sales increases and repeat purchases by consumers
Below the line promotionPromotion that is not a directly paid-for means of communication, but based on short-term incentives to purchase
Examples: price deals, coupons, loyalty reward programs, buy one, get one free, games and competitions…
Personal SellingA person from the sales staff communicates
directly with a potential customer to try to sell the product
Could be cold calling as well - Glengary Glenn Ross movie clip
Direct MailWe call it junk mail in the USA
The new age of junk mail is basically spam
Trade FairsAnd exhibitions…….for wholesalers for
example, but could be for retail as well
SponsorshipPayment by the company to the organizers
of an event so that the company name becomes associated with the event
Or Can be the sponsor of a whole league (Colombia soccer)
Public Relations (PR)The deliberate use of free publicity provided by newspapers, TV, and other media to communicate with and achieve understanding by the public
PR http://www.youtube.com/watch?v=C5uIH0V
Tg_o
http://www.semissourian.com/story/1319007.html
BrandingThe strategy of differentiating products from those of the competitors by creating an identifiable image and clear expectations of a product
Branding Goals include name recall and customer loyalty…..
What about the costs?Marketing or promotional budget – the
financial amount made available by the company for spending on marketing during a certain time period
Spending limits can be set by: a percentage of sales, objective based budgeting, or competitor-based budget
PackagingPart of the image, in addition to having to be
the right packaging for the product
See Nescafe Case Study on page 327, Analyze (answer Qs in class)
DistributionChannel of Distribution – this refers to the
chain of intermediaries a product passes through from producers to final consumer
ConsumersManufacturersRetailers
DistributionCustomer service as an objective of
distribution (PCs sold only on line
Or farmer example….
Channel Strategy See page 29! Self Study in class, answer
question
Internet Marketing The marketing of products over the internetYou get automatic market research toohttp://www.walmart.com/
http://www.barnesandnoble.com/http://www.fedex.com/pe/
http://www.apple.com/