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MarketingMarketing
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What is a market?What is a market?
Any place where buyers and sellers meet.
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Consumer marketsConsumer markets
Consumer markets - are made up of individuals who purchase goods/services for personal or domestic use.
Consumable goods, eg food, cosmetics, magazines
Durable goods, eg cars, televisions, clothes
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Industrial marketsIndustrial markets
Industrial markets - organisations that purchase goods and services to use in the production of other goods and services.
Consumable goods, eg raw materials
Durable goods, eg machinery and equipment
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What is marketing?What is marketing?
‘Marketing is the management process responsible for identifying, anticipating and satisfying consumer requirements profitably.’
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What is the role of marketing?What is the role of marketing?To identify, anticipate and satisfy
customer needs.To provide customers with desired
goods/services = profits.To ensure customer awareness of
goods/services.
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Marketing objectivesMarketing objectivesTo target a new market or market
segment.
To achieve or maintain market share.
To develop a new range of products.
To improve the image of the product.
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Marketing activitiesMarketing activitiesMarket researchNew product developmentSellingPricingPromotion and advertisingPreparing publicity information
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Factors leading to the importance of Factors leading to the importance of marketingmarketing
Economic growth and booms – with more disposable income, marketing is needed to gain market share.
Fashion – marketing attempts to anticipate trends and/or changes in tastes, lifestyle.
Technology – new product innovation is essential for firms to keep up with competitors.
Competition – rivals may come from overseas. Firms have to be aware of the market environment both at home and abroad.
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Product orientationProduct orientation
Production capabilities
Manufactureproduct
Aggressive sales effort
Customers
Production orientation is when a business focuses on the production process and seeks to make goods that are viewed as superior.
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Market orientationMarket orientation
Customer needs
Potential market opportunities
Marketing product and services
Customers
Market orientation starts with the consumer and looks at consumer needs. It is customer orientated.
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Advantages of market-orientated Advantages of market-orientated approachapproach
Can respond more quickly to changes in market due to market research.
Increased chance of new product success.
Stronger position to combat new competitors/entrants.
Can anticipate market changes.
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The marketing environmentThe marketing environment
The market
Consumer trends and behaviour
Technology
PoliticalCompetition
The economySocial
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Market share and market growthMarket share and market growth
Market share is the percentage of customers who buy/use a company’s goods/services.
Market growth is the volume of new sales or customers within a market.
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Marketing mixMarketing mix
The 4PsProductPricePlacePromotion
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Product/serviceProduct/service
Product – the good or item to be made for sale to customers.
From the product everything else follows in the marketing mix (product, price, place, promotion).
Now watch Steve Jobs’ iPod launch…
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Levels of a productLevels of a productCore – the basic product.
Actual – the product on sale to the public.
Augmented – a product with additional features to boost its USP.
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Boston boxBoston box
Market share
Market growth
High
High
Low
Low
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Boston box Boston box –– strategies strategiesStars
Build sales/market share
Invest to turn into cash cow
Problem children
Build selectively
Harvest or divest rest
Cash cows
Hold sales/market share
Use excess cash to invest in stars, problem children
Dogs
Harvest or divest
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Product lifecycleProduct lifecycle
The product lifecycle is a theory that has some assumptions:
•Products have a lifespan.
•All products pass through the stages described.
•All products decline.
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Stages in cycleStages in cycleDevelopment – In this costly stage, money is spent on research to create a viable prototype. Introduction – The product is launched onto the market but normally sales are low due to competition and lack of awareness from the public.
Growth – Sales rise sharply as awareness increases. This is the first stage where the company starts making a profit.
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Stages in cycleStages in cycle
Maturity – The product is now a market leader and ways to expand sales become more difficult. When there is an overkill of supply, this is the saturation point.
Decline – Sales begin to fall, and the product begins a slow death as trends, technology or imitators overtake it.
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Product lifecycleProduct lifecycle
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Extension strategiesExtension strategies
Change the product – have additional features or upgrade the product. Change the price – lower prices to make it more appealing to non-users/buyers. Change the place/channel of distribution – look to more outlets or go online to widen market opportunities.
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Extension strategiesExtension strategiesChange the promotion method –
introduce sales promotional campaigns, such as BOGOF.
Change the packaging – to make it more eye-catching to customers.
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Effects of extension strategiesEffects of extension strategies
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Answer a questionAnswer a questionChanging the packaging of products
can make them more appealing and eye-catching to consumers.
Explain five other methods of extending the product lifecycle.(5 marks) 2008
10 minutes
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Peer markingPeer markingYou are going to swap answers.
Has your partner answered well?Does the answer make sense?Is it worth a mark?
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SolutionSolution Improve the product by adding new or additional features
customers will want, eg cameras on mobiles. Alter price, either lower or increase price to attract
customers. Change the method of advertising, move the message, eg
from TV to radio. Change the use of the product, eg Lucozade once was
used to reenergise ill people, now used as a sports drink. Introduce line extensions to the product, create new
flavours, different sizes or even alter the format like the PSP.
Change the name of the product, eg Opal Fruits to Starburst, Marathon to Snickers.
Alter the place the product is sold, offer products online to reach a wider customer base.
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What is a new product?What is a new product?New to the worldNew product linesAdditions to existing product linesImprovements and revisions to
existing productsRepositioned products
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New product development stagesNew product development stages
Generate ideas – Brainstorming session to come up with ideas. Quantity rather than quality is needed before refining the idea to something realistic.
Analysis and further research – Time and money spent on discovering what is possible and what is not. Can existing technologies be used? Or will something totally new be created?
Are the products marketable? – Will customers buy the product? Potential customers may be surveyed at this stage.
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New product development stages New product development stages (contd.)(contd.)
Prototype – A working model is developed.Test marketing – Potential customers may
test several versions (or generations) of the product, and feedback will be used to modify the prototype.
Full launch – If satisfactory, the product will be put into full production and a marketing campaign will be put in place to raise awareness of the product, emphasising the benefits it brings to customers.
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Product failuresProduct failuresFord EdselNew CokeSony Betamax VCRMcDonald’s Arch DeluxeSinclair C5DeLorean motor car
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Successful NPDSuccessful NPDDoes the product have a USP?Is there a specific market segment to
target?Is the market large enough and will
there be a return on investment?Are R&D and marketing
communicating?Was NPD process handled well?
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BrandingBrandingA brand is a registered trademark of a company, including the name or logo that can only be used by that company.
Branding helps create USPs (unique selling points), and via advertising and creating a positive, desirable image, build brand loyalty.
Brands promote an image of high quality, which means a premium price can be charged.
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Advantages of brandingAdvantages of branding
• Easily identifiable.
• Brand loyalty – repeat purchases.
• Premium pricing can occur.
• High quality is associated with brands.
• Can create a family of branded products.
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Disadvantages of brandingDisadvantages of branding• Brands take time to establish
reputation and quality.
• Advertising and promotion costs will be expensive.
• Negative press can tarnish entire family of products.
• Cheap imitations may flood the market.
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Answer a questionAnswer a question
Discuss the effects on an organisation of branding their products.(6 marks) 2009
12 minutes
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Peer markingPeer markingYou are going to swap answers.
Has your partner answered well?Does the answer make sense?Is it worth a mark?
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SolutionSolutionProducts in the brand range are instantly
recognisable and are uniquely different from other products.
Brand loyalty can be built up, which can lead to repeat purchases.
Brand is perceived to be of high quality, which can mean premium prices can be charged.
Makes it easier to launch new products onto the market as there is already a brand family of products.
Brand names can be expensive to build up as it takes time to achieve their reputation.
Bad publicity can affect the whole brand, which can ruin the brand’s reputation overnight.
Imitator and fake products are common, which can damage sales in the long run.
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Own brandsOwn brands
Own brands are goods made by a producer who sells them to a well-known retailer such as Tesco or Sainsbury’s, who repackage them and sell them at a low price under their own brand label.
What are the own brands for the major supermarkets?
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Advantages of own brandsAdvantages of own brands
• Own brands will attract more customers and more sales within the store.
• Producer will have guaranteed sales.
• Products are cheaper.
Disadvantages of own brandsSome customers believe own brands are of lower quality than established brand names (although this is not necessarily true).
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Answer a questionAnswer a questionDiscuss the advantages and
disadvantages of selling own brands.(4 marks) 2008
8 minutes
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Self-markingSelf-markingYou are going to answer on your own!
Have you answered well?Does the answer make sense?Is it worth a mark?
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SolutionSolution Own labels require very little advertising as customers will
be normally be regular shoppers. The retailer does not need to produce the own-brand
products as they can buy them from manufacturers and re-label them.
A range of products with own labels can be sold because a brand family is established.
Some own brands can be seen as value for money and a quality product when customers look for good deals.
Own labels are cheaper to customers as the price is always lower than that of regular brands.
Whole brands can be tarnished over one product’s failure or problem. This can ruin reputation overnight.
Run the risk of imitator brands, which can damage sales.
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PricePrice
Price has to be set appropriately or else customers will not purchase the product. High quality and high price normally go together and vice versa.
In determining price firms have to consider:
•production costs of materials
•profit mark-up
•the market price (what competitors charge).
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Long-term pricing strategiesLong-term pricing strategies
Low price – Price lower than competitors. Only appropriate where there is a little brand loyalty and competition in the market is high.
Market price – Setting price at a similar price to competitors. Homogeneous product means that price competition is not of benefit. They compete in other areas, eg service.
High price – High-quality products, premium goods and services where image is important, such as perfumes.
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Short-term pricing strategiesShort-term pricing strategies
Market skimming – In a new market a high price is set and then once the first customers have bought, the price is lowered to continue to skim the cream of the market layer by layer. Penetration pricing – A low price used to enter a new highly competitive market.
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Short-term pricing strategiesShort-term pricing strategies
Destroyer pricing – An illegal pricing tactic used to eliminate competition where a ridiculously low price is charged (sometimes at a loss) to smash competitors. Once market share is achieved, prices soar. Promotional pricing – A short-term strategy to gain media attention and renew consumer interest, eg BOGOF or loss-leader tactics. Demand-oriented pricing – When different prices are charged at different times for the same good/service based on high demand or lack of demand.
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Answer a questionAnswer a question
Describe three pricing tactics that could be used when an organisation attempts to break into a new market.(6 marks) 2009
12 mimutes
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Peer markingPeer markingYou are going to swap answers.
Has your partner answered well?Does the answer make sense?Is it worth a mark?
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SolutionSolutionHigh price – price is set higher than competitors to
give the image of quality and exclusiveness.
Low price – price is set lower than competitors to attract customers to their product/service.
Skimming – price is set high initially, when no competition exists. When competitors enter the market, price is lowered to market price.
Market/competitive pricing – price is set at the same level as competitors, normally used for products that are identical.
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Solution (cont’d)Solution (cont’d) Penetration pricing – price is set slightly lower than competitors to
attract customers; once a customer base is established, the price is slowly increased to same as competitors
Promotional pricing – a low price is set for a short period of time to boost sales in the short term, possibly even making a loss on the product. This is often used by supermarkets to attract customers.
Destroyer pricing – price is set very low compared to competitors and once there is no competition in the market the price is then put back up to the previous level or higher. This is mainly used by larger organisations to destroy competition, as you must have large reserves to sustain this tactic over any length of time.
Cost-plus pricing – is the cost of buying in the materials with a mark-up added on.
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PlacePlace
Producers
Wholesalers
Retailers
Consumers
Direct selling
Producer to wholesaler
Two or more intermediaries
Producer to retailer
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Choice of distribution channelChoice of distribution channel
Projected level of demand
Geographical spread
Optimum methods of stock control
Seasonal trendsCosts of
distribution
Speed of distribution
Legal restrictionsChanges in buying
habits and life styleExisting buying
habits
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Wholesaler
Retailer
Consumer
A distribution channel
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Direct channelDirect channel
This is from manufacturer to consumer.
Fastest way (perishable goods?).
Cheapest for consumer (no costs added on by each part of the chain).
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Manufacturers
A B C D E
Company
warehouse
Wholesalers
Company
outlets
Retailers Retailers E-tailers
C o n s u m e r s
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Advantages of using wholesalersAdvantages of using wholesalers
Buy in bulk, saving manufacturers the delivery costs of many small runs.
They bear the risk of holding stock.Break down the bulk supplies and sort
into quantities retailers will buy.Give advice to manufacturers,
knowing what goods will sell well.
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Key termsKey terms
Manufacturer – firm that makes goods.
Wholesaler – company that stores goods in bulk before selling them on in smaller batches.
Retailer – firm that sells goods to end-users.
Consumer – person who uses final good/service.
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Answer a questionAnswer a question
Discuss the advantages and disadvantages to a manufacturer of using a wholesaler.(5 marks) 2008
10 mimutes
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Peer markingPeer markingYou are going to swap answers.
Has your partner answered well?Does the answer make sense?Is it worth a mark?
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SolutionSolutionAdvantages Saves on a number of smaller deliveries as retailers will buy in
bulk. Less money tied up in stock as the wholesaler stores the
materials. Wholesalers may label the product for the retailer, saving costs. Wholesalers break product down into smaller more saleable
sizes that can be packaged and sold by the retailer. Wholesalers can give market research direct to manufacturer,
which may affect future buying decisions.
Disadvantages Loss of control of how the product is presented because it is
normally packaged already. Lower profits as wholesaler, as intermediaries, take their cut.
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Types of promotionTypes of promotion
Promotion
Advertising Sales promotion
Direct mail
Personal selling
Public relations
Exhibitions and trade fairs
Merchandising
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What is promotion?What is promotion?
Promotion is the way firms inform customers of their products and try to generate sales.
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Methods of promotionMethods of promotion
• Advertising• Sales promotion• Public relations• Merchandising• Packaging• Exhibitions and trade fairs• Direct mail• Personal selling
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Types of advertisingTypes of advertisingInformative: Health Education Board for Scotland – smoking, drugs, alcohol etcPersuasive: used in very competitive markets, uses powerful images and language – ‘Probably the world’s favourite lager’.Corporate: promoting the whole company not a single product – BP adverts focus on their ‘green image’ not on the product (petrol)Generic: the whole industry comes together to promote the whole industry – Scottish beef, Scottish tourism
Click for clipSome classic adverts
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Types of advertising mediaTypes of advertising mediaPrint: newspapers and magazines
Broadcast: TV, radio, internet
Outdoor: billboards, buses, round football grounds etc
Which one is chosen depends on:
•cost: TV expensive but memorable
•target audience: choice of programme, newspaper
•competitors’ advertising: match to competitors
•impact required: new product wide variety of methods
•the law: tobacco and alcohol
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Sales promotion – out of the Sales promotion – out of the pipeline and into the pipelinepipeline and into the pipeline
Into the pipeline targets retailers to purchase from suppliers. It also includes materials to help them sell to customers, eg merchandising displays and posters. Out of the pipeline targets customers and end users, eg trial packs and BOGOF.
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Public relations (PR)Public relations (PR)
This is when an organisation tries to communicate with customers, shareholders, employees and the government – all of whom form the organisation’s ‘public’.
The aim of public relations is to improve the image of an organisation’s products and the image of the organisation itself.
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The role of PRThe role of PR
Provides public with information about the organisation.
Builds confidence/reputation of the organisation and awareness of its products.
Develops goodwill in the community.Presents the organisation in a positive way.Supports and enhances other areas of the
promotional mix, such as advertising and selling.
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PR activities PR activities
Opening a new storeCharitable donationsEvent sponsorshipCelebrity product endorsementPress conferences and press releases
It is important to remember that PR is always conducted with ‘spin’ involved. In other words it always tries to have the firm viewed in the best possible light.
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MerchandisingMerchandising
• Merchandising involves making sure a firm’s products are laid out in the most enticing or attractive way possible to customers.
• Special displays, stands or posters may be given to retailers to help point-of-sale advertising.
• ‘Eye level is buy level’, for example when a new DVD comes into the local supermarket expect giant posters and cardboard cut-outs of the characters to be emblazoned around the store!
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Packaging Packaging
The ‘cover’ or packaging of the product can also generate sales.
Design – the colour scheme should help make the product stand out from rivals.
Protection – is the packaging appropriate to ensure it doesn’t get damaged during distribution or when being taken home by the customer?
Information – most products sold in supermarkets have to carry labels with information on their content or to indicate if they pass the BSI quality standard.
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Answer a questionAnswer a question
Describe and justify four different methods of direct selling that could be used by an organisation.(8 marks) 2010
15 minutes
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Self-markingSelf-markingYou are going to answer on your own!
Have you answered well?Does the answer make sense?Is it worth a mark?
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SolutionSolution Personal selling – Products are sold by experienced
sales personnel. Direct contact can be made with the retailer or consumer. Can be tailor-made to customer requirements. Demonstrations of the product or service can be shown.
Mail order – Goods sold via catalogues. Offers credit facilities. No need for high-street stores. Internet selling – making use of websites to sell products. Consumers can order online from offices or homes. Is available worldwide. Can be accessed 24/7.
Specialist magazines – Used to describe and sell specialised products or services. Customers who are sent or purchase the magazine are directly interested. Consumers can phone in orders or speak to specialists.
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Target marketsTarget markets
Undifferentiated or mass marketingWhen a product is sold to the entire market.
Differentiated marketingWhen a product is offered to a group or
groups within the total market.This is done by market segmentation.
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Undifferentiated marketingUndifferentiated marketing
Firm Market
Marketing mix
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Differentiated marketingDifferentiated marketing
Firm
Segment 1
Segment 2
Segment 3
Marketing mix 1
Marketing mix 2
Marketing mix 3
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Concentrated marketingConcentrated marketing
Firm
Segment 1
Segment 2
Segment 3Marketing mix
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Methods of market segmentationMethods of market segmentation
• Age• Race• Gender• Lifestyle
• Size of family• Income• Work• Location
Note: These are sometimes referred to as bases of segmentation.
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Socio-economic groupSocio-economic group
A Higher managerial, administrative or professional
B Intermediate, clerical, administrative or professional
C1 Supervisory, clerical, junior administrative or professional
C2 Skilled manualD Semiskilled and unskilledE State pensioners, widows, casual
and lowest paid
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Psychographic segmentationPsychographic segmentation
Segments people according to lifestyle. Lifestyle is a person’s individual pattern of behaviour, including attitudes, beliefs, interests, hobbies, habits, religion.
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Answer a questionAnswer a question
Describe six methods that an organisation could use to segment their market.(6 marks) 2009
12 minutes
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Peer markingPeer markingYou are going to swap answers.
Has your partner answered well?Does the answer make sense?Is it worth a mark?
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SolutionSolutionAge – segments the market by different age
groupings, such as young or old, under 12, 13–19, 20–35, over 35.
Occupation – segments the market by different types of occupation.
Education – segments the market by the level of education attained.
Socio-economic – segments the market by grouping customers into different economic classifications.
Geographical – segments the market by the area they live in.
Cultural/religious background – segments the market by religion or ethnicity.
Family lifestyle – segments the market by customers being either married or single.
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Niche marketingNiche marketing
A niche market is when a firm concentrates on selling to a specific market segment.
Niche markets are normally very small, but can be highly profitable.
Niche markets normally know their customers’ needs very well.
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Niche marketingNiche marketing
AdvantagesNiche market may
be overlookedGain competitive
advantage
DisadvantagesIf successful, larger
competitors may enter market
Niche markets are smaller and may suffer more frequent swings in consumer spending
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Market researchMarket research
What is market research?‘The collection, collation, and
analysis of data relating to the marketing and consumption of goods and services.’
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Market research is used to find Market research is used to find information about:information about:
the market itself (size and make-up – age, gender, income, tastes)
promotional methodscustomer feedback (opinions, usage
and attitudes)sales data (best sellers, best stores,
best sales staff)influence and impact of competitorseffect of price on market.
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Primary (field) researchPrimary (field) research
1. Questionnaires2. Personal
interviews3. Telephone
interviews4. Postal surveys
5. Observations6. Technology, eg
loyalty cards7. Focus groups8. Customer
panels
Used to collect primary data
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SamplingSamplingSampling is a way to find out the views of the population without asking everyone!
Random sampling – A randomly generated list of individuals. Free of bias, but not targeted at any market segment.
Quota sampling – A group selected to reflect a proportion of the whole population. Cheaper than random sampling but can be less representative than the random method.
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Primary researchPrimary research
PositivesOnly firm that
collects data has access
Can be controlled/verified
NegativesExpensive to
collectLengthy time
involved, information could be out of date
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Secondary (desk) researchSecondary (desk) research
Used to collect secondary data.Examples:sales figuresannual reports and datainternet data (eg other businesses’ websites)
government publications, eg Social Trends
commercial publications, eg Keynote, Mintel.
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Secondary (desk) researchSecondary (desk) research
PositivesSaves timeRelatively
inexpensive
NegativesNot specifically
related to project undertaken
Cannot be verified
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Problems with market researchProblems with market research
• Human behaviour is unpredictable.
• Sampling and bias.
• Other forms of bias, eg leading questions.
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Answer a questionAnswer a question
Describe four methods of field research.(8 marks), 2009
15 minutes
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Peer markingPeer markingYou are going to swap answers.
Has your partner answered well?Does the answer make sense?Is it worth a mark?
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SolutionSolution Personal interview: this is a face-to-face interview,
conducted in the street or at a person’s home, where an interviewer asks a respondent questions.
Focus group: a small group of selected individuals are involved in discussions about an organisation’s product or service, led by a facilitator to provide qualitative information.
Telephone survey: individuals are telephoned at their home and asked specific questions by an interviewer.
Postal survey: questionnaires are sent through the post to selected individuals, but the response rate is very poor.
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SolutionSolution Consumer audit: continuous market research is
carried out with a selected group of consumers who record their purchases in a diary. This is then analysed for trends by marketers.
Hall test: individuals are invited to try out a product and then give their opinion on it. These are collated and analysed.
Observation: customers’ actions and purchasing patterns are observed by trained staff, who look for consumer behavioural trends.
Test marketing: product is launched on a small area to gauge the consumers response. If successful the product can be mass produced.