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

Price Tricks – Anchoring Video

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!

Movie Product Placements

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