Unit 2 Topic 1 - Marketing
Areas Covered click on topic to revise Functional Activities Customers Market Growth, Market Share, Market Leader Market Segmentation Target Market Product Product Development Risks involved Product Mix Product Lifecycle Branding Price Factors affecting price Pricing Strategies Place Location Factors Distribution Channels Promotion Internet Advantages and disadvantages of e- commerce QR codes Social Networks Deal of the Day Apps Text Messaging E-mail advertising On-line ratings YouTube Other Advertising methods Special offers Celebrity endorsement Ethical Marketing Market Research Field/Primary research Costs/benefits of field research Desk/Secondary research Costs/benefits of desk research
Functional activities
There are four functional activities of a business Marketing Finance Functional Activities of a Business Operations Return Human Resources (People)
What is marketing
What is Marketing? Marketing involves trying to meet the needs and wants of customers by finding out what they want and providing it at a price that can make a profit. In large organisations, marketing will be done by a the marketing department. In small organisations it may be done by the owner, along with many other tasks.
What is a Market? A market is where buyers and sellers come together. How many different types of markets can you think of? Outdoor market Shopping mall High street shop Ice-cream van Housing market Banks/mobile banks Through an app Mail order Dispensing machine Door to door eg Avon Telephone sales TV shopping channels Internet e-commerce/ebusiness If people buy products/services in quantity, there is a market. A market requires buyers and sellers Return
Why is Marketing Important? It can attract new customers by letting them know about the range of products the business has It can allow the business to enter new markets (eg using the internet to sell a product on the other side of the world It can help the business grow It can increase the amount of profit a business makes Return
Market Growth, Market Share, Market Leader Marketing can help a business grow it s number of customers Market Growth. This increases the proportion of customers it has from the market Market Share If they have more customers than all other providers, they are Market Leaders Return
UK Supermarket Market share
Market Segments Sex/Gender eg Male/Female products directly produced for females or males Age Income/Social class - Where they live - Religious or cultural belief Lifestyle eg Pampers, teenage magazines, SAGA holidays eg people who can afford the latest gadgets when they first come onto the market (socio-economic groupings A, B, C1, C2, D and E) eg garden centre who specialise in plants for the local area (weather/soil). eg Halal meat (speciality butcher for beliefs and religion) eg into sport/fitness Occupation - eg - Stethoscope
Target market A target market is the group of people that a business thinks are the most likely to buy their good or service. Consider: Since you are not old enough to drive, you are not the target market for car manufacturers You do phone a lot so you are a target market for phone providers and manufacturers Return
Why? To make sure the product is suitable and meets the specific needs of a customer group Make sure it is sold where those people will see and buy it It is priced so that it reflects the target group To use the correct advertising and marketing strategy
How do we define or describe a target market? Marketing use different things to group people. Often, the product will be targeted towards a segment that is made up of different types.
Marketing mix
The Marketing Mix Product Price Promotion Place Return This is the good or service which is sold on the market This is how much a business charges for the good or service. Different pricing strategies can be used This is how customers are told that the product exists and are encouraged to buy it This is the way businesses make the product available and where it is sold The product must be what the customer wants market research helps with this The price must suit the customer. If competitors prices are lower, customers will buy from them. Price should reflect quality The product must be advertised so customers know about it. Promotion encourages customers to buy The product must be accessible often via different places eg websites, shops, apps, TV
Marketing mix - PRODUCT
To succeed, all businesses must attempt to be ahead of their competitors. All businesses must be aware of: developments in technology development in their own market changing needs and wants of the market To do this they need to invest time and resources in order to come up with new ideas (ie to be innovative). Billions are spent each year on product development
Have a look at these videos of product development dyson toothpaste transit mobility aid snowboard google food Burrs! Note some of these products are completely new, others are changing/improving to remain competitive
Stages in Product Development and Research Market Research Ideas Prototype or development Test marketing Changes Method of production Price Place Promotion Carried out to find out what the customer wants developed, either from extensive scientific research, from identifying a market through market research or through brainstorming sessions lab experiments or production of a model may be necessary, designs have to be shaped and altered and perhaps even some preliminary testing undertaken. stage where the product is tested on a representative sample of consumers. This results in useful feedback and hopefully reduces the risks of failure when the product is finally launched Based on feedback received from testing the prototype Has to be decided, eg mass production? Price charged will have to be decided Decide where the product will be sold Types of promotion to be used will have to be decided Return
http://www.mackies.co.uk/ video Mackie's Vision is to be a global brand from the greenest company in Britain created by people having fun. The main elements in our vision are to build our brand and increase export (which includes England and the rest of the world), to look after our environment and continually reduce our carbon footprint (leaving nothing behind except ice cream) to have fun. Return
Some Risks Click for video Customers may not want to buy the product (ie there is no demand for it) The money invested in developing the product would be wasted The business reputation could be damaged if nobody wants the product or if it is inferior quality External factors (eg the economy or competitors) might impact upon the success of the product.
The Product Mix Many organisations produce a large range of products This is done for a number of reasons, including To spread the risk and not be dependent on one single product To suit different types of customers Range of Procter and Gamble products
Product Life Cycle Once a product has been launched onto the market, it has a life cycle. The product life cycle shows the different stages of the product s life. The four stages are: Research and Development Introduction Growth Lots of market research and testing. The business is spending money but receiving no income from the product. At this stage, some products are abandoned if there is no prospect of selling. The product is introduced or launched onto the market. Lots of promotion and advertising to encourage sales but product is not really profitable Once customers know about the product, sales begin to grow. Lots of advertising. Later in this stage, the organisation starts to make profit. Other businesses may have developed similar products Maturity Decline Return Everyone who wants the product has heard of it, they have a loyal customer base sales are at their highest and other companies will enter the market selling similar products. Spend money developing new products Sales begin to fall product is getting older and newer versions are coming on the market customers no longer want the product.
Product Life Cycle Graph Return
How organisations can extend the product life cycle When a product reaches decline stage, the organisation may take steps to extend its life. To do this, they will look at the marketing mix Product does the product have to be changed to attract new customers Price should the price be dropped, or should special offers be introduced to attract interest Promotion this may include preparing a new brand image for the product along with a fresh advertising campaign Place - better offers and display materials to the shops stocking the products. Sell on-line to increase market Return
What is a brand A brand can be a logo, symbol or name that is given to a group (eg Cadbury) or type of product (ipad). Branded products usually have an easily identifiable logo and a slogan Vorsprung durch Technik
What are the Reasons for Developing a Brand? It is easily identifiable and is recognized by customers It is used to differentiate from competitors Encourages customer loyalty and repeat custom It encourages people to pay more It is used to get customers to try a new product they already know and trust the name
Drawbacks of Branding Very expensive and time consuming process to develop a brand One product getting a bad reputation can damage the name of the brand Some organisations try to copy brands and produce low quality, fake products Return
Marketing mix - PRICE
The decision may depend on: The stage in the life cycle Price charged by competitors How much it costs to make How much profit is wanted How much of the product can be supplied The market segment that the product is aimed at
Some further information on Price Life Cycle Competitors prices Manufacturing cost Profit required Rarity value Market segment At the beginning of the life cycle, the product may be priced high as they are in high demand. They may also have incurred high costs in research and development. As demand begins to fall, the price may be reduced so they continue to sell If price is higher than competitors, they may lose customers to them A business must cover its costs in order to break even. It must calculate the cost of the product before it can set a realistic price The more profit wanted, the higher the price that will have to be charged. Some organisations do not exist to make a profit so will set prices accordingly. Products made in small quantities may be priced higher eg high performance/value cars or limited edition prints Products aimed at people with high incomes may be priced higher (Waitrose) where products aimed at low income (eg Tesco value) are priced lower. Return
Pricing Strategies High Price Low Price Cost plus pricing Penetration pricing Setting price higher than competitors customers will think it is better quality eg branded goods like Tesco finest Setting price lower than competitors customers looking for a bargain will buy the product own brand goods like Tesco value The manufacturer calculates the cost of the product then usually adds on a % in order to make a profit. This ensures a profit is made eg building jobs Set the price low for a new product when there are already similar products in order to penetrate the market. Increase price as product is established eg new cereals/chocolate bars/crisp flavours
Pricing Strategies (cont) Price Skimming Destroyer Pricing Promotional Pricing Psychological Pricing Charging a high price for a product that is new. Customers are happy to pay a high price status eg new iphone Setting price low to destroy the competition eg selling newspaper for 10p Price charged is lower than normal for a short period, eg after Christmas prices lowered to get rid of excess stock Price charged makes the customer think they are getting a bargain eg 1.00 99p
Marketing mix - PLACE
Disneyland, Paris Opened in 1992 An estimated 17 million people could drive there within 2 hours 300 million could fly there within a few hours
Place - Braehead Shopping Centre Why is Braehead located where it is? Return
Place - Many factors will be considered when deciding where to locate: Where the customer is Premises Parking Infrastructure Locate close to the people who will buy the products A business may have specific requirements, eg kitchen or large warehouse area Customers need to be able to park Water, fuel, transport Return
Government incentives Market segment Employee availability Competition Environmental impact Sometimes the Government or Local Authority will offer grants to businesses setting up in the area Being close to the market segment, eg Soar ski wear shops Employees needed to work. May require particular skills eg shipbuilding May wish to be far away or close to increase market share Consider the impact on the environment eg windfarms Return
Website Mail Order Catalogue Retail Outlets
Place - Where the product is sold: We have already considered this topic (What is a market see early slides) Shops E-commerce websites Markets Tv shopping channels Vending machines Catalogues Newspaper and magazines Home shopping parties Telephone ordering
Place Distribution Channels A B MANUFACTURERS C D direct eg from farmer to customer at farmers market Company warehouse Company outlets eg Ikea Wholesalers Eg Bookers Retailers eg Soroba Shop Retailers Eg Tesco CONSUMERS
Place - Advantages and Disadvantages of Different Channels Channel Advantages Disadvantages Producer to consumer Producer to retailer to customer Producer to wholesaler to retailer to customer Cheaper no middle man. Better quality Cheaper than chain including wholesaler Retailers bear marketing costs Small retailers can obtain variety of goods May have to collect Manufacturer wastes time selling goods Retailer will have a markup so increasing the cost Goods more expensive as wholesaler and retailer will add to cost Return
What are the different methods of physically getting the product to the customer. Return
Marketing mix - PROMOTION
Product promotion involves persuading customers to buy the product using a variety of techniques, for example competition entry, money-off vouchers, discounts, BOGOF customers think they are getting a good deal. Advertising involves making customers aware of the product. It also gives information about the product and tries to encourage customers to buy it.
Using Technology to raise awareness of products
Internet websites Lots of information about products can be made available using company websites. Websites can also be used to sell the company products this is called e-commerce. Many people now do shopping online and look for bargains Click for video
Advantages of E-commerce to the business Customers worldwide can be targeted Product information can be updated quickly Businesses may not have to pay for premises to display stock More environmentally friendly than printing leaflets Advantages of E-commerce to the customer Customers can buy online 24/7 Customers can usually buy cheaper than going into a store Stock availability can be checked instantly Products can often be personalised eg trainers Disadvantages of E-commerce to the business Customers may not want to disclose personal details Can be expensive to make and maintain a website Employees need training to maintain and update the website Disadvantages of E-commerce to the customer The goods can t be seen or handled before buying There is no personal contact with the organisation Will have to wait for the product to be delivered Return
QR Codes Can be used to direct people to company websites Return
Social Networking Facebook, Twitter, blogs, wikis are very useful for raising awareness of products
Deal of the Day Deal-of-the-day (also called flash sales or one deal a day) is an ecommerce business model in which a website offers a single product for sale for a period of 24 to 36 hours. Potential customers register as members of the deal-a-day websites and receive online offers and invitations by email or social networks. Examples Groupon, itison
Apps Apps which allow customers to browse products and buy online are becoming more popular eg the Amazon app Can be used on the move Can be used using wifi However Training would be needed by creator so that app is easy to use Depends on good internet connection Return
Text Messaging Text messaging is widely used by businesses to communicate and promote products to customers. Specific customers can be targeted quickly with information This is cheaper than some other methods of promotion Lots of customers can be targeted However Texts only include a small amount of information Customers may receive lots of text messages and start to feel annoyed!
E-mail Advertising Many businesses use e-mail to send mailshots to customers. Customers can sign up to a mailing list and be e-mailed with detaails of special offers, new products and other promotions. E-mails can be sent at any time Message can be sent to many different people simultaneously Can be sent worldwide at little cost Environmentally friendly However Some e-mails can be filtered as spam Receiving lots of e-mails can be irritating to the customer Viruses can be spread through e-mails
On-line Ratings Can help customers to decide whether or not buy a product based on information provided by other customers
YouTube Companies can post videos of their products in action and allows customers to view before they buy the product
Other Advertising Methods Method Advantages Disadvantages Video clip Television Cinema Leaflets and Junk Mail Newspapers/ magazines Reach millions Target audience visual/sound impact target particular films. captive audience Cheap to produce Know their readers can target Often read twice Expensive Expensive Easy to ignore Can be expensive Radio Target audience, cheaper Smaller audience Poster/ billboard Internet Product placement Return High visual impact In place for long time High visual impact Can link to buy product Manufacturers pay for products to be used in films/television productions Can t contain much information
Choosing a Method of Advertising Product Method Reason Christmas function in Royal Hotel New restaurant opens in Oban Cadbury launch new chocolate bar Local newspaper Oban Times Menus delivered to doors by postman TV and cinema adverts Not too expensive Reaches target audience Fairly inexpensive Customers keep info Info must reach large audience Rock Concert to be held in Hampden?? Return
Promotion Special Offers Method Information BOGOF (buy one get one free) Free gifts/samples Loyalty cards Discounts Competition Eg Boots 3 for the price of 2. Customer usually buys more than required Eg fast food restaurants. May be used to increase demand at quieter times of the year Eg Tesco, Boots. Regular customers save points to spend in store. Also used to monitor customer purchases Encourage purchase of particular product. May be money off voucher Eg prize draw on wrapper of product if purchased Point of sale advertising Special display cases in store Sales Return Encourage people to visit shops they wouldn t normally.
Promotion Celebrity Endorsement Celebrities are used to raise awareness of a product or encourage customers to buy it
Ethical Marketing/Advertising All marketing and advertising must be: an accurate description of the product or service legal decent truthful honest socially responsible (not encouraging illegal, unsafe or anti-social behaviour) Return
Market Research
Market Research is the the process where businesses find out information about their customers and the market. It involves finding out what customers want, but also finding out about what other businesses are selling and for how much. This allows businesses to make key decisions like Altering the price of the product Changing the product in some way Launching a new product Changing where the product will be sold
There are 2 main types of Market Research Primary or Field Research Secondary or Desk Research
PRIMARY/FIELD RESEARCH Field Research involves going out into the market place and finding out NEW information for your own business. This is called primary information. Return
Methods of Field Research (1) - Surveys Method Personal interview Face to face discussion where interviewer asks questions The interviewer can encourage the respondent to answer questions Points can be clarified Time consuming and expensive to carry out Interviewers will need training Postal Survey Questions are sent out through the post Fairly cheap to send the survey Survey can be completed at own pace People may not go to the bother of completing survey No opportunity for clarification Tel Survey Online Survey People are contacted by phone to answer questions Large numbers can be contacted Less expensive than personal interviews Information obtained instantly Questions are displayed on a website People get annoyed about receiving phone calls Useful for short surveys only as people don t want to spend time Links can be set up for large numbers of people Inexpensive Return Relies on people having internet connection No personal contact
Field Research (2) Other Methods Focus Groups This is a discussion among a specially chosen group of people, eg BBC viewers Feelings and views can be observed Points can be clarified and expanded upon Time consuming and expensive to carry out Info can be difficult to analyse May not be a representative group Observations EPOS Social Networking Hall Tests This involves watching and recording situations eg number of visitors to a shop or children playing with a new type of toy Facts and figures are easy to analyse People being observed may not act naturally Electronic Point of Sale gathers information at the chechout Those being observed are not usually asked for opinions Privacy and ethical issues Large quantities of information Expensive to buy system No opinions sought from customers FB and Twitter used to gather feedback from customers. Often used to interact with customers and find out their reactions and opinions 2-way interaction Large numbers can be contacted Product is given to customers to try and feedback sought Product is tried and feedback is based on experience Relatively inexpensive to carry out Return Information not usually private Not all customers join websites Response may give the response they think the organisation wants to hear
Costs and Benefits of Field Research Costs (Disadvantages) of Field Research Expensive to carry out this type of research Can be time consuming to carry out and find results Benefits (Advantages) of Field Research This provides up-to-date and reliable information The Information has been gathered for a specific purpose and is therefore relevant to the business
SECONDARY/DESK RESEARCH Desk Research involves finding out information from existing sources, using information that has already been gathered for another purpose. This is called secondary information.
Methods of Desk Research Government records The government publishes information from a variety of sources eg the census for population figures, import and export figures Printed information This could include books, journals, magazines and newspapers Online research There is a vast amount of information available from websites which can be used for market research. If using this data, however, it is important to ensure that the websites being used are reliable and contain accurate information. Return
Costs and Benefits of Desk Research Costs (Disadvantages) of Desk Research The information may not be exactly relevant to your needs The information may not be accurate or up-to-date if it has been gathered by someone else Benefits (Advantages) of Desk Research The information does not always cost money to obtain The information is usually easy to obtain as the research has already been carried out