Higher Business Management

Higher Business Management Unit 2 Learning Outcome 2 Marketing BM Unit 2 - LO2

Marketing “The process involved in identifying, anticipating and satisfying consumer requirements profitably”. BM Unit 2 - LO2

Marketing Role and Importance of Marketing • Identify consumer’ requirements – find out exactly what consumers want • Anticipate consumers’ requirements – future needs • Satisfy consumers’ requirements – service, quality + value for money? BM Unit 2 - LO2

Marketing Anticipating Consumers’ Requirements • What do they want today? • What do they want in the future? • Trends must be considered to anticipate future needs • Volatile markets - fashion, toys, technology (mobile phones, computers, etc) BM Unit 2 - LO2

Marketing Identifying Consumers’ Requirements • What do they want? Consumers must buy products and continue to do so • Fierce competition and consumers’ expectations mean that products must be constantly updated and altered to suit • Other factors - price, quality, prompt delivery, attractive packaging and after-sales service • Advertising and promotion play a big part BM Unit 2 - LO2

Marketing Satisfying Consumers’ Requirements • “The customer is king!” • Businesses must be customer-focused • No customers no business • Must offer - good service, quality products, value for money, prompt delivery, good after-sales service (eg returns), well presented and packaged goods, at the right price and available at the right place BM Unit 2 - LO2

Marketing “Marketing involves anticipating customers' needs and finding the right product or service to meet those needs, thereby encouraging high sales levels. Vodafone goes further by looking to impress on its customers not merely what its products are i.e. features, but also what they can increasingly do i.e, benefits. This involves effective communication. “ The essentials of marketing BM Unit 2 - LO2

Marketing Role and Importance of Marketing All organisations need to carry out marketing activities to meet their objectives: • Public Sector – may develop services if research shows that is what the community wants • Private Sector – meet customers’ needs through market research • Voluntary Sector – competition for donations, therefore charities spend huge amount of money on marketing. BM Unit 2 - LO2

Marketing Importance of Marketing Poor marketing can lead to failure: • The American car industry • The British motor cycle industry BM Unit 2 - LO2

Marketing Importance of Marketing Good marketing can lead to success: • Swatch • Easyjet and Ryanair BM Unit 2 - LO2

Marketing Marketing as a strategic activity Using marketing, organisations hope to achieve a number of objectives which are essential for success: • To increase sales revenue and profitability • To increase or maintain market share • To maintain or improve the image of the business, its brand or its product • To target a new market or a new segment of the market • To develop new and improved products. BM Unit 2 - LO2

Marketing – concerned with: Marketing What How When Where • Inception/design • Price • Selling and promotion • Distribution • After-sales services BM Unit 2 - LO2

Marketing Market– a meeting place for buyers (consumers) and sellers BM Unit 2 - LO2

Marketing Consumer market are made up of individuals who buy goods or services for their personal or domestic use. The 3 classifications are: • Convenience goods – non-durable goods • Shopping goods – durable goods • Speciality goods – eg cosmetics, fashion items. Consumer Market BM Unit 2 - LO2

Marketing Industrial Market Goods and services bought on the industrial market can be similar to those in the consumer markets, eg consumers use banking services and so do businesses. However, industrial goods also include plant and machinery, raw materials, consumable supplies and business services. BM Unit 2 - LO2

Product-led - Product Orientated Marketing • Putting a product on the market without prior market research • Assumption of best available and no real competition • Often new inventions like Dyson vacuum cleaners or Playstation 2 • A risky approach which can fail - British motor bikes BM Unit 2 - LO2

Market-led - Customer Orientated Marketing • Considering what the customers want before putting a product on to the market • Competition has led to companies focusing on the needs of the customer • Also looks at the influences on purchasing decisions BM Unit 2 - LO2

The MarketingEnvironment Marketing Consumer trends and behaviour Competition Government THE MARKET The economy Technology BM Unit 2 - LO2

Marketing Environment – Government Influence on marketing Marketing • Trade Descriptions • Monopolies and Mergers Act • Fair Trading and Competition Acts • Consumer Protection Laws • Code of Advertising Practice • Advertising Standards BM Unit 2 - LO2

Marketing Environment – Competition Marketing • Close substitutes • Markets – Some markets dominated by a few big producers; other markets have many producers. • Unique Selling Points (USP) • Emotional Selling Proposition (ESP) BM Unit 2 - LO2

Marketing Environment – Technology Marketing • Use latest technology to keep up with competition • Technological advances create new markets and cause decline of others, eg video tapes and DVDs • Sophisticated production methods allow high quality, faster and cheaper production • Improved communications and information Unique Selling Points (USP) • Internet and saturation usage of mobile phones allow businesses new ways to tap into new markets BM Unit 2 - LO2

Marketing Environment – Economic forces Marketing • Interest rates – high rates, consumers buy less; organisations reduce borrowing and spending • Exchange rates affect - £ is low, UK exports become cheaper • Economic growth high consumer confidence and spending. BM Unit 2 - LO2

Marketing Environment – Consumer trends & behaviour Marketing • Changes in the age distribution of the population • Disposable income • Household status, eg rise in single households – smaller ready meals • Social class • Location • Lifestyle taste and fashion, eg environmental issues, healthy lifestyle • Political BM Unit 2 - LO2

The Marketing Mix Marketing In order to market or sell its product successfully, a business must develop a strategy based on 4 key elements: Product Place Price Promotion BM Unit 2 - LO2

Core Actual Augmented The basic product - eg toothpaste cleans teeth The way the product is presented - design, brand name, packaging, etc (Colgate toothpaste - red packaging) Additional features - protection against decay, fresh breath, attracting the opposite sex, etc Product/Service Marketing BM Unit 2 - LO2

The Product Life Cycle Marketing £000 Costs/Sales New Product Idea Death Launch/ Introduction Growth Maturity Saturation Decline Time BM Unit 2 - LO2

Product Innovation Marketing • Generating an idea • Analysing the idea • Producing a prototype • Test market • Adapt product to solve problems • Launch the product BM Unit 2 - LO2

Extending the Product Life Cycle/Extension Strategies Marketing • Developing new markets for existing products, eg computers • Providing line extensions - Mars: fun-sized, yoghurt, ice cream, mini-sized, giant-sized • Finding new uses for existing products • Develop a wider range of products • Develop styling changes • Promoting more frequent use of the product – mainly by reducing price BM Unit 2 - LO2

Extending the Product Life Cycle/Extension Strategies Marketing • Improve the product – think soap powder • Change the packaging – perhaps to appeal to different market segment • Change the channel of distribution – internet shopping • Change product prices • Change promotion method • Rebrand the name of the product – Marathon to Snickers BM Unit 2 - LO2

The Product Mix/Portfolio – range of products that a firm produces to spread risk. Marketing • Very few companies have only one product • Some companies have a range of related products eg Proctor & Gamble • Some companies have totally unrelated products in their product portfolios eg Imperial Group • It is important that you have new products being launched to replace products going into decline in your “Product Mix” BM Unit 2 - LO2

The Product Mix/Portfolio Marketing Boston Matrix – used by some firms to analyse their product mix. BM Unit 2 - LO2

Branding Marketing • Branding distinguishes a product from its competitors – product differentiation • Instantly recognisable by consumers • Often linked to quality and reliability • Can command a premium price BM Unit 2 - LO2

Benefits of branding: Instant recognition, eg Cadbury Brand loyalty, therefore repeat purchases Charge higher prices because of brand loyalty Easy to intro new products using brand name, eg Virgin Strong brand has money value in Balance Sheet Brands Marketing BM Unit 2 - LO2

Drawbacks of branding: Time taken to establish brand Cost of promoting brand Bad publicity affects all products of same brand Imitations/fakes difficult to combat Fashion brands can suffer when fashions change Brands Marketing BM Unit 2 - LO2

Products branded with the name of the store selling them Most of the big supermarkets (Tesco) and chain stores (Boots) have their own brands Often cheaper alternatives to branded goods Make a list of as many “own brands” you can think of. Indicate which branded product they are designed to rival Eg “Wheat Bisks” by Safeway to rival “Weetabix” Own Brands Marketing BM Unit 2 - LO2

This is a feature that allows a product to stand out from its rivals. Should offer the consumer some unique benefit that may motivate them to switch brands Unique Selling Point (USP) Marketing BM Unit 2 - LO2

Try to identify the USP of each of the products listed opposite Think of how they are presented to you in the advertising you see daily on TV, in newspapers and magazines Coca Cola Nike Kit Kat Sunny D Skoda Cars Mercedes Cars Baxter’s Soups Fairy Liquid Finish (dishwasher tablets) Unique Selling Point (USP) Marketing BM Unit 2 - LO2

Price of a Product? Marketing • The price of a product is one of the main factors in buying that product. Too low a price could give the impression of poor quality and too high a price may not give the feeling of value for money • Price is influenced by:- the product being new, what competitors are charging, the product’s stage in its life-cycle, the selling location, the market segment and many other factors BM Unit 2 - LO2

Long term pricing strategies: Marketing • Low-price strategy in a market with strong competition: price elasticity of demand. • Market-price strategy petrol – matching competitors • High-price strategy up-market, exclusive image BM Unit 2 - LO2

Short-term pricing strategies Marketing • Skimming – high initial price for max profit • Penetration pricing – low initial price for new product • Destroyer – eliminating the competition (‘Go’ and ‘EasyJet’/’Ryanair’) • Promotional – lowering prices for a period to ‘promote’ more sales BM Unit 2 - LO2

Short-term pricing strategies Marketing • Price discrimination (aka Demand-oriented) – charging different prices according to the level of demand eg cross-channel ferry fares in summer • Premium pricing – high prices to create exclusive image, eg Ferrari, Gucci • Loss leaders – use to entice customers • Competitive pricing – charge similar prices to avoid price war, eg petrol stations. BM Unit 2 - LO2

Cost-plus pricing A manufacturer or retailer will calculate the cost of making or buying a product and add a set percentage profit to arrive at their selling price. Different businesses use different rates of mark-up. Method used by small businesses as it is the simplest. Contribution pricing A business will calculate the direct costs of making or buying a product (wages & raw materials). A contribution toward the fixed costs of the business (rent, loan repayments) are added. Any amount after covering fixed costs is profit for the business. Calculating a Selling Price Marketing BM Unit 2 - LO2

Place Marketing The nature of the product or service will determine where a firm decides to sell – referred to as DISTRIBUTION. The Channel of Distribution is the route taken by a product as it passes from the producer to the consumer. BM Unit 2 - LO2

Place - Distribution Channels Marketing Producer 1 Producer 2 Producer 3 Consumer Retailer Wholesaler Consumer Retailer Consumer BM Unit 2 - LO2

The Channel of Distribution chosen depends on: Marketing • The nature of the product being sold • Finance available to the organisation • Reliability of companies in the chain • Desired image for the product • Government restrictions • Product’s life cycle • Manufacturer’s distribution capability BM Unit 2 - LO2

The Wholesaler Function Marketing • Buys in bulk from producers (low transport costs) and sells to retailers in smaller quantities • Bears stock-holding risk • Offers a wide variety of goods in small quantities • Packages and labels goods • Offers advice to both producers and retailers as to which goods are selling well BM Unit 2 - LO2

The Retailer Function Marketing • Breaks down bulk to quantities consumers wish to buy and store at home • Provides information to consumers through advertising, displays and trained staff • Stores a variety of goods, displays them and marks on prices • Offers range of related services - credit, HP, after-sales service and delivery BM Unit 2 - LO2

Types of Retailer Marketing • Independent - convenience stores, corner shops • Multiple Chains - M&S, Dixons, Boots • Supermarkets - Tesco, Asda, Safeway, etc • Co-operatives • Department Stores - Harrods, Selfridges • Franchises - Benetton, Body Shop, McDonald’s • Discount Store – Matalan, Primark and TK Maxx BM Unit 2 - LO2

Direct Selling Marketing • Internet selling – allows a business to reach a global market. Customer info is easily collected to target offers and promotions. • Mail Order – goods sold to customers through catalogues, Next, Kays. Credit facilities make this popular. • Direct mail – involves letters, brochures about products to homes, eg Reader’s Digest • Newspaper/magazine selling-customers respond directly to adverts. • Personal Selling – door-to-door or telephone, eg sales reps visit GPs, double-glazing sales. BM Unit 2 - LO2

Promotion Marketing Promotion is the way in which customers are made aware of a product or service and is persuaded to purchase it. BM Unit 2 - LO2

Higher Business Management