Marketing
- Created by: nuhaazhar
- Created on: 20-09-16 13:06
Marketing Mix - the 4Ps
Marketing mix - Refers to the combination of factors which help a business sell its products.
The 4Ps -
- Product: applies to the product itself, its design and quality, comparing with competitors' products.
- Price: the price at which the product is sold, comparing with competitors' products' price, should cover costs
- Place: questioning method of distribution channel
- Promotion: how the product is advertised and promoted, questioning methods of promotion that would be effective/suitable for the product
What makes a product successful?
- satisfies existing needs and wants of consumers
- not too expensive to produce
- design - performance reliability, quality must be consistent with product's brand image
- capable of stimulating new wants from the customer
- has something distinctive to make it look different
- produce a new product or introduce new changes to original product before its competitors
Market Segmentation
Market segment: A group of customers with similar needs and wants
Types of segmentation:
- Demographic: definining a market by age, gender and family size
- Socio-economic: defining a market by income and occupation
- Lifestyle: defining a market where customers are located
- defining a market by values, opinions, hobbies, interests, personality characteristics
- Geographic: defining a market where customers are located
Why do businesses segment the market?
- To make sure they meet the needs&wants of customers more effectively
- To help them decide how to market their product/service
- Get more customers = make more profits
Problems with market segmentation:
- Product may appeal to other customers (people that are not targeted may want to use)
- Business could pick the wrong target market (if not enough research)
The importance of Market Research
- Businesses use market research to help them decide the right mix
Market research: process of gathering, analysing and interpreting information about a market
Product-oriented: business focus mainly on the product itself; produce product first then find market
Market-oriented: business carries out market research first to find out what consumers want before a product is developed and produced
Why is market research needed?
Types of information
- Quantitative: numbers and statistics; able to retrieve by close-ended questions
- Qualitative: produces information in the form of descriptions
Primary Research
+s/-s of questionnaires:
- + detailed qualitative information
- + can be carried online; cheaper and easier to collate/present
- - time and money consuming (collating/analysing)
- - answers to questions might not be very accurate -> misleading to business
+s/-s of interviews:
- + interviewer able to explain the questions to interviewee
- + detailed responses from interviewee
- - interviewer could lead the interviewee -> inaccurate results due to bias
- - time-consuming; often also expensive way
Sample: a group of people who are selected to respond to a market research
Random sample: when people are selected at random for source of information
Quota sample: when people are selected on the basis of certain characteristics as a source
Focus group: a group of people who are representative of the target market
Secondary Research
Internal sources of information:
- Sales repartment sales record, pricing data, customer records, sales reports
- Opinions of distribution and public relations
- Finance department
- Customer Service department
External sources of information:
- Government statistics
- Newspapers
- Market research agencies
- The internet
Product Packaging
Packaging: is the physical container or wrapping for a product. Often used to appeal to consumers.
- New packaging can extend the product lifecycle
Purposes of packaging:
- protects the product
- easy to transport
- present an appealing image
- easy to open and use the product
- provide product information inc. barcodes
- promotes brand image
Product Life Cycle
Product life cycle: describes the stages a product will pass through from its introduction, through its growth until it is mature and then finally its decline
Development: product is tested and developed before it is launched; market research is carried; there will be no sales
Introduction: initial sales are low until customers start buying; production costs = higher than revenue from sales
Growth: sales increase = production becomes more profitable; early development costs can be recovered; success of product -> brand loyalty and repeat sales
Maturity: product reaches peak of sale; most profitable point for the company; competitors enter market
Saturation: product/service becomes less popular (satured); decline in sales; more competitors enter market . ****
Decline: sales have fallen; new design for product has been introduced; revenue has fallen; product may be removed
****Extension strategies: extend life of product before it goes into decline; businesses use marketing techniques to improve sales eg use a new advertising campaign or make small changes to the product's design, colour or packaging
Don't Imagine Good Maggi So Daringly
Pricing Methods
Cost-plus pricing: the cost of manufacturing the product plus the profit mark up; + easy to calculate; + all costs are covered; + costs increase = price increase; - competition may not increase prices when you do; less incentive to control costs
Example: cost = RM50; percentage mark up = 50; selling price = 1.5 x 50 = RM75
Competetive pricing: when product is priced in line with or just below competitors' prices; happens when there is a lot of choice
Psychological pricing: involves setting a price just below a large number to make it seem cheaper; charging a very high price for a high quality product; little sales revenue is lost
Penetration pricing: when the price is set lower than the competitors' prices in order to be able to enter a new market; ensures that sales are made for new product entering the market; profit per unit sold may be low
Price skimming: high price is set for a new product on the market; people will pay because of the novelty factor; can help to establish the product as being good quality; may put off potential customers
Promotional pricing: setting a very low price for a short period of time; boost sales throughout; useful for getting rid of unwanted stock; renew customers' interest; lower sales revenue
Price discrimination: firms charge different prices to different consumers for same product; lead to increased revenue and profits but can also add costs (prices constantly changing)
Price Elasticity
Price elasticity: a measure of the responsiveness of demand to a change in price.
Law of demand: as price increases, demand decreases
Price elastic (very responsive): small percentage change in price = large percentage change in demand. Eg Pepsi vs Coke
Price inelastic: (unresponsive): large percentage change in price = smaller percentage change in demand. Eg Nexus uniform (even if price increases, new students will have to buy no matter what)
SPLAT!
- Substitutes: no substitutes = inelastic
- Proportion of income: takes up small proportion of someone's income = inelastic
- Luxury of necessity: essential for living and is needed eg petrol = inelastic
- Addictive: product is addictive = inelastic
- Time to respond: no time to search for cheapest price = inelastic
Aims of Promotion
Promotion: the way in which a business communicates with existing and potential customers to encourage demand
Promotion as part of the marketing mix includes:
- Advertisements
- Sales promotion
Aims:
- To increase sales
- To create brand image
- To introduce new products to the market
- To improve the company image
- To inform people about particular issues, often used by government
- To compete with competitors' products
Types of Distribution Channels
Distribution channel: the means by which a product is passed from the manufacturer to the customer - this can often involve an intermediary (aka middle men)
Direct channel: no intermediaries; increasingly popular method; + simple; + no intermediary = cheaper to customer; - not suitable for large products; - expensive to send by post so not cost effective
Retailers: more popular when retailer is large or when products are expensive; they deal directly with the customer; + producers sell large quantities to retailers; + reduced distribution costs (bc you're sending large quantities in one go) = more cost effective; - price increases for customer; - producers lose control over how product is sold
Wholesalers: breaking bulk; benefit from economies of scale (the more they buy the cheaper each unit becomes); simplifies process for retailers; + small retailers are able to purchase smaller quantities; + wholesaler saves storage space; - fresh products might not be of good quality as it takes longer for them to reach shops; - producers lose control
Agent: have specialist knowledge of that country, so they sell on behalf of the business; they can also be the only intermediary; do not hold stock; operate in tertiary sector; + offer specialist knowledge; know about local conditions; - producers lose control; - consumers pay more
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