Marketing

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  • 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 
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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) 
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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 

 

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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 

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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 
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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 
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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 

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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) 

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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 
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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 
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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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