Marketing Fundamentals Extra Notes

What is Marketing?

• Marketing is engaging customers and managing profitable customer relationships. The twofold goal of marketing is to attract new customers by promising superior value, and to keep and grow current customers by delivering satisfaction.
• Marketing consists of actions taken to build and maintain desirable exchange relationships with target audiences involving a product, service, idea or other object. Beyond simply attracting new customers and creating transactions, the company wants to retain customers and grow their business. Marketers want to build strong relationships by consistently delivering superior customer value.

Consumer wants, needs and demands

• Wants are the form taken by human needs as they are shaped by culture and individual personality.
• A hungry person in Australia, Singapore or Hong Kong might want a rice or noodle dish for a quick lunch, accompanied by green tea. A hungry person in the South Pacific might want mangoes, suckling pig and beans.
• Demands are human wants that are backed by buying power.
• A simple way to look at needs, wants and demands is that a person needs water to survive (thirst). The person may want a carbonated beverage to satisfy his or her thirst. If the person has the resources, he or she may demand a particular brand of carbonated beverage, such as Coca-Cola, Pepsi or another local brand.

Marketing Strategy

• We define marketing management as the art and science of choosing target markets and building profitable relationships with them. The marketing manager’s aim is to attract, engage, keep and grow target customers by creating, delivering and communicating superior customer value.
• To design a winning marketing strategy, the marketing manager must answer two important questions: (1) What customers will we serve? (Who is our target market?) and (2) How can we serve these customers best? (What is our value proposition?)
• A marketing organisation’s demand comes from two groups: new customers and repeat customers.

Marketing Concept

• The marketing concept holds that achieving organisational goals depends on determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors do.
• The selling concept takes an inside-out perspective. It starts with the factory, focuses on the company’s existing products, and calls for heavy selling and promotion to obtain profitable sales. It focuses primarily on customer conquest – getting short-term sales with little concern about who buys or why.
• The marketing concept starts with a well-defined market, focuses on customer needs and integrates all the marketing activities that affect customers. In turn, it yields profits by creating lasting relationships with the right customers based on customer value and satisfaction.

Societal Marketing

• The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and society’s wellbeing. It calls for sustainable marketing – socially and environmentally responsible marketing that meets the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs.

Customer Relationship Management

• In its broadest sense, customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.It deals with all aspects of acquiring, keeping and growing customers. Hence, more specifically,
• It is the process of managing detailed information about individual customers and carefully managing customer touch points in order to maximise customer loyalty.

Strategic Planning

• Strategic planning sets the stage for the rest of the planning in the firm. Companies usually prepare annual plans, long-range plans and strategic plans. The annual and long-range plans deal with the company’s current businesses and how to keep them going. In contrast, the strategic plan involves adapting the organisation to take advantage of opportunities in its constantly changing environment.
• A mission statement is a statement of the organisation’s purpose – what it wants to accomplish in the larger environment. A clear mission statement acts as an ‘invisible hand’ that guides people in the organisation.

Marketing strategy

• Guided by marketing strategy, the company designs an integrated marketing mix made up of factors under its control – product, price, placement logistics, promotion, people, process and physical evidence.
• Market segmentation is analysing how a market is naturally broken into distinct groups of buyers who have different needs, characteristics or behaviours, and who might require tailored products or marketing programs.
• Market targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to enter.
• Positioning is arranging for a product to occupy a clear, distinctive and desirable place in the minds of target consumers relative to competing products.
• Differentiation is differentiating the company’s market offering from that offered by competitors, to create superior customer value.
• Consumers can be grouped and served in various ways based on geographic, demographic, psychographic and behavioural factors.
• A company with limited resources might decide to serve only one or a few special segments or ‘market niches’.

Marketing Mix

• The marketing mix is the set of controllable, tactical marketing tools that the company blends to produce the response it wants in the target market. The marketing mix consists of everything the company can do to influence the demand for its product.
• The marketing mix consists of everything the company can do to influence the demand for its product. The many possibilities can be collected into groups of variables known as ‘the extended marketing mix’ : product, price, placement logistics, promotion, people, process and physical evidence.
• An effective marketing program blends all of the marketing mix elements into an integrated marketing program designed to achieve the company’s marketing objectives by delivering value to consumers. The marketing mix constitutes the company’s tactical tool kit for establishing strong positioning in target markets.

Publics

• A public is any group that has an actual or potential interest in or impact on an organisation’s ability to achieve its objectives. We can identify seven types of publics:
• Media Publics
• Financial Publics
• Government Publics
• Local Publics
• Citizen-action publics

Marketing Analytics

• Marketing analytics involves tools and technologies used in making sound marketing decisions that lead to effective outcomes and return on marketing investment. This process requires data collection and analysis from all channels in the physical and digital arenas, including big data, over a time span.
• For example, Netflix maintains a bulging customer database and uses sophisticated marketing analytics to gain insights, which it then uses to fuel recommendations to subscribers, to decide what programming to offer and even to develop its own exclusive content in the quest to serve its customers better

Marketing Research

• Marketing research is the systematic design, collection, analysis and reporting of data relevant to a specific marketing situation facing an organisation. Companies use marketing research in a wide variety of situations. For example, marketing research gives marketers insights into customer motivations, purchase behaviour and satisfaction. It can help them to assess market potential and market share, or to measure the effectiveness of pricing, product, distribution and promotion activities.
• The marketing research process has four steps: (1) defining the problem and research objectives; (2) developing the research plan; (3) implementing the research plan; and (4) interpreting and reporting the findings.

Developing the Research Plan

• Once the research problems and objectives have been defined, researchers must determine the exact information needed, develop a plan for gathering it efficiently and present the plan to management. The research plan outlines sources of existing data and spells out the specific research approaches, contact methods, sampling plans and instruments that researchers will use to gather new data.
• A marketing research project might have one of three types of objectives.:
• The objective of exploratory research is to gather preliminary information that will help define the problem and to suggest hypotheses.
• The objective of descriptive research is to describe things, such as the market potential for a product or the demographics and attitudes of consumers who buy the product.
• The objective of causal research is to test hypotheses about cause-and-effect relationships.

Consumer Markets

• Marketing stimuli consist of the marketing mix elements: product, price, placement logistics and promotion, together with the people, processes and physical evidence involved. Other stimuli include major forces and events in the buyer’s environment: economic, technological, political, social and cultural.
• The marketer wants to understand how the stimuli are changed into responses inside the consumer’s black box, which has two parts. First, the buyer’s characteristics influence how he or she perceives and reacts to the stimuli. Second, the buyer’s decision process itself affects the buyer’s behaviour. We look first at buyer characteristics as they affect buyer behaviour and then discuss the buyer decision process.

Characteristics Affecting Consumers

• Cultural: culture, cultural groups, social class
• Social: reference groups, family , roles and status
• Personal: age and life-cycle stage, occupation, economic situation, lifestyle
• Psychological: motivation, perception, leaning, beliefs
• opinion leaders – people within a reference group who, because of special skills, knowledge, personality or other characteristics, exert social

Stages in the adoption process

• Consumers go through five stages in the process of adopting a new product:
• Awareness: The consumer becomes aware of the new product, but lacks information about it.
• Interest: The consumer seeks information about the new product.
• Evaluation: The consumer considers whether trying the new product makes sense.
• Trial: The consumer tries the new product on a small scale to improve his or her estimate of its value.
• Adoption: The consumer decides to make full and regular use of the new product.

Influence of product characteristics on rate of adoption

• Relative advantage: the degree to which the innovation appears superior to existing products. HDTV offers substantially improved picture quality. This sped up its rate of adoption.
• Compatibility: the degree to which the innovation fits the values and experiences of potential consumers. HDTV, for example, is highly compatible with the lifestyles of the television-watching public. However, in the early years, HDTV was not yet compatible with programming and broadcasting systems, slowing adoption. Now, as more and more high-definition programs and channels have become available, the rate of HDTV adoption has increased.
• Complexity: the degree to which the innovation is difficult to understand or use. HDTVs are not very complex. Therefore, as more programming has become available and prices have fallen, the rate of HDTV adoption is increasing faster than that of more complex innovations.
• Divisibility: the degree to which the innovation may be tried on a limited basis. Early HDTVs were very expensive, slowing the rate of adoption. As prices fall, adoption rates are increasing.
• Communicability: the degree to which the results of using the innovation can be observed or described to others. HDTV is easy to demonstrate and describe, and this will enhance the uptake by consumers.

Market Structure and Demand

• Derived demand:Business demand that ultimately comes from (derives from) the demand for consumer goods.
• Inelastic demand is total demand for many business products is not affected much by price changes, especially in the short run.
• Fluctuating demand is the demand for many business goods and services tends to change more – and more quickly – than the demand for consumer goods and services does.

Segmenting Consumer Markets

• A marketer has to try different segmentation variables, alone and in combination, to find the best way to view the market structure. The main variables that might be used in segmenting consumer markets. Here, we look at the main geographic, demographic, psychographic and behavioural variables.
• Behavioural segmentation divides buyers into segments based on their knowledge, attitudes, uses or responses to a product.
• Occasion segmentation can help firms build up product usage. For example, most consumers of fruit juice drink it in the morning, but marketers such as Boost Juice want juices to be seen as a part of a healthy lifestyle and to be consumed throughout the day.
• Benefit segmentation requires finding the main benefits people look for in the product class, the kinds of people who look for each benefit and the main brands that deliver each benefit.
• Using inter-market segmentation (also called cross-market segmentation), marketers form segments of consumers who have similar needs and buying behaviours even though they are located in different countries.
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Selecting Position Strategy

• The full positioning of a brand is called the brand’s value proposition – the full mix of benefits upon which the brand is differentiated and positioned. It is the answer to the customer’s question, ‘Why should I buy your brand?’
• Company and brand positioning should be summed up in a positioning statement. The statement should follow the form: To (target segment and need) our (brand) is (concept) that (point of difference). For example: ‘For every athlete, Nike’s experience and expertise ensures that you have the perfect shoe for your sport.’

Brand Equity

• Brand equity is the differential effect that knowing the brand name has on customer response to the product and its marketing. It is a measure of the brand’s ability to capture consumer preference and loyalty. A brand has positive brand equity when consumers react more favourably to it than they do to a generic or unbranded version of the same product. A brand has negative brand equity if consumers react less favourably to it than they do to an unbranded version.
• Co-branding offers many advantages. Because each brand operates in a different category, the combined brands create broader consumer appeal and greater brand equity. Co-branding can take advantage of the complementary strengths of two brands. It also allows a company to expand its existing brand into a category it might otherwise have difficulty entering alone. For example, the Nike + iPod arrangement gives Apple a presence in the sports and fitness market. At the same time, it helps Nike to bring new value to its customers.

Brand Development

• Line extensions occur when a company extends existing brand names to new forms, colours, sizes, ingredients or flavours of an existing product category.
• A company might introduce line extensions as a low-cost, low-risk way to introduce new products. Or it might want to meet consumer desires for variety, to use excess production capacity or simply to command more shelf space from resellers.
• A brand extension extends a current brand name to new or modified products in a new category.
• A brand extension gives a new product instant recognition and faster acceptance. It also saves the high advertising costs usually required to build a new brand name

Main Steps in new-product development

• Idea generation
• Idea screening
• Concept development and testing
• Marketing Strategy Development
• Commercialisation
• Test Marketing
• Product Development
• Business Analysis

Customer-centered new product dev.

• Customer-centred new-product development focuses on finding new ways to solve customers’ problems and create more customer-satisfying experiences.
• Under this sequential product development approach, one company department works individually to complete its stage of the process before passing the new product along to the next department and stage. This orderly, step-by-step process can help bring control to complex and risky projects
• Many companies use a team-based new-product development approach. Under this approach, company departments work closely together in cross-functional teams, overlapping the steps in the product-development process to both save time and increase effectiveness.
• The team-based approach does have some limitations. For example, it sometimes creates more organisational tension and confusion than the more orderly sequential approach. However, in rapidly changing industries that are facing increasingly shorter product life cycles, the rewards of fast and flexible product development far exceed the risks. Companies that combine a customer-centred approach with team-based new-product development gain a big competitive edge by getting the right new products to market more quickly.
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Major Pricing Strategies

• Customer value-based pricing uses buyers’ perceptions of value, not the seller’s cost, as the key to pricing. Value-based pricing means that the marketer cannot design a product and marketing program and then set the price. Price is considered along with the other marketing mix variables before the marketing program is set.
• good-value pricing strategies – offering just the right combination of quality and good service at a fair price.
• Cost-based pricing involves setting prices based on the costs for producing, distributing and selling the product, plus a fair rate of return for the company’s effort and risk.
• cost-plus pricing (or markup pricing) – adding a standard markup to the cost of the product.
• breakeven pricing, or (target-return pricing). The firm tries to determine the price at which it will break even or make the target return it is seeking. Target-return pricing uses the concept of a breakeven chart, which shows the total cost and total revenue expected at different sales-volume levels
• Competition-based pricing involves setting prices based on competitors’ strategies, costs, prices and market offerings