Fluent Essays

Course textbook It is recommended that you buy the interactive e-text version for easy access (link is on Canvas). If you download VitalSource Bookshelf (the app), you can access the textbook offline as well. You are already somewhat knowledgeable marketers Don’t believe me? • Countless marketing decisions throughout your lifetime • May be the household decision-maker You are an expert in the market of yourself (and maybe your household). We will expand your thinking by learning about marketing as a discipline and marketing management as a business approach. What can be “marketed”? Short answer: Anything. Goods Services Places Events Experiences Ideas Feelings People (even you). What is “marketing”? “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” American Marketing Association (2017) It is not just selling things and making ads. It is a whole-business approach The ‘customer’ is at the centre. What is “value”? “A customer’s overall assessment of the utility of an offering based on perceptions of what is received and what is given.” Elliott et al., (2021) Thinktivity: How do food delivery services (e.g., Uber Eats) provide the four types of utility? Utility Form Time Place Possession Consumer expectations Company promise and offering Evolution of marketing Product orientation Make the best product Ferrari Sales orientation Persuade people to buy the product Car dealers Relationship marketing Develop long-term relationships with customers Airlines Societal marketing Satisfy the needs of society The Body Shop Focus on company needs Focus on others’ needs Production orientation Make a lot of product Coca Cola Pre-1950s Customer orientation Satisfy the needs of the customer Disposable nappies 1950s – 2000s Thinktivity: Where do your favourite companies sit on this continuum? Is it the 4 Ps, 7 Ps, 4 Cs, or the 5 Cs… One thing to get used to quickly—marketers love acronyms. The strategic approach The 5 Cs Customers Company Context Collaborators Competitors The original marketing mix The 4 Ps Product Price Place (distribution) Promotion The extended marketing mix The 7 Ps Product Price Place (distribution) Promotion People Process Physical evidence The customer-centric marketing mix The 4 Cs Consumer Costs Convenience Communication These are all essentially addressing the same thing. Ultimately, it all comes down to two key strategic decisions, with customers at the centre: 1. Where to compete 2. How to compete Focus on the 4 Ps and the rest will follow. What is “strategy”? • Business/corporate strategy • A plan of action for maximising company strength (i.e., profitability) against forces in the business environment. • Marketing strategy • How a company differentiates itself positively from its competitors, using its relative strengths to better satisfy customer needs. • Creating a difference that can be preserved long-term (i.e., a sustainable competitive advantage—establishing a position in the market that is superior to that of the competition and sustainable over time). Strategy is converted into goals and objectives. • Goals are general. • Objectives are SMART (specific, measurable, achievable, realistic, timebound). Marketing strategy serves the business strategy. Business strategy Marketing strategy Summary 1. “Marketing” is far broader than we assume. 2. “Marketing” is about creating, communicating, delivering, and exchanging value for customers and society. 3. “Value” is the utility, meaning, and experience that customers derive—it is unique to each customer. 4. Marketing has evolved significantly over the decades, and we are now focussing more on social value and sustainability. 5. The marketing mix (4 Ps) are tools for strategic decisions that focus on where to compete and how to compete. 6. Marketing strategy serves the broader business strategy. Learning outcomes 1. Understand and appreciate the need for ethical and social responsibility in marketing and business 2. Identify the key components of a situation analysis and understand why it is conducted 3. Appreciate marketing from an international perspective Recap from last week (AMA, 2017) The marketing process Ethical and legal responsibility in marketing • Ethics and laws address different things: • Ethics deals with moral principles and values. • Laws are society’s values and standards that are legally enforceable. • Marketing decisions can be: 1. Ethical and legal 2. Ethical but illegal 3. Unethical but legal 4. Unethical and illegal Corporate social responsibility and sustainability What does it mean to be ‘sustainable’? Meeting the needs of the present without compromising future generations in being able to meet their own needs. Ethics, social responsibility, and sustainable marketing are not just corporate fads The process of marketing planning The marketing environment How do you eat an elephant? Situation analysis Sometimes the 5 Cs framework is used to guide the situation analysis. Internal environment (can control) External environment (cannot control) External environment (cannot control) External environment (cannot control) Internal analysis The aim is to understand the company: • Resources • Capabilities • Competencies • Competitive advantage. (Barney, 1991, 1995) External analysis • Market • Industry and competitors • Environment Making sense of the situation International marketing • Sometimes called ‘global marketing’—operating in a world-wide market. Essentially, it is the application of marketing principles beyond the home country. Standardisation vs. customisation https://www.daytranslations.com/blog/wp- content/uploads/2019/01/How-McDonalds-Adapts-the-World-1.jpg https://www.daytranslations.com/blog/wp-content/uploads/2019/01/How-McDonalds-Adapts-the-World-1.jpg Summary 1. The marketing process involves understanding, creating, communicating, and delivering value for customers. 2. Ethics and law do not always align. Regardless, businesses must always ensure goals are pursued ethically. Marketers should adhere to ethical values to ensure business/marketing decisions do no harm to consumers. 3. CSR is implemented in businesses usually using the triple bottom line approach. Sustainable marketing is about making marketing decisions that ensure both the current and future generations are able to meet their needs. Consumers are demanding for more ethical and sustainable approaches from the companies they buy from. 4. Marketing planning involves understanding the situation, setting objectives within the given situation, and crafting a strategic plan to achieve those objectives. 5. The marketing environment has three levels: internal, micro, and macro environments. Each level needs to be analysed in order for decision makers to have a full understanding of the current situation of a business. 6. International marketing is the application of marketing principles beyond the home country, into international markets. The same principles apply but with a cultural sensitivity towards the target country. 7. When entering and competing in an international market, a company can either standardise or customise their offering, with pros and cons for each approach. The situation analysis helps decision makers understand which approach is best for a given company. Learning outcomes 1. Understand the importance of consumer behaviour to marketers. 2. Articulate each of the stages in the consumer decision-making process. 3. Understand the role of involvement, problem-solving types, and loyalty in the consumer decision-making process. 4. Identify the types/factors of influences on consumer behaviour. 5. Understand the differences and similarities between business buying behaviour and consumer behaviour and the decision-making processes. 6. Appreciate the contemporary changes to the consumption process due to megatrends. Scope of buyer behaviour Buyer behaviour Consumer behaviour (more focus today) Business buyer behaviour The marketing mix – The 4 Ps The study of consumer behaviour is concerned with: Who are the consumers? What do they buy? Why do they buy? How do they buy? When do they buy? Marketing management is concerned with: Who are the target customers? What do they buy? Why do they buy? How do they buy? When do they buy? In B2B markets, the focus is on businesses as customers. “Consumer” vs. “customer” vs. “buyer” vs. “client” Often, these terms are used interchangeably and are understood as generally the same thing. However, it gets complicated: • Consumer – directly consumes the product but may not directly buy the product themselves. • Customer – may not necessarily be a consumer and a customer can be an individual person or an entity. • Buyer – may not necessarily be a consumer, can resell or on-sell the product, and can be an individual person or an entity. • Client – directly consumes a service “Consumer market” – a market that consists of all the individuals and households who buy or acquire products for personal consumption. The consumption process Acquire Consume Dispose Simple Quick Habitual Complex Time-intensive Extended Consumer decision-making process Why do we buy things? Consumers are motivated to purchase by their needs and wants. BUT Consumers don’t always know what they need or want. Marketing shapes that. Need (functional need) • Fuelled by the feeling of deprivation of basic necessities. • E.g., food, shelter. Want (psychological need) • Fuelled by the feeling of desire that is shaped by a persons knowledge, culture, personality, and other external influences. • E.g., specific brands, luxuries. Consumer decision-making process (EKB Model: Engel-Kollat-Blackwell, 1968) Pre-purchase • Identify need/want • Search possible solution • Build consideration set Purchase • Narrow consideration set • Decide on retail channel Post-purchase • Evaluate (e.g., satisfaction, repeat purchase, WOM) Need/want recognition Information search Evaluation of alternatives/options Purchase Post-purchase evaluation At which stage of the process do marketers have influence? Stage 1: Need/want recognition Actual state Desired state How do influencers impact need/want recognition? Stage 2: Information search Internal search • Existing knowledge (memory) • Previous experience • Vicarious experiences (learning through observation of others) External search • Personal sources (WOM) • Online reviews (eWOM) • Marketer-created sources (ads and websites) • Public sources (neutral sources) How do you search for information when thinking about buying a product? Stage 3: Evaluation of alternatives/options Universal set Retrieval set Evoked set (consideration set) Universal set All possible brands, products, stores for a given product category. Retrieval set Brands, products, stores readily brought forth from memory. Evoked set/consideration set Brands, products, stores the consumer would consider purchasing. Unawareness set Brands, products, stores the consumer is not aware of. Inept set Brands, products, stores the consumer would avoid purchasing. Take 10 brands that you can think of and place them in the categories above. Why did you place them there? Stage 3: Evaluative criteria A set of salient or important attributes and benefits about a particular offering (product or service). • Attribute – specific characteristics or features of an offering that resides in the offering. • Benefit – abstract feelings or experiences that reside in the consumer. Determinant attributes – offering features that are important to the buyer and on which competing brands or stores are perceived to differ. Attributes Mint flavor Added fluoride Cavity protection Benefits Fresh breath Stronger enamel Healthier teeth Stage 4: Purchase At this stage, the decision is one of two: 1. To purchase 2. Not to purchase (abandon decision) Factors that impact decision to purchase: • Make it easier to purchase (e.g., payment type, location of POS, finance options). • Have offering in stock/available. • Reduce wait time. • Create urgency (e.g., time pressure or perception of scarcity). • Friendly service. Stage 5: Post-purchase evaluation Stage 5: Post-purchase evaluation Comes from consumption/use of the product/service. Factors that impact post-purchase satisfaction: • Demonstrating correct usage • Building realistic expectations • Providing insurance and money back guarantee • Encouraging feedback AND acting on it • Periodically checking in with customers (if high value offering) Stage 5: Post-purchase evaluation Commonly known as ‘buyer’s remorse’ or ‘cognitive dissonance’. Reducing cognitive dissonance requires reinforcing the decision through: • Follow-up contact • Congratulation letters • Advertising • Social reinforcement via brand communities • Having a ‘cool’ brand Interesting read: https://www.ama.org/2019/08/07/10-characteristics- of-brand-coolness-and-how-to-engineer-them/ https://www.ama.org/2019/08/07/10-characteristics-of-brand-coolness-and-how-to-engineer-them/ Stage 5: Post-purchase evaluation Want to encourage repeat purchase and foster loyalty. Loyalty is engendered through: • Loyalty schemes and programmes • Customer engagement • Repeat purchase discounts • Satisfactory product performance (i.e., high quality) Involvement The degree of importance associated with a product or service. Directly impacted by perceived risk in four categories: 1. Financial (associated with perceived ROI) 2. Performance/functional (associated with product) 3. Physical (associated with safety) 4. Social/psychological (associated with social perception) Note: Involvement is idiosyncratic. Consumers may have different levels of involvement for the same type of product. Involvement and problem-solving types Need/want recognition Information search Evaluation of alternatives/options Purchase Post-purchase evaluation Low involvement Habitual decision making High involvement Extended decision making Need/want recognition Purchase Need/want recognition Information search Evaluation of alternatives/options Purchase Post-purchase evaluation Limited involvement Limited decision making No involvement Impulse purchase Purchase Involvement to loyalty and engagement Extra for experts: https://www.mckinsey.com/business- functions/marketing-and-sales/our-insights/the- consumer-decision-journey https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/the-consumer-decision-journey Influences on consumer behaviour and decision-making Marketing Mix Product Price Place Promotion Situational factors Physical • Store atmospherics • Weather Social • Crowds • Salespeople • Other shoppers Time • Time pressure or restrictions Motivational • Special event • Special reason Mood – person’s mood at time of purchase • Any mood state Individual factors Personal characteristics – relatively stable Psychological characteristics – shapes thinking, aspirations, expectations • Demographics • Age (generation) • Gender • Ethnicity • Income • Education • Occupation • Physical location • Lifestyle – how people spend time and money, who they spend it with • Personality – unique characteristics • Motivation – internal drive to satisfy unfulfilled needs or achieve unmet goals • Perception – psychological process of filtering, organising, and attributing meaning to the world • Beliefs and attitudes • Beliefs – descriptive and evaluative thoughts about something • Attitudes – enduring evaluation of something (positive vs. negative vs. neutral) • Learning – process of acquiring new knowledge Group factors Cultural – large social groupings Social – wider group influences • Culture – defining system of knowledge, beliefs, values, rituals, and artefacts of a given society • Subculture – differ from broader culture on certain influential dimensions • Social class – hierarchical social ranking in society, heavily influenced by socioeconomic status • Reference groups – group individual looks to for guidance on appropriate values, attitudes, behaviours (linked with social risk) • Family – important for early learning; stage of family lifecycle • Roles and status • Play multiple roles • Status within group Business buying behaviour Distinctive characteristics that make B2B different from B2C. Business buyers are: • Generally less fickle than consumers (one bad interaction won’t drive a buyer away) • Generally rational – formal assessment (less prone to advertising, price discounts, will consider long-term benefits more) • Generally loyal and valuable (regular repeat purchases of high-value) Business buying behaviour is also impacted by internal and external environmental factors. Demand characteristics Derived demand • Business market demand impacted by knock-on effects from the consumer market. • Very prone to fluctuations Joint demand • Interdependent demand for multiple products. Inelastic demand • Insensitive to price changes. Business decision-making process New task purchase Straight rebuy Modified rebuy B2B and B2C Consumer market Business market The contemporary consumption process Acquire Consume Dispose What are the implications for companies and marketers? Think about this from both B2B and B2C contexts. Summary 1. Consumer behaviour is the study of behaviour of individuals and households who buy goods and services for personal consumption. 2. Consumers are motivated to purchase by their needs and wants, and their needs and wants are shaped by marketers. 3. Consumption involves processes associated with acquisition, consumption, and disposal. 4. There are five stages of the consumer decision-making process and marketers can influence every stage. 5. Involvement is the consumer’s degree of interest in the product or service and is impacted by perceived risk associated with the purchase. 6. There are four types of influences on consumer behaviour (including the marketing mix). 7. Business buying behaviour is unique and different to consumer behaviour but also shares similarities, because ultimately, all decisions involve people. 8. Mega-trends in consumption have altered the traditional consumption process and this has significant implications for marketers. Week 1 – Week 6 Textbook Scope Week1: chapter 1 Week2: chapter 2, skim chapter 13 Week 3: chapter 4, skim chapter 5 Week 4: chapter 6 Week 5: chapter 7, skim chapter 11 Week 6: chapter 8 & 10 Learning outcomes 1. Understand the concept of target marketing and its importance. 2. Identify and explain the target marketing process. 3. Understand the market targeting strategies and how target marketing impacts the 4 Ps. 4. Understand the key elements involved in each of steps in the target marketing process. Markets and segments Entire market Market segments Subgroups of customers with homogeneous needs and wants. More effective and efficient to serve viable segments within the wider market. Applies to both consumer markets and business markets. Group of customers with heterogeneous needs and wants. Difficult (almost impossible) to serve the entire market. The target marketing concept Process of identifying and understanding smaller, targetable market segments to tailor the marketing mix to maximise value between the company and the customers in those segments. Involves three steps: Requires thorough understanding of: Segmentation Targeting Positioning Industry Competitors Company Customers Situation analysis (week 1) Buyer behaviour (week 2) Why do marketers practice target marketing? Identify growth and market opportunities Focus marketing efforts Streamline product development and design Derive appropriate pricing strategies Ultimately, target marketing is the tool that enables marketers the efficient use of resources to develop focussed offerings and more persuasive messages. The target marketing process Identify market segments (existing and potential customer base) Target the viable segment(s) Develop a positioning strategy for the viable segment(s) Segmentation Understand the heterogeneity of consumer needs and wants of each segment. Targeting Choose a target segment based on viability. Positioning Position and differentiate the offering (e.g., features, pricing, communication channels). • Use positioning strategy as a guide to allocate resources in overarching marketing strategy. Segmentation Market segmentation is the process of dividing the consumer market into smaller, homogeneous, meaningful segments on the basis of commonalities (i.e., similar needs, lifestyles, etc). 1. Identify variables that allow meaningful delineation of market segments. a. Easily measured and accessed. b. Accurate and relevant in predictability. 2. Profile and personify the segments. a. Describe typical consumer that represents the segment. b. Develop intimate understanding of segments. Bases of segmentation Demographic • Based on demographic variables. • Most commonly used. • E.g., variables could be age and generational cohorts, ethnicity, gender, income, family composition, education. Geographic • Based on geographic variables. • Especially relevant for certain industries and business models. • E.g., variables could be country, region, city, urban vs. rural, climate. Psychographic • Based on psychological traits. • Also commonly used. • Popular models are Roy Morgan Values Segments, VALS. • E.g., variables could be attitudes, values, lifestyles, interests, opinions and beliefs. Behavioural • Based on purchase and consumption behaviours. • Direct indicator of emerging trends. • E.g., variables cold be usage rate, benefits sought, usage occasion, loyalty, price sensitivity. Business market segmentation is more complex and often fruitless due to one-to-one, relationship-based nature of marketing. If segmented, then often it is based on size of business, geography, industry, product application. http://www.roymorgan.com/products/values-segments/about- values-segments http://www.strategicbusinessinsights.com/vals/ustypes.shtml http://www.roymorgan.com/products/values-segments/about-values-segments http://www.strategicbusinessinsights.com/vals/ustypes.shtml Combining the bases of segmentation Marketers never use just a single variable (e.g., age) within a single basis of segmentation (e.g., demographic). For meaningful segmentation that provides accurate and relevant predictions about consumer preference and behaviour, the bases are almost always used in combination. Well-renown and popular models used by companies: • Helix Personas (combination of Roy Morgan data and third-party data). • Claritas PRIZM Premier. • Euromonitor Global Consumer Types. Profiling and personifying segments Describes the typical customer in a particular market segment, including the common features shared by members of the segment and how the differ from other segments. à Describe based on segmentation bases and variables. Example of profiling format: 1. Demographic description (e.g., age, gender) 2. Geographic description (e.g., location) 3. Psychographic description (e.g., lifestyles, attitudes, beliefs, values) 4. Behavioural description (e.g., usage and benefits sought from the specific product) Then, develop a persona (i.e., name them, get to know them, develop deep understanding). Helix Personas http://www.helixpersonas.co.nz/browse http://www.helixpersonas.co.nz/browse Common segmentation mistakes Segmenting a segment • Groups end up being too small to be meaningful = not viable Making a caricature not a persona • Not using enough empirical evidence when creating personas often results in cartoon characters = not realistic Forgetting that segments contain real people • A segment simplifies a group of people, but ultimately, individuals make up the segment, so it is very likely that they will not all be completely identical = too simplistic, lacking appreciation of complexity And forgetting that all segmentation bases shift over time. Targeting Market targeting is the process of systematically examining the possible market segments and selecting the most viable segment for the company to target. 1. Evaluate potential segments. a. Potential sales volume and revenue (size and attractiveness) b. Ability of company to serve the segment and compete with others c. Analyse cost structures 2. Select target segment(s). a. Market research b. Historical trends c. Purchasing patterns d. Test marketing Evaluating potential segments Market potential Total volume of sales of a product category that all companies in a particular industry expect to sell in a specific period of time, with level of marketing activity held constant. Sales potential (total volume of company sales) Market share × market potential Sales revenue Sales potential × average selling price Competitor analysis Part of the situation analysis Cost structure Evaluating the costs incurred in creation, communication, and delivery of offering. If fixed costs are high, consider not entering the market despite attractiveness. Estimated maximum Depends on: • Stability of market potential • Stability of target segment • Level of industry marketing activity • Effectiveness of company’s promotional efforts Market targeting strategies and the 4 Ps Undifferentiated (mass) marketing Differentiated (segmented) marketing Concentrated (niche) marketing Micromarketing Serving the whole market with one offer, do not consider segments. E.g., petrol. Target several different market segments with separate offers for each segment. E.g., cars. Target one segment or a niche within a segment. E.g., boutique brands. Ranges from small local markets (local marketing) to one individual (direct marketing). E.g., real estate agents. Focus on similar needs of consumers, not the differences. Focus on different needs of consumers. Focus on similar needs of a single group of consumers. Focus on needs of a small group of consumers or single consumers. Targeting broadly Targeting narrowly Mass customisation: combination of mass production with individual customisation. Marketing mix Market Marketing mix 1 Segment 1 Marketing mix 2 Segment 2 Marketing mix Segment or niche Marketing mix Marketing mix Positioning Positioning is the process of developing a marketing mix to occupy a certain position in the minds of consumers in the target market, relative to competing offers. Note: Consumer perceptions ≠ product characteristics Directly linked with evaluation of alternatives stage in the consumer decision- making process. • Provides consumers with heuristics to ‘short-cut’ decisions. • Based on simple propositions that consumers generally agree with and easily remember. The marketing mix is used in its entirety to position the offering. Determine the position If it’s an existing product, then you must analyse current position. Based on market research and analysis (market research companies), perceptual mapping is conducted. 1. Identify determinant attributes of the product or product category. 2. Assess how the company’s product and brand vs. competitors’ product and brand are positioned relative to these attributes. Jane’s Chocolate Repositioning Jane’s Chocolate Jane’s Chocolate Proceed with caution! Determine the marketing mix What we’ll cover in detail in the next 4 weeks J Summary 1. It is extremely difficult to serve the entire market. Therefore, marketers segment and target segments of markets for effective and efficient marketing efforts using the target marketing concept. 2. The target marketing concept involves three steps and requires thorough understanding of the current situation and buyer behaviour. 3. There are four bases of segmentation, and appropriate bases and variables must be used for easy measurement, access, accuracy, and predictability. 4. Consumer market segmentation involves the four bases, whereas business market segmentation involves different bases and is often not possible due to the nature of business relationships. 5. Segmentation is conducted using the combination of the bases for meaningful segments. 6. The goal of targeting is to derive the most viable segment(s) to target. 7. There are four main market targeting strategies, each involving different variations of the marketing mix. 8. Positioning is relative to competitors and their offerings. 9. Repositioning should be done with caution and a long-term view. Learning outcomes 1. Understand what a product is. 2. Understand and apply the Total Product Concept. 3. Identify product classifications and the different types of products. 4. Understand the Product Life Cycle and the process of new product development. 5. Understand how products are adopted in the market. 6. Understand and apply the Ansoff growth matrix and strategies. 7. Understand product obsolescence. 8. Understand what a service is and its unique characteristics. What does it mean to “manage” the product? Keeping in mind the organisational objectives (e.g., sales, revenue, reputation), managing product-related decisions involves: Product development Product launching Branding Packaging Positioning is the process of developing a marketing mix to occupy a certain position in the minds of consumers in the target market, relative to competing offers. The marketing mix is used in its entirety to position the offering. Repositioning is the process of shifting from the existing position to a new position in the minds of consumers in the target market, relative to competing offers. “Managing product” is about how to position Segmentation Targeting Positioning What is a “product”? A physical good A service An idea Examples: Food Clothes Shampoo Cars Essentially anything we buy that we can physically touch (tangible). Examples: Banking Insurance Education Healthcare Essentially the intangible things we buy that we benefit from (i.e., experience). Examples: Reuse, refuse, recycle Stay home, save lives MAGA Get out, stay out Essentially concepts, issues, or philosophies aimed at behavioural or attitudinal change. Anything offered to a market that satisfies a need/want for exchange of value between the customer and the organisation. The Total Product Concept (TPC) • An idea to determine the different levels of the product. • Allows marketers to take a comprehensive view of the product. • Views the product as the totality of value and benefits it provides to the customer. Potential product Augmented product Expected product Core product Fundamental benefit that satisfies the customer’s need. The “solution”. Attributes that deliver the benefits of the core product. The “basic expectations”. Bundle of benefits beyond expectations. The “add-ons”. Potential features and benefits not yet available. The “upcoming”. Product differentiation TPC of Hidrate Spark 3 (Smart water bottle) Potential product Augmented product Expected product Core product Portable hydration Convenient size and weight Durable (drop-resistant, dishwasher safe) Easy to refill and wash Leakproof Ergonomic design Fashionable colour and shape Patented one-click lid BPA-free Sensor technology for tracking intake Bluetooth sync for hydration reminders Glowing light for hydration reminders GPS tracking * Not yet a feature but is a possibility in the future Hygiene sensor* Product classifications Durability and tangibility Two broad categories 1. Consumer products 2. B2B (industrial) products Durable goods • Long-lasting and tangible • E.g., computer Non-durable (perishable) goods • Short-lasting and tangible • E.g., food Services • Intangible and perishable • E.g., haircut Consumer product types Adapted from Kerin & Hartley (2017) Type of consumer product Basis of comparison Convenience product Shopping product Specialty product Unsought product Examples Toothpaste, cake mix, soap, ATM cash withdrawal Cell phones, computer, airline tickets, clothes, furniture BMW, Rolex watch, heart surgery Burial insurance, skin treatment for acne Price Relatively inexpensive Relatively expensive Very expensive Varies Place (distribution) Widespread, many outlets Large number of selective outlets Very limited Often limited Promotion Emphasise price, availability, awareness Emphasis on differentiation from competitors Emphasis on uniqueness of brand and status Awareness is essential Brand loyalty Easily substitutable Substitutable but prefer certain brands Not substitutable, strong brand loyalty Substitutable Purchase behaviour Frequent, quick, minimal effort Infrequent, relatively time-intensive Infrequent, very time- intensive Very infrequent, sometimes time-intensive Level of involvement Low (routine problem- solving) Moderate to high (limited or extended problem- solving) High (extended problem- solving) Varies B2B (industrial) product types Parts and materials • Raw materials • Unprocessed, natural materials that form parts of business products • E.g., fleece for yarn, iron ore for steel • Components • Processed items that form parts of business products • E.g., processors for computers, engines for cars Equipment • Capital equipment • Buildings and machinery • E.g., warehouses • Accessory equipment • Items that support production • E.g., printers Services and supplies • Business services • Specialised services that support operations • E.g., legal services, cleaning • Maintenance, repair, operating supplies • Items that assist in production operations • E.g., engine oil Product life cycle Develop idea, research, prototyping, pre-testing, modifications Product launch (commercialisation), promotion, trial and purchase Increased competition, continued promotion Determine future of product (alter marketing mix or exit market) Reduce investment, change product, halt production Which stage/phase of the PLC is the Hidrate Spark 3 smart water bottle in? Why? Managing product through the life cycle New product fail https://www.wired.com/2013/08/the-newton-lives/ https://www.wired.com/2013/08/the-newton-lives/ New product development (NPD) “New” means lots of things: • New to market – new product market has never seen before • New to company – existing product but first time producing as a company • New to product line – extension of what the company is currently producing • New to product – modification, enhancement, improvement of product already being produced by the company NPD process: Idea generation Screening Concept evaluation Marketing strategy Business analysis Product development Test marketing Commercialisation Important note: Throughout this process, the customer must be considered at all times. Product adoption and diffusion of innovation Degree of “newness” How “new” a product is to consumers impacts the amount of learning effort consumers need to exert in order to use the product. Adapted from Kerin & Hartley (2017) CONTINUOUS INNOVATION DYNAMICALLY CONTINUOUS INNOVATION DISCONTINUOUS INNOVATION Definition Requires no new learning Disrupts consumers’ normal routine, moderate degree of new learning Requires high degree of new learning and change in consumption behaviours Examples Toothbrush and toothpaste Electric toothbrush and tooth “foam” Hands-free electric brushing device Marketing strategy Gain awareness, wide distribution Promote points of difference and benefits Focus on consumer education Degree of “newness” How “new” a product is to consumers impacts the amount of learning effort consumers need to exert in order to use the product. Adapted from Kerin & Hartley (2017) CONTINUOUS INNOVATION DYNAMICALLY CONTINUOUS INNOVATION DISCONTINUOUS INNOVATION Definition Requires no new learning Disrupts consumers’ normal routine, moderate degree of new learning Requires high degree of new learning and change in consumption behaviours Examples Toothbrush and toothpaste Electric toothbrush and tooth “foam” Hands-free electric brushing device Marketing strategy Gain awareness, wide distribution Promote points of difference and benefits Focus on consumer education Degree of “newness” How “new” a product is to consumers impacts the amount of learning effort consumers need to exert in order to use the product. Adapted from Kerin & Hartley (2017) CONTINUOUS INNOVATION DYNAMICALLY CONTINUOUS INNOVATION DISCONTINUOUS INNOVATION Definition Requires no new learning Disrupts consumers’ normal routine, moderate degree of new learning Requires high degree of new learning and change in consumption behaviours Examples Toothbrush and toothpaste Electric toothbrush and tooth “foam” Hands-free electric brushing device Marketing strategy Gain awareness, wide distribution Promote points of difference and benefits Focus on consumer education Degree of “newness” How “new” a product is to consumers impacts the amount of learning effort consumers need to exert in order to use the product. Adapted from Kerin & Hartley (2017) CONTINUOUS INNOVATION DYNAMICALLY CONTINUOUS INNOVATION DISCONTINUOUS INNOVATION Definition Requires no new learning Disrupts consumers’ normal routine, moderate degree of new learning Requires high degree of new learning and change in consumption behaviours Examples Toothbrush and toothpaste Electric toothbrush and tooth “foam” Hands-free electric brushing device Marketing strategy Gain awareness, wide distribution Promote points of difference and benefits Focus on consumer education Ansoff growth matrix Least risk Moderate risk High riskModerate risk Ansoff growth strategies Market penetration Selling more to current customers or recruiting new customers in current market. Key activity: Promotion Market development Seeking new markets for current product. Key activity: STP and promotion Product development Creating new products for current market. Key activity: NPD Diversification Creating new products into new markets. Key activity: NPD, STP, promotion Now your turn Which strategy do you think Coca Cola company are using with the new flavoured Diet Coke range? How can Coca Cola use each of the Ansoff growth strategies? What would that look like? Product obsolescence When a product is no longer used and/or relevant, they are said to have become ‘obsolete’. Unplanned obsolescence: When a product is superseded by another due to environmental change (e.g., social or technological). Planned obsolescence: When companies intentionally makes their product become obsolete either by introducing new products to replace them or by designing them to become less functional over time. A company can either reposition an obsolete product for reinvigorated growth OR it can stop production altogether and ‘delete’ it from their product mix. Product deletion: Process of eliminating a product from the product mix. What is a “service”? Intangible activities or benefits offered to a market that satisfies a need/want for exchange of value between the customer and the organisation. “Service” • Act of delivering an offering that adds value to the offering. • E.g., online shopping delivery, restaurant service “Services” • Are unique products. • Activities, performances, or benefits of value but does not involve exchange of tangible goods. • E.g., medical consultation, massage In reality, an offering is always a mixture of tangible goods and intangible services (and service). The service continuum No such thing as “pure good” or “pure service”. Characteristics of services Intangibility • No physical presence. • Create tangible cues (e.g., physical atmosphere), service guarantees, testimonials, consumer education, price and branding. Inseparability • Can’t separate service from service provider or production from consumption. • Quality skills (technical and interpersonal), time management and availability, technology (e.g., ATMs) Heterogeneity • Inconsistent and variable. • Develop service delivery systems/scripts, manage expectations, staff training, customer selection, feedback mechanisms (mystery shoppers, surveys), customisation/tailoring. Perishability • Cannot be stored or stockpiled. • Manage demand over time, stimulate demand, manipulate supply capacity (i.e., more/less staff/providers). “Extended services marketing mix”—the 7 Ps People—managing employees in contact with customers. Process—systems and procedures surrounding the service offering. Physical evidence—tangible cues of quality of service (includes branding). Summary 1. Managing the product is part of positioning and involves all product-related decisions that provide value to consumers as well as meet organisational goals. 2. A product can be a physical good, a service, or an idea that satisfies a need/want and provides value. 3. The TPC is a comprehensive perspective of the product that has four levels that comprise of the whole product. 4. Products range from durable to non-durable, tangible to intangible. 5. Consumer products consist of four broad categories; B2B products consist of three broad categories. 6. The PLC has five phases, each which must be managed differently. 7. NPD process involves 8 stages, all requiring the customer to be at the centre to avoid product failure. 8. The newer and unfamiliar a product is, the more focus needs to be put on consumer education. 9. Ansoff growth matrix and associated growth strategies outline how an organisation can use products to grow. 10. Marketers also need to think about product obsolescence and how to manage product deletion. 11. Services are unique and have four distinct characteristics. The three extra Ps address these characteristics. 12. Offerings are always on a continuum ranging from service-dominated to product-dominated. Learning outcomes (pricing) 1. Understand the concept of price and its elements 2. Understand the importance of price and pricing to companies and consumers 3. Understand the factors that impact pricing 4. Understand the common approaches to pricing 5. Identify some of the common pricing tactics 6. Understand the effect of the distribution channel in pricing Pricing failures What is “price”? Price is the money exchanged for the ownership or use of an offering. Price indicates value to both sellers and buyers. Price (i.e., value) must be agreed on between buyer and seller or no transaction. Buyers Judge value by comparing the price against perceived benefits to determine the worth of the offering, relative to substitutes. Sellers Judge value by considering profit margins, consumers perceptions and financial ability, and external forces (e.g., industry, competition, legal) Pricing objectives “Pricing” is the conscious, explicit management activity of a company. Pricing involves specifying the role of price in a company’s marketing and overall strategic plans. Organisational objectives Financial objectives Marketing objectives Pricing objectives Profitability Long-term prosperity (survival) Market share (volume) Positioning Customers willingness to pay Both the marketing and accounting/finance departments are involved in pricing. Pricing sweet spot Value of offering to the customer Organisations costs incurred in creating, communicating, and delivering the offering Pr ic e ce ili ng Price floor Internal organisational factors External environmental and situational factors Satisfactory compromise Competition Costs Demand Maximising profit is just one aspect of pricing. What does “price” do to consumers? Price determines whether or not a consumer will buy. • Priced too high à consumer will choose not to purchase • Priced too low à can negatively influence perceived quality of offering (degrade brand image) Research shows that most of the time, price overrides the influence of all other factors. Price has a stronger effect than: • Promotional influences • Consumer attitudes • Consumer values • Consumer beliefs Etc Generally, increasing price = less demand (and less sold) Exception: prestige/luxury products Why do marketers care about “price”? Pricing is THE most important marketing management decision. • It is critical because it directly impacts company profits. • It is also the easiest marketing mix element to change. Unit price impacts actual quantity sold à impacts a company’s costs. Hence, price directly influences revenue and indirectly influences cost. Voilà—direct effect on profit. Elements of “price” The price equation: Final Price = List Price – Incentives and Allowances + Extra Fees or surcharges In other words: What you actually pay = Price stated – Rebate, Discount, Trade-in + Interest, Late Payment Penalties, Delivery Fee Interesting fact: Buyers are often more willing to pay extra fees than a higher list price! (A psychological effect) Customers Competitors Price Costs Pricing constraints Certain factors can limit the price range a company can set. These are: • Demand (product and brand effects, consumer income) • PLC (new innovation vs. mature product) • Cost of production, marketing, and distribution • Cost of changing prices (online vs. offline) • Type of competitive market (price wars) • Competitors’ prices and awareness • Legal and ethical considerations • Etc Costs, volume, and profit relationships When determining a price, a company must control costs and conduct break-even analysis (BEA) to determine break-even point (BEP). Types of costs: • Total cost (TC) = Total cost incurred (FC + VC) • Fixed cost (FC) = Sum of expenses that does not change (e.g. rent) • Variable cost (VC) = Sum of expenses that vary with quantity produced/sold • Unit variable cost (UVC) = Cost expressed on a per-unit basis (VC/Q) Break-even analysis (BEA) is used to determine the relationship between total revenue and total cost to calculate profitability across different levels of output. Break-even point (BEP) is the quantity at which total revenue and total cost are equal. Hence, selling units beyond BEP is the goal (i.e. profit). Common approaches to pricing Consumer tastes and preferences Cost and profit Competitors or “the market” Revenue and costs In cr ea se d im po rt an ce Costs, profit, and competition Demand and competition Demand, cost, or profit Demand and competition D ec re as ed im po rt an ce Price skimming Selling to the top of the market (less price sensitive and very willing to buy) at a high price. As demand for this top end of the market is satisfied, a company will reduce the price to attract the next tier of consumers who are moderately price sensitive. And so on … “Layering”. 4 conditions must be met for price skimming to work: 1. Enough prospective consumers willing to buy immediately 2. High initial price will not attract competitors 3. Lowering price has only a minor effect on increasing sales and reducing costs 4. Consumers assume high price = high quality Penetration pricing Opposite of skimming pricing. Penetration pricing is setting a low initial price on a new product to appeal immediately to the mass market, (then raise once customer base is established). 3 conditions must be met for penetration pricing to work: 1. Many market segments are price sensitive. 2. Low initial price discourages competition entering the market. 3. Production and marketing costs decrease exponentially as production volume increases. 2 options for companies using penetration pricing: 1. Maintain initial price long-term to gain profit lost from low introductory level. 2. Further decrease price to maximise units sold to generate profit. Prestige pricing Deliberately setting a very high price to attract quality-conscious and status- conscious consumers. • Increasing price = increases demand (to a certain point – “inflection point”) • Not limited to stereotypical luxury items. Caveat: Relies heavily on consumers actually believing that price indicates value. Standard mark-up pricing Adding a fixed percentage to the cost of all items in a specific product class. • Often used by supermarkets or large retail stores that sell a large number of different products. This is because it is difficult to estimate demand for each and every product. • Mark-up varies according to type of retail store, type of product, and product volume. • Mark-ups must cover all expenses, overheads, and contribute to profits. E.g. movie theatres à movie tickets vs. candy bar snacks Profit-oriented pricing Setting a target and working backwards. Target can be: • Annual target of $ profit • Annual target of \% sales • Annual target ROI Competition-oriented pricing Customary pricing Based on tradition and history. Dictated by competition and distribution channel. Above-, At-, or Below-market pricing Involves making an educated-assumption of competitors’ prices or the market price and deliberately pricing above, at, or below it. Loss leader pricing Deliberately selling a product below its customary price. Primary purpose is to hook in customers to the store in hopes that they will buy other products. Banking, airlines, petrol Utilities, telcos, diamonds Shopping products Produce, staples Examples Effect of the distribution channel Producer (the company) Price $5 Wholesaler Price $5 + wholesaler mark-up $4 Retailer (Price $5 + wholesaler mark-up $4) + retailer mark-up $3 Online retailer ((Price $5 + wholesaler mark-up $4) + retailer mark-up $3) + online retailer mark-up $1 Consumer (you) Actual price you pay $5 + $4 + $3 + $1 = $13 Pricing strategy in your marketing plan Guidance for the pricing strategy section in your marketing plan: • We do not expect you to undertake extensive calculations to work out the price point(s). • Instead, we want you to do general research on the market prices and then consider which of the pricing tactics would be appropriate. • We will mark you on your justification, not your ability to undertake extensive pricing calculations. • In your justification, ensure you indicate the issues and considerations that must be taken into account (e.g., constraints, factors, influences). Summary (pricing) 1. Price indicates value for both sellers and buyers, where value means different things to sellers vs. buyers. 2. Price overrides the influence of many other factors for consumers. 3. Price directly impacts company profits. 4. Pricing is the most critical element of the marketing mix that is difficult to get ‘right’ and easiest to change. 5. Pricing must reach a sweet spot that is in between the price floor and ceiling, balances internal and external factors, and provides a satisfactory compromise between demand, costs, and competition. 6. Pricing objectives must align with organisational, financial, and marketing objectives. 7. There are four types of common approaches to pricing: demand-oriented, cost-oriented, profit- oriented, and competition-oriented, that each put more importance on certain factors than others. 8. Each layer of the distribution channel creates mark-ups that must be considered when pricing offerings. 9. Consumer psychology influences price and satisfaction. Learning outcomes (distribution) 1. Understand the function of distribution in marketing management and the importance of intermediaries. 2. Understand the different types of distribution channels and intermediaries. 3. Identify the different types of distribution strategies. 4. Understand the importance of supply chain management. 5. Understand the difference between physical distribution and service distribution. 6. Understand the retailing types and omnichannel marketing. Positioning the brand through distribution Global retail channels E-commerce 96\% of sales Hotels Restaurants Cafes 4\% of sales Australian luxury brand https://www.racked.com/2017/10/13/16452460/aesop-hand-soap https://www.racked.com/2017/10/13/16452460/aesop-hand-soap What is “distribution”? The marketing function that focusses on getting the offering into the hands of the end consumer. A distribution channel is the chain of individuals and organisations (intermediaries) directing offerings from producers to end users. Key decisions in managing ‘place’ involves choosing appropriate distribution channels and marketing via intermediaries. Also involves service providers (e.g., transport, packing, preserving, warehousing). Main intermediaries: • Wholesalers • Industrial buyers • Agents or brokers • Retailers • Daigou (China) Distribution channels Essentially, ways in which a company can get the right products to the right customers at the right place and at the right time (i.e., enhancing utility). Typically, distribution channels are described as “a network of firms that are interconnected in their quest to provide sellers a means of infusing the marketplace with their goods, and buyers a means of purchasing those goods, doing it all as efficiently and profitably as possible” (Iacobucci, 2015, p. 175). Intermediaries Make the flow of offerings from the company to the consumer possible. They reduce the number of transactions required for companies to reach their final customers (i.e., reduce costs for the company). 3 functions: 1. Transactional (buying/representing, selling, risk-taking) 2. Logistical (physical functions) 3. Facilitating (enabling functions) Intermediaries create customer value by enhancing utility. Beware: Inefficient and ineffective intermediaries can increase costs and cause dissatisfaction to both the producer and the consumer. Types of distribution channels D2C or DTC Companies can use a combination of these channels.Consider who the end consumer/customer deals with and how that impacts the brand/position. Also, in the age of AI, machine learning, and harnessing big data, indirect channels can pose barriers to customer data. Types of distribution strategies Creating a “value chain” via the distribution channel is critical. The marketer must consider both the nature of the product and its target market to decide which distribution strategy is able to deliver the most value. Intensive distribution • Distribute products via every suitable intermediary. • Large number of dealers within a given area. • E.g., FMCGs Selective distribution • Distribute products through intermediaries chosen for some specific reason. • Several dealers within a given area. • E.g., clothing brands Exclusive distribution • Distribute products through a single intermediary for any geographic region. • One or a few dealers within a given area. • E.g., luxury brands High intensity Low intensity Retailing Activity that includes all the activities of selling, renting, and providing offerings to end consumers. • Retail outlet is where the customer and the product meet, and where the exchange occurs. • Can be a primary or peripheral business activity (e.g., specialised retailer vs. producers also retailing their products). Key decision: What retailing approach(s) is suitable based on location and positioning? Retail positioning matrix Where would you place Countdown? Omnichannel marketing Blends multiple types of distribution channels in a way that mutually reinforces attracting, retaining, and building relationships with end consumers. Purpose is to deliver a consistent experience for both brick-and-mortar shoppers and online shoppers. Facilitates purchase at both physical and online stores, therefore adding value. E-commerce also includes m-commerce (i.e., apps). Summary (distribution) 1. Distribution is the marketing function that enables the flow of the offering from the producer to the hands of the end consumer through a distribution channel of intermediaries. 2. Distribution channels increase utility for both the consumer and the company. It is often called a value chain, because value is added at each step. 3. Intermediaries reduce the number of transactions required for companies to reach their end consumers and reduce costs, but if inefficient, they can be a source of dissatisfaction. 4. There are two main types of distribution channels: direct and indirect. Direct channels connect the producer and consumer without intermediaries. Indirect channels involve intermediaries. 5. The three types of distribution strategies range from low to high intensity in terms of market coverage. 6. Retailing should be executed by considering both location and position of the retailers. 7. Omnichannel marketing is the blending of multiple channels to create synergy. Individual Test (40\%) – Assignment Brief BUSMGT: Marketing Management Quarter 4, 2021 This document contains the initial details for the Test that you must individually sit in Marketing Management. Further guidance will be provided closer to the time. The Test is held in Week 7 of the quarter and will cover content from weeks 1 to 6, so you will need to study and prepare throughout weeks 1-7 so that you are not rushed. You will answer 2 questions in full essay style. Each question is worth 20 marks. The test is open book, meaning you can refer to your notes and readings from class, however your answer must all be in your own words (i.e., paraphrased and/or original). Learning outcomes addressed in this assignment LO1 Determine and justify the appropriate use of market research techniques to support decision-making in marketing management. LO3 Review and appraise distinct consumer research frameworks and consumer behaviour theories and concepts in relation to marketing management. Assignment name: Test Assignment weighting: 40\% of your final grade Due date and time: Friday 29th October 2021 from 6:15 PM to 8:30 PM Test format: Open book - answer 2 essay-style questions on a combination of topics (20 marks per question) Word limit: 1,000 words per question (+/- 10\%) Reference format: APA 7th - you are required to provide in-text citations where you use and/or refer to sources such as the textbook or readings, but a reference list is not required, and secondary research is not required Aim of the Test The aim of this Test is for students to individually demonstrate their own understanding (in their own words) of the marketing management knowledge gained in the course up to week 6 through application. You should draw from: (1) The theory and concepts you have learnt in classes from weeks 1 to 6 (2) The readings from weeks 1 to 6 (3) Your group marketing plan project Further guidance and detailed instructions will be provided closer to the time. General guidelines This Test requires you to demonstrate your understanding and application of the marketing management concepts and theories covered up to week 6. For each question, your answer should be no more than 1,000 words long (+/- 10\%) including citations (but a reference list is not required). Your answers should be written in essay-style, meaning that you should include both an introduction and conclusion, and body paragraphs with logical flow in between. Body paragraphs should follow the PEEL/TEE+ structure. Stronger answers will provide definitions of concepts and explanations of theories in the student’s own words, clear explanations of how the concepts apply to the scenario, with strong justifications and supporting examples based on the scenario to illustrate their depth of understanding and knowledge. Furthermore, they will be very readable and succinct with no errors. Marking rubric (applied to each question, marked holistically) Total 20 marks Very good Good Passable Not passable Content and application 6 marks Demonstrates an advanced level of knowledge and understanding of the concepts and theories. Key concepts and theories are accurately and completely expressed. Well-supported by detailed and accurate examples. Demonstrates a good level of knowledge and understanding of the concepts and theories. Key concepts and theories are expressed, though perhaps not always accurately or completely. May not always be wellsupported by detailed and accurate examples. Demonstrates some knowledge and understanding of the concepts and theories. Key concepts and theories are partially expressed. Examples are very general and/or less credible/convincing in nature. Does not demonstrate adequate understanding of the concepts and theories. Key concepts and theories are either poorly expressed or not expressed sufficiently. Examples are not credible/convincing nor appropriate. Focus and analysis 6 marks Extremely clear focus on the topics at hand. Question is completely answered. Arguments are fully developed. High-quality ideas and reasons. Fair focus on the topics at hand. Most components of the question are answered. Arguments are well developed. Good ideas and reasons. Some focus on the topics at hand, though this may drift at times. Important components of the question are not answered. Arguments are partially developed. Weak ideas and reasons. Poorly focussed on the topics. Question is not at all adequately answered. Arguments are not welldeveloped. Poor ideas and reasons. Structure 4 marks Introduction is inviting, states main topics, and provides an overview of the essay. Body paragraphs are very well-structured and are organised very logically and effectively. There is an excellent flow between paragraphs. Conclusion is an excellent summary of the essay. Introduction states the main topics and provides an overview of the essay. Body paragraphs are wellstructured and are organised logically and effectively. There is a good flow between paragraphs. Conclusion is a good summary of the essay. Introduction states the main topics but is not very comprehensive. Body paragraphs are not always well-structured and may not be logically organised. There is an adequate flow between paragraphs. A conclusion is provided. There is no clear introduction. Body paragraphs are not well-structured and are not logically organised. Paragraphs do not flow well. There is no adequate conclusion. Readability 4 marks Tone and style are wellsuited to a business academic audience and the essay has no rhetorical questions or slang/colloquialism. All sentences are complete. No errors in grammar, word choice, and/or spelling. Tone and style are generally acceptable for a business academic audience and the essay has no rhetorical questions or slang/colloquialism. Most sentences are complete. Very few errors in grammar, word choice, and/or spelling. Tone and style are inconsistent and simplistic, and the essay uses a few rhetorical questions and/or slang/colloquialism. A large number of sentences are incomplete. Many errors in grammar, word choice, and/or spelling. Tone is frequently or consistently inappropriate for a business academic audience and uses rhetorical questions and/or slang colloquialism on a number of occasions. Most or all sentences are incomplete. So many errors in grammar, word choice, and/or spelling that the essay ultimately does not communicate the student’s ideas in an acceptable or understandable manner. 1 1 1