Chapter 8: Marketing The Role and Impact of Marketing

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Chapter 8 MarketingThe Role and Impact of
Marketing

• Marketing is all activities involved in getting
  goods and services from the businesses that
  produce them to the consumer.
• Marketing does not include the production of
  goods and services.
• Marketing has two fundamental roles to sell what
  a business makes and to manage the brand.
  Marketing activities include
• Branding
• Businesses can spend millions creating an image
  for products and services with a brand name, logo
  or trademark, and a slogan.

• distribution
• advertising
• promotion

• research
• development
• sales

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Chapter 8 MarketingThe Role and Impactof
Marketing

• Brand Name
• A brand name is a word or group of words a
  business uses to distinguish its products from
  that of the competition. Brand names should be
  distinctive, stand out, and memorable.
• A brand name is how a product and company are
  identified and it is important to organizational
  success.
• When people talk with others about brand
  preference this is free publicity for the
  company.
• Logo or Trademark
• A logo is a symbol that is associated with the
  company or product. It can take the following
  forms monogram, visual symbol, or abstract
  symbol.
• A trademark is a word, symbol, design, or a
  combination of all three that a business uses to
  distinguish its goods or services from others.
• A logo or trademark helps a product compete for
  consumer awareness.
• Monogram a stylized rendering of a companys
  initials or a combination of initials and
  numbers.
• Examples include IBM (International Business
  Machines) who wanted to consumers to associate
  them with computers not adding machines, and KFC
  (Kentucky Fried Chicken) who did not want
  consumers seeing the work Fried, etc.
• Visual symbol These are line drawings of people,
  animals, or things such as Apple Computers apple
  and Kelloggs Frosted Flakes Tony the Tiger.
• Abstract symbol These are shapes that carry a
  visual message but are not representative of
  actual things. The Nike swoosh is an example
  and one of the worlds most well recognized
  logos.

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Chapter 8 MarketingThe Role and Impactof
Marketing

• Slogan - A slogan is a short or catchy
  advertising phrase associated with a company or
  product.
• Slogans are taglines for both print and broadcast
  advertisements.
• Examples include MasterCards Priceless,
  Canadian Blood Services Its in You to Give,
  and Sprites Obey Your Thirst.
• Brand Identification - Everything associated with
  a product, such as the slogan, name, and logo,
  must be used consistently to ensure that the
  brand is always identifiable to the consumer.
• The writing, the colours used, the design of the
  package should always be used in association with
  the product, this way it is always clear to the
  consumer that they are getting the product they
  desire.
• The Product Life Cycle
• Marketing efforts pay off in the form of consumer
  reaction to the brand. Successful marketing
  efforts increase brand equity or the value of the
  brand in the marketplace. The changes in
  popularity or sales volume of a product over time
  can be graphed on the product life cycle or style
  curve.
• Successful marketing efforts created brand
  awareness customers can name you brand as part
  of a specific category. Brand loyalty is when
  customers prefer your brand and support it.
• Brand insistence is when customers will not
  accept a substitute for a particular brand.
• Brands that have reached brand insistence have
  enormous equity.

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Chapter 8 MarketingThe Role and Impact of
Marketing

• Product Introduction Is the launch of a product
  into the marketplace. It may be done locally,
  all the way to internationally. Businesses need
  to inform potential customers about the products
  features, availability, package design, and brand
  identification. Early adopters are individuals
  who like to be one of the first to try a new
  product. Marketers often focus their early
  efforts on these trendsetters who can be sports
  icons, celebrities, or even students.
• Growth As the new product sales increase
  competitors enter, this can decrease
  profitability due to decreased market share. They
  often compete by adding features, improving
  quality, or sell at a lower price. The product
  line becomes very visible and is promoted on
  commercials, billboards, print ads, etc.
• Some competitors start to drop out of the
  competitive race at this stage.
• Maturity Growth is flat it does not increase or
  decrease, and brand equity is at its highest.
• Businesses keep advertising the product to keep
  it in the consumers eye.
• Products, also know as cash cows, at this stage
  usually make large profits and this income can be
  used to develop and fund new products for the
  company. Examples include Tide and Kelloggs Corn
  Flakes.
• Decline When sales decrease because customers
  leave to by other brands, and they are not
  replaced, a product can enter the decline stage.
• Sometimes a change in price or advertising can
  slow down or stop the decline.
• The Decision Point The business may make an
  effort to regain original sales figures and brand
  equity or they may discontinue the product
  altogether. If they try to save the product a
  variety of options are available
• Repositioning making the product popular with a
  new consumer group
• Reformulate (new scent), repackage (new container
  and spout), and re-introduce (new and improved)
  the product.
• Repricing to gain popularity. New promotion.
• Obsolete technology utilized in the product will
  make such that no amount of marketing efforts
  will restore product position.

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Chapter 8 MarketingThe Role and Impact of
Marketing

• Non-traditional Product Life Cycles
• Fads - A fad is a product that is extremely
  popular with a select market for a short time,
  usually less than a year.
• Trends are not fads, trends last longer and
  influences other areas.
• Some well-known fads are hula hoops, yo-yos,
  Pogs, and Tamagotchis.
• Businesses who plan well, and sell most of its
  stock and get out of the market just before the
  fad reaches its peak, can make an excellent
  profit.
• Some companies market knock-offs of fads, often a
  cheaper version. If they do not sell off their
  inventories before the fad quickly dies off they
  can stand to lose money.
• Niches - A niche is a section of the market in
  which a product dominates and into which few
  competitors enter. Niche marketers are often left
  alone because of barriers to entrythe factors
  that prevent competition from being profitable.
• A niche product tends to have a short growth
  stage and leads to a solid, but not financially
  spectacular, maturity stage.
• Niche marketers usually invent their products and
  hold exclusive patents or formulas.
• By the time the competition can produce a
  competitive product the niche marketers have
  cornered that market.
• Barriers to entry include the small market size,
  the cost of RD, advertising expenses, factory
  and equipment costs, design costs, lack of
  distribution channels, and the cost of raw
  materials.
• Seasonal
• Some products are popular during a specific time
  or season. Balancing product quantity with
  seasonal sales is called inventory management. To
  be left with little seasonal inventory,
  businesses calculate the amount of product to
  keep on hand.
• Christmas and summer are seasonal time frames
  within which certain products are marketed.
• Inventory management is the balancing of product
  quantity with sales.

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Chapter 8 MarketingMarketing Concepts

• Marketing can be divided into two major concepts
  the product concept and the market concept.
  Product concept involves the four Ps of marketing
  and market concept involves the two Cs of
  marketing.
• The Four Ps of Marketing are the four elements of
  a good marketing campaign product, price, place,
  and promotion.
• The Two Cs of Marketing are the two major
  external factors in marketing the competition
  and the consumer.
• The Four Ps of Marketing
• A good combination of all four elements, called
  the marketing mix, translates into an effective
  campaign.
• Products and Services
• The two reasons businesses develop product are
  because they can and they see a need. The
  development of good products and services
  considers quality, design, features, and benefits.

• Product
• Price

• Place
• Promotion

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Chapter 8 MarketingMarketing Concepts

• Quality
• Improvements made to the quality of a product
  attracts more customers.
• Consumers depend on the quality of many
  established brand names.
• Consumers know that higher quality usually means
  that the product or service is more expensive.
• Some products are successful because they can
  meet consumer needs, at a lower quality, and
  therefore a lower price.
• Design
• Every product and service has a design component.
  Consumers will often buy one product over another
  because of the way it looks.
• We often think of design in relation to clothing,
  such as jeans that come in many different styles.
• When a package is designed the function has to be
  considered.
• Packaging protects the product from light, dirt,
  germs, air, water, tampering, and damage.
• Packaging can aid ease of use, such as a spout or
  a resealable bag.
• Product identification or recognition benefits
  from package shape and colour, such as the
  Coca-Cola bottle.
• Label design is also an aspect of design and it
  can help a product stand out. Labels also give
  information such as size, weight, ingredients,
  and nutritional facts.
• Services consider design features in their web
  pages and the physical design of their store.
• Features
• Product developers consider the features used,
  such as the materials, scent, size, or the taste,
  when constructing a new product. Service
  providers outline or detail what they do best.
  Some examples of product features are the smell
  of different perfumes, foam or feather
  pillows, and laundry detergent can be spring sent
  or sent-free.

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Chapter 8 MarketingMarketing Concepts

• Benefits
• Consumers buy products and services for a
  particular purpose. Businesses need to make
  consumers aware of the advantages of a product to
  be motivated to buy it. Examples of
  benefits are a microwave that cooks food faster
  or a can opener that does not leave a sharp
  edge.
• The Product/Service Mix
• A retail store provides services and a service
  business sells a product. The resulting
  product/service mix can increase sales to
  existing customers and attract new ones.
• A retail store could offer a delivery service, an
  installation service, or a gift-wrapping service.
• A service business, such as a veterinarian could
  not only assist ill pets but could also sell pet
  food products
• Price
• Prices for products must be set with care to
  ensure their success. Today consumers are very
  price conscious and look for competitive prices
  at other stores or on the Internet. Businesses
  need to be price sensitive and look at their
  competitors prices for the same products.
• If consumers think the price of a product is too
  high, it will not sell.
• Consumers can easily find out product prices by
  searching on the Internet.
• Marketers need to be aware of how price sensitive
  their product is how much sales will go up or
  down when the price goes up or down.

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Chapter 8 MarketingMarketing Concepts

• Place (Channels of Distribution)
• Channels of distribution are the paths of
  ownership that
• goods follow as they pass from the producer or
  manufacturer to the consumer. The 3 types
  of channels of distribution are direct, indirect,
  and specialty.
• A product does not change as it moves through the
  distribution chain.
• If the product is changed or altered that is the
  end of that channel and a new one begins.
• Direct Channels - Direct channels of distribution
  connect the consumers to the producers of the
  goods or services. Also referred to as the
  maker-user relationship. - Simplest form of
  distribution.
• - Direct channel distribution does not use
  intermediaries or businesses that take possession
  of the goods before the consumers do, they add
  costs to the product so that they realize a
  profit.
• With direct channels consumers can readily inform
  the producers of their needs and they may feel
  more confident about the product because they
  deal directly with the company that produces it.
• Indirect Channels - Indirect channels of
  distribution have one or more intermediaries who
  import products (importers), wholesale goods
  (wholesalers), or retail products (retailers).
• Importers Importers are businesses that seek out
  foreign products to bring into their own country.
  Importers may negotiate distribution deals with
  foreign manufacturers, buy the goods, store the
  goods, and may sell the goods. To eliminate risk
  importers can arrange only delivery of foreign
  goods to Canadian businesses.
• Wholesalers Wholesalers buy goods from producers
  or importers and resell the goods to retailers.
  The manufacturer may require that the retailer
  buy a minimum quantity of goods. Using a
  wholesalers may mean that the retailer pays a
  higher price but they get the quantity they need
  and the wholesaler may store the products close
  by.
• Retailers Linked directly to consumers,
  retailers buy merchandise customers want, keep it
  in stock, and display it so that customers can
  examine it in an easy-to-reach location.

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Chapter 8 MarketingMarketing Concepts

• Specialty Channels
• A specialty channel of distribution is an
  indirect way to
• distribute products by using vending machines,
  telemarketing, catalogue sales, e-commerce, and
  door-to-door sales. No retail store is involved.
• Vending Machines Vending machines, that can sell
  virtually anything, can be placed where consumers
  are.
• Telemarketing Using the telephone to sell
  products and services is very popular. A sales
  pitch or scripted presentation that anticipates
  all possible consumer responses is delivered to
  people once the automated call distributors
  (ACDs), a computerized dialing system, calls
  them.
• Catalogue Sales Catalogues from retailers
  provide information about merchandise that
  consumers can purchase by mail, phone, or at the
  store.
• E-commerce The most important specialty channel,
  e-commerce is selling products and services
  online. For consumers it is convenient and
  competitive and for manufacturers and retailers
  it reduces distribution costs.
• Promotion
• Promotion is an attempt to sell a product. Sales
  promotion encourages consumers to buy products by
  using coupons,contests,premiums, samples,or
  special events.
• Coupons offer consumers money off the price of a
  product but redemption rates, a method of
  determining effectiveness, are only about 5.
• Contests increase brand recognition through an
  anyone can enter and win concept that is not
  gambling and cannot require a purchase to enter.
• Customer loyalty cards are stamped with each
  purchase and, when full, entitles the customer to
  a discount or a free product.
• Premiums are when the consumer makes a purchase
  and they get something for free.
• Samples samples are small trail sizes of a
  product that are given to
  
  consumers, it is expensive but
  often results in increased sales.
• Special Events are used to attract customers and
  increase sales.

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Chapter 8 MarketingMarketing Concepts

• The Two Cs of Marketing
• The marketing department must consider two major
• external factors the competition and the
  consumer.
• The Competitive Market - The competitive market
  refers to the sellers of a specific product, and
  is often expressed in terms of the total dollars
  spent annually on the product. The percentage of
  the market that a company or brand has is called
  its market share. A market segment is a part of
  the overall market with similar characteristics.
• The soft drink market has a flavoured market
  segment (root beer for example) and an energy
  drink segment (Red Bull for example).
• The two ways to increase market share are to
  increase the size of the overall market (the
  introduction of energy drinks created a new
  segment) and to take sales away for the
  competition.
• Competition among Products - Indirect competition
  means products or services are not directly
  related to each other. Products that are similar
  to one another are called direct competition.
• All products and services compete for the
  consumers money in some way.
• Indirect Competition Is competition between
  products or services that are not directly
  related to each other such as a teen with 25 who
  decides on spending it on movie tickets or on a
  CD.
• Discretionary Income The portion of ones
  disposable income that is not already committed
  to paying for necessities and can be used to buy
  things for pleasure, satisfaction, and comfort.
• Disposable Income Is the amount of income that
  is left after taxes have been paid. This income
  can be used to pay for the basic necessities such
  as food, clothing, and shelter.
• Direct Competition Competition between products
  that are very similar and have only minor
  differences. These products that compete
  directly with each other do so through image,
  quality, price, design, features, and benefits.

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Chapter 8 MarketingMarketing Concepts

• The Consumer Market
• In their effort to be competitive, businesses
  study
• and target the consumer market, the potential
  users of a product or service. These consumers
  can be identified by demographics and lifestyle.
• Demographics
• Demographics is the study of obvious
  characteristics that categorize human beings.
  Some examples of demographics include the
  following
• Demographics are used by businesses to target
  specific consumers.
• Age Age defines our tastes as well as our needs
  and wants. Some age groups are consumers, but
  not always customers. Adults or parents are
  gatekeepers, or the person who makes buying
  decisions for others, often children who can
  influence their decisions.
• Gender Some products lines are distinctly
  marketed to men or women, but more and more
  traditionally gender marketed products are being
  targeted to both groups (detergent and power
  tools are examples).
• Family life cycle Peoples stage in the family
  life cycle often determines needs and wants. New
  parents need baby items and seniors may buy a
  retirement escape.
• Income level Is the grouping of consumers by how
  much money they make or have. Some products are
  marketed to consumers in every income bracket
  (Kelloggs Corn Flakes), some are not (Mercedes).
  
• Ethnicity and culture Businesses target people
  based on their background and customs.
• Lifestyle study is called psychographics.
• Lifestyle is the way people live, including their
  values, beliefs, and motivations.
• When marketing to demographic groups, marketers
  need to consider their lifestyles because a
  persons beliefs (such as being environmentally
  conscious or concerned about diet) influence what
  they purchase.

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Chapter 8 MarketingAdvertising

• Creating Good Advertising
• Good advertisements sell products by making the
  consumer remember the brand name of their
  products or services.
• Can be referred to as the AIDA principal
  Attention, Interest, Desire, and Action
• The 4 standard rules for creating good
  advertising are summarized as follows
• Attract attention develop a good headline
  Print ads need a
  good headline, it should not be more than seven
  words, it should mention the brand, and should
  encourage receiver to read the rest of the ad.
  Broadcast ads attract attention with sound,
  unusual visuals, attractive people, celebrities,
  or something funny.
• Gain interest make people want to read, watch,
  or listen. Print ads should be
  easy to read and to the point. Broadcast ads
  should get to the message quickly. Visual images
  should be strong.
• Build desire help the customer want your
  product. Print ads
  should build desire with words, adding benefits
  with each line. Broadcast ads repeat brand names.
• Get action always ask for the sale. Ask the
  consumer to buy now, give them reasons, and
  provide the necessary information so that they
  can.
• Types of Advertising
• Advertising is the paid-for promotion of a
  businesses goods and services using a variety of
  mass media to target a market.
• Advertising, that always is the advertisers
  point of view, costs a lot of money.
• Publicity, usually more believable that
  advertising, is information about a business,
  either positive or negative, that appears in the
  media and is not paid for by the business.
• Some companies hire public relations (PR) firms
  that can influence the media with well written
  positive stories about the business.

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Chapter 8 MarketingAdvertising

• Common advertising classifications include
• Comparing Types of Advertising
• Advertisers use the following categories to help
  them select which media to use for a certain
  product promotion. These eight categories are
• Reach means the number of people exposed to a
  message.
• Frequency is the number of times an audience will
  see or hear the ad over a given period of time.
• Selectivity means the ability of the medium to
  focus on a target audience.
• Durability means how long the advertisement lasts
  in the house.
• Lead-time means how fast the ad can be ready to
  run.

• direct-to-home advertisements are messages (flyer
  or catalogue) that come
• directly to a persons residence.
• out-of-home are messages (billboard or bus ad)
  that the consumer is supposed
• to receive while not at home.
• Radio advertisements or go anywhere medium uses
  words sound to draw us in.
• Television and effective but expensive medium,
  combines words, sound, and
• images to reach very large audiences.
• Newspaperads range from inexpensive local ads in
  classifieds to full page spreads in national
  publication
• Magazines offer the opportunity to target
  specific groups of consumers with colour.
• The Internet The Internet allows for three
  different types of advertising company websites,
  banner ads on other websites, and e-mail
  advertising. (Non-permission-based e-mail is
  called spamming.)

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Chapter 8 MarketingMarketing Research

• Market research is the collection and analysis of
  
• Information that identifies specific groups of
  consumers who would use a
  particular product or service.
• Types of Marketing Research
• Marketers use different types of research
  depending on what information is needed, how it
  will be collected, and what will be done with the
  final information after it is analyzed. The
  following is a list of the most common types of
  research used by marketers

• consumer research uses methods such as phone or
  personal interviews to discover what type of
  products consumers want and predicts the sales
  potential of that product.
• market research identifies specific groups of
  consumers who would use a particular
  product/service
• motivation research tries to find out why we buy,
  by looking at the emotional and rational motives
  that influence buying decisions.
• pricing research helps a company decide if they
  can sell a product for a competitive price and
  make a profit.
• competitive research looks for opportunities
  where competition is weak or absent and
  determines what competitors are doing.
• product research Product research looks at
  details of a product or service and analyzes the
  impact these details might have on the market.
• advertising research Advertising research gives
  information on effective ways to get a message to
  potential consumers.

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Chapter 8 MarketingMarketing Research

• Marketing Research Tools rely on secondary and
  primary data.
• Secondary Data
• Secondary data is information collected by
  others. Secondary data can be collected from Web
  sites, databases, periodicals, indexes, and
  professionally prepared marketing research
  reports.
• Researchers re-interpret secondary data for their
  own or their clients purposes.
• A lot of secondary data is available for free,
  however sources such as databases or reports can
  be costly (a beverage industry report costs
  almost 10 000).
• Primary Data refers to current information that
  is collected and analyzed for a specific purpose.
  Methods include

• test marketing involves producing a limited
  quantity of a new product and introducing it to
  one or two areas (in Ontario London,
  Peterborough, and Kingston are often used). This
  method is expensive and should be done carefully
  to ensure good decisions.
• internal information sources includes data
  mining, analysis of a companys own records
  (sales, inventory, advertising, and promotional
  results), that gathers primary data on product
  history and/or customer behaviour.
• Surveys are a planned set of questions used to
  gather data that can be analyzed to help solve
  problems. Most surveys us closed-ended questions
  for which respondents must select an answer from
  two or more choices they are given. Open-ended
  questions are questions that allows respondents
  to develop their own answers, they are difficult
  to analyze and are used only when very specific
  data is needed.
• Observation is used to learn how people react to
  situations and it is done without interaction and
  often when the subject does not know they are
  being watched.
• Focus groups are company-arranged meetings of
  potential consumers that the marketer observes
  during an organized discussion. Participants are
  usually paid.