Higher Business Management

1
Higher Business Management

• Unit 2
• Learning Outcome 2
• Marketing

2
Marketing
The process involved in identifying,
anticipating and satisfying consumer requirements
profitably.
3
Marketing
Role and Importance of Marketing

• Identify consumer requirements find out
  exactly what consumers want
• Anticipate consumers requirements future needs
• Satisfy consumers requirements service,
  quality value for money?

4
Marketing
Anticipating Consumers Requirements

• What do they want today?
• What do they want in the future?
• Trends must be considered to anticipate future
  needs
• Volatile markets - fashion, toys, technology
  (mobile phones, computers, etc)

5
Marketing
Identifying Consumers Requirements

• What do they want? Consumers must buy products
  and continue to do so
• Fierce competition and consumers expectations
  mean that products must be constantly updated and
  altered to suit
• Other factors - price, quality, prompt delivery,
  attractive packaging and after-sales service
• Advertising and promotion play a big part

6
Marketing
Satisfying Consumers Requirements

• The customer is king!
• Businesses must be customer-focused
• No customers no business
• Must offer - good service, quality products,
  value for money, prompt delivery, good
  after-sales service (eg returns), well presented
  and packaged goods, at the right price and
  available at the right place

7
Marketing
8
Marketing
Role and Importance of Marketing

• All organisations need to carry out marketing
  activities to meet their objectives
• Public Sector may develop services if research
  shows that is what the community wants
• Private Sector meet customers needs through
  market research
• Voluntary Sector competition for donations,
  therefore charities spend huge amount of money on
  marketing.

9
Marketing
Importance of Marketing

• Poor marketing can lead to failure

• The American car industry
• The British motor cycle industry

10
Marketing
Importance of Marketing

• Good marketing can lead to success

• Swatch
• Easyjet and Ryanair

11
Marketing
Marketing as a strategic activity

• Using marketing, organisations hope to achieve a
  number of objectives which are essential for
  success
• To increase sales revenue and profitability
• To increase or maintain market share
• To maintain or improve the image of the business,
  its brand or its product
• To target a new market or a new segment of the
  market
• To develop new and improved products.

12
Marketing concerned with
Marketing

• Inception/design
• Price
• Selling and promotion
• Distribution
• After-sales services

What How When Where
13
Marketing

• Market a meeting place for buyers (consumers)
  and sellers

14
Marketing

• Consumer Market

• Consumer market are made up of individuals
• who buy goods or services for their personal
• or domestic use. The 3 classifications are
• Convenience goods non-durable goods
• Shopping goods durable goods
• Speciality goods eg cosmetics, fashion items.

15
Marketing

• Industrial Market

Goods and services bought on the industrial
market can be similar to those in the consumer
markets, eg consumers use banking services and so
do businesses. However, industrial goods also
include plant and machinery, raw materials,
consumable supplies and business services.
16
Product-led - Product Orientated
Marketing

• Putting a product on the market without prior
  market research
• Assumption of best available and no real
  competition
• Often new inventions like Dyson vacuum cleaners
  or Playstation 2
• A risky approach which can fail - British motor
  bikes

17
Market-led - Customer Orientated
Marketing

• Considering what the customers want before
  putting a product on to the market
• Competition has led to companies focusing on the
  needs of the customer
• Also looks at the influences on purchasing
  decisions

18
The Marketing Environment
Marketing
Consumer trends and behaviour
Government
Competition
THE MARKET
Technology
The economy
19
Marketing Environment Government Influence on
marketing
Marketing

• Trade Descriptions
• Monopolies and Mergers Act
• Fair Trading and Competition Acts
• Consumer Protection Laws
• Code of Advertising Practice
• Advertising Standards

20
Marketing Environment Competition
Marketing

• Close substitutes
• Markets Some markets dominated by a few big
  producers other markets have many producers.
• Unique Selling Points (USP)
• Emotional Selling Proposition (ESP)

21
Marketing Environment Technology
Marketing

• Use latest technology to keep up with competition
• Technological advances create new markets and
  cause decline of others, eg video tapes and DVDs
• Sophisticated production methods allow high
  quality, faster and cheaper production
• Improved communications and information Unique
  Selling Points (USP)
• Internet and saturation usage of mobile phones
  allow businesses new ways to tap into new markets

22
Marketing Environment Economic forces
Marketing

• Interest rates high rates, consumers buy less
  organisations reduce borrowing and spending
• Exchange rates affect - is low, UK exports
  become cheaper
• Economic growth high consumer confidence and
  spending.

23
Marketing Environment Consumer trends
behaviour
Marketing

• Changes in the age distribution of the population
• Disposable income
• Household status, eg rise in single households
  smaller ready meals
• Social class
• Location
• Lifestyle taste and fashion, eg environmental
  issues, healthy lifestyle
• Political

24
The Marketing Mix
Marketing
In order to market or sell its product
successfully, a business must develop a
strategy based on 4 key elements
Product
Place
Price
Promotion
25
Product/Service
Marketing

• Core
• Actual
• Augmented

• The basic product - eg toothpaste cleans teeth
• The way the product is presented - design, brand
  name, packaging, etc (Colgate toothpaste - red
  packaging)
• Additional features - protection against decay,
  fresh breath, attracting the opposite sex, etc

26
The Product Life Cycle
Marketing
000 Costs/Sales
New Product
Idea
Death
Launch/ Introduction
Decline
Saturation
Growth
Maturity
Time
27
Product Innovation
Marketing

• Generating an idea
• Analysing the idea
• Producing a prototype
• Test market
• Adapt product to solve problems
• Launch the product

28
Extending the Product Life Cycle/Extension
Strategies
Marketing

• Developing new markets for existing products, eg
  computers
• Providing line extensions - Mars fun-sized,
  yoghurt, ice cream, mini-sized, giant-sized
• Finding new uses for existing products
• Develop a wider range of products
• Develop styling changes
• Promoting more frequent use of the product
  mainly by reducing price

29
Extending the Product Life Cycle/Extension
Strategies
Marketing

• Improve the product think soap powder
• Change the packaging perhaps to appeal to
  different market segment
• Change the channel of distribution internet
  shopping
• Change product prices
• Change promotion method
• Rebrand the name of the product Marathon to
  Snickers

30
The Product Mix/Portfolio range of products
that a firm produces to spread risk.
Marketing

• Very few companies have only one product
• Some companies have a range of related products
  eg Proctor Gamble
• Some companies have totally unrelated products in
  their product portfolios eg Imperial Group
• It is important that you have new products being
  launched to replace products going into decline
  in your Product Mix

31
The Product Mix/Portfolio
Marketing

• Boston Matrix used by some firms to analyse
  their product mix.

Market Share Market Share
High Low
Market Growth High Star Problem Child
Market Growth Low Cash Cow Dog
32
Branding
Marketing

• Branding distinguishes a product from its
  competitors product differentiation
• Instantly recognisable by consumers
• Often linked to quality and reliability
• Can command a premium price

33
Brands
Marketing

• Benefits of branding
• Instant recognition, eg Cadbury
• Brand loyalty, therefore repeat purchases
• Charge higher prices because of brand loyalty
• Easy to intro new products using brand name, eg
  Virgin
• Strong brand has money value in Balance Sheet

34
Brands
Marketing

• Drawbacks of branding
• Time taken to establish brand
• Cost of promoting brand
• Bad publicity affects all products of same brand
• Imitations/fakes difficult to combat
• Fashion brands can suffer when fashions change

35
Own Brands
Marketing

• Products branded with the name of the store
  selling them
• Most of the big supermarkets (Tesco) and chain
  stores (Boots) have their own brands
• Often cheaper alternatives to branded goods

• Make a list of as many own brands you can think
  of. Indicate which branded product they are
  designed to rival
• Eg Wheat Bisks by Safeway to rival Weetabix

36
Unique Selling Point (USP)
Marketing

• This is a feature that allows a product to stand
  out from its rivals.
• Should offer the consumer some unique benefit
  that may motivate them to switch brands

37
Unique Selling Point (USP)
Marketing

• Coca Cola
• Nike
• Kit Kat
• Sunny D
• Skoda Cars
• Mercedes Cars
• Baxters Soups
• Fairy Liquid
• Finish
• (dishwasher tablets)

• Try to identify the USP of each of the products
  listed opposite
• Think of how they are presented to you in the
  advertising you see daily on TV, in newspapers
  and magazines

38
Price of a Product?
Marketing

• The price of a product is one of the main factors
  in buying that product. Too low a price could
  give the impression of poor quality and too high
  a price may not give the feeling of value for
  money
• Price is influenced by- the product being new,
  what competitors are charging, the products
  stage in its life-cycle, the selling location,
  the market segment and many other factors

39
Long term pricing strategies
Marketing

• Low-price strategy
• in a market with strong competition price
  elasticity of demand.
• Market-price strategy
• petrol matching competitors
• High-price strategy
• up-market, exclusive image

40
Short-term pricing strategies
Marketing

• Skimming high initial price for max profit
• Penetration pricing low initial price for new
  product
• Destroyer eliminating the competition (Go and
  EasyJet/Ryanair)
• Promotional lowering prices for a period to
  promote more sales

41
Short-term pricing strategies
Marketing

• Price discrimination (aka Demand-oriented)
  charging different prices according to the level
  of demand eg cross-channel ferry fares in summer
• Premium pricing high prices to create exclusive
  image, eg Ferrari, Gucci
• Loss leaders use to entice customers
• Competitive pricing charge similar prices to
  avoid price war, eg petrol stations.

42
Calculating a Selling Price
Marketing

• Cost-plus pricing
• A manufacturer or retailer will calculate the
  cost of making or buying a product and add a set
  percentage profit to arrive at their selling
  price.
• Different businesses use different rates of
  mark-up.
• Method used by small businesses as it is the
  simplest.

• Contribution pricing
• A business will calculate the direct costs of
  making or buying a product (wages raw
  materials).
• A contribution toward the fixed costs of the
  business (rent, loan repayments) are added.
• Any amount after covering fixed costs is profit
  for the business.

43
Place
Marketing

• The nature of the product or service will
  determine where a firm decides to sell referred
  to as DISTRIBUTION.
• The Channel of Distribution is the route taken by
  a product as it passes from the producer to the
  consumer.

44
Place - Distribution Channels
Marketing
Producer 1
Producer 2
Producer 3
Consumer
Retailer
Wholesaler
Retailer
Consumer
Consumer
45
The Channel of Distribution chosen depends on
Marketing

• The nature of the product being sold
• Finance available to the organisation
• Reliability of companies in the chain
• Desired image for the product
• Government restrictions
• Products life cycle
• Manufacturers distribution capability

46
The Wholesaler Function
Marketing

• Buys in bulk from producers (low transport costs)
  and sells to retailers in smaller quantities
• Bears stock-holding risk
• Offers a wide variety of goods in small
  quantities
• Packages and labels goods
• Offers advice to both producers and retailers as
  to which goods are selling well

47
The Retailer Function
Marketing

• Breaks down bulk to quantities consumers wish to
  buy and store at home
• Provides information to consumers through
  advertising, displays and trained staff
• Stores a variety of goods, displays them and
  marks on prices
• Offers range of related services - credit, HP,
  after-sales service and delivery

48
Types of Retailer
Marketing

• Independent - convenience stores, corner shops
• Multiple Chains - MS, Dixons, Boots
• Supermarkets - Tesco, Asda, Safeway, etc
• Co-operatives
• Department Stores - Harrods, Selfridges
• Franchises - Benetton, Body Shop, McDonalds
• Discount Store Matalan, Primark and TK Maxx

49
Direct Selling
Marketing

• Internet selling allows a business to reach a
  global market. Customer info is easily collected
  to target offers and promotions.
• Mail Order goods sold to customers through
  catalogues, Next, Kays. Credit facilities make
  this popular.
• Direct mail involves letters, brochures about
  products to homes, eg Readers Digest
• Newspaper/magazine selling-customers respond
  directly to adverts.
• Personal Selling door-to-door or telephone, eg
  sales reps visit GPs, double-glazing sales.

50
Promotion
Marketing

• Promotion is the way in which customers are made
  aware of a product or service and is persuaded to
  purchase it.

51
Aims of Promotion
Marketing

• Persuading - to purchase the products
• Informing - telling consumers about the product
• Reminding - that the product still exists

52
Methods of Promotion
Marketing

• Advertising
• Sales promotions
• Public relations
• Exhibitions and trade fairs
• Merchandising
• Direct mail
• Personal selling

53
Types of Promotion are categorised as being
Marketing

• Above the line
• Use of independent media, eg TV and newspapers to
  reach mass audience
• A lot of waste not targeted
• Below the line
• Directly controlled by the business
• Sales promotion, direct mail, trade fairs -
  targeted consumers who may be interested

54
Advertising
Marketing

• Informative advertising new or improved
  products Health info
• Persuasive advertising where consumers see
  little difference between one product and another
• Corporate advertising promoting whole company
  rather than single product, eg BA, BP

55
Advertising
Marketing

• Generic advertising promoting whole industry,
  eg Scottish Beef
• Product endorsement famous sports or showbiz
  personalities are paid to wear particular
  product, eg Adidas pay David Beckham
• Product placement paying for products to be
  used in films or TV progs, eg BMW and James Bond

56
Advertising Decisions
Marketing

• The effect on Sales?
• The target market?
• Why do the consumers NOT buy the product?
• Which is the best medium to use?

NB who controls/checks adverts
57
Advertising Decisions
Marketing

• Which is the best medium to use depends on
• Product
• Market segment
• Type of coverage local, national
• Advertising budget
• How competitors advertise
• How technical the product is
• Size of the organisation
• Legal restrictions, eg tobacco

58
Types of Advertising Media
Marketing

• Print - newspapers and magazines, direct mail
• Broadcast - TV, radio and cinema
• Outdoor - billboards, posters, etc
• Internet

59
Sales Promotion
Marketing

• Point of sale displays
• Sale or return
• Dealer competitions/bonuses
• Staff training
• Credit facilities

• Into the pipeline
• Offered by manufacturers to retailers to
  encourage them to stock their products.

60
Sales Promotion
Marketing

• Out of the pipeline
• Offered by the retailer to final customer to
  encourage purchases to be made.

• Free samples
• Credit facilities
• Demonstrations
• Competitions
• Buy one, get one free
• Bonus packs
• Free offers
• Coupons, vouchers

61
Public Relations (PR)
Marketing

• Improving the image of the product and
  organisation
• Supporting and promoting a charity
• Sponsoring sporting or cultural events
• Product endorsement by celebrities
• Press conferences and press releases in times of
  difficulty or when good publicity can be obtained

62
Target Markets
Marketing
Undifferentiated (mass) marketing Marketing
directed at all consumers, the whole market.
One product is sold to the entire market high
volume sales, economies of scale. Eg milk, Mars
Bars

• Differentiated marketing
• Different products sold to different groups
  within total market. Products altered to suit
  needs of different consumers. Market is split
  into different groups who have similar wants and
  needs goods produced specifically for these
  groups. Use market segmentation.

63
Target Markets
Marketing

• Niche marketing
• Niche marketing involves a business aiming a
  product at a particular, often very small,
  segment of the market (local or small national).
  Focus on needs of a market ignored or overlooked
  by other firms no competition in short term.
• Disadvantage attract competition in long term.
  Market too small for competition. Small number
  of consumers more frequent swings in consumer
  spending than larger markets.

64
Market Segmentation
Marketing
Breaking down of markets into sub-groups that
can be targeted with a specific marketing mix.

• Advantages
• Seller can meet buyers requirements
• Advertising can be focused - less wasteful
• Expertise developed for a specific market
• Higher sales
• Increased profits

65
Methods of Segmentation
Marketing

• Age Smash Hits
• Gender - Heat
• Socio-economic grouping Daily Record
• Education level SundayTimes
• Income Ski Monthly
• Religion
• Residential area
• Lifestyle preferences - hobbies, politics

66
Methods of Segmentation
Marketing

• Socio-economic groupings
• Social classes are used by advertising and market
  research industries
• A Very senior managers or professionals, top
  civil servants
• B Middle managers, owners of small businesses
• C1 Junior managers, non-manual workers
• C2 Skilled manual workers
• D Semi-skilled and un-skilled workers,
  apprentices
• E People on long term benefits, casual workers

67
Market share
Marketing

• Advantages
• Larger the market, larger the profit
• Purchasing economies of scale reduce costs
• R D with large profits
• Costs marketing, transport spread over larger
  output

• Percentage of total sales of product/service
  achieved by one organisation.

68
Assessment of the Market
Marketing

• Where are the consumers of the product?
• How many consumers are there?
• What are their attitudes and preferences?
• How effective are the distribution methods?
• What are the strengths and weaknesses of
  competitors?

69
Market Research -Definitions
Marketing

• Market research is the systematic gathering,
  recording and analysing of data about problems
  relating to the marketing of goods and services.

• Market research is the means by which those who
  provide goods and services keep themselves in
  touch with the needs and wants of those who buy
  these goods and services.

70
The Need for Market Research
Marketing

• Discover what consumers think of the product
• Discover what consumers are willing to pay
• Discover if a promotion is appropriate
• Discover if the packaging is appropriate
• Identify what competition exists - now and in the
  future

• Predict changes required in its product/service
• Identify what is selling
• Identify who is buying the product/service
• Explain what is happening in the market
• Investigate possible courses of action
• Identify the size of the market

71
Methods of Research
Marketing

• PRIMARY RESEARCH
• Information collected by the organisation itself
  or by a paid market research agency.
• SECONDARY RESEARCH
• Information already collected for another
  purpose, eg government statistics.

72
Methods of Research - PRIMARY
Marketing
Primary data is gathered by field research

• By observation or asking people questions
• Up-to-date
• Collected for the exact purpose of the
  organisation
• Not easily available to competitors
• Time-consuming
• Expensive

73
Techniques of field research
Marketing

• Surveys
• Personal interview, postal survey, telephone
  survey, purchase survey
• Sampling who, how many, how to choose
• Random sampling, Stratified random sampling,
  Quota sampling
• Test marketing
• Consumer panel
• Hall tests
• Questionnaire see notes 48-50
• Collection of customer data observation,
  loyalty cards, EPOS/bar codes, the internet

74
Market Research SECONDARY
Marketing
Secondary data is gathered by desk research
Internal Sources
External Sources

• Government publications - social and economic
  trends, annual statistics, population census
• Competitors data - annual reports, promotions,
  price lists, web sites
• Newspapers, trade magazines, Mintel (research
  org), etc

• Sales figures
• Stock figures
• Accounting records
• Customer comments
• Sales reps reports
• Market research data gathered previously

75
Market Research SECONDARY
Marketing

• Value and reliability is limited because
• Much of the information is historic
• Collected for another purpose
• Available to competitors
• Cannot normally go back to the initial source to
  check accuracy or ask follow-up questions

76
ICT and Market Research
Marketing

• Databases compiled by research agencies
• Electronic point of sale information (EPOS)
• Supermarket loyalty cards
• Stock control software gives sales breakdown
• Web sites - customers can e-mail comments back to
  the company

77
Problems with Market Research
Marketing

• Sampling Bias - small sample can give a wrong
  impression
• Human Behaviour - opinions change rapidly
• Interviewer Bias - leading questions may
  be asked
• Time taken for research - expensive
• Difficult to access secondary time wasted
• Larger the sample, more reliable the information.