24108 Marketing Foundations

UTS

Chapter One - INTRODUCTION TO MARKETING

Marketing – set of institutions and processes for creating, communicating, delivering and exchanging products of value for customers, clients, partners and society at large. Firms with a market orientation perform better than firms without a market orientation. They have better profits, sales volumes, return on investment and market share. Marketers must learn about the needs and wants of customers. This is an ongoing process as customer preferences are continually evolving. The best marketers are able to offer something that is unique or special to customers e.g. Ipad.

An example of marketing in action is Apple Ltd creating customer delight via market orientation i.e. a focus on the customer. Moreover, with a clear focus on New Product Analysis coupled by market research the company is able to achieve this objective. Apple has better profits, sales volume return on investment and market share. The marketer has adopted marketing thinking via mutually beneficial exchange with value creation for all parties, both parties expectations being met and both parties benefit from the transaction.

Ethics is a set of moral principles that guide attitudes and behaviour. Corporate Social Responsibility is the material fact that businesses have a duty to act in the best interests of the society that sustains them. They are obliged to act ethically, within the law and fulfil requirements such as philanthropy, protecting the natural environment, providing products that benefit society and generating employment and wealth. Qantas’s corporate social responsibility (‘the spirit of Australia’) is used as leverage to earn more cash money via support of community organisations such as Clean up Australia, Land Care and the Prime Minister’s Disability Awards. The marketing organisation has not fulfilled its obligations to all stakeholders if it merely acts within the law. The organisation must act in the best interests of most stakeholders such as shareholders, employees, customers, partners and government.

Marketing can be used by not for profit organisations such as the Salvation Army that aims to advance the welfare of the less fortunate and needy. This can be via Integrated Marketing Communications or promotion in online news media to generate donations to help the needy.

A contemporary product that demonstrates how marketers stimulate demand is I phone. The product’s augmentation such as special features that differentiates I phone from competing products e.g. a digital high definition camera which allows users to take pictures when they want.

Advertisements that are product focused include BMW ‘the ultimate driving machine’, while advertisements that are customer focused include NAB ‘more give less take.’

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The Marketing Process

The marketing process involves answering two questions. The first question is what customers we serve (market segmentation and targeting). The second question is how we best serve targeted customers (differentiation and positioning).

  1. Understand the marketplace and customer needs and wants
  2. Design a customer-driven marketing strategy
  3. Construct an integrated marketing program that delivers superior value
  4. Build profitable relationships and create customer delight
  5. Capture value from customers to create profits and customer equity

Simple Marketing Concepts

-Needs, wants and demands – products as bundles of benefits, look for best value for money

  • Needs – things that are vital for survival e.g. housing, food and water.
  • Wants – a non-necessary desire e.g. designer clothes and perfume.
  • Demands – wants backed by buying power

-Products – offered to market to satisfy need or want (e.g. goods, experiences, place, information)

-Value, satisfaction and quality

  • Value – customer’s overall perception of the utility of a product based on what is received and what is given. Utility is the usefulness of a product.

V = Quality/ Price

= Benefits expected/ benefits received

  • Customer satisfaction – extent to which perceived performance meets expectations
  • Quality – how well products satisfies want

-Exchange, transactions and relationships

  • Exchange – the mutually beneficial transfer of products of value between buyer and seller. It involves:
  • value creation for all parties
  • both parties benefit from the transaction
  • Both parties expectations must be met e.g. quality and price.

An example of an exchange is the Cancer Council Australia runs Television advertisements encouraging people to protect their skin from sun damage. People become aware that they should wear protective clothing when in the sun. The Cancer Council meets its objectives because more people are wearing protective clothing when in the sun. Long term benefits will arise for society as the rate of skin cancer drops for the Australian population.

Transaction – marketing’s unit of measurement; trade of value

Relationship marketing – creating, maintaining and enhancing strong value-laden relationships with customers and other stakeholders.

A market is a group of customers with heterogeneous needs and wants e.g. Geographic markets (China, Australia and the UK), Demographic markets (Baby boomers, Gen X and Gen Y) and Product markets (water bottle and pain killer).

Designing Customer-Driven Marketing Strategy

  1. Marketing management – “analysis, planning, implementation and control of programs designed to create, communicate and deliver value to customers and facilitate managing customer relationships in ways that enable the organisation to meet its objects and those of its stakeholders

Selective Customer to Serve

Demand management – understand and monitor nature of consumer demand; build profitable relationships, cost of attracting new customer is five times higher than keeping existing one

Creating excitement

The Marketing Evolution

1. Trade (bartering and exchange of products).

2. Production orientation– what could be made? Henry Ford said that “you can have any car that you want as long as it’s black (because black was the cheapest car to produce)”

  1. Sales orientation – consumers won’t buy unless organisations undertake large-scale promotional efforts (e.g. life insurance). “Hey come and buy the blue car, we know you can get black but blue is better” says the used car salesman.
  2. Marketing orientation – focus on the customer and finding out what they need and want.
  3. Societal market orientation- used as a selling point and leverage to target socially aware customers i.e. Corporate Social Responsibility and Ethics.

Selling and Marketing Concepts

Concept / Starting Point / Focus / Means / Ends
Selling / Factory / Existing products / Selling and promoting / Profits through sales volume
Marketing / Market / Customer Needs / Integrated Marketing / Profits through customer satisfaction

Philosophies

  1. Social marketing concept – balance between ideas of SOCIETAL (HUMAN WELFARE) + COMPANY (PROFITS) + CONSUMERS (SATISFACTION)

Preparing an Integrated Marketing Program

  1. Outlines which customers the company will serve and how it will create value
  2. Developed to deliver value to target customers
  3. Builds relationships; consists of marketing mix

Managing the Marketing Mix

PRODUCT – good, service or idea offered to the market for exchange.

PRICE – the amount of money a business demands in exchange for its products.

  1. PROMOTION – advertising, personal selling, online marketing
  2. PLACEMENT – channel management
  3. Physical evidence – used to measure satisfaction i.e. as services are intangible
  4. Process – in ‘high-contact’ services, customers involved in creating and enjoying experiences
  5. People – many service experiences involve interacting with people; relationships

Customer Relationship Management (CRM)

  1. Overall process of building and maintaining profitable customer relationships by delivering superior value and satisfaction
  2. Deals with all aspects of acquiring, keeping and growing customers

RelationshipBuilding Blocks: Customer Value and Satisfaction

  1. Customer perceived value – evaluation of difference between benefits and costs
  2. Customer satisfaction – product’s perceived performance and buyer’s expectations

Capturing Value from Customers

  1. Creating customer loyalty and retention – delighted customers remain loyal and will tell others about their positive experience with brand; losing a customer is losing more than a sale
  2. Growing share of customer – through variety and cross-selling e.g. restaurants want ‘share of stomach’ whilst banks want ‘share of wallet’
  3. Building customer equity - the combined discounted customer lifetime value of all a company’s current and potential customers

Chapter Two–MARKETING ENVIRONMENT

The Marketing Environment is all the internal and external forces that affect a marketer’s ability to create communicate and deliver products of value. Marketers must influence their environment. They use environmental analysis to break the marketing environment into smaller bits to make it easier to understand. The internal environment is the people and processes within an organisation that affect a marketer’s ability to create, communicate and deliver products of value e.g. marketing information system and sales force.

The Microenvironmentis the forces within an organisation’s industry. It is not directly controllable by the organisation. It consists of customers, clients, competitors and partners.

Partners include (LFWARS) Logistic firms (storage and transport), financiers (banking and insurance), wholesalers (B2B), advertising agencies, retailers (B2C) and suppliers. Marketers must ensure their products provide their target market with greater value than their competitors’ products.

The Macroenvironmentis the forces outside of an organisation’s industry. It includes Political, Economic, Socio cultural, Technological and Legal forces.

Political forces include lobbying for favourable treatment at the hands of government and lobbying for favourable regulation.

Economic forces are how much money individuals and organisations have to spend and how they choose to spend it. They include prices, income and availability of credit.

Socio cultural factors affect people’s attitudes, beliefs, behaviours, preferences, customs and lifestyles. Social Cultural factors includedemographicssuch asstatistics about a population: age, gender, ethnicity, educational attainment and marital status.Furthermore, the natural environment is an example of a social cultural theme that has recently emerged.

Technological forces allow a better way of doing things. Technology changes expectations and behaviours of customers and clients and have huge effects on how suppliers work.

Legal factors include legislation enacted by elected officials. Laws and regulations fall under the following categories: privacy, fair trading, consumer safety, prices, contract terms and intellectual property.

Situational Analysis involves assessing an organisation’s current position in the market place. A marketing plan communicates how marketers plan to get from the current situation to where senior management thinks the organisation should be.

Marketing metrics are used to measure the current performance and the outcomes of past activities. It includes Return on Investment, Customer satisfaction, Market share and Brand Equity.

-Return on investment – Cost and benefit analysis which takes into account sales volume, marketing investment (cost, share of voice) and bottom line (profit, share of industry profit).

-Customer satisfaction- churns(the percentage of customers lost) and number of complaints received/ resolved.

-Market share is defined as the percentage share of total industry profits includingthe percentageimprovement in the market share growth/ decline.

-Brand equity- awareness (the percentage of the total target market) and loyalty (repeat purchase behaviour).

A SWOT analysis is used to identify strengths (those attributes of the organisation that help to achieve its objectives), weaknesses (those attributes of the organisation that hinder it in trying to achieve its objectives); opportunities (factors that are helpful to achieve the organisation’s objectives) and threats (factors that are harmful to achieving the organisation’s objectives). Strengths and weaknesses are internal; opportunities and threats are external.

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SWOT Analysis of Qantas

Strengths

-highest safety standard

-employees strong commitment to the Qantas Group

-Named one of the world’s top airlines in the prestigious Skytrax World Airline Awards.

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Weaknesses

-operations deemed as inferior to competitors

-strikes

Opportunities

-transitioning the business from cost centres to profit centres

Threats

-Security concerns

-Increased competition

-The federal government’s Workplace Relations policy

-Rising fuel prices

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Respond to the Marketing Environment

Some companies view marketing environment as uncontrollable, others take on environmental management perspective.

Marketing management should aim to be proactive rather than reactive wherever possible

Chapter Three–MARKET RESEARCH

Market Research (MR) is gathering information and knowledge about the market. For example, a business that makes bird houses involves understanding, creating (production and operations), communicating (promotion e.g. on Channel Nine on TV on a show such as The Voice Australia) and delivering (e.g. a store such as Kmart or Target because older people are not as tech savvy). The above stated market research process is interlinked and ongoing. Moreover, if a business creates what it perceives to be a profitable product but if there are hardly any customers, then the firm needs to do market research to find out why the consumers are not buying. The results of market research are fed into a Marketing Information System (MIS), which holds and organises all of the organisation’s marketing information. The MIS is in house (internal environment).

The inputs of a MIS are:

-Marketing Intelligence (Sales representative reports, customer service reports, customer feedback surveys, competitor actions and environmental changes)

-Internal Reports(Accounting reports, Sales reports, Production reports and Distribution reports).

Market research involves five major components:

-defining the research problem (profit or sales related clause)

-designing the research methodology (design) e.g. dropping prices by 5per cent increases sales by twenty per cent i.e. actionable results

-collecting data

-analysing data and drawing conclusions

-presenting the results and making recommendations.

What the research is intended to answer is known as the research problem e.g. 1) why is the sale of sultanas down at the Pymble Woolworths? 2) Why is Apple’s brand image taking a hit? As the research project proceeds the research problem may need to be redefined. A market research brief should be prepared to guide the project. A market research brief specifies the research problem, the info required, the time frame and the budget. A planned methodology to answer the research problem is known as the research design. Types of MR include exploratory, descriptive or causal research. Exploratory research gathers more information about a loosely defined problem e.g. a focus group. Descriptive research is used to solve well defined problem by clarifying more about certain phenomena e.g. healthy product range for MC Donald’s Quick Service Restaurants (food done fast) . Causal research tests if a variable affects an outcome e.g. effect of coupons on pizza sales at Pizza Hut.

MR draws on two types of data. Secondary data is data already exists. Primary data gathers specifically for the current research project. Research methods can be quantitative or qualitative research. Quantitative research collects data that can be represented numerically and analysed statistically. Experimentation, neuroscience and observation are quantitative research methods e.g. the survey. Qualitative research obtains rich and detailed info that underlie observable behaviour. Interviews and focus groups are the most qualitative research methods.

MR tries to find out about the population by studying a small part of it and generalising the results (sample).

Probability sampling ensures every member of a population has a known chance of being selected in the sample. Non Probability sampling provides no way of knowing the chance of a member being selected in the sample.

Once a research project has been designed, it must be implemented in compliance with the design via project management. Data must be carefully collected and organised so that it can be efficiently analysed. Quantitative data can be statistically manipulated to identify trends and patterns in the data. Qualitative data can be reduced to allow statistical analysis but much of the rich detail can be lost. Qualitative data analysis can lead to further research in the form of quantitative research. Data analysis allows conclusions to be drawn and recommendations formulated. The findings and recommendations of the market research project should be presented in a concise and clear manner.

Two types of probability sampling methods are random sampling and stratified sampling. In a random sample each member of the population has an equal opportunity of being for the sample. In a stratified sample the population is divided into different groups based on some characteristic e.g. age and gender and then from each groups a random sample is chosen.

Two types of non probability sampling methods are quota sampling and convenience sampling. A quota sample divides the population into groups based on a number of characteristics. In a convenience sample, participants are selected based on convenience e.g. interviewing your friends and family for a project.

Unethical market research examples

Sugging – selling under the guise of market research.

Frugging- fund raising under the guise of market research.

Codes of practice for Market research in Australia:

-research must be objective, based on scientific methods and conducted in compliance with the law.

-respondents identities must not, without their consent be revealed to anyone not directly involved in the market research project or used for any non research purpose.

-Professional researchers must not act negligently

Chapter Thirteen – International Marketing

Globalisation is the process via international individuals, organisations and government become interconnected and similar. Barriers have diminished facilitating greater interconnections between different countries and their people. This has resulted in close interdependence in terms of trade, finance, living standards and security.

Chapter4 – Consumer Behaviour (CB)

Factors influencing consumer behaviour Summary

Situational factors include physical, social, time, motivational and mood factors.

Group factors- cultural (sub cultural and social class) and social (reference groups, family, roles and status).