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Marketing C5-9 Notes.docx

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David Toleman

Chapter Five A business market consists of all the organisations that buy goods and services to use in the production of other products and services that are sold, rented or supplied to others. The business buying process is the decision-making process by which business buyers establish the need for purchased products and services and identify, evaluate and choose between alternative brands and suppliers. The industrial market consists of all the individuals and organisations acquiring goods and services that are used in the production of other goods and services. The reseller market consists of all the individuals and organisations that acquire goods for the purpose of reselling or renting them to others, usually at a profit. The government market consists of government units at all levels – federal, state and local government that purchase or rent foods used in carrying out their functions. The institutional market includes schools, hospitals and other institutions that provide goods and services to people in their care. Government buying is part of the institutional market. Procurement managers and officers are business managers responsible for buying company supplies, raw materials and capital items, directly from suppliers in most cases. Derived demand is the organisational demand that ultimately comes from the demand for consumer goods. Business markets are differentiated from consumer markets by: 1. Fewer buyers 2. Large buyers 3. Close supplier-customer relationships – Due to the smaller customer base as well as the importance and power of these larger customers, close relationships form in business markets 4. Geographically concentrated buyers – Business buyers are concentrated in Sydney and Melbourne 5. Inelastic demand – Total demand for many business goods and services is not much affected by price changes 6. Fluctuating demand – Demand for business goods and services tends to be more volatile than the demand for consumer goods and services. A given percentage increase in consumer demand can lead to a much larger percentage increase in the demand for plant and equipment needed for additional output. A straight rebuy is an industrial buying situation in which the buyer routinely reorders something without modification. A modified rebuy is an industrial buying situation in which the buyer wants to modify product specifications, prices, terms or suppliers. A new task is an industrial buying situation in which the buyer purchases a product or service for the first time. Systems buying is the purchase of a packaged solution to a problem, which avoids making all the separate decisions involved in buying each item or service separately. A buying centre consists of all the individuals and units that participate in the organisational buying decision process. The buying centre includes users, influencers, buyers, deciders and gatekeepers (the person in the buying centre who controls the flow of information to others) The business buying process: 1. Problem recognition 2. General need description – Company describes the general characteristics and quantity of needed item 3. Product specification – Organisation decides the best technical product characteristics for the needed item 4. Supplier search 5. Proposal solicitation – Buyer invites qualified suppliers to submit proposals 6. Supplier selection 7. Order routine specification – Buyer writes the final order with the chosen supplier, technical characteristics, quantity needed etc. 8. Post-purchase performance review – Buyer rates satisfaction with suppliers and decides whether or not to continue the relationship Micromarketing is a form of target marketing in which companies cater to the needs and wants of narrowly defined geographic, demographic or psychographic segments. Marketing has passed through three stages: 1. Mass marketing – Sellers mass produces, mass distributes and mass promotes one product to all 2. Product-variety marketing – Seller produces two or more products that have different features, style, quality, size etc. 3. Target marketing – Seller identifies market segments, selects one or more and develops products and marketing mixes tailored to each.  Market segmentation – Dividing a market into distinct groups of buyers with different needs and characteristics  Market targeting – Evaluating each segment’s attractiveness and deciding which one to enter  Market positioning – Setting the competitive positioning for the product and creating a detailed marketing mix The ultimate form of target marketing is customised marketing in which the company adapts its product and marketing program to the needs of a specific customer. For a market segment to be useful, it must fulfil five points: 1. Measurable – Size and purchasing power of segment must be measurable 2. Accessible – Segments must be able to be effectively reached and served 3. Substantial – Segment must be large enough and profitable enough 4. Differentiable – Segments must be distinguishable and respond differently to various marketing mix elements 5. Actionable – Effective programs must be able to be designed for attracting and serving segments Chapter Six A target market describes a set of buyers sharing common needs or characteristics that the company decides to serve. There are three market coverage strategies; undifferentiated, differentiated and concentrated marketing. 1. Undifferentiated marketing is a strategy in which a company might decide to ignore market segment differences and go after the whole market with one market offer. 2. Differentiated marketing is a strategy in which a company decides to target several market segments and designs separate offers for each. 3. Concentrated marketing is a strategy in which a company goes after a large share of one or a few markets. 4. Permission marketing is centred on getting customers’ consent to receive information from a company. A product position is the way a product is defined by consumers on important attributes The positioning task consists of three steps: 1. Identify possible competitive advantages 2. Select the right competitive advantages 3. Effectively communicate and deliver the chosen position to the market Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing extra benefits that justify a higher price. A company or market offering can be differentiated on the basis of product, service, personnel and image: Product differentiation – Performance, style, design, durability, consistency Services differentiation – Speedy, reliable delivery and quality installation Personnel differentiation – Hiring and training better staff than competitors Image differentiation – Singular, distinctive message that conveys product’s main benefits and positioning Many marketers believe that companies should aggressively promote only one benefit to target markets Positioning errors: Under-positioning – Failing to position the company at all, nothing special about company Over-positioning – Giving buyers too narrow a picture of the company Confused positioning – Leaving buyer with a confused image of a company Differences are only worth establishing if: Important – The difference delivers a highly valued benefit to target buyers Distinctive – Competitors don’t offer the difference Superior – Difference is superior to other ways customers might obtain the benefit Communicable – Difference is communicable and visible to buyers Pre-emptive – Difference is not easy to copy Affordable – Buyers can afford to pay for difference Profitable – Company can introduce the difference profitably Fast-moving consumer goods are products which are consumed in a single use or on a few usage occasions A product has three levels, the core, actual and augmented product. 1. The core product describes the main benefits that consumers receive when they buy a product. 2. The actual product consists of the styling, features, brand name, packaging and other components that combine to deliver core product benefits. 3. The augmented product describes the additional consumer services and benefits built around the core and actual products. Thus, a product is more than a simple set of tangible features and instead is a bundle of benefits that satisfies consumer needs. Consumer products are those bought by final consumers for personal consumption Convenience products are goods and services that the customer usually buys frequently and with minimal buying effort and comparison Shopping products are goods and services that the consumer compares on such bases as suitability, quality, price and style Specialty products are those that have unique characteristics or brand identification for which some buyers are willing to make a special purchase effort Unsought products are goods and services that consumers don’t know about or don’t normally think of buying Industrial products are those bought by businesses for further processing or for use in conducting a business Materials and parts are industrial goods that enter the manufacturer’s product completely including raw materials Capital items are industrial goods and services that aid in the buyer’s manufacturing or service operations Supplies and services are industrial goods and services that don’t enter the finished product at all Chapter Seven A service is an activity or benefit that one party may offer to another that is essentially intangible and doesn’t result in the ownership or anything. Service inseparability refers to how services cannot be separated from their providers Service variability refers to the possibility for a service to change from person to person due to customer interaction Service perishability distinguishes services from products as there is no stored physical inventory In services marketing, the 4Ps approach has an additional 3 Ps; people (appearance and behaviour of service deliverers), processes (how the service is delivered) and physical evidence (layout, brochures, signs etc.) Product quality refers to the ability of a product to perform its functions including durability, reliability etc. Product design is the process of designing a product’s style and function A brand is a name, term, sign, symbol or combination of these intended to identify the goods or services of a company. Brand equity is the value of a brand based on the extent to which it has brand loyalty, name awareness, perceived quality, strong brand associations etc. The fundamental asset underlying brand equity is customer equity; the value of the customer relationships that the brand creates. Brand strategy entails decision pertaining to brand positioning, brand name, sponsorship and brand development. Co-branding is the practice of using the established brand names of two different companies on the same product. Line extension is using a successful brand name to introduce additional items in a given product category under the same brand name. Brand extension is a new or modified product launched under an already successful brand name. Multi-b
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