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Introduction to Management II: Lecture 005

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Management (MGT)
Chris Bovaird

14 February 2013 CHAPTER 5: UNDERSTANDING MARKETING PROCESSES AND CONSUMER BEHAVIOUR WHAT IS MARKETING? Marketing is planning and executing the development, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy both buyers’ and sellers’ objectives. We are all influenced by the marketing activities of companies, but as consumers, we are in fact the essential ingredient in the marketing process. Needs and wants are the forces that drive marketing. Marketing Concept is the idea that the whole firm is directed toward serving present and potential customers at a profit. The different departments of the firm (IE: Marketing, production, finance) must operate as a system to provide the common goal of customer satisfaction. The four activities that comprise the marketing mix:  Developing  Pricing  Promoting  Placing Products PROVIDING VALUE AND SATISFACTION Limited financial resources force most of us to be selective, consumers buy products that offer best value when it comes to meeting their needs and wants. Value is the relative comparison of a product’s benefits versus its costs. The benefits of a high value product are much greater than its costs. Benefits include not only the functions of the product, but also the emotional satisfactions associated with owning, experiencing, or possessing it. Satisfied buyers perceive the benefits derived from the purchase to be greater than its costs. VALUE = BENEFITS / COSTS Marketing strategies focus on increasing value for customers (IE: Developing new product, opening store for longer hours). Utility is the ability of a product to satisfy a human want or need. Marketing strives to provide us four kinds of utility:  Time Utility is products are available when consumers want them (IE: Ornaments on Christmas)  Place Utility is when products are available where customers can conveniently purchase them (IE: Opening annual Christmas departments)  Ownership Utility is conveniently transferring ownership from store to customer (IE: Store selling ornaments)  Form Utility is making products available in the first place (IE: Turning raw materials into finished ornaments) GOODS, SERVICES, AND IDEAS Consumer Goods are products purchased by individuals for their personal use. Consumer Marketing is firms that sell products to consumers for personal consumption. Industrial Goods are products purchased by companies to use directly or indirectly to produce other products. Industrial Marketing is firms that sell products to other manufacturers. Services are intangible products (IE: Time, expertise) or an activity that can be purchased. Service Marketing (IE: Insurance, airlines). Marketing also promotes ideas (IE: Do not drink and drive). Relationship Marketing emphasizes lasting relationships with customers and suppliers. THE MARKETING ENVIRONMENT External Environment is outside factors that influence marketing programs by posing opportunities or threats.  Political and Legal Environment (IE: Legislation on cell phones in cars, pollution). To gain public support for their products and activities, marketing uses advertising campaigns for public awareness on issues of local, regional, or national importance through lobbying and contributions to political candidates  Social and Cultural Environment (IE: More people working at home, more women in workforce). The values, beliefs, and ideas form the fabric of Canadian society and effects businesses (IE: Reduction in air conditioners for greener Canada).  Technological Environment (IE: Satellite dish, home television shopping). New products make some existing products obsolete, and many of them change our values and lifestyles, in turn stimulates new goods and services not directly related to the new technology itself  Economic Environment (IE: Inflation, recession, recovery). Determine spending patterns by consumers, business, and governments as consumer spending increases as consumer confidence in economic conditions grow during periods of prosperity.  Competitive Environment requires marketers must convince buyers that they should purchase their products rather than those of some other seller. o Substitute Products are products that are dissimilar from those of competitors but that can fulfill the same need (IE: Jam and Honey are substitutes) o Brand Competition appeals to consumer perceptions of similar products o International Competition are domestic against foreign products (IE: Flight on Swissair against Air Canada) THE MARKETING MIX Marketing Managers are responsible for planning and implementing all the marketing-mix activities that result in the transfer of goods or services to customers. Marketing Plan is a detailed strategy for gearing the marketing mix to meet consumer needs and wants. Marketing Mix is the combination of product, price, place, and promotion strategies used in marketing a product.  Product is a good, service, or idea that satisfies buyers’ needs and demands. Mass customization allows marketers to provide products that satisfy very specific needs of consumers. Product Differentiation is the creation of a product or product image that differs enough from existing products to attract customers  Price is concerned with choosing the appropriate price for a product to meet the firm’s profit objectives and buyers’ purchasing objectives. It refers not only to the actual amount of money that consumers must pay for a product or service, but also to the total value of things that consumers are willing to give up in return for being able to have the benefits of the product or service. Prices must support a variety of costs involving operation, administrative, research and marketing, but prices can’t be so high that consumers turn to competitor products. Low prices generally lead to larger sales volumes. Higher prices usually limit market size but increase profits per units and may attract customers by implying that a product is of high quality  Place (Distribution) is concerned with getting products from the producer to the buyer, including physical transportation and choice of sales outlets  Promotions are techniques for communicating information about products 4 Ps: Product, price, place, promotion are a mirror image of buyer’s 4C’s: customer solution, customer cost, customer convenience, customer communication. Target Markets are any group of people who have similar wants and needs and may be expected to show interest in the same products. Market Segmentation is dividing a market into categories according to traits customers have in common. Positioning is the process of fixing, adapting, and communicating the nature of the product itself. IDENTIFYING MARKET SEGMENTS Members of a market segment share common traits or behaviours that affect purchasing decisions.  Geographic Variables are geographical units that may be considered in a segmentation strategy (IE: Rainfall in B.C. prompts umbrellas sales than does in Arizona’s desert)  Demographic Variables are characteristics of populations that may be considered in developing a segmentation strategy (IE: Age, income, gender), these are objective criteria that cannot be altered and marketers must work with or around them  Psychographic Variables are traits that a group has in common, including motives, attitudes, activities, interests, and opinion, they can sometimes be changed by marketing efforts  Product Use Variables are consumer characteristics based on the use of a product, benefits expected from it, reasons for purchasing it, and loyalty to it (IE: Women’s shoemaker identifies three segments: athletic, casual, dress shoes). Hard Core Loyalists are consumers that always buy one brand. Switchers buy various brands. Whatever basis is used for segmenting a market, care must be taken to position the product correctly. A product’s position refers to the important attributes that consumers use to assess the products (IE: Ford is economy whereas Porsche is high performance) Segmentation must be done carefully. A group of people may share similar segmentation variables but have different spending habits. In Canada, the two dominant cultures are English and French, showing significant differences in consumer attitudes and behav
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