Introduction to marketing and the importance of marketing:
What is marketing?
o An organisational function and set of processes for creating, communicating
and delivering value to customers and for managing customer relationships in
ways that benefit the organisation and its stakeholders.
o The activity, set of institutions and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients,
partners and society at large.
The marketing process:
o In the first four steps, companies work to understand customer needs and
wants, design a marketing strategy, construct marketing programs and build
strong customer relationships.
o In the final step companies capture value from customers in the form of
sales, profits, and long-term customer equity.
1. Understanding the marketplace and customer needs:
Customer needs, wants and demands:
o Needs: States of felt deprivation.
o Wants: The form taken by human needs as they are shaped by
culture and individual personality.
o Demands: Human wants that are backed by buying power.
o Goods, services and experiences.
o Product: Anything that can be offered to a market for attention,
acquisition, use or consumption that might satisfy a want or a need.
Includes physical objects, services, persons, places, organisations
o Market offering: Some combination of products, services, information
or experiences offered to a market to satisfy a need or want.
Customer value and satisfaction:
o Value: The difference between the benefit the customer gains from
owning and using a product and the costs of obtaining it.
o Satisfaction: The extent to which a product’s perceived performance
matches the buyer’s expectations.
If the performance falls short of expectations, the buyer is
If performance matches or exceeds expectations, buyer is
satisfied or delighted.
Exchanges and relationships:
o Exchange: The act of obtaining a desired object from someone by
offering something in return.
o Market: The set of all actual and potential buyers of a product.
2. Designing a marketing strategy:
Marketing management: The analysis, planning, implementation and control
of programs designed to create, build and maintain beneficial exchanges with
target buyers for the purpose of achieving organisational objectives.
To design a successful marketing strategy, marketing manager must be able
o What customers will we serve – what is our target market?
o How can we serve these customers best – what is our value
Selecting customers to serve:
o Done by dividing the market into segments of customers (market
segmentation) and selecting which segments it will go after (target
o Demand management: Conditions: Negative demand. Major part of the market dislikes the product
and may even pay a price to avoid it e.g.
No demand. Target consumers may be unaware of a
particular need, or may not be able to
articulate it, therefore they are unaware
of/uninterested in a good/service that
satisfies that need e.g. foreign language
Latent demand. Consumers may share a strong need that
cannot be satisfied by any existing product
e.g. safer neighbourhoods.
Declining demand. Demand is decreasing often brought about
by competition e.g. church memberships.
Irregular demand. Varying on a seasonal, daily or hourly basis
e.g. supermarkets overstocked during the
week, but understocked after the weekend.
Full demand. When the organisation is satisfied with their
volume of business and are operating at
close to current capacity.
Overfull demand. Demand that is higher than what the
organisation can or wants to handle.
Demarketing must take place – reducing
Unwholesome demand. Unwholesome products will attract organised
efforts to discourage their consumption e.g.
‘unselling’ campaigns for cigarettes, alcohol
and hard drugs.
Choosing a value proposition:
o Company must decide how it will serve its targeted customers – how it
will differentiate and position itself in the marketplace.
o Value proposition: Set of benefits or values the company promises to
deliver to consumers to satisfy their needs through the offerings it
3. Preparing an integrated marketing plan and marketing mix:
Delivers the intended customer value.
o Documents the result of the marketing process, by summarising the
market situation, defining the marketing strategy (including target
markets and value proposition), and laying out the detailed marketing
program and the resources required to implement the strategy.
Marketing program builds customer relationships by transforming the
marketing strategy into action. Consists of the firm’s marketing mix (set of
marketing tools the firm uses to implement its marketing strategy).
Marketing mix tools:
o Classified into 4 broad groups, called the 4Ps of markeing: Product,
Place, Price, Promotion.
o To deliver on its value proposition, the firm must first create a need-
satisfying market offering (product); must decide how much it will
charge (price); how it will communicate and inform the target
customers about the offering and its value (promotion); must make the
offering available to target consumers (place).
4. Building profitable customer relationships:
Marketing organisation’s demand comes from both new and repeat
Organisations focusing more on retaining customers and building lasing
relationships with them.
5. Capturing value from customers: If the company creates value for the target customers and builds strong
relationships with them well, then it can capture value from them in return.
Marketing terminology and marketing and value:
Delivering value to customers:
The marketing philosophy and its relevance to corporate culture:
o Marketing philosophy: Holds that achieving organisational goals depends on
determining the needs and wants of target markets and delivering the desired
satisfactions more efficiently and effectively than competitors.
o For philosophy to take hold, it must become an integral part of an
The role of culture in delivering value:
o Corporate culture, if correctly aligned with the external environment, is the
key to long-term organisational success.
o Culture has many levels and aspects: deeply embedded values, norms and
A strong market-oriented culture drives strong business performance:
o Market culture:
The overarching culture of a business, relating to the attention it
focuses on markets.
The level of belief that the ultimate purpose of the business is to
create superior customer value, profitably.
The degree to which practices, systems and skills across the
business are focused on creating value for customers and the
Alternative management philosophies and cultures:
o Production philosophy: Consumers favour products that are available and
highly affordable, and that management should therefore focus on improving
production and distribution efficiency.
o Product philosophy: Consumers favour products that offer the most quality,
performance and features, and that the organisation should therefore devote
its energy to making continuous product improvements.
o Selling philosophy: Consumers won’t buy enough of the organisation’s
products unless the organisation undertakes a large-scale selling and
Customer value and satisfaction:
o Customer delivered value: The difference between the prospective
customer’s evaluation of all the benefits and all the costs of an offering as
compared to the perceived alternatives.
o Total customer benefit: The bundle of economic, functional and psychological
benefits customers expect from a given market offering.
o Total customer cost: The bundle of costs customers expect to incur in
evaluating, obtaining, using and disposing of the given market offering.
o The extent to which a product’s perceived performance matches a buyer’s
o Customer-centred companies: Companies that focus on customer outcomes
when designing their strategies.
Capturing value from customers:
Value co-creation: An interaction between the firm and active consumers who are
informed, networked and empowered, resulting in value that is shared by both
Relationships in marketing:
o Customer relationship management: The overall process of building and
maintaining profitable customer relationships by delivering superior customer
value and satisfaction. o Five levels of relationships that can be formed with customers who have
purchased a marketing organisation’s product:
Basic. The marketing organisation’s salesperson
sells the product but doesn’t follow up in
Reactive. Salesperson sells the product and
encourages the customer to call whenever
they have any questions or problems.
Accountable. Salesperson phones the customer a short
time after the sale to check whether the
product is meeting the customer’s
expectations. They also gather any
improvement suggestions and details of
Proactive. Salesperson phone the customer from time
to time with suggestions about improved
product use or helpful new products.
Partnership. The marketing organisation works
continuously with the customer and with
others to discover ways to deliver value.
o Customer value-building approaches:
Financial benefits. Relies primarily on adding financial benefits
to the customer relationship e.g. frequent-
Social benefits. As well as financial benefits. Marketing
organisation personnel work to increase their
social bonds with customers by learning
individual customers’ needs and wants and
then individualising and personalising their
products and services in order to meet them
e.g. referring to hotel guests by name.
Structural ties. As well as financial and social benefits. E.g. a
business marketer might supply customers
with special equipment that help them
manage their orders, payroll and inventory.
Retention and customer profitability:
Measuring and managing return on marketing:
o Return on marketing investment (ROMI): The net return from a marketing
investment divided by the costs of the marketing investment.
Customer lifetime value:
o The amount by which revenues from a given customer over time exceed the
company’s costs of attracting, selling to and servicing that customer.
Embedding market culture in people and processes:
Internal marketing program: Marketing its capabilities to another part of the
o Aim: To ensure that staff share the organisation’s goals, and have sufficient
training and power to respond appropriately under different situations.
o Ensures that there is a common purpose among those who work together.
Service quality is a group effort:
Service delivery: When customers and representatives of an
organisation interact with one another. Such interactions play
a large part in determining whether or not the customer is
satisfied and remains loyal to the marketer, particularly in
service and experiential encounters.
Quality: The totality of features and characteristics of a
product/service that bear on its ability to satisfy stated or
implied needs. o Processes in delivering customer value:
Value chain: The activities performed to deliver a product to a
Benchmarking: Comparison of a company’s performance and
processes with those of its competitors and with best-practice
Service blueprinting: Documentation of the steps involved in
providing a service to a customer.
Value delivery networks: Marketing channels in which each channel
member adds value for the customer.
Sustainability and the societal marketing concept:
Societal marketing concept:
o The idea that the organisation should determine the needs, wants and
interests of target markets and deliver the desired satisfactions more
efficiently and effectively than competitors in a way that maintains/improves
the consumers’ and society’s wellbeing.
o Questions whether the pure marketing concept is adequate in an age of
environmental problems, resource shortages, rapid population growth,
worldwide economic problems and neglected social services.
o Asks if the firm that senses, serves and satisfies individual wants is always
doing what is best for consumers and society in the long run.
o Calls on marketers to balance three considerations in setting their marketing
The marketing environment:
The actors and forces outside marketing that affect marketing management’s ability to
develop and maintain successful transactions with its target customers.
The marketing organisation’s microenvironment:
The forces close to the organisation that affect its ability to serve its customers.
o The marketing organisation:
Designs marketing plans, taking into account other groups in the
o Marketing intermediaries:
Firms that help the organisation to promote, sell and distribute its
goods to final buyers.
Physical distribution firms: Warehouse, transportation and
other firms that help the organisation to stock and move
goods from their points of origin to their destination e.g.
Resellers: Distribution channel firms that help the
organisation to find customers or make sales to them e.g.
Marketing services agencies: Marketing research
companies, advertising agencies, media firms, marketing
consulting agencies and other service providers that help the
organisation to target and promote its products to the right
Financial intermediaries: Banks, credit companies, insurance
companies and other businesses that help finance
transactions or insure against the risks associated with the
buying and selling of goods.
Marketing organisation can operate in five types of customer
markets: Consumer markets: Individuals and households that buy
goods and services for personal or household consumption.
Business markets: Organisations that buy goods and
services for further processing or for use in their production
Reseller markets: Organisations that buy goods and services
in order to resell them at a profit.
Government markets: Government agencies that buy goods
and services in order to product public services or transfer to
those who need them.
International markets: Overseas buyers, including
consumers, producers, resellers and governments.
Any group that has an actual or potential interest in, or impact on,
and organisation’s ability to achieve its objectives.
Financial publics: Influence the organisation’s ability to obtain
funds e.g. shareholders.
Media publics: Those that carry news, features and editorial
opinion e.g. newspapers.
Government publics: Requirements e.g. product safety.
Citizen-action publics: Organisation’s marketing decisions
may be questioned by consumer groups, environmental
groups, minority groups and other public interest groups.
Local publics: Every organisation has them e.g.
General publics: Marketing organisation needs to be
concerned about the general public’s attitude towards its
products, services and activities.
Internal publics: Include employees, volunteers, managers
and board of directors.
The marketing organisation’s macroenvironment:
The larger societal forces that affect the whole microenvironment.
o Demography: The study of human populations in terms of size, density,
location, age, sex race, occupation and other statistics.
Changing age structure of the population.
The changing family.
Geographic shifts in population.
A better educated and more white collar population.
Increasing ethnic diversity.
o Factors that affect consumer buying power and spending patterns.
Changes in income.
Changing consumer spending patterns.
o Natural resources that are needed as inputs by marketers or which are
affected by marketing activities.
Shortages of raw material.
Increased cost of energy.
Government intervention in natural resource management.
o Forces that affect new technologies, creating new product and market
Fast pace of technological change.
High R&D budgets.
Increased regulation. Political environment:
o Laws, government agencies and pressure groups that influence and limit
various organisations and individuals in a given society.
Legislation regulating business.
Increased emphasis on ethics and socially responsible actions.
o Institutions and other forces that affect society’s basic values, perceptions,
preferences and behaviours.
Persistence of cultural values.
Subcultures (groups of people with shared value systems based on
common life experiences or situations).
Shifts in secondary cultural values.
Marketing Information Systems:
The marketing information system (MIS):
People, equipment and procedures to gather, sort, analyse, evaluate and distribute
needed, timely and accurate information to marketing decision makers.
Accessing information needs:
o A good MIS balances the information managers would like to have against
what they really need and what is feasible to acquire or monitor.
o Internal records: Information gathered from sources within the company to
evaluate marketing performance and to detect marketing problems and
o Marketing intelligence: Systematic collection and analysis of publicly
available information about competitors and developments in the
o Marketing research: The function that links the consumer, customer and
public to the marketer through information.
Information used to identify and define marketing opportunities and
problems; to generate, refine and evaluate marketing actions; to
monitor marketing performance; and to improve understanding of the
o Market research: The systematic gathering, recording and analysing of data
relevant to a particular market.
o Distributing information:
Distributed marketing information systems: Internal and external
information that can be obtained over digital networks, even around
The marketing research process:
Defining the problem and the research objectives:
o Exploratory research: Marketing research to gather preliminary information
that will help to define problems better and suggest hypotheses.
o Descriptive research: Marketing research to describe marketing problems,
situations or markets better – such as the market potential for a product, or
the demographics and attitudes of consumers.
o Casual research: Marketing research to test hypotheses about cause-and-
Developing the research plan:
o Determining specific information needs:
Depends on the research objectives e.g. if Uncle Toby’s wanted to
research to find out how consumers would react to the company
replacing the box of oats with a plastic container it might call for
specific information about:
Demographic, economic and lifestyle characteristics of
current breakfast eaters. Consumer usage patterns for cereal.
o Gathering secondary information:
Primary data: Information collected for the current research purpose.
Secondary data: Information that already exists somewhere, having
been collected for another purpose.
o Planning primary data collection:
Observational research: The gathering of primary data by observing
relevant people, actions and situations.
Survey research: The gathering of primary data by asking
people questions about their knowledge,
attitudes, preferences and buying behaviour.
Experimental research: The gathering of primary data by selecting
matched groups of subjects, giving them
different treatments, controlling unrelated
factors, and checking for differences in group
Contact methods: Questionnaires online, by mail, personal or online.
Online marketing research: Collecting primary data through internet
surveys and online focus groups.
Response rates and costs of different survey methods.
o Sample: A segment of the population selected for marketing
research to represent the population as a whole.
o Research instruments:
Single-source data systems: Electronic monitoring
systems that link consumers’ exposure to television
advertising and promotion with what they buy in
o Implementing the research plan:
Putting marketing research plan into action.
o Interpreting and reporting the findings.
Other marketing research considerations:
Marketing research in small businesses and not for profit organisations.
International marketing research.
Public policy and ethics in marketing research.
o Intrusions on consumer privacy.
o Misuse of research findings.
o Codes of practice.
Consumer market: All the individuals and households who buy or acquire goods and services
for personal consumption.
Characteristics influencing consumer behaviour:
Motive (or drive): A need that is sufficiently pressing to direct the
person to seek satisfaction of the need.
o Perception: The process by which people select, organise and interpret
information to form a meaningful picture of the world. Perceptual
Selective exposure: Impossible for a person to pay attention to all
stimuli they are exposed to, marketers must work hard to make sure
their product stands out and catches their attention.
Selective distortion: Tendency of people to adapt information to
personal meanings. Marketers must try to understand the mindsets
of consumer and how they will affect interpretation of advertising and
Selective retention: People tend to only retain information that
supports their attitudes and beliefs.
Changes in an individual’s behaviour arising from experience.
o Beliefs and attitudes:
Belief: A descriptive thought or conviction that a person holds about
Attitude: A person’s relatively consistent evaluations, feelings and
tendencies towards an object or an idea.
o Personality and self-concept:
Personality: A person’s distinguishing psychological characteristics
that lead to relatively consistent and lasting responses to their own
Brand personality: The specific mix of human traits that are attributed
to a particular brand.
Brand image: The set of beliefs consumers hold about a particular
o Occupation – Affects the goods and services bought.
o Economic situation – Affects product choice.
o Culture: The set of basic values, perceptions, wants and behaviours learned
by a member of society from family and other important institutions.
Major influence on person’s wants and general behaviour.
o Subculture: A group of people with shared value systems based on common
life experiences and situations e.g. Muslims (creating phone, drink, bank,
o Social classes: Relatively permanent and ordered divisions in a society
whose members share similar values, interests and behaviours.
Distinct product and brand preferences e.g. clothing.
o Family and household – Members can strongly influence buyer behaviour.
Reference groups: Groups that have direct (face-to-face) or indirect
influence on a person’s attitude or behaviour.
Membership groups: Groups that have a direct influence on a
person’s behaviour and to which a person belongs.
Aspirational groups: Groups to which an individual wishes to belong.
Opinion leaders: People who exert influence on other’s opinions and
o Roles and status.
o Roles in the buying process:
Initiator: The person who first suggests or thinks of the idea of buying
a particular product or service.
Influencer: A person whose views or advice carry some weight in
making the final buying decision.
Decider: The person who ultimately makes a buying decision or any
part of it.
Buyer: The person who makes the actual purchase.
User: The person who consumes or uses a product or service.
o Consumer lifestyle: Lifestyle: A person’s pattern of living as expressed in their activities,
interests and opinions.
Types of buying decision behaviour:
Complex buying behaviour: Consumer buying behaviour in situations characterised
by high consumer involvement in a purchase and significant perceived differences
Dissonance-reducing buying behaviour: Consumer buying behaviour in situations
characterised by high involvement but few perceived differences between brands.
Habitual buying behaviour: Consumer buying behaviour in situations characterised by
low consumer involvement and few significant perceived brand differences.
Variety-seeking buying behaviour: Consumer buying behaviour in situations
characterised by low consumer involvement but significant perceived brand
Bounded rationality and prospect theory:
Prospect theory: A theory that describes how people make decisions when the
outcome is uncertain.
Mental accounting: How people seem to think about money.
Segregation and integration: People appear to think about outcomes in terms of
‘losses’ and ‘gains’.
Losses are weighted more heavily than gains.
The buyer decision process:
Problem recognition: Consumer recognises a problem or need.
Information search: Consumer is aroused to search for more information.
Evaluation of alternatives: Consumer uses information to evaluate alternative brands
in the choice set.
Purchase decision: Consumer buys the product.
Post-purchase behaviour: Consumers take further action after the purchase, based
on their satisfaction or dissatisfaction.
o Cognitive dissonance: Buyer discomfort caused by post-purchase conflict.
Buyer behaviour & segmentation, targeting and positioning:
The structure of business-to-business markets:
Business market: All the organisations that buy goods and services to use in the
production of other products and services or for the purpose of reselling/renting them
to others at a profit.
Business buying process:
o 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.
o All the individuals and organisations acquiring goods and services that enter
into the production of other products and services that are sold, rented or
supplied to others.
o All the individuals and organisations that acquire goods for the purpose of
reselling or renting them to others at a profit.
o Government units that purchase or rent goods and services or carrying out
the main functions government.
o Schools, hospitals, nursing homes, prisons and other institutions that provide
goods and services to people in their care.
Industry classification schemes: o Australian and New Zealand Standard Industrial Classification (ANZSIC):
System of classifying industry into 19 major groups and 86 subdivisions.
Characteristics of business markets:
o Market structure and demand.
o Nature of the buying unit.
Business buyer behaviour:
Main types of buying situations:
o Straight rebuy: An industrial buying situation in which the buyer routinely
reorders something without modification.
o Modified rebuy: An industrial buying situation in which the buyer wants to
modify product specifications, prices, terms or suppliers.
o New task: An industrial buying situation in which the buyer purchases a
product or service for the first time.
o Systems buying: Buying a packages solution to a problem, which avoids
making all the separate decisions involved in buying each item or service
o Buying centre: All the individuals and units that participate in the
organisational buying decision process.
Participants in the business buying process:
o Users: Members of the organisation who use the product or service.
o Influencers: Affect the buying decision.
o Buyers: Have formal authority to select the supplier and arrange terms of
o Deciders: Have formal or informal power to select or approve the final
o Gatekeepers: Control the flow of information to others.
Major influences on business buyers:
o Environmental factors.
o Organisational factors:
Business buying on the internet.
o Interpersonal factors.
o Individual factors.
The business buying process:
o Problem recognition.
o General need description:
Stage in the industrial buying process in which the company
describes the general characteristics and quantity of a needed item.
o Product specification:
Stage of the industrial buying process in which the buying
organisation decides on and specifies the best technical product
characteristics for a needed item.
o Supplier search:
Stage of the industrial buying process in which the buyer tries to find
the best vendors.
o Proposal solicitation:
Stage of the industrial buying process in which the buyer invites
qualified suppliers to submit proposals.
o Supplier selection:
Stage of the industrial buying process in which the buyer reviews
proposals and selects a supplier.
o Order-routine specification:
Stage of the industrial buying process in which the buyer writes the
final order with the chosen supplier, listing the technical
specifications, quantity needed, expected time of delivery, return
policies, warranties, etc.
o Post-purchase performance review: Stage of the industrial buying process in which the buyer rates its
satisfaction with suppliers, deciding whether to continue, modify or
drop the relationship.
Three stages of marketing:
o Mass marketing: The seller mass produces, mass distributes and mass
promotes one product to all buyers.
o Product-variety marketing: Seller produces two or more products that have
different features, styles, quality, sizes, etc.
o Target marketing: Seller identifies market segments, selects one or more of
them, and develops products and marketing mixes tailored to each.
Taking the form of micromarketing: A form of target marketing in
which companies tailor their marketing programs to the needs and
wants of narrowly defined segments.
Three main steps in target marketing – segmentation, targeting and
Dividing a market into direct groups of buyers who might require separate products or
marketing mixes; the process of classifying customers into groups with different
needs, characteristics or behaviour.
Bases for segmenting consumer markets:
o Geographic segmentation: Dividing a market into different geographical units
such as nations, regions, states, etc.
o Demographic segmentation: Dividing the market into groups based on
demographic variables such as age, sex, family, occupation, education, etc.
Age and life-cycle segmentation: Dividing a market into different age
and life-cycle groups.
Gender segmentation: Dividing a market into different groups based
Income segmentation: Dividing a market into different groups based
o Psychographic segmentation: Dividing a market into different groups based
on social class, lifestyle or personality characteristics.
o Behavioural segmentation: Dividing a market into groups based on
consumer’s knowledge of, attitude towards, uses for and responses to a
Occasion segmentation: Dividing the market into groups according to
occasions when buyers get the idea, make a purchase or use a
Benefit segmentation: Dividing the market into groups according to
the different benefits that consumers seek from the product.
Attitude towards a product.
Requirements for effective segmentation:
o Measurable – Size and purchasing power of the segments must be able to be
o Accessible – Segments must be able to be effectively reached and served.
o Substantial – Segments must be large enough and profitable enough to
o Differentiable – Segments must be conceptually distinguishable and respond
differently to different marketing mix elements and programs. o Actionable – Effective programs must be able to be designed for attracting
and serving the segments.
Evaluating each market segment’s attractiveness and selecting one or more
segments to enter.
Target market: A set of buyers sharing common needs or characteristics that the
company decides to serve.
Evaluating market segments:
o Segment size and growth.
o Segment structural attractiveness.
o Company objectives and resources.
Selecting market segments:
o Undifferentiated marketing: A market-coverage strategy in which a company
might to ignore market segment differences and go after the whole market
with one market offer.
o Differentiated marketing: A market-coverage strategy in which a company
decides to target several market segments and designs separate offers for
o Concentrated marketing: A market-coverage strategy in which a company
goes after a large share of one or a few submarkets.
Choosing a market-coverage strategy:
o Permission marketing: Marketing centred on getting customers’ consent to
receive information from a company.
Arranging for a product to occupy a clear, distinctive and desirable place relative to
competing products in the minds of target consumers; formulating competitive
positioning for a product and creating a detailed marketing mix.
What is market positioning?
o Product position: The way the product is defined by consumers on important
attributes – the place the product occupies in consumers’ minds relative to
o Positioning on specific product attributes e.g. advertising low price.
o Positioning on the benefits they offer e.g. Colagte whitens teeth.
o Positioning according to usage occasions e.g. Gatorade replaces athlete’s
bodily fluids during the summer.
o Positioning directly against a competitor e.g. ‘We’re number two, so we try
harder’ campaign by Avis rental cars.
o Positioning away from competitors e.g. Oracle directly compares its products
with competitor’s products.
o Positioning for different product classes e.g. some margarines are positioned
against butter, others against cooking oil.
Choosing and implementing a positioning strategy:
o Identifying a positional direction.
o Identifying possible competitive advantages:
Competitive advantage: An advantage over competitors gained by
offering consumers greater value, either through lower prices or by
providing more benefits that justify higher prices.
o Selecting the right competitive advantages:
How many differences to promote?
Which differences to promote?
o Communicating and delivering the chosen position. Product and Services Marketing:
What is a product?
Anything that can be offered to a market for attention, acquisition, use or consumption that
might satisfy a want or need e.g. physical objects, services.
Types of products:
o Durable products – products that are used over an extended period of time
(e.g. DVD players).
o Non-durable products (fast-moving consumer goods) – products that are
consumed in a single use or on a few usage occasions (e.g. weekly grocery
Includes services that are offered by marketers e.g. legal advice, dental care and
The sale of many physical products includes some service, and many services
include some physical products.
Convenient to view products as lying on a continuum between the two extremes and
involving a combination of physical products and services.
Economi Commodities Goods Services Experience Transformation
c offering s s
Economy Agrarian Industrial Service Experience Transformation
Economic Extract Make Deliver Stage Guide
Nature of Fungible Tangible Intangible Memorable Effectual
Key Natural Standardise Customise Personal Individual
attribute d d
Method of Stored in bulk Inventoried Delivered Revealed Sustained
supply after on demand over a through time
Seller Trader Manufacture Provider Stager Elicitor
Buyer Market Customer Client Guest Aspirant
Factors on Characteristic Features Benefits Sensations Traits
Product planners need to think about the product on three levels:
o Core product – the main reason why the customer is buying the product e.g.
a computer to do work on.
o Actual product – a product’s parts, styling, features, brand name, packaging
and other attributes that combine to deliver core product benefits e.g. battery,
applications, hardware, touch screen.
o Augmented product – additional consumer services and benefits built around
the core and actual products e.g. accessories, warranty.
Consumer products – products bought by final consumers for personal consumption.
Further classified based on how consumers go about buying them:
o Convenience products – consumer goods and services that people usually
buy frequently, immediately and with a minimum of product comparison and
buying effort. E.g. milk, bread.
Staples: products that consumers buy on a regular basis e.g. tea.
Impulse – purchased with little planning or search effort e.g.
Emergency – purchased when a need is urgent e.g. umbrellas during
o Shopping products – consumer goods and services that the customer, in the
process of selection and purpose, characteristically compares on such bases
as suitability, quality, price and style e.g. clothing, furniture. Uniform: products similar in quality but different enough in price to
justify making comparisons. The seller has to ‘talk price’ to the buyer.
Non-uniform: product features are often more important to the
consumer than the price e.g. the cut, fit and look of a suit.
o Speciality products – consumer goods and services with unique
characteristics or brand identification for which a significant group of buyers is
willing to make a special purchase effort (not normally compared by buyers)
e.g. Porsche cars, Mont Blanc Pens.
o Unsought products – consumer goods and services that the consumer either
doesn’t know about, or knows about but doesn’t normally think of buying e.g.
life insurance, pre-paid funeral.
Industrial products – goods bought by individuals and organisations for further
processing or for use in conducting a business e.g. chainsaw. Further classified
according to how they enter the production process and what they cost.
o Materials and parts – industrial goods that become part of the buyer’s
product, fall into two classes:
Raw materials: e.g. farm products, natural products.
Manufactured materials and parts: e.g. component material.
o Capital items – industrial goods and services that aid in the buyer’s
manufacturing or service operations. Two groups:
Installations: usually bought directly from the producer after a long
decision period e.g. buildings.
Accessory equipment: often bought from resellers e.g. tools.
o Supplies and services - Industrial goods and services that don’t enter the
finished product at all.
Supplies: usually purchased with minimum effort or comparison e.g.
maintenance and repair items (e.g. nails, paint, brooms).
Business services: usually supplied under contract e.g. maintenance
and repair services (window cleaning, computer maintenance and
Services – any activity or benefit that one party can offer to another that is essentially
intangible and doesn’t result in the ownership of anything.
Service industries (Australian and NZ Standard Industrial Classification divisions):
o Electricity, gas, water and waste services (ANZSIC division D).
o Construction (E).
o Wholesale trade (F).
o Retail trade (G).
o Accommodation and food services (H).
o Transport, postal and warehousing (I).
o Information media and telecommunications services (J).
o Financial and insurance services (K).
o Rental hiring and real estate services (L).
o Professional, scientific and technical services (M).
o Administrative and support services (N).
o Public administration and safety (O).
o Education and training (P).
o Healthcare and social assistance (Q).
o Arts and recreation services (R).
o Other services (S).
o Intangibility – services cannot be seen, tasted, felt, heard or smelled before
they are bought e.g. haircut.
o Inseparability – services cannot be separated from their providers, whether
the providers are people or machines e.g. hairdresser.
o Variability – services more variable than physical products e.g. restaurant.
o Perishability – services cannot be stored for later sale or use e.g. concert.
The extended service mix: o In services marketing there are an additional three Ps (as well as product,
place, price and promotion) to consider in the ‘extended service marketing
o People: the appearance and behaviour of service deliverers e.g. the dress
and manner of Jetstar cabin crew.
o Processes: how the service is actually delivered e.g. how passengers are
checked-in at the airport.
o Physical evidence: layout, furniture, brochures, signs e.g. reception areas of
an OPSM outlet.
o Serve as cues to allow customers to judge the overall quality of the service
o The customer:
Has needs that are often difficult to identify or quantify, may result in
a gap between what they expect and what they receive.
The challenge for marketers, through market research and customer
dialogue, is to reduce this gap.
Also, as customers are usually present or involved in service delivery
(e.g. haircut) they may not understand their role and mismanage their
contribution to the experience.
May also be present at the point of delivery and consumption (e.g.
concert), their individual behaviours may have an adverse effect on
o Service recovery:
Companies should have procedures and processes in place in case
Procedures employees follow – apologise, compensate, provide
options and take responsibility.
Key – to empower front-line service employees, give them authority,
responsibility and incentives they need to recognise, care about and
tend to customer needs.
o Delivering and performing service:
Challenge for service providers is to ensure consistency across time,
people and outlets.
E.g. receptionist for a Holiday Inn in Melbourne must behave the
same as the one in Wellington.
The use of manuals and procedures is essential, but when dealing
with people, variation is always a possibility and therefore remains a
Managing service quality:
o One of the main ways a service firm can differentiate itself is by delivering
consistently higher quality than its competitors do.
o Top service companies aim for 100% defect-free service and watch service
performance of themselves and their competitors very closely.
Extending the goods and services classification:
Event marketing – combines elements of marketing physical products with those of
services, particularly the experiential aspects of sporting, entertainment and other
staged events delivered over a period of time.
Social marketing – application of marketing to influence and change people’s ideas,
attitudes and behaviour for social good e.g. anti-smoking campaigns.
Political marketing – the process of ‘selling’ parties and candidates in a way that
make consumers give them attention, vote for them and support their policies.
Cause marketing – marketing an idea or a social cause (e.g. nuclear free living).
Not-for-profit marketing – involves activities by organisations not motivated by profit,
which ultimately lead to a donation, bequest or some other contribution.
Experiences marketing – involves adding value for customers buying products and
services through customer participation and connection by managing the
environmental aspects of the relationship e.g. visiting Disneyland. Individual product decisions:
1. Product attribute decisions:
o Product quality:
The ability of a product to perform its functions; it includes the
product’s overall durability, reliability, precision, ease of operation
and repair, and other valued attributes.
o Product features:
Can be offered with varying features.
o Product design:
The process of designing a product’s style and function; creating a
product that is attractive; easy, safe and inexpensive to use and
service; and simple and economical to produce and distribute.
2. Branding – consumers view brand as an important part of the product, and branding
can add value to it by allowing a company to charge higher prices.
o What is a brand?
A name, term, sign, symbol or design (or a combination) intended to
identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors.
o Brand equity:
The value of a brand, based on the extent to which it has high brand
loyalty, name awareness, perceived quality, strong brand
associations, and other assets such as patents, trademarks and
o Brand strategy:
Entails decisions on brand positioning, brand name, brand
sponsorship and brand development
Brand strategy decisions:
Brand positioning – can position the brand in the target customer’s
mind on either product attributes - least desirable level of positioning
(e.g. the marketers of Colgate can talk about the product’s innovative
ingredients and good taste); benefits (e.g. Colgate marketers can go
beyond the ingredients and talk about the resulting teeth-whiting
benefits); beliefs and values – strongest (e.g. Colgate marketers
communicate emotive issues such as giving customers ‘healthy,
beautiful smiles for life’).
Brand name selection – a good name can add greatly to a product’s
success. Desirable qualities for a name include:
It should suggest something about the product’s benefits and E.g. Navman.
It should be easy to pronounce, recognise and remember. E.g. AIM, Flickr.
Name should be distinctive. E.g. Kodak, Barbie.
Should translate easily into foreign languages.
Should be capable of registration and legal protection.