MKW1120 MONASH.docx

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Monash University
Maureen Griffiths

Introduction to marketing and the importance of marketing: What is marketing?  Defined: 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.  Market offerings: 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 and ideas. 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 dissatisfied.  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.  Markets: 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 to answer: o What customers will we serve – what is our target market? o How can we serve these customers best – what is our value proposition?  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 marketing). 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. vaccinations. 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 courses. 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 demand. 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 makes. 3. Preparing an integrated marketing plan and marketing mix:  Delivers the intended customer value.  Marketing plan: 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 customers.  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 organisation’s culture.  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 behaviours.  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 business.  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 promotion effort. Customer value and satisfaction:  Customer value: 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.  Customer satisfaction: o The extent to which a product’s perceived performance matches a buyer’s expectations. 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 parties.  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 anyway. 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 specific disappointments. 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- flyer programs. 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 organisation. 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 customer.  Benchmarking: Comparison of a company’s performance and processes with those of its competitors and with best-practice companies.  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 policies:  Company profits.  Consumer wants.  Society’s interests. 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 organisation. 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. Linfox.  Resellers: Distribution channel firms that help the organisation to find customers or make sales to them e.g. Myer.  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 markets.  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. o Customers:  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 process.  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. o Competitors. o Publics:  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. neighbourhoods residents.  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.  Demographic environment: 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.  Economic environment: o Factors that affect consumer buying power and spending patterns.  Changes in income.  Changing consumer spending patterns.  Natural environment: 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.  Increased pollution.  Government intervention in natural resource management.  Technological environment: o Forces that affect new technologies, creating new product and market opportunities.  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.  Cultural environment: 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.  Developing information: o Internal records: Information gathered from sources within the company to evaluate marketing performance and to detect marketing problems and opportunities. o Marketing intelligence: Systematic collection and analysis of publicly available information about competitors and developments in the marketplace. 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 marketing process. 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 world. 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- effect relationships.  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:  Research approaches: 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 responses.  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.  Sampling plans: 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 stores. 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. Buyer behaviour: Consumer market: All the individuals and households who buy or acquire goods and services for personal consumption. Characteristics influencing consumer behaviour:  Psychological factors: o Motivation:  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 processes:  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 sales information.  Selective retention: People tend to only retain information that supports their attitudes and beliefs. o Learning:  Changes in an individual’s behaviour arising from experience. o Beliefs and attitudes:  Belief: A descriptive thought or conviction that a person holds about something.  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 environment.  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 brand.  Personal factors: 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, etc). 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.  Social factors: o Family and household – Members can strongly influence buyer behaviour. o Groups:  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 buying behaviour. 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 between brands.  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 differences. 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.  Industrial market: 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.  Reseller market: o All the individuals and organisations that acquire goods for the purpose of reselling or renting them to others at a profit.  Government market: o Government units that purchase or rent goods and services or carrying out the main functions government.  Institutional market: 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 separately. 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 purchase. o Deciders: Have formal or informal power to select or approve the final suppliers. o Gatekeepers: Control the flow of information to others.  Major influences on business buyers: o Environmental factors. o Organisational factors:  Upgraded purchasing.  Centralised purchasing.  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. Markets:  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 positioning. Market segmentation:  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 on gender.  Income segmentation: Dividing a market into different groups based on income. o Psychographic segmentation: Dividing a market into different groups based on social class, lifestyle or personality characteristics.  Socioeconomic status.  Lifestyle.  Personality. o Behavioural segmentation: Dividing a market into groups based on consumer’s knowledge of, attitude towards, uses for and responses to a product.  Occasion segmentation: Dividing the market into groups according to occasions when buyers get the idea, make a purchase or use a product.  Benefit segmentation: Dividing the market into groups according to the different benefits that consumers seek from the product.  User status.  Usage rate.  Loyalty status.  Buyer-readiness stage.  Attitude towards a product.  Requirements for effective segmentation: o Measurable – Size and purchasing power of the segments must be able to be measured. o Accessible – Segments must be able to be effectively reached and served. o Substantial – Segments must be large enough and profitable enough to serve. 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. Market targeting:  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 each. 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. Market positioning:  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 competing products.  Positioning strategies: 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.  Product differentiation.  Services differentiation.  Personnel differentiation.  Image differentiation. 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 items).  Includes services that are offered by marketers e.g. legal advice, dental care and banking.  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 function Nature of Fungible Tangible Intangible Memorable Effectual offering 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 production duration Seller Trader Manufacture Provider Stager Elicitor r Buyer Market Customer Client Guest Aspirant Factors on Characteristic Features Benefits Sensations Traits demand s  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. Product classifications:  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. chocolate bars.  Emergency – purchased when a need is urgent e.g. umbrellas during a rainstorm. 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 repair). Services classifications:  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).  Services characteristics: 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 mix’. 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 offering.  Service challenges: 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 each other. o Service recovery:  Companies should have procedures and processes in place in case they fail.  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 challenge.  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 channel relationships. 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. qualities. 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.
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