BSB 126 – MARKETING NOTES
LECTURE 1: INTRODUCTION TO MARKETING AND THE MARKETING CONCEPT
Marketing is not selling or advertising!
Marketing must get it (all) right
• Price collectively known as the 4 P’s
• Place (target market eg. Myers or BigW?)
• People (target market and staff)
• Time – increasingly valued by consumers
• If the competition moves onto marketing before your business and they never do, the business is
• “The future belongs to people who see possibilities before they become obvious”
The Production Orientation
• Are willing to pay more for a product
• People’s perception of a rand and its quality is difficult/slow to change
• The difference between selling and marketing:
- Selling – find and customer and sell it (to anyone)
- Marketing – choose a need and know it better than the customer
• Railways – went broke due to competitions. Train is a product where as transport is a customer need.
• MGM (movie studio)
Movie business = entertainment
Product = customer need
Selling = marketing
• Marketing involves thinking about a customer need, not the product. Solely concentrating on the
product leads to failure eg. Apple ‘died’ for a while but came back into the market due to better product
• Selling – someone focused on the product that is focused on the needs of the seller and not the buyer (ie.
the seller is trying to sell the product in order to make profit/commission/revenue)
• “There will always be a need for selling. But the aim of marketing is to know and understand the
customer so well that the product fits him and sells itself. Marketing should result in a customer who is
ready to buy. All that is needed then is to make the product or service available …”
• Selling = needs of the seller
• Marketing = needs of the buyer
Product orientation → selling orientation → marketing orientation
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Customer Orientation coordinated → customer satisfaction↓
+ + marketing activities organisation success
Organisation’s performance objectives
Differences between marketing and selling orientations
• Marketing orientation – determining customer needs and wants and then developing a product to satisfy
that need and still yield a satisfactory profit. The aim is consumer satisfaction.
- 2 + 2 = 5
- Various products in a company feed off each other and all reinforce each other (eg. Disney)
- Initial money may come from merchandise
Satisfactions = Perceptions – Expectations
S = P - E
• Brand loyalty is craved by marketers
Refinements of the marketing concept
• Quality is defined by customers
• TQM = total quality management
• Selling is about transactions whilst marketing is about building a relationship
• For external marketing to be successful – internal marketing must be good. The bigger company
generally = less concerned with their customers/marketing outside their area
The Societal Marketing Concept
• Customer satisfaction and profit = a certain balance
• “green-washing” – green or carbon neutral claims
Importance of Marketing
• Traditionally, seen as an expense but is now seen as an investment.
TEXTBOOK NOTES – Chapter 1: Presenting and Describing Information
Marketing: process of developing, pricing, promoting and distributing goods, services and ideas to satisfy the
needs of consumers
Exchange: trade of things of value between buyer and seller so that each is better off
Marketing concept: idea that an organisation should strive to satisfy the needs of consumers while also trying to
achieve the organisation’s goals
Market orientation: focusing organisational efforts to collect and use information about customers’ needs to
Market: people with desire and ability to buy a specific product
Target market: specific group of potential consumers towards which an organisation directs its marketing
Marketing mix: the marketing manager’s controllable factors – product, price, promotion and place – that can
be taken to solve a marketing problem
Environmental factors: uncontrollable marketing factors such as social, economic, technological, competitive
and regulatory forces
Customer value: buyers’ benefits including quality, price, convenience, on-time delivery and before-and-after
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Relationship marketing: linking the organisation to its individual customers, employees, suppliers and other
partners for their mutual long-term benefit
Marketing program: plan that integrates the marketing mix to provide a good, service or idea to prospective
Societal marketing concept: view that organisations should satisfy the needs of consumers in a way that
provides for society’s wellbeing
Ultimate consumers: people who use the goods and services purchased for a household
Organisational buyers: manufacturers, wholesalers, retailers and government agencies who buy goods and
services for their own use or for resale
Utility: benefits or customer value receive by the product
What is marketing?
• The importance of the beneficial exchanges that satisfy the objectives of both those who buy and those
who sell ideas, goods and services
• Marketing seeks to discover the needs and wants of perspective customers and to satisfy them
• The organisation must strike a continual balance among the sometimes differing interests of different
individuals and groups eg. it is not possible to simultaneously provide the lowest-prices and highest-
quality products to customers and pay the highest prices to suppliers, highest wages to employees and
maximum returns to shareholders.
How Marketing discovers and satisfies consumer needs
• Should marketing try to satisfy consumer needs or wants? BOTH!
• Marketing tries to influence what we as consumers buy
• A mistake often made by businesses is to focus too much on the produce they are selling and not on the
• A focus on customer needs is central to the market orientation widely followed by businesses today
• The first stage was the production era: goods were scarce and buyers were willing accept anything that
was available from the 1920s-1960s. This was followed by the marketing concept era in which
organisations strived to satisfy the needs of consumers while also trying to achieve the organisation’s
goal. This lead to today’s market orientation era. The market orientation focuses its efforts on
continuous collecting information about customer’s needs, sharing this information and using it to create
• This has led to customer relationship management (CRM) – the process of identifying prospective
buyers, understanding them intimately and developing favourable long-term perceptions of the
organisation and its offerings so that buyers will choose them in the market place.
• Word of mouth advertising is far more effective than any advertising a firm can do itself.
• Loyalty matters financially to a firm because it costs a business up to time times more to recruit one new
customer than to keep an existing customer.
• The four P’s: Controllable Marketing Mix Factors
o Product: a good, service or idea to satisfy a customer’s needs
o Price: what is exchanged for the product
o Promotion: a means of communication between the seller and buyer
o Place: a means of getting the product the consumer. When a company puts a product on sale,
they are changing one element of the marketing mix – namely, the price.
The Marketing program: How customer relationships are built
• A firm achieve meaningful customer relationships by creating connections with its customers through
careful co-ordination of the product, its price and the way it’s promoted and how it’s placed.
• Relationship marketing involves a personal, ongoing relationship between the organisation and its
individual customers that begins before and continues after the sale
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• The stages of marketing:
o Awareness: knowing that the movie/product etc. is coming and what the main themes are
o Exploration: involves actively seeking further information and a growing desire to purchase the
o Commitment: requires a definite intent to purchase the product and recruiting others to do so.
How Marketing Became So Important
• Every organisation markets through manufacturing, retailing and providing services as well as non-
• Goods, services and even ideas are marketing.
• Both individuals and organisations buy and use goods and services that are marketed. Ultimate
consumers are people who use these goods and services in their household. In contrast, organisational
buyers are those such as retailers, manufacturers or government who buy goods and services for their
own use or for resale.
• In free-enterprise society, there are three specific groups who benefit from effective marketing:
consumers who buy, organisations that sell and society as a whole.
• True competition ensures consumers benefit from the best products, the lowest prices or exceptional
• Marketing creates utility, the benefits or customer value received by users of the product. The utility is
the result of the marketing exchange process. There are four different utilities: form, place, time and
possession. The production of the good or service constitutes form utility. Place utility means having the
offering available where consumers need it, whereas time utility means having it available when needed.
Possession utility is the value of making an item easy to purchase through financial arrangements.
1. Marketing is process of planning and executing the conception, pricing, promotion and distribution of
goods, services and ideas to create exchanges that satisfy individual and organisational objectives. This
definition relates to two primary goals of marketing:
a) discovering the needs of consumers and satisfying them and,
b) satisfying them.
2. Because an organisation doesn’t have the resources to satisfy the needs of all consumers, it selects a target
market of potential customers – a subset of the entire market – on which to focus its marketing program.
3. Four elements in a marketing program designed to satisfy customer needs are product, price, promotion and
place. These elements are called the marketing mix or the four P’s or the controllable variables because
they are under the general control of the marketing department.
4. Environmental factors, also called uncontrollable variables, are largely beyond the organisation’s control.
These include social, technological, economic, competitive and regulatory forces.
5. Building on customer value and relationship marketing concepts, successful firms develop mutually
beneficial long-term relationships with their customers.
6. In marketing terms, our business history is divided into four periods: the production era, the sales era, the
marketing concept era and the current marketing orientation era.
7. Marketing managers must balance consumer, organisational and societal interest. This involves issues of
ethics and social responsibility.
8. Profit-making and non-profit organisations perform marketing activities. They market goods, services and
ideas that benefit consumers, organisations and countries. Marketing creates utilities that give benefits, or
customer value, to users.
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LECTURE 2: SEGMENTATION
What is the most important choice that a company makes?
• Choice shapes the business eg. Who are you selling to/who is your target market – ensure it fits with the
• Evolution from mass and product variety marketing (a different range eg. Colours, shape) due to new
• Product changes due to competition, consumer taste and technology improvements
• Marketing targeting – focus on the customer need
• Vertical integration – drive down costs to ensure a larger profit
Market Segmentation is the process of dividing the total market for a good or service into several smaller,
internally homogeneous groups
• Why segmentation is necessary:
- Differences in buying habits
- Differences in the way goods/services are used
- Different motives for buying
- In competitive markets, it is dangerous to treat all customers the same
• Ideal is ‘one-to-one’ marketing – selling to one person at a time
• Typically 2-12 is the market segment for most companies
Markets are segmented by:
• Intuition based on experience and judgement
• Mimicking competitors and earlier market entrants
• Performing an analysis: identifying current and potential wants – identifying characteristics that
distinguish segments – determining who has each want
A useful segmentation process must meet 5 criteria:
1. Potential for increased profit ie. extra costs such as production, advertising (x amount of different types
are needed), distribution all go up – economies of scale
2. Similarity of needs of buyers within a segment eg. Product features wanted
3. Difference of needs of buyers among segments
4. Potential of a marketing action to reach a segment eg. Not just TV but radio or a letter drop – depending
on the target market/demographics
5. Simplicity and cost of identifying and assigning buyers to segments
Not every business should segment the market – most but NOT all should.
Most basic market segmentation divides into:
• Ultimate consumers: those who use it for themselves/in the home
• Business users: those who use it in their businesses, to make other products or to resell it
Example Market Segmentations
1. Age 1. Star rating
2. Gender 2. Price
3. Occupation 3. Location
Consumer markets are commonly further segmented on the basis of:
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• Buying behaviour
These are the most significant factors!
• Divides the market based upon the geographic distribution of the population
• Regional distribution eg. Europe, Asia as they tend to share the same values
• Urban, suburban and rural distribution ie. to suit the needs of an urban customer will be different than
that of a rural customer
• Uses the vital statistics that describe a population eg. Age, social class, ethnicity
• Examining attributes related to how a person thinks, feels and behaves.
• Approaches are typically based on personality, values, lifestyle and interests
• Used to segment the market based upon product-related behaviour
• Common bases are:
- Benefits desired
- Product usage rate eg. Nonusers, light, medium, heavy
- 80/20 rule: 80% of profits are made by 20% of the customers
Business markets are often segmented on the basis of:
• customer location
• type of business customer ie. industry, size
In targeting, when selecting a segment to pursue, a company can follow one of 3 broad strategies:
1. market aggregation: every customer ie no segmentation at all. Employ product differentiation
2. single-segment concentration: focus on one segment or a niche market eg. Ferrari
3. multiple-segment segmentation: (most businesses are in this category) select two or more segments and
devise marketing mixes for each
Guidelines in selecting a target market
• market size – large size = more attractive
• expected growth
• number and size of competition is minimal
• cost of reaching the segment – is it effective
• opportunity must be compatible with the company’s resources and objectives
Roy Morgan Values Segments
• allows you/business to know more about the target market and their interests and needs. Therefore,
marketers are better able to suit the customer needs
• Example: customer is always looking for a deal. Therefore retail staff is taught to make a ‘deal’ despite
the retail price on the shelf.
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• The way a firm’s product, brand or organisation is viewed relative to the completion
• There are 3 steps in the positioning process
1. Selecting the positioning concept
2. Design the feather that most effectively conveys position
3. Coordinate marking mix components to convey a consistent position
• Once company is identified to a niche – the company has to stick to it!
• Only 1 concept/idea can be put in a 30 second commercial and therefore it is ideal for the company to
focus entirely on one key concept or idea
Essence of market segmentation and marketing
• In the willingness to not serve certain customers needs/wants – the ability to say No to a certain market
• “The essence of positioning is sacrifice. Yu must be willing to give something up in order to establish
that unique position.”
• Eg. Nike choose athletes with attitude/who are rebellious to cater to their youth-oriented target market
• Companies must be a choice – otherwise your brand is bland to all consumers
Demand forecasting entails estimating sales of a product during some time in the future.
• The concepts of market segmentation, targeting and positioning
• The process of market segmentation
• Bases for segmenting consumers and business markets
• Target-market strategies
• Methods of forecasting demand
TEXTBOOK NOTES: Chapter 8 Identifying Market Segments and Targets
Market segmentation: sorting potential buyers into groups that have common needs and will respond similarly
to a marketing action
Marketing segments: groups that result from market segmentation
Product differentiation: strategy of using different marketing mix activities, such as product features or
advertising, to help consumers perceive a product as being different and better than competing products
Market-product grid: framework relating the segments of a market to products or marketing actions of the firm
Synergy: increased customer value achieved through performing organisational functions more efficiently
Usage rate: quantity consumed or times visited during a specific period
80/20 rule: idea that 80% of a firm’s sales are obtained from 20% of its customers
Product positioning: the space a product occupies in consumers; minds on important features relative to
Perceptual map: means of displaying the position of products or brands in the customers’ minds
A new producer in a market is often smarter to create a new niche in an established market rather than take on
a well-established business which dominates that market.
Why Segment Markets?
• Segment markets in order to respond more effectively to the wants of groups of potential buyers and
thus increase sales and profits
• Market segmentation involves aggregating prospective buyers into groups that have common needs and
will respond similarly to a marketing action resulting in relatively homogeneous groups of perspective
buyers r those who are relatively similar to each other in terms of their consumption behaviour
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• Stresses the importance of grouping people or organisations according to the similarly of their needs and
the benefits they are looking for in making a purchase
• Such needs and benefits must be related to specific marketing actions the organisation can take and may
involve separate products or other aspects of the marketing mix
• It is only a means to an end: to lead to tangible marketing actions that can increase sales and
When to Segment Markets
• expects that this will increase its sales, profit and return on investment
• there are three types/situations
o one product and multiple market segments
o multiple products and multiple market segments
o ‘segments of one’ or mass customisation
The process of segmenting and targeting markets involves five key steps
Identify market needs
Steps in segmenting and targeting markets
1. Group potential buyers into segments
2. Group products to be sold into categories
3. Develop a market-product grid and estimate size of markets
4. Select target markets
5. Take marketing actions to reach target markets
Execute marketing program
Step 1: Form potential buyers into Segments
• It’s not always a good idea to segment a market
• Segments should be developed that meet 5main criteria:
o Potential for increase profit
o Similarity of needs of potential buyers within a segment
o Difference of needs of buyers among segments
o Potential of a marketing action to reach a segment
o Simplicity and cost of assigning potential buyers to segments
• Two variables are generally used to segment consumer markets: consumer characteristics and buying
Step 2: Form Products to be sold into groups
Step 3: Develop a Market-Product Grid and Estimate Size of Markets
Step 4: Select Target Markets
• Target markets must be selected carefully
• If a company picks too narrow a group of segments, it may fail to reach the volume of sales and profits
• If a company picks too broad a group of segments, it may spread its marketing efforts so thin that the
extra expenses are more than the increased sales and profits
• Criteria to use in picking target segments:
o Market size
o Expected growth
o Competitive position
o Cost of reaching the segment
o Compatibility with the organisation’s objectives and resources
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Step 5: Take Marketing Actions to Reach Target Markets
• Phil Knight, founder of Nike: “It doesn’t matter how many people you offend, as long as you are
reaching your target market”
Market Product Synergies: A Balancing Act
• Recognising opportunities for key synergies (efficiencies) is vital to success in selecting target market
segments and making marketing decisions
• Marketing synergies: run horizontally across the grid, each row represents an opportunities for
efficiency in terms of a market segment
• Product synergies: run vertically down the market product grid, each column represents an opportunity
for efficiency in research and development
• Taking advantage of marketing synergies can often come at the expense of production ones because a
single consumer segment will likely require a variety of products – each will have to be designed and
Product Positioning Using Perceptual Maps
• A key to positioning a product or brand effectively is the perceptions of customers.
• In determining its position and the preferences of customers, companies obtain three types of data from
1. The important attributes for a product class
2. Judgements of where existing products or brands are located on these attributes
3. The location of the firm’s own product or brand on these attributes
1. Market segmentation is sorting potential buyers into groups that have common needs and will respond
similarly to a marketing action
2. A straightforward approach to segmenting, targeting and reaching a market involves five steps
a) form potential buyers into segments by characteristics such as their needs
b) form products to be sold into groups
c) develop a market-product grid and estimate size of markets
d) select target markets
e) take marketing actions to reach the target markets
3. Marketing variables are often used to represent customer needs in the market segmentation process
4. Usage rate is an important factor in a market segmentation study. Users are often divided into heave,
medium and light users
5. Non-users are often divided into prospects and non-prospects. Non-users of a firm’s brand may be
important because they are prospects – users of some other brand in the product class who may be
convinced to change brands
6. Criteria used a) to segment markets and b) to choose target segments are related b different. The former
includes potential to increase profits, similarity of needs of buyers within a segment, difference of needs
among segments and whether or not a resulting marketing action is possible. The latter includes market
size, expected growth, the competitive position of the firm’s offering in the segment and the cost of
reaching the segment
7. A market-product grid is a useful way to display what products can be directed at which market
segments, but the grid must lead to marketing actions for the segmentation process to be worthwhile
8. In positioning a product, a company can consider consumer judgments in the form of perceptual maps to
locate its brand or product relative to competing ones.
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LECTURE 3: LINKING MARKETING AND CORPORATE STRATEGIES
Levels of Strategy in Organisations
• Business unit: organisation that markets a set of related products to clearly defined customers
• Function level groups of specialists create value for an organisation
Why strategic planning is important?
• Guidance to management: what are we trying to achieve?
• Recognising/responding to threats/change/opportunities
• Rationale to evaluate competing requests, coordinate strategy related to decision-making
• Proactive not reactive
• “The plan (outcome) is nothing, planning (a process) means everything” – its not about the outcome but
about how you got there
• Internal organisational politics and having a good plan – either of these factors make the final decision
Strategic Planning: the mission comes first!
• Mission statement: why organisation exists and what it seeks to achieve. Identifies, “What is our
• However, this question can only truly be answered from a customer’s perspective: with his/her
perceptions, values, situations
• It’s all about the customer need, not the product
• It has been suggested to define a business in 3 ways:
o Customer groups or who
o Customer needs or what customer needs are satisfied.
o Technologies or how
A mission statement of the company’s scope including customers, markets, products, technology and values
often with an inspirational theme
In contract, a culture is a system of shared values ie. what are you saying to customers and employees about
what you find important that distinguishes the organisation from others.
Example: due to an increase in technology, Microsoft was forced to change their mission statement. As a result
of this, Microsoft now competes with Nokia. It is crucial to know who the competition is and be able to define
Stages in Strategic Marketing Planning
• Situation analysis
• Goals of objectives – convert mission into targeted levels of performance to be achieved
• Strategies of how to achieve goals
• Control or checks that the plan is on target
• Assesses where a firms product has been, where it is now and where it is headed
• Helps to understand where we are now in terms of plans and external factors and trends affecting it
Examples of goals or objectives
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• Quality/customer satisfaction
• Social responsibility
It is important to be specific in setting goals ie. by how much or give a time frame
Stages in Strategic and Marketing Planning
• Marketing strategy: means by which a marketing goal is achieved
o Marketing program or mix
The control phase
• Comparing results with plans to identify deviations
The Strategic Marketing Process: Developing a Strategy
1. Situation Analysis (lots of ways of doing this!)
o Understanding the market environment
o Points of Difference
o Business Portfolio Analysis
o Market-Product Analysis
o Porter’s 5 Forces
Situation Analysis: Understanding the Marketing Environment
• Customers – who are vs. Potential
• Competencies – organisations special capabilities
• Competitive advantage – unique strength compared to competitors
• Benchmarking – discover how to do something better within your own firm ie. look at competitors/other
organisations (someone who is very good at the process you are interested in) to see how to do it
• Competitors – who are they? How do you define them? Don’t always focus on your immediate
competition, rather on anyone who focuses on meeting the same consumer need
Points of Difference
• Characteristics of a product that make it superior to competitive substitutes
• Most new products fail – approx 90%.
• This is the single most important factor in the success or failure of a new product
Developing Corporate Strategy: Business Portfolio Analysis
• Studies a firms business units as though they were a collection of separate investments
Net Promoter Scale
• Indicator of loyalty and likely retention ie. how likely is a customer to recommend a business to others?
• Correlates growth and other satisfaction scores, measured relative to competitors
• Should be a basis for managerial decision making and situational analysis
4 Categories in BCG (Boston Consulting Group Growth – share matrix for a strong diversified firm)
• Star: increased growth and market share – hope that it will become a cash cow
• Cash cow: high share of the business profits
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• Question mark/problem child: a couple of choices about what to do with it
• Dog: ‘complete loser’ – get rid of it
4 Strategies of BCG
• Invest to build Star and ?
• Invest to hold ?
• Harvest Cash Cow, Star
• Divest Dog
• Market penetration
• Market development
• Product development
• Diversification – very risky ie. almost 80% fail in the first 5 years
Porter’s 5 Forces
• Threat of new entry
• Threat of substitutes
• Power of buyers
• Power of suppliers
TEXTBOOOK NOTES: Chapter 2 Linking Marketing and Corporate Strategies
Profit: reward to a business firm for the risk it undertakes for offering a product for sale
Goals: targets of performance to be achieved, often by a specified time
Market share: ratio of a firm’s sales to the total sales of all firms in the industry
Strategic marketing process: approach whereby an organisation allocates its marketing mix resources to reach
its target markets
Marketing plan: road map for the marketing activities of an organisation for a specified future period of time
Situation analysis: taking stock of where a firm or product has been recently, where it is now and where it is
SWOT analysis: organisation’s appraisal of its internal strengths and weaknesses and its external opportunities
Market segmentation: sorting potential buyers into groups that have common needs and will respond similarly
to a marketing action
Points of difference: those characteristics of a product or service that make it superior to competitive substitutes
Marketing strategy: means by which a marketing goal is achieved
Marketing tactics: detailed day-to-day operational decisions essential to the overall success of marketing
Levels of Organisations and How Marketing Links to them
• All organisations need strategic direction ie. they need an idea of what they hope to achieve and how
they plan to do this
• SBU – Strategic Business Unit
• PMU – Product Market Unit
Business Corporate-level strategy
Business unit-level strategy
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Information Systems Finance Research and Development Marketing Manufacturing HR
Strategy Issues in Organisations
• The Business
• The mission
• Goals or objectives – businesses can pursue several different types of goals:
o Market share in terms of revenue or volume
o Customer satisfaction
o Employee welfare
o Social responsibility
Setting Strategic Directions
Involves answering two questions:
1. Where are we now?
2. Where do we want to go?
Where are we now?
o An organisations special capabilities, including skills, technologies and resources that
distinguish it from other organisations
o Should be distinctive enough to provide a competitive advantage, a unique strength relative to
competitors, often based on quality, time, cost or innovation
Where do we want to go?
Knowing where the organisation is at the present time enables managers to set a direction for the firm and
commit resources to move in that direction
• Business Portfolio Analysis
o Uses quantified performance measures and growth targets to analyse a firm’s strategic business
units as though they were a collection of separate investments
o Vertical axis represents market growth rate ie. the annual rate of growth of the specific market or
o Horizontal axis represents relative market share, defined as the sales of the SBU divided by the
sales of the largest firm in the industry
o Can be divided into four groups based on the amount of cash generated or required from the
Cash cows: generate large amounts of cash, far more than they can invest profitably in
their own product line. Dominant market share of a low-growth market and provide cash
to pay large amounts of company expenses and enables investment in other SBU’s
Stars: high share of high-growth markets that may need extra cash to finance their own
rapid future growth – hope they become cash cows
Question markets/problem children: low share of high-growth markets which require
large injections of cash just to maintain their market share
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Dogs: low share of low-growth markets. They may never generate enough cash to sustain
themselves and do not hold the promise of ever becoming real winners for the firm.
Dropping may be required, except when relationships with other SBUs, competitive
considerations or potential strategic alliances exist
• Market Product Analysis
o Use the strategy of market penetration – increase sales of present products to existing markets
o Market development – selling existing products to ne market
o Product development – involves selling a new product to existing markets
o Diversification – involves developing new products and selling them in new markets. This is a
potentially high-risk strategy because the company has neither previous product experience nor
marketing experience from which to draw
The Strategic Marketing Process
Other questions soon begin to emerge:
1. How do we allocate our resources to get where we want to go?
2. How do we convert our plans to actions?
3. How do your results compare with plans and do deviations require new plans?
• This approach is used in the strategic marketing process – an organisation allocates its marketing mix
resources to reach its target markets. Divided into three phases: planning, implementation and control
• Leads to a formal marketing plan – a road map of marketing activities of an organisation for a specified
Strategic Marketing Process: The Planning Phase
1. Situation (SWOT) analysis
• Taking stock of where the firm or product has been recently, where it is now and where it is
headed in light of the organisation’s plans and the external forces and trends affecting it
• SWOT – an organisation’s appraisal of its internal strengths and weaknesses and its external
opportunities and threats
• Both can be done at the level of the entire company, business unit, product line or specific
• Knowledge of favourable/unfavourable factors both internal and external from the company
forms the foundation on which the business builds its marketing program:
o Indentifying trends in the firm’s industry
o Analysing the firm’s competitors
o Assessing the firm itself
o Researching the firm’s present and prospective customers
• SWOT analysis helps a firm identify the strategy related factors which can have a major effect
on the company in order to translate these results into specific actions to help the firm grow
2. Market-Product Focus and Goal Setting
• Determining which products will be directed towards which customers is essential for
developing an effective marketing program
• Groups have common needs and will respond similarly to a marketing action
• Ideally, a firm can use market segmentation to identify the segments on which it will focus its
efforts and develop one or more marketing programs to reach them
3. Marketing Program
• Use of the 4 P’s in the marketing program
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Executing the Marketing Program
• Strategy: used loosely but implies both the end sought (target market) and the means to achieve it
Comparing Results with Plans to Identify Deviations
• Planning gap: the difference between the projection of the path to reach a new goal and the projection of
the path of results of a plan already in place.
1. Today’s large organisations, both business firms and nonprofits organisations, are often divided into
three levels: the corporate, business unit and functional levels
2. Marketing has a role in all three levels by keeping a focus on customers and finding ways to add
genuine customer value. At the lowest level, marketing serves as part of a team of functional specialists
whose day-to-day actions actually involve customers and create customer value
3. Organisations exist to accomplish something for someone. To give itself focus, an organisation
continuously assesses its business, mission and goals
4. Setting strategic directions for an organisation involves asking, “Where are we now?” to assess the
organisation’s customers, competencies and competitors. It also involves asking, “Where do we want to
go?” and using techniques like portfolio analysis and market-product analysis
5. The strategic marketing process involves an organisation allocating its marketing mix resources to reach
its target market using three phases: planning, implementation and control
6. The planning phase of the strategic marking process has three steps, each with more specific elements:
situation (SWOT) analysis, market-product focus and goal setting and marketing program
7. The implementation phase of the strategic marketing process has four key elements: obtaining
resources, designing the marketing organisation, developing schedules and executing the marketing
8. The control phase of the strategic marketing process involves comparing results with the planned targets
to identify deviations and taking actions to correct negative deviations and exploit positive ones.
Jessica King BSB126 –Marketing Semester 1, 2009 16
LECTURE 4: INTRODUCTION TO MARKETING AND THE MARKETING CONCEPT
• Don’t have to do market research to find out information
• Use of databases/data warehouses
• Reduces the guesswork but never eliminates the need for judgement
• Can be misleading due to problems with:
- marketing objectives
- research problem definition
- understanding the results
• Is necessary due to:
- competitive pressures
- changing complex markets both foreign and domestic
- the cost of strategic mistakes
- changing customer expectations
Marketing research has a lot of pitfalls but is necessary and has to be done because with mistakes are larger
Limitations of marketing research
• consumer behaviour is complex and difficult to predict
• what people say and do may be different
Four Step Marketing Approach
1. Define the problem (most important)
- set research objectives
- identify possible marketing actions
2. Develop a research plan
- identify data needed for marketing actions
- determine how to collect data
3. Collect relevant information
- primary/secondary data
4. Deliver the final report
- analyse data
- present findings
- make recommendations
Data for research projects comes from:
• Primary sources: specifically gathered for the issue at hand
• Secondary sources: data already gathered eg. news media, government agencies, marketing research
Secondary Data (always start with this!)
• Saves time and money if relevant
• Aids determination of direction for primary data
• Pinpoints the kind of people to approach
• Serves as a basis of comparison
Jessica King BSB126 –Marketing Semester 1, 2009 17
• May not be on target with the specific issue at hand
• Is it comparable?
• Quality and accuracy of data?
• Is it current?
• Is it impartial?
• Answers specific questions
• Current data
• Source of data is known
• Secrecy can be maintained
• Quality may decline if interviews are lengthy
• Reluctance to participate
• Surveys eg. phone, mail, internet, focus groups
• Observation eg. personal, mechanical
• Experiments eg. laboratory, field
• Qualitative eg. focus groups, online forums
Focus groups: group of approximately 12 who participate in a group discussion led by a moderator
Primary Data/Research Secondary Data/Research
Qualitative Data Quantitative Data Qualitative Data Quantitative Data
(how they think – (survey)
A Question of Sampling
• Representative of the group it is drawn from
• Improper sample can lead to error in study
• Therefore make a choice between the two types: probability or non-probability
• Simple random sample: known and equal change of selection
• Stratified random sample: population divided into mutually exclusive groups (eg age)
• Cluster (area) sample: population divided into mutually exclusive groups and draw a sample
• Convenience sample: most accessible population
• Judgement sample: uses judgement to select population member who has food prospects for accurate
• Quota sample: interviews a prescribed number of people in several categories
Jessica King BSB126 –Marketing Semester 1, 2009 18
• People watching people eg. mystery shoppers
• People watching activity eg. audits
• Machines watching people eg. traffic counters
Motivational Research/Projective Techniques
• Uses ambiguous stimuli to explore subconscious motives and values
• Eg. Thematic apperception tests and drawings – drawings are used and not photos because photos lead
Predicting behaviour is an inexact science
Research is a process, not a project – needs to be ongoing, not a one-shot deal.
TEXTBOOOK NOTES: Chapter 7 Turning Marketing Information into Action
Marketing research: process of collecting and analysing information in order to recommend actions to improve
Objectives: specific, measureable goals to achieve in solving a problem
Measures of success: criteria or standards used in evaluating proposed solutions to a problem
Data: facts and figures related to a problem
Secondary data: facts and figures that have already been recorded before the project at hand
Primary Data: facts of figures that are newly collected for a project
Observational data: facts and figures obtained by watching either mechanically or in person how people
Questionnaire data: facts or figures obtained by asking people about their attitudes, awareness, intentions and
Sales forecast: total sales of a produce that a form expects to sell during a specified time period under specified
What is marketing research?
• Process of defining a marketing problem and opportunity, systematically collecting and analysing
information and recommending actions to improve an organisation’s marketing activities.
• It can reduce risk and uncertainty in order to take more effective marketing actions
Step1: Define the Problem
Set the research objectives
Identify possible marketing actions
• If objectives are too broad, the problem may not be researchable
• If they are too narrow, the value of research results may be seriously lessened
Step 2: Develop the Research Plan
Identify Data needed for marketing decisions
• Focus on collecting data that helps to make a clear choice
Determine how to collect data
• Often as important as actually collecting the data.
• Can be broken into two categories: concepts and methods
• Concepts: ideas about how products or services
Jessica King BSB126 –Marketing Semester 1, 2009 19
• Methods: approaches that can be used to collect data. Two methods included sampling – by selecting a
group of distributions, customers or prospects and asking questions and treating answers as typical for
all. The other method is statistical inference – generalise the results from the sample to much larger
groups to decide on marketing actions
Step 3: Collect Relevant Information
• Facts and figures previously recorded
• Internal eg. financial statements, research reports
• External eg. ABS census reports, government figures
• Facts and figures newly collected for the project
• Observational eg. mechanical and electronic approaches
• Questionnaire eg. mail, online, telephone or focus groups
Step 4: Deliver the Final Report
1. Marketing research is the process of defining a marketing problem and opportunity, systematically
collecting and analysing information and recommending actions to improve an organisation’s marketing
activities. The chapter uses a four-step marketing research sequence that can lead to better decisions
2. Defining the problem, step 1 in the sequence, involves setting the research objectives and identifying
possible marketing actions
3. Developing the research plan, step 2, requires identifying the data needed and determining how to collect it
4. Collecting relevant information, step 3, includes considering pertinent secondary and primary data.
Secondary data have been recorded prior to the project and include those pieces of information internal and
external to the organisation. Primary data are collected specifically for the project and are obtained by either
observing or questioning people
5. Information technology enables massive amounts of marketing data to be stored, processed and accessed.
Databases can be queried using data mining to find statistical relationships useful in marketing
6. Delivering the final report is step 4. It involves analysing data, presenting finds and making
recommendations to decision makers
7. three sales forecasting techniques are judgements of individuals, surveys of groups and statistical methods
Jessica King BSB126 –Marketing Semester 1, 2009 20
LECTURE 5: CONSUMER BEHAVIOUR
The consumer decision making process
• Needs recognition
• Information search
• Evaluation of alternatives all are effected by cultural and social factors
• Post purchase behaviour
• Internal and external stimuli
• 5 senses – sensual marketing: using all 5 senses in marketing products
• Evoked set: groups of brands, resulting from an information search, from which a buyer can choose.
Information accrued over time regarding specification/likes/dislikes
• Sources can be internal or external eg. choice magazine
• Evaluation of products
• Analyse product attributes
• Rank attributes by importance
• Post-purchase anxiety or tension experienced after an inconsistency between behaviour and
• The consumer asks, did I make a good decision/buy the right product/get good value for money?
Marketing can minimise this through:
• Effective communication
Psychological influences on consumer behaviour:
• Marketers try t understand why a consumer behaves in such a way – reason is he/she is motivated to
• Motive: a need sufficiently stimulated that an individual is moved to seek satisfaction
• A purchase is often the result of multiple motives
• Motives may conflict each other
• Conscious vs. unconscious – Freudian theory
Jessica King BSB126 –Marketing Semester 1, 2009 21
• Psychoanalytic theory has caused marketers to realise that they must appeal to buyer’s dreams, hopes
• They must also provide buyers with socially acceptable rationalisations for many purchases
Maslow’s hierarchy of needs
• Selective exposure/attention: consumer notes certain things and ignores others
• Selective comprehension/distortion: changes or distortions information that conflicts with feelings or
• Selective retention: remembers only information that supports personal believes
• Perceive: the meaning given to something sensed – depends on the object and experiences
• Selective exposure: notice messages consistent with attitudes and beliefs. Paradigms – mindset/filter
• Subliminal perception: registers on the subconscious mind
• Proximity influences perception ie. other things being equal, things near each other tend to be perceived
as belonging together. Proximity used in ads to suggest a relationship between a product advertised and
other desirable products/situations.
Mode of living that is identified by:
• How people spend their time and resources/activities
• What they consider important/interests
• What they think of themselves and the world around them (self-concept)
Socio-cultural influences on consumer behaviour
• Personal influences
• Reference groups
• Social class
TEXTBOOOK NOTES: Chapter 7: Consumer Behaviour, Organisational Markets and Buyer Behaviour
Consumer behaviour: actions a person takes in purchasing and using products and services
Purchase decision process: stages a buyer passes through in making choices bout which products or services to
Involvement: personal, social and economic significant of a purchase to the consumer
Motivation: energising force that stimulates behaviour to satisfy a need
Personality: someone’s consistent behaviours or responses to recurring situations
Jessica King BSB126 –Marketing Semester 1, 2009 22
Perception: process by which someone selects, organises and interprets information to create a meaningful
picture of the world
Perceived risk: anxiety felt when a consumer cannot anticipate possible negative outcomes of a purchase
Attitude: tendency to respond to something in a consistently favourable or unfavourable way
Beliefs: consumer’s perceptions of how a product or brand performs
Opinion leaders: individuals who have social influence over others in their purchase decisions
Word of mouth: people influencing each other in personal conversations
Reference groups: people to whom an individual looks as a basis for self-appraisal or as a source of personal
Family life cycle: family’s progression from formation to retirement, each phase bring with it distinct
Sub-cultures: sub groups within a larger culture that have unique values, ideas and attitudes
Purchase decision Process
The process has five stages
Problem recognition: perceiving a need → information search: seeking value → alternative evaluation:
assessing value → purchase decision: buying value → post-purchase behaviour: value in consumption or use
Problem Recognition: perceiving a need
• The initial step in purchase decision
• Realises there is a different between what they currently have and would they would like to have
Information Search: seeking value
• A consumer beings to search for information about what might satisfy the newly discovered need
• Firstly, this may be based on previous experiences with products/brands
• A consumer make undertake an external search for information – which is needed when one does not
have much past experience or knowledge or the financial risk of making a bad decision is high and the
cost of gathering information is low.
• This can be done in three ways: personal sources, public sources and marketer-dominated sources
Alternative evaluation: assessing value
• The information search clarifies the problem for the consumer by suggesting criteria or points to
consider for purchase, providing brand names that might meet criteria and developing consumer value
• Evaluative criteria: factors that represent both the objective attributes of a brand and the subjective ones
Purchase decision: buying value
• Two choices remain: from who to buy and when to buy?
• Deciding when to buy is frequently determined by a number of factors
Post-purchase behaviour: value in consumption or use
• A company’s sensitivity to a customer’s consumption experience strongly affects the value a consumer
perceives after the purchase
• Studies show that satisfaction or dissatisfaction affects consumer communications and repeat-purchase
Involvement and Problem-Solving variations
• High involvement purchase occasions typically have at least of three characteristics: the item to be
purchased is expense, can have serious personal consequences or could reflect on one’s social image
• Routine problem solving is typically the case for low-price, frequently purchased products
Jessica King BSB126 –Marketing Semester 1, 2009 23
• Extended problem solving exists in high-involvement purchase situations for items such as cars, houses,
overseas travel and financial investments.
Influences on the consumer purchase decision process
• Energising force that stimulates behaviour to satisfy a particular need
• Markets try to simulate these needs
• Physiological needs: ones which must be satisfied first eg. basic to survival
• Safety needs: involve self-preservation and physical well being
• Personal needs: the need for achievement, status, prestige and self-respect
• Self-actualisation: personal fulfilment
• Revealed in a person’s self-concept which is the way people see themselves and the way they believe
others see them
• How people see themselves vs. how they would like people to see themselves
• Selective perception: filters the information so that only some of it is understood or remembered. Occurs
when people pay attention to messages that are consistent with their attitudes and believes and ignore
those that aren’t.
• Selective exposure: post-purchase stage of decision process, when consumers read advertisements for
the brand they just bought – also occurs when a need exists.
• Selective comprehension: interpreting information so that it is consistent with your attitudes and beliefs
• Selective retention: means that consumers do not remember all the information they see, read or hear
even minutes after exposure
• Consumers learn which sources to use for information about products and services which evaluative
criteria to use when assessing alternatives and how to make purchase decisions
• Behavioural learning: the process of developing automatic responses to a type of situation built up
through repeated exposure to it – drive, cue, response and reinforcement
Jessica King BSB126 –Marketing Semester 1, 2009 24
• Cognitive learning: learning without direct experience but through thinking, reasoning and mental
• Brand loyalty: a favourable attitude towards and consistent purchase of a single brand over time, results
from positive reinforcement of a brand
Values, Beliefs and Attitudes
• Attitude formation: a learned predisposition to respond to an object in a consistently favourable or
• Shaped by values and beliefs
• Attitude change: marketers use through approaches to try to change consumer attitudes towards
products and brands
1. Changing beliefs about the extent to which a brand has certain attributes
2. Changing the perceived importance of attributes
3. Adding new attributes to the product
• The way of living identified by how people spend their time and resources (activities), what they
consider important (interests) and what they think of themselves and the world around them (opinions)
• Psychographics: analysis of consumer lifestyles which has produce many insights into consumer
• VALS program – identifies 8 interconnected categories of adult lifestyles based on a person’s self-
orientation and resources.
Socio-cultural Influences on Consumer Behaviour
• Opinion leadership: more likely to be important for products that provide a form of self-expression eg.
cars and clothing
• Word of mouth: perhaps the most powerful information source for consumers because it typically
involves friends whoa re viewed as trustworthy
• Reference groups: people to whom an individual looks on as a basis for self appraisal eg. Comparing
yourself to your peers. They affect consumer purchases because they influence the information, attitudes
and aspiration levels that help set a consumer’s standards. They have an important influence on the
purchase of luxury products but not necessities. Broken into three groups, membership group, aspiration
group and dissociative group.
• Family group
- consumer socialisation: children learn how to purchase by interacting with adults in purchase
situations and through their own experiences
- family life cycle: the distinct phases that a family progresses through bringing with it identifiable
- family decision making: two decision making styles exist – spouse-dominant and join decision-
• Culture and Subculture
- Culture refers to a set of values, ideas and attitudes that learned and shared amongst a group
- Subcultures within the larger group exist with unique values, idea sand attitudes all of which
affect buying patterns.
1. When a consumer buyers a product, it is not an act but a process. There are five steps in the purchase
decision process: problem recognition, information search, alterative evaluation, purchase decision and
post purchase behaviour
Jessica King BSB126 –Marketing Semester 1, 2009 25
2. Consumers evaluate alternatives on the basis of attributes. Identifying which attributes are most
important to consumers, along with understanding consumer beliefs about how a brand performs on
those attributes, can make the difference between successful and unsuccessful products
3. Consumer involvement with what is bought affects whether the purchase decision process involves,
routine, limited or extended problem solving. Situational influences also affect the process
4. Perception is important to markets because of the selectivity of what a customer sees or heads,
comprehends and retains
5. Much of the behaviour that consumers exhibit is learned. Consumers learn from repeated experience
and reasoning. Brand loyalty is a result of learning
6. Attitudes are learned predispositions to respond to an object or class of objects in a consistently
favourable or unfavourable way. Attitudes are based on a person’s values and beliefs concerning the
attributes of products or services
7. Personal influence takes two forms: opinion leadership and work-of mouth. A specific type of personal
influence exists in the from of reference groups
8. Family influences on consumer behaviour result from two sources: family life cycle and decision
making within the household
9. Within Australia and NZ, there are subcultures that affect a consumer’s values and behaviour. Marketers
must be sensitive to these influences when developing a marketing mix.
Jessica King BSB126 –Marketing Semester 1, 2009 26
LECTURE 6: PRICING
Steps in Setting Price
• Pricing constraints & objectives
• Approximate pricing level
• List price
• Adjustments to list price
Identify Pricing Constraints and Objectives
• Demand for the Product Class, Product, and Brand
• Newness of the Product: Stage in the Product Life Cycle
• Single Product versus a Product Line
• Cost of Producing and Marketing the Product
1. Selecting Price Objective
• Maximum current profit / share
• Max sales growth / volume
• Meeting competition
• Prestige (allows you to sell at a higher price)/ Price quality leadership (charge top dollar to send a
message to consumers)
• Market skimming
• Social responsibility
2. Determining Demand, Revenue and Expectations
• Analyse target market expectation or evaluation of price & quality
o e.g. lower price with higher quality product seems wrong to customers
• Forecast market demand
o Boeing believes future customers will want reduced travel time over sleeping berths etc.
o Price elasticity of demand
Price Elasticity of Demand
• The percentage change in quantity demanded relative to a percentage change in price.
• Petrol demand is elastic and inelastic – in the short term there is little that can be done
• Unique value
• Aware of substitutes
• % of total spending
• Difficult to compare
• P.E.D. formula eg. A lot of Australians say they care about buying Australian owned in surveys but
more often than not they buy the cheapest.
Importance of PED to marketing managers
• PED not same over all possible prices of a product. (e.g. in text)
Jessica King BSB126 –Marketing Semester 1, 2009 27
• PED not same for product classes & brands within product class.
How to estimate a demand curve
• Existing data (longitudinal or cross section)
• Price experiments
• Ask buyers what if
3. Determine, cost, volume and profit relationships
The Importance of Controlling Costs
i. Total cost
ii. Fixed cost: do not change with the quantity of the product that is produced and sold.
iii. Variable cost: vary directly with the quantity of the product that is produced and sold.
iv. Marginal cost
• The break-even point is the quantity at which total revenue and total cost are equal and beyond
which profit occurs
• And economies of scale: U shaped AC curve if high fixed costs
• LAC v SAC
• Used by H.P. to drive down prices
• But risk if overbuild or new technology eg. HP use cost understanding to dominate the market
4. Select an Approximate Price Level
a. Skimming Pricing:
• The highest initial price that customers really desiring the product are willing to pay.
• Situations to support this strategy: (1) Enough prospective customers are willing to buy the
product immediately at the initial high price to make these sales profitable, (2) The high
initial price will not attract competitors, (3) Lowering price has only a minor effect on
increasing the sales volume and reducing the unit cost, and (4) Customers interpret the high
price as signifying high quality
b. Penetration Pricing
• Setting a low initial price on a new product to appeal immediately to the mass market
• Conditions supporting a penetration strategy include: (1) Many segments of the market are
price sensitive, (2) A low initial price discourages competitors from entering the market, and
(3) Unit production and marketing costs fall dramatically as production volumes increase.
c. Prestige Pricing
• Setting a high price so that status-conscious consumers will be attracted to the product and
d. Price Lining
• Setting the price of a line of products at a number of different specific pricing points.
e. Odd-Even Pricing
Jessica King BSB126 –Marketing Semester 1, 2009 28
• Odd-even pricing involves setting prices with a few dollars or cents under an even number,
with the assumption that demand might drop off dramatically if the price were raised to the
even number, e.g. $19.95
f. Target Pricing
• Manufacturer deliberately adjusting the composition and features of a product to achieve the
target price to consumers, e.g. Japanese electronics.
g. Bundle Pricing
• The marketing of two or more products in a single “package” price. (PC’s – screen, mouse
h. Yield Management Pricing
• The charging of different prices to maximize revenue for a set amount of capacity at any
• Used by airlines effectively
i. Perceived or lifetime value
• Relatively high price reflects total costs over product lifetime.
• E.g. Caterpillar – give no apologies for having a higher cost but the cost of running the truck
over time is lower due the reliability of the brand.
o Standard Markup Pricing
o Cost-Plus Pricing: practice of summing the total unit cost of providing a product or service and
adding a specific amount to the cost to arrive at a price, eg client pays ad agency a fee based on
costs plus agreed profit, based on cost (was used in the music industry before iTunes)
o Experience Curve Pricing
o Standard markup pricing entails adding a fixed percentage to the cost of all items in a specific
product class, e.g. large # items in dept stores & supermarkets means estimating demand for
each is impossible.
• Target Profit Pricing (e.g. PTO)
• Target Return-on-Sales Pricing
• Target Return-on-Investment Pricing
• Customary Pricing (based on tradition)
• Above/At/or Below- Market Pricing
• Loss-Leader Pricing - Loss-leader pricing is used to attract customers in hopes they will buy other
products as well
5. Set the List of Quoted Price
a. One price vs. flexible pricing
i. One price for all buyers
ii. Different prices for different buyers & situations, e.g. yield management, Dell, online
b. Price Lining
c. Captive product pricing, e.g. razors or car parts or restaurant wines
Jessica King BSB126 –Marketing Semester 1, 2009 29
6. Make Special Adjustments to the List or Quoted Price
• Discounts (qty, season, cash)
• Legal and Regulatory Aspects of Pricing
o Price Fixing (conspiracy, e.g. vitamins)
o Price Discrimination
o Deceptive Pricing, e.g. bait & switch
o Predatory Pricing (cement) - Charging a very low price for a product with the intent of
driving competitors out of business.
TEXTBOOOK NOTES: Chapter 11: Pricing Products and Services
Price: money or other considerations exchanged for the ownership of a good or service
Profit equation: profit = total revenue – total cost
Demand curve: graph relating quantity sold and price, which shows how many units will be sold at a given
Total revenue: total money received from the sale of the product
Total cost: total expenses incurred by a firm in producing and marketing a product, total cost is the sum of fixed
costs and variable costs.
Fixed cost: firm’s expenses that are stable and do not change with the quantity of product that is produced and
Variable cost: sum of the expenses of the firm that vary directly with the quantity of products that is produced
Break-even analysis: examines the relationships between total revenue and total cost to determine profitability
at different levels of output
Pricing objectives: expectations that specify the role of price in an organization’s marketing and strategic plans
Pricing constraints: factors that limit the range of price a firm may set
Nature and Importance of Price
• New tactic is ‘special fees’ and ‘surcharges’ – drive by consumer’s zeal for low prices combined with
the ease of marking price comparisons on the Internet
• Price influences customer’s perception of overall quality – the higher the price, the higher the quality
• Value pricing: the practice of increasing a product’s benefits while maintaining or decreasing price eg.
• Profit = total revenue – total cost
General Pricing Approaches
• Approaches emphasis factors underlying expected customer tastes and preferences more than such
factors as cost, profit and competition when selecting a price level
• Skimming pricing: setting the highest initial price that customers really desiring the product are willing
to pay. As the demand of these customers is satisfied, the firm lowers the price to attrach another, more
• Penetration pricing: setting a low initial price on a new product to appeal immediately to the mass
market – in some situations this may follow skimming pricing.
Jessica King BSB126 –Marketing Semester 1, 2009 30
• Prestige pricing: involves setting a high price so that quality-or-status conscious consumers will be
attracted to the product and buy it
• Odd-even pricing: involves setting prices a few dollars or cents under an even number eg. $19.99
• Target pricing: manufactures will sometimes estimate the price that the ultimate consumer would be
willing to pay for the product and then work backwards through the markups to determine what price
they should charge. This results in target pricing, results in the manufacturer deliberately adjusting the
composition and features of a product to achieve the target price to consumers.
• Bundle pricing: the marketing of two or more products as a single package
• Yield Management Pricing: the charging of different prices to maximize revenue for a set amount of
capacity at any given time.
• Economic value pricing: demand-oriented approach as it is set based on the customer perception of
value for money over the life of a product including all ancillary costs.
• A price setter stresses the cost side of the pricing problem, not the demand side.
• Standard Markup Pricing: involves adding a fixed percentage to the cost of all items in a specific
product class – high volume products have a smaller markup than low volume products.
• Cost-Plus Pricing: involves summing the total unit cost of proving a product or service and adding a
specific amount to the cost to arrive at a price
• A price setter may choose to balance both revenues and costs to set prices using profit-oriented
• Target Profit Pricing: when a firm sets an annual target of a specific dollar amount of the profit
• Target Return-on-Sales Pricing: set prices that will give a profit a specific percentage eg. 1% of sales
• Target Return-on-Investment Pricing: set prices to achieve a return on investment target such as a
percentage that is mandated by the board of directors or regulators - used by electricity providers.
• Rather than emphasis demand, cost or profit factors, a price setter can stress what competitors or ‘the
market’ is doing
• Customary Pricing: a standardized channel of distribution or other competitive factors dictate the price
• Above/At/Below Market Pricing: the ‘market price’ of a product is what customers are generally willing
to pay, not necessarily that price that the firm sets – marketing managers often have a subjective feel for
the competitors price or the market prices and using this has a benchmark they may deliberately choose
to set their price above, at or above.
• Loss-leader Pricing: deliberately sell a product below its customary price to attract attention – not to
increase sales but to attract customers in the hope they will buy other products
The Demand Curve
• Three key factors effect consumer demand: Consumer taste, price and availability of similar products
and consumer income.
• Movement along a demand curve eg. When price is lowered, demand increases assumes that other
factors remain unchanged
• Price elasticity – a key consideration related to the product’s demand curve and refers to how sensitive
consumer demand and the firm’s revenues are the changes in the product’s price.
Jessica King BSB126 –Marketing Semester 1, 2009 31
• A product with elastic demand is one in which a slight decrease in price results in a relatively large
increase in demand or units sold. In contrast, a product with inelastic demand means that slight increases
or decreases in price will now significantly affect the demand or units sold for the product.
Fundamentals of Estimating Revenue
• Total Revenue (TR) = Unit Price (P) x Quantity Sold (Q)
• Break-even Point (BEP) is the quantity at which total revenue and cost are equal
• Total cost (TC) is the total expense incurred by a firm in producing and marketing
• Fixed cost (FC) the sum of the expenses of the firm that are stable and do not change with the quantity
of product that is produced and sold
• Variable cost (VC) is the sum of the expenses of the firm that vary directly with the quantity of product
that is produced and sold.
• TC = FC + VC
Identifying Pricing Objectives
• Profit or Return on Investment (ROI). There are three types:
- Managing for long-run profits: gives up immediate profit in exchange for achieving a higher
- Maximizing current profit: eg. For a quarter of the year as targets an cab set and performance
- Target return: objective occurs when a firm sets a profit goal
• Market Share
• Unit Volume
• Social Responsibility
Identifying Pricing Constraints
• Demand for the Product Class, Product and Brand
• Newness of the Product: Stage in the Product Life Cycle
• Cost of Producing and Marketing the Product
• Competitors’ Prices
• Legal and Ethical Considerations
Setting a final price
• Price must be high enough to cover the cost of providing the product and meet the objectives of the
company yet must be low enough that customers are willing to pay it but not too low or customers may
think they are purchasing an inferior product.
• Setting a price is given in the following steps:
1. Select an Approximate Price Level
- You must understand the market environment, the features and customer benefits of the
particular product and the goals of the firm
2. Set the List or Quotes Price
- One-price Policy: involves setting one price for all buyers of a product or service
- Flexible Price Policy: involves setting different prices for products and services depending on
individual buyers and purchase situations in light of demand, cost and competitive factors
3. Make Special Adjustments to the List of Quoted Price
- Discounts – reductions from the list price based on quantity, seasonal, trade or cash factors
Jessica King BSB126 –Marketing Semester 1, 2009 32
- Allowances – reductions from list or quoted prices in the form of trade-in or Promotional
- Geographical Adjustments – made by manufactures or wholesalers to list or quotes prices to
reflect the cost of transportation of products – FOB origin pricing and uniform delivered pricing.
1. Price is the money or other considerations exchanges for the ownership or use of a product or service.
Although price typically involves money, the amount exchanges I often different fro the list or quotes
price because of allowances and extra fees.
2. Consumers use price as an indicator of value when it is paired with the perceived benefits of a good or
service. Sometimes price influences consumers perceptions of quality itself and other times consumer
make value assessments by comparing the costs and benefits of substitute items
3. Four general approaches for finding an approximate price level for a product or service are demand-
oriented, cost-oriented, profit-oriented and competition-oriented pricing.
4. Demand-oriented pricing approaches stress consumer demand and revenue implications of pricing and
include eight types: skimming, penetration, prestige, odd-even, target, bundle, yield management and
5. Cost-oriented pricing approaches emphasize the cost aspects of pricing and include two types: standard
markup and cost-plus pricing
6. Profit-oriented pricing approaches focus on a balance between revenues and costs to set a price and
include three types: target profit, target return-on-sales and target return-on-investment
7. Competition-oriented prices approaches emphasis what competitors or the marketplace are doing and
include three types: customary, above/at/or below market and loss leader pricing
8. A demand curve shows the maximum number of products consumers will buy at a given price and for a
given set of (a) consumer tastes, (b) price and availability of other products and (c) consumer income.
When any of these changes there is a shift of the demand curve. An essential revenue concept is total
9. It is necessary to consider cost behavior when making pricing decisions. Important cost concepts
include total cost, variable cost and fixed cost.
10. Break-even analysis shows the relationship between total revenue and total cost at various quantity of
output for given conditions of price as well as fixed cost and variable cost. The break-even point is
where total revenue and cost are equal
11. Pricing objectives, which specify the role of price in a firm’s marketing strategy, may include pricing
for profit, sales revenue, market share, unit sales, survival or some socially responsibly price level
12. Pricing constraints such as demand, product newness, costs, competitors, other products sold by the firm
and the type of competitive market restrict a firm’s pricing range
13. Given an approximate price level for a product, a manger must set a list or quotes price by considering
factors such as one-price versus a flexible-price policy.
14. List or quoted price is often modified through discounts, allowances and geographical adjustments.
Jessica King BSB126 –Marketing Semester 1, 2009 33
LECTURE 7: ITEGRATED MARKETING COMMUNICATION AND ADVERTISING
Advertising was once recognized as manipulated and was the pillar of marketing communication
Integrated Marketing Communication: A new way to think about advertising
• The concept under which a company carefully integrates and coordinates its many communications
channels to deliver a clear, consistent and compelling message about the organisation and its product
• Integrated marketing communication is a strategic business process used to plan, develop, execute and
evaluate coordinated, measurable, persuasive brand communications programs over time with
consumers, customers, prospects, employees, associates and other targeted relevant external and internal
audiences. The goal is to generate both short-term financial returns and build long-term brand and
IMC is about
• Measurable, persuasive brand communications.
• With consumers, customers, prospects, employees, associates.
• Targeted, relevant external and internal audiences.
• Generate short-term financial returns.
• Build long-term brand and shareholder value.
Key Constructs of IMC
• Starts with the consumer.
• Builds on number of traditional marketing communication disciplines.
• Integrates the strategy and the message to maximize the impact.
• Chooses the marketing communication discipline based on IMC objectives.
• Addresses multiple audiences and builds relationships with them. Database central to all
• Continuous, circular, responsive communication as a dialogue.
• Shared budgets and evaluation measures.
• Measurable and accountable.
• Aims to achieve synergy. To get more from the budget.
• an entire structure of messages – with its links and repetition – creates impact beyond the power of any
one message on its own and this happens in situations where there might be little attention paid to
Growth of IMC
• Changes in marketplace.
• Changes in organisational structure.
• Changes in consumers.
• Changes in communication.
• Advertising – Advertising is a paid, mediated form of communication from an identifiable source,
designed to persuade the receiver to take some action, now or in the future.
• Sales promotion – Short term incentives to encourage the purchase of a product or service.
• Direct Marketing – An interactive system of marketing which uses one or more advertising media to
effect a measurable response or transaction at any location.
Jessica King BSB126 –Marketing Semester 1, 2009 34
• Public Relations – Building good relations with the company’s various publics by obtaining favourable
publicity, building a good corporate image and handling unfavourable rumours, stories and events.
• Personal selling – two way flow of communication between buyer and seller, designed to influence a
person or a group’s purchase decision.
• Very persuasive communication as it is an immediate, customized message (which can contain complex
info) to a select audience.
• Very expensive way to communicate.
Contributions of IMC disciplines
• Advertising - Reaches large audiences quickly and cost effectively, builds image through emotion,
symbols, visuals and repetition and can create added value.
• Sales Promotion - Provides immediate short-term boost, but can weaken brand loyalty, encourage cost
cutting and reduce profitability.
• Direct Marketing – Measurable, targeted, accountable, technology driven.
• Public relations – Credibility, targeted, cost effective, relationship building.
• Personal selling – Persuasive, interactive, builds relationships.
Barriers to the implementation of IMC
• Organisational structure – most organisations structured vertically in silos.
• Turf battles and agency egos – who controls IMC?
• Lack of support of top management.
• Lack of database development.
• Lack of measurement tools.
• Marketers reluctance to put all eggs in one basket.
• Lack of expertise of IMC.
• Any paid form of non-personal presentation and promotion of ideas, goods and services using mass
media by an identified sponsor
• Advertising has changed … Still typically paid for but no longer just non personal, doesn’t always use
mass media and often has an Identified sponsor
• Advertising is a paid, mediated form of communication from an identifiable source, designed to
persuade the receiver to take some action, now or in the future.
How is advertising different
• Advertising is typically paid communication unlike PR, sales promotion or direct marketing.
• Advertising uses mass media and new media, which may be different from direct marketing, sales
promotion or PR.
• Advertising has an identified sponsor, unlike PR or direct marketing
How advertising is the same
• Consumers view all communication as advertising – unable to discriminate between sales promotion,
direct marketing and public relations.
Role of advertising
• Makes the prospect familiar with the product.
• Reminds the prospect about the product.
• Brings news of new products.
• Adds values not intrinsic to the product.
Jessica King BSB126 –Marketing Semester 1, 2009 35
• Reassures and helps retain customers.
• Increases the enthusiasm of those marketing the product.
Advertising exists because …
• It is part of our communication system.
• It advises people of the availability of goods and services.
• It assists in making informed decisions.
• It advises people of their rights and obligations as citizens.
• It informs, guides, directs, persuades and warns us.
Advertising contributes to society
• As an instrument of marketing communication
• As a form of social communication
How advertising works
• Advertising can produce both communication and behavioural effects
• But extensive research into advertising has not established direct relationship between advertising and
sales (expect in case of direct response advertising
Advertising as communication
• Sharing of an idea, exchanging information or the process of developing a commonality of thought
between the sender and the receiver
o Says what
o In which Channel
o To whom
o With what effect
Advertising is a paid, mediated form of communication from an identifiable source, designed to persuade the
receiver to take some action, now or in the future.
TEXTBOOOK NOTES: Chapter 14: Integrated Marketing Communications
Receivers: Consumers, who read, hear or see the message sent by a source
Encoding: process whereby the sender transforms an idea into a set of symbols
Decoding: process whereby the receiver takes a set of symbols and transforms them into an idea
Noise: factors that can work against effective communication by distorting the message or feedback received.
Advertising: any paid form of non-personal communication about an organisation, good, service or idea by an
Personal selling: two-way flow of communication between a buyer and seller, often in a face-to-face
encounter, designed to influence a person’s or group’s purchase
Public relations: form of communication management that seeks to influence the feelings, opinions or beliefs
held by customers, potential customers, shareholders, suppliers, employees and others about a company and its
products or services
Publicity: non-person, indirectly paid presentation of an organisation, good or service
Sales promotion: a short-term offer designed to arouse interest in buying a good or service
Promotional mix: combination of one or more of the promotional elements – advertising, personal selling,
public relations and sales promotion – a firm uses to communicate with consumers
Push strategy: directing the promotional mix to channel members to encourage them to order and stock a
Jessica King BSB126 –Marketing Semester 1, 2009 36
Pull strategy: directing the promotional mix at ultimate consumers to encourage them to ask the retailer for the
Integrated marketing communications: concept of designing marketing communications programs that co-
ordinate all promotional activities to provide a consistent message across all audiences.
Hierarch of effects: sequence of stages a potential buyer goes through: awareness, interest, evaluation, trial and
Direct marketing: promotional strategy that uses direct communication with consumers to generate a response
in the form of an order or request for further information
Direct orders: the result of direct marketing offers that contain all the information necessary for a potential
buyer to make a decision to purchase and complete a transaction
Lead generation: result of direct marketing offer designed to create interest in a product or a service and a
request for additional information
Traffic generation: outcome of direct marketing offer designed to motivate people to visit a business
• Doesn’t have imme