BSB126 - Final Exam Notes (Summary of Lectures 7 - 13)

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Marketing Final Exam Notes Lecture 7: Marketing Segmentation and Positioning Market segmentation: sorting potential buyers into groups that have common needs and will respond similarly to a marketing action (relatively homogenous groups) Product differentiation: using different marketing mix activities (product features or advertising) to help consumers perceive product as being different & better than competing products Market-product grid: Framework to relate market segments to products/ marketing actions by firm Steps in Segmenting and Targeting Markets 1. Group potential buyers into segments  Criteria  Potential for increased profit  Similarity of needs within a segment  Different of needs within a segment  Potential of marketing action to reach segment  Simplicity and cost of assigning potential buyers to segments  Ways to segment consumer markets  Geography (Region, City Size)  Demographics (Gender, Age, Social Class and Ethnicity)  Psychographics (Personality, Lifestyle, Values – VALS)  Roy Morgan Values Segments: Ten mindset segments of the Australian population based on values and ways of seeing the world  Young optimism: optimistic and seeking to improve prospects in life  Visible achievement: have ‘made it’ in their field, confident of abilities and retain traditional values about home, work and society  Socially aware: community minded and social activities  Buying behaviour (Benefits desired and Product Usage Rate)  80/20 Rule: 80% of a firm’s sales are obtained from 20% of its customers  Ways to segment organisational markets  Location  Exporters  No. of employees  Benefits sort 2. Group products into categories  Needs based approach 3. Develop a Market-Product Grid and Estimate Size of Markets Christina Meyers BSB 126 Marketing 1 4. Select Target Markets  Criteria  Market size  Expected growth  Competitive position (where no. and size of competitors minimal)  Cost of reaching the segment  Compatibility with organisation’s objectives and resources 5. Take Marketing Actions to Reach Target Markets  Three broad strategies: 1. Market aggregation: treat the total market as a single segment and employ product differentiation 2. Single-segment concentration: focus on one segment (niche market) 3. Multiple-segment segmentation: select two or more segments and devise different marketing mixes for each Marketing synergies: Opportunity for efficiency in terms of a market segment – focusing on one group of consumers, however can be expensive as the customer will likely require various products Product synergies: Opportunity for efficiency in research and development and production – focusing on one product, however can be expensive to market to a variety of consumers Marketing and product synergies must be balanced to increase profit Product positioning: Way a firm’s product is viewed relative to the competition Perceptual map: Means of displaying the position of products or brands in the consumers’ minds Key to positioning effectively is to obtain data from consumers about: 1. Important attributes 2. Where existing products fit with these attributions 3. Location of the new product in regards to these attributes Three Step Positioning Process 1. Select the positioning concept 2. Design feature most effectively convey position 3. Coordinate marketing mix components to convey consistent position Demand forecasting: estimating sales of a product during some future time period Two approaches 1. Top down: Forecasts economic conditions & industry trends, determine market & sales potential for product, measures current/planned market share and forecasts the firms sales 2. Bottom up: Generates estimates of future demand from customers/company salespeople, combines estimates to get total forecast, adjusts based on insights into industry, completion and general economic trends Christina Meyers BSB 126 Marketing 2 Lecture 8: Product Product: Good, service or idea consisting of tangible and intangible features that satisfies consumers and is received in exchange for money or some other unit of value Product line: Group of closely related products that satisfy a class of needs, are used together, sold to the same customer group, distributed through same type of outlets/fall within given price range Product mix: All product lines offered by a company Product mix width: No. of different product lines Product mix length: No. of product items the company carries Product mix depth: How many versions are offered of each product in the line Product mix consistency: How closely related the various lines are in end use, production requirement, distribution channels etc. Types of Consumer Products 1. Convenience: Relatively inexpensive item purchased frequently with minimum shopping effort (staples, impulse and emergency goods) 2. Shopping: A product that requires comparison shopping, because it is usually more expensive and found in fewer stores 3. Speciality: A particular item that consumers search extensively for and are reluctant to accept substitutes (not very price sensitive) 4. Unsought: A product unknown to the potential buyer or a known product that the buyer does not actively seek The Product Life Cycle  Introduction – Product introduced to target market  Little competition  Sales grow slowly  One product  Minimal profit, often due to large investment costs  Promotion focuses on awareness and information  Skimming strategy: high initial prices to cover costs and take advantage of price insensitivity of early buyers  Penetration pricing: low initial price to discourage competitors, but costs must be closely monitored  Stimulate primary demand (desire for product class since there are few competitors with the same product) selective demand (desire for specific brand)  Limited distribution Christina Meyers BSB 126 Marketing 3  Growth – Rapid increase in sales  More competition (and competitive pricing)  More product versions (added features to differentiate from other brands)  More competitive price to gain market share  Promotion stresses points of difference  Wider distribution  Maturity – Slowing of sales  Many competitors (weaker competitors leave)  Profits declines due to fierce competition  Full product line  Prices decrease to defend market share  Reminder-oriented promotion hold market share through differentiation & new buyers  Maximum outlets 2. Decline – Long-term drop in sales (usually due to technological advances)  Reduced competition  Minimal promotion  Fewer outlets  Strategies 1. Deletion: dropping the product from the company’s product line 2. Harvesting: company keeps product but reduces marketing costs 3. Finding a new Market: company seeks market where the product is not in the same stage of product life cycle e.g different countries at different levels of economic/technological advancement/have different needs for social/cultural reasons Length of the Product Life Cycle  No exact time to move through life-cycle  Consumer products generally have shorter life cycles than business products  Technology informs consumers faster and shortens product life cycles Shape of the Product Life-Cycle Generalised Life-Cycle – Normal products High-learning product: Extended introductory period, as significant education of consumer is required Low-learning product: Short introductory period, as benefits of product are immediately understood, however competitors enter rapidly as product can often be easily imitated, so it is important to broaden distribution quickly and be able to meet demand Fashion-product: Goes through periods of growth & decline that may last many years (clothing styles) Fad product: Goes through rapid sales and equally rapid decline (e.g beanie babies and tamagotchies) Christina Meyers BSB 126 Marketing 4 The Life-Cycle of Consumers Diffusions of innovation: product diffuses through the population 1. Innovators 2. Early adopters 3. Early majority 4. Late majority 5. Laggards Managing the Product Life-Cycle 1. Modifying the Product  Product modification: Altering a product’s characteristics (quality, performance or appearance) to try to increase and extend the product’s sales 2. Modifying the Market  Market modification strategies: 1. Finding new users 2. Increasing use 3. Create new use situations 3. Repositioning the Product  Product repositioning: Changing the place a produce occupiers in a consumer’s mind relative to competitive products  Product repositioning strategies 1. Reacting to competitor’s position 2. Reaching new markets 3. Catching a rising trend 4. Changing the value offer Branding and Brand Management Branding: Use of a name, phrase, design, symbol or combination of these to identify and distinguish its products Brand name: Any word, device or combination of these used to distinguish a seller’s goods or services Brand personality: Set of human characteristics associated with a brand name Brand equity: the value added to a product due to brand beyond the functional benefits Brand equity must be built over time 1. Give brand an identity 2. Give brand a meaning 3. Get consumer to respond to your brand 4. Get consumers to relate to your brand Brand equity proves a financial advantage for the brand owner Christina Meyers BSB 126 Marketing 5 Brand Strategies 1. Manufacturer Branding: brand names uses either multi-product or mutli-brand approach  Multi-product branding: Uses one name for all products  Advantages:  Consumers who have good experiences with a product will transfer those feeling to all of the products  Lower costs as all products advertised under one brand name (brand awareness)  Allows for line extension – using the brand name to enter a market segment in the same product class  Multi-branding: Gives each product a distinct name (e.g Disney  Disney and Miramax & Touchstone Pictures)  Advantages:  Can be used on the basis of price-quality segment  Ensures each brand is unique to its particular target market, and there is no risk that one product failure will affect other products in the line  Disadvantages:  More expensive that multi-product, as you must generate awareness for each new brand, without the benefit of previous impressions 2. Sub-branding: Combines existing brand with new brand (e.g Cadbury Roses  Cadbury Crunchie) 3. Brand extension : Using an existing brand name to enter a completely different product class (e.g Nike shoes  all sportswear, Cadbury chocolates  drinks and deserts)  Risk: Too many use will dilute the brand meaning 4. Private branding: Brand name owned by a wholesaler or retailer e.g Woolworths  Advantage: Produces high profits for manufacturers and resellers 5. Mixed branding: Firm markets products under its own name and that of a reseller because the segment attracted to the reseller is different from their own market (e.g Epsom Printers  Epsom Printers and IBM Printers Benefits of Packaging and Labelling 1. Communicational – information about product conveyed to customer 2. Functional – convenience, protection/storage, consumer protection (use-by dating, tamper resistant containers) 3. Perceptual – perception in consumer’s mind - status, economy and product quality New Products and Why They Succeed and Fail 1. Insignificant point of difference (superior characteristic, unique benefit meets needs ) 2. Incomplete market and product definition (target market, needs, wants, product) 3. Too little market attractiveness (target market with high growth and real buyer need) 4. Poor execution of marketing mix (4P’s – Product, Price, Promotion, Place) 5. Poor product quality or insensitivity to consumers’ needs 6. Bad timing (dramatic shift in consumer taste) 7. No economical access to buyers Christina Meyers BSB 126 Marketing 6 Lecture 9: Integrated Marketing Communication (IMC) and Advertising The Communication Process Communication: Process of conveying a message Source: Company or person who has information to share Message: Information sent by a source to a receiver Channel of communication: The means of conveying the message Receiver: consumer who reads, hears or see the message 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 For effective communication the sender and receiver must have mutually shared field of experience (understanding and knowledge) Response: Impact the message had on receiver’s knowledge, attitudes or behaviours Feedback: communication flow from receiver back to the sender that helps the sender know whether the message was properly decoded and understood Noise: factors which work against effective communication by distorting a message or feedback received e.g printing error, sales-person’s accent, use of slang, interference of other messages Promotional Elements 1. Mass selling  Advertising: Any form of non-personal communication about an organisation, good, service or idea by an identified sponsor  Sales Promotions: Short term incentive to encourage purchase of a product or service  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 2. Customised interaction  Personal Selling: Two way flow of communication between buyer and seller, designed to influence a person or group’s purchase decision IMC: Company carefully integrates and co-ordinates its many communication channels to deliver clear, consistent and compelling message about the organisation and its product Contribution of IMC Promotional Element  Advertising – builds awareness  Sales promotion – generates inquiry  Direct Marketing- additional information to individual prospects  Personal selling- completes transaction Christina Meyers BSB 126 Marketing 7 Promotional mix: Combination of one or more or the promotional elements 1. Target audience 2. Stage of the Product Life-cycle 3. Channel of distribution  Push Strategy: Push the product onto wholesalers, who push it one to others  Pull Strategy: Pull the demand from customer, who pull a demand through the distribution channel All promotional activities must create a consistent message across all audiences Synergy: The whole is greater than the sum of the parts The entire structure of messages creates impact beyond the power of any one message on its own Reasons for the Growth of IMC  Changes in:  Marketplace  Mass production/marketing/advertising obsolete  Advertising not yielding results, cost increased at a rate higher than CPI  shift to non-advertising sources – marketing, sales promotion and direct marketing   audience no.’s + proliferation and fragmentation of media (more TV channels)  Organisational structure  Interchange disciplines, interchangeable skills   qualification of clients,  outsourcing , shift from product to service economy, shift in marketplace power from manufacturer  retailer  consumer (online)  Consumers   education level,  women in workforce,  nuclear family, money rich time poor,  knowledge of advertising & marketing  sceptical,  brand loyalty  Communication  Shift from verbal  visual,  value & importance of perception vs facts, consumer content generator, free media channels worldwide reach (YouTube) Developing the Promotion Program 1. Developing  Identify target audience  The more you know about your target audience, the easier it is to reach them  Specify promotional objective  Hierarchy of effects 1. Awareness 2. Interest 3. Evaluation 4. Trial 5. Adoption Christina Meyers BSB 126 Marketing 8  Set budget  Percentage of sales: % of past/anticipated sales  Competitive parity: Match competitor’s level of spending or a proportion based on market share  All you can afford: Money to be spent on promotion after all other budget items are covered  Objective and Task (best approach) 1. Determine objectives 2. Determine tasks to meet objective 3. Determine costs of task  Select promotional element  Design promotion  Schedule promotion  Effective timing  Order in which different elements are introduced  Frequency of each use 2. Executing  Pre-test and carry out the promotion 3. Evaluating  Post-test promotion and record impact and contribution towards achieving objectives in test-result database  Make needed changes Direct Marketing: Direct communication with a customer to encourage them to place on order or seek further information e.g direct mail and catalogues, television, telemarketing and direct selling The value of direct marketing  Convenience  Entertainment  Privacy  Time-saving  Low-prices  Customer service Direct orders: Offer which contains all the information for a buyer to make a purchase immediately Lead generation: Offer designed to create interest in a product and a request for further information Traffic generation: offer designed to motivate people to visit the business Advertising: Paid, mediated form of communication from an identifiable source, designed to persuade the receiver to take some action, now or in the future Christina Meyers BSB 126 Marketing 9 Product Advertisement (focuses on selling a good or service) 1. Pioneering (informational) – what a product is, what it can do and where it can be found 2. Competitive (persuasive) – promotes specific brand’s features and benefits 3. Reminder – reinforce previous knowledge Developing the advertising program 1. Identify the target audience 2. Specify advertising objectives  Increase sales or brand awareness or both? 3. Set advertising budget  Four alternative recognised methods 4. Design the advertisement  Message Appeal 1. Fear appeal – will avoid some negative experience 2. Sex appeal – will increase attractiveness of user 3. Humorous appeal – product is more fun or exciting than competitors  Humour may wear out quickly  Humour effectiveness can vary across countries 4. Create the Actual Message  Copyrighters create text portion of advertising message 5. Select the right media  Maximise exposure and minimise costs  Reach: No. of different people or households exposed to an ad  Frequency: Average no. of times person in target audience is exposed to message or ad  Gross Rating Points (GRP): Reach (% of total market) multiplied by frequency  Cost per Thousand (CPM): cost of reaching 1000 individuals/households with or ad Different Media Alternatives Advantages Disadvantage Television  Large specific audiences  High costs  Uses pictures, print, sound  Short exposure time and motion for effect  Perishable message  Difficult to convey complex information Radio  Low cost  No visual  Local audiences  Short exposure time  Ad can be produced and  Perishable message placed quickly  Difficult to convey complex information  Sound, humour and intimacy effective Magazines  Can target specific audiences  Long time to place ad  High-quality colour  Relatively high cost  Long life of ad  Competes attention with other  Ads can be clipped and saved magazine features  Can convey complex info Christina Meyers BSB 126 Marketing 10 Newspapers  Excellent local coverage  Compete for attention with other  Placed and changed quickly newspaper features  Can be saved  Short life span  Quick consumer response  Poor colour  Low cost Internet  Video and audio capabilities  Large files require more time to load  Animation can capture  Effectiveness is still uncertain attention  Can be interactive and link to advertiser Outdoor  Low cost  Message must be short and simple  Local market focus  Low selectivity of audience  High visibility  Criticised as a traffic hazard and visual  Opportunity for repeat pollution exposure’s Direct Mail  High selectivity of audience  High cost per contact  Can contain complex  Poor image (junk mail) information and personalised messages  High quality graphics 6. Scheduling Advertising  Buyer turnover: how often new buyers enter the market to buy the product  Higher turnover  more advertising  Purchase frequency  Higher frequency  less repetition  Forgetting rate: speed buyers forget brand if advertising is not seen  Higher rate more advertising  Three basic approaches:  Continuous schedule: Steadily throughout the year  Flighting schedule: Periods of advertising are scheduled to reflect seasonal demand  Pulse schedule: A combination of the two, with heavy period of promotion or introduction of a new product 7. Executing the Advertising Program  Pre-test: Tests conducted before an ad is placed to determine whether it communicates the intended message, or to select from alternative versions of the ad  Portfolio test: Ad is placed in a portfolio along with other ads, and consumers are asked for their impression of the ad on several evaluative scales  Jury test: Panel of consumers shown ad copy and rate how they like it, how much it drew their attention and how attractive they thought it was  Theatre test: Consumers view new movies or television shows, in which new ads are also shown. Views register their feelings on hand-held recording devices during the showing or in a questionnaire afterwards Christina Meyers BSB 126 Marketing 11 8. Carrying out the advertising Program  Full-service agencies: provides complete range of services e(market research, media selection, copy development, artwork and production)  Limited service agencies  In-house agencies 9. Evaluating the advertising program  Post-test: conducted after an ad has been shown to the target audience to determine whether it has accomplished its purpose  Aided recall: A consumer is asked about their exposure to an ad, and the Starch tests uses aided recall to determine what percentage:  Remember the ad  Saw or read any part of the ad identify the product or brand  Read at least half of the ad  Unaided recall: Various questions are asked without prompting  Attitude test: Questions are asked to measure changes in attitudes of consumer in response to the ad  Inquiry test: Additional product information, samples or premiums are offered to readers or viewers. Ads generating the most inquiries are presumed to be the most effective.  Sales Test: Manipulate an advertising variable, and observe sales effects by monitoring data from checkouts at supermarkets Christina Meyers BSB 126 Marketing 12 Lecture 10: Pricing Price Equation Price = List Price – Incentive and Allowances + Extra Fees Profit Equation Profit = Total Revenue – Total Cost = (Unit Price x Quantity) – Total Cost Price is an indicator of value Price influences consumers’ perception of overall quality (most believe higher price = higher quality) Steps in Pricing Products and Services STEP 1: Identifying Pricing Constraints 1. Demand for the Product Class, Product and Brand  Luxury vs. necessity  The higher the demand, the higher price can be charged 2. Stage in the Product Life-Cycle  Earlier in life-cycle, higher price can usually be charged 3. Cost of producing and marketing the product  Set a floor price to cover costs 4. Competitor’s prices 5. Legal and Ethical Consideration
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