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Chapter 5

Business Chapter #5 Notes.doc

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University of Waterloo
BIOL 376

Business Chapter #5 – Understanding Marketing Processes and Consumer Behavior Marketing – Planning and executing the development, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy both buyers’ and sellers’ objectives. Marketing Concept – The idea that the whole firm is directed toward serving present and potential customers at a profit Value – Relative comparison of a product’s benefits versus its costs The benefits of a high value product are much greater than its costs. Benefits include not only the functions of the product, but also the emotional satisfactions associated with owning, experiencing, or possessing it. Value = Benefits/Costs Utility – Ability of a product to satisfy a human want or need Marketing strives to provide four kinds of utility - When a company turns out ornaments in time for Christmas, it creates time utility: It makes products available when consumers want them - When a department store opens its annual Christmas department, it creates place utility: It makes products available where customers can conveniently purchase them - When the store sells ornaments, it provides ownership utility by conveniently transferring ownership from store to customer. - By making products available in the first place – by turning raw materials into finished ornaments – the ornament maker creates form utility Consumer Goods – Products purchased by individuals for their personal use. Firms that sell products to consumers for personal consumption are engaged in consumer marketing Industrial Goods – Products purchased by companies to use directly or indirectly to produce other products. Firms that sell products to other manufacturers are engaged in industrial marketing Services – Intangible products, such as time, expertise, or an activity that can be purchased Relationship Marketing – A type of marketing that emphasizes lasting relationships with customers and suppliers External Environment – Outside factors that influence marketing programs by posing opportunities or threats Five Environmental Factors include: the political/legal, social/cultural, technological, economic and competitive environments. Political/Legal – Political Activities, both foreign and domestic, have profound effects on business. Legislation on the use of cellphones in cars and pollution legislation can determine the destinies of entire industries. Social/Cultural – Most people are working at home, more women are entering the workforce, the number of single-parent families is increasing, food preferences and physical activities reflect the growing concern for healthful lifestyles, and the growing recognition of cultural diversity continues Technological – They create new goods and services. New products make some existing products obsolete and many of them changes our values and lifestyles. In turn, they often stimulate new goods and services not directly related to the new technology itself. Economic – Economic conditions determine spending patterns by consumers, businesses, and governments. Thus they influence every marketer’s plans for product offerings, pricing, and promotional strategies. Among the more significant economic variables, marketers are concerned with inflation, interest rates, recession and recovery. Competitive – In a competitive environment, marketers must convince buyers that they should purchase their products rather than those of some other seller. By studying the competition, marketers determine how best to position their own products for three specific types of competition: - Substitute products are dissimilar from those of competitors but can fulfill the same need. - Brand Competition occurs between similar products, such as the auditing services provided by large accounting firms. The competition is based on buyers’ perceptions of the benefits of products offered by particular companies - International Competition matches the products of domestic marketers against those of foreign competitors. Marketing Managers – Managers responsible for planning and implementing all the marketing mix activities that result in the transfer of goods or services to customers Marketing Plan – A detailed strategy for gearing the marketing mix to meet consumer needs and wants In planning and implementing strategies, marketing managers develop the four basic components (called the Four P’s) of the marketing mix. These components are: product, price, place, and promotion Marketing Mix – The combination of product, price, place, and promotion strategies used in marketing a product Product – A good, service, or idea that satisfies buyers’ needs and demands Product Differentiation – The creation of a product or product image that differs enough from existing products to attract consumers Price – That part of the marketing mix concerned with choosing the appropriate price for a product to meet the firm’s profit objective and buyers’ purchasing objectives. Distribution – That part of the marketing mix concerned with getting products from the producer to the buyer, including physical transportation and choice of sales outlets Promotion – Techniques for communicating information about products. The most important promotional tools include advertising, personal selling, sales promotions, and public relations. In effect, the seller’s 4 Ps are a mirror image of the buyer’s 4 Cs: customer solution (product), customer cost (price), customer convenience (place), and customer communication (promotion). Target Markets – Any group of people who have similar wants and needs and may be expected to show interest in the same product(s) Market Segmentation – Dividing a market into categories according to traits customers have in common In marketing, the process of fixing, adapting, and communicating the nature of the product itself is called positioning. In identifying market segments, researchers look at geographic, demographic, psychographic, and product-use variables Geographic Variables – Geographical units that may be considered in a segmentation strategy Demographic Variables – Characteristics of populations that may be considered in developing a segmentation strategy Psychographic Variables – Psychological traits that a group has in common, including motives, attitudes, activities, interests, and opinions Product Use Variables – Consumer characteristics based on the use of a product, benefits expected from it, reasons for purchasing it, and loyalty to it Market Research – The systematic study of what buyers need and how best to meet those needs Market research can occur at almost any point in a product’s existence. Most commonly, however it is used when a new or altered product is being considered. These are the five steps in performing market research: 1. Study the current situation. What is the need and what is being done to meet it at this point? 2. Select a research method. In choosing a method, marketers must bear in mind the effectiveness and costs of different methods 3. Collect data. Secondary data is information already available as a result of previous research by the firm or other agencies. For example, Statistics Canada publishes a great deal of data that is useful for business firms. Using secondary data can save time, effort and money. But in some cases secondary data are unavailable or inadequate, so primary data – new research by the firm or its agents – must be obtained. 4. Analyze the data. Data are not useful until they have been organized into information 5. Prepare a report. This report should include a summary of the study’s methodology and findings. It should also identify alternative solutions (where appropriate) and make recommendations for the appropriate course of action. The four basic types of methods used by market researchers are observation, surveys, focus groups, and experimentation. Observation – A market research technique involving viewing or otherwise monitoring consumer buying patterns Survey – A market research technique based on questioning a representative sample of consumers about purchasing attitudes and practices Focus Groups – A market research technique involving a small group of people brought together and allowed to discuss selected issues in depth Experimentation – A market research technique in which the reactions of similar people are compared under different circumstances Consumer Behavior – The study of the process by which customers come to purchase and consume a product or service To understand consumer behavior; marketers draw heavily on the fields of psychology and sociology. The result is a focus o
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