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Management (MGT)
Bill Mc Conkey

Chapter #5: Understanding Marketing  What is marketing? o Process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals o Our needs and wants are the forces that drive marketing  Marketing concept: o Idea that the whole firm is directed toward serving present and potential customers at a profit o Must design products and services that meet the specific needs of customers and follow any trends that may capture potential customers – Ex. Change in tastes  Value and Benefits: o Ratio of benefits to cost o Generally involves the price, expenditure of the buyer’s time, and the emotional satisfaction of owning the product  Value and Utility: o Utility is the ability of a product or service to satisfy the needs or wants of a customer o Time utility: availability when required o Place utility: readily available for purchase o Ownership utility: transfer of goods from store to customer o Form utility: turning raw materials into the finished product  Types of goods and services: o Consumer goods: products purchased by individuals for their personal use o Industrial goods: products purchased by companies to use directly or indirectly to produce other products o Services: intangible products, such as time, expertise or any activity that can be purchased  The Marketing Mix Strategy: o Marketing managers: responsible for the planning and implementation of all marketing mix activities o Marketing plan: when a need is identified and action is taken to implement it, a marketing plan is developed to focus a strategy towards meeting such expectations of needs and wants  Product: o Conceiving and developing new products o Consider the changing factors when developing the product: change in tastes, economic conditions, technology, etc. o Product differentiation: often used to add value to a certain product or service through the unique features that it offers in comparison to other similar products  unique selling point  Price: o In a customer’s perspective, the price matters because it is the opportunity cost of money  Ex. Taking money out of their investments to make a purchase; generally thinks about the benefits they will receive from this product (utility) o From the seller’s perspective: must be priced correctly to ensure they cover the operational costs, but can’t be too high that the customers will not want to purchase it. Low/high price strategy varies per business  Place (Distribution): o Placing a product in the proper outlet o Decisions about warehousing, inventory control, warehousing, channel distribution, etc.  Promotion: o Techniques for communicating information about products  Target Marketing and Segmentation o Target market: groups of people who share similar needs and wants o Target segmentation: categorization of common needs of wants, and creating a product or service catered to each segment  Geographic variables: o Geographic factors that may affect the buying patterns and should be considered in a segmentation strategy  Demographic variables: o Characteristics of a population such as age, ethnicity, income, gender, etc. considered to develop the most effective segmentation strategy  Psychographic variables: o Traits such as attitudes, interests, motives and opinions that a marketing strategy could consider to produce an effective strategy  Product-use variables: o Consumer characteristics based on the use of a product, benefits expected from it, reasons for purchasing it and loyalty  Market research: o Study of what buyers need and how best to meet those needs o Stakeholders: consumers, employees, investors, suppliers, local communities o Controllable marketing variables: 4 P’s o Environmental factors: economic, technological, competitive, political, legal, social, and cultural  Research Process: o Current situation – what is being done now? o Select a research method – effectiveness and costs o Collect data – making use of readily available and accessible secondary data or if insufficient, the use of primary data through new research o Analyze data – organization o Report – summary of findings, alternatives, recommendations  Research methods: o Observation: a market research technique involving viewing or otherwise monitoring consumer buying patterns o Surveys: questioning a representative sample of consumers about purchasing attitudes and practices o Focus group: small group of people brought together and allowed to discuss selected issues in depth o Experimentation: reactions of similar people are compared under different circumstances  Consumer behaviour: study of the process by which customers come to purchase and consume a product or service o Psychological: motivations, perceptions, ability to learn, and attitudes o Personal: lifestyle, personality, economic status, and life-cycle stage o Social: family, opinion leaders, reference groups o Cultural: way of living, values, and social class  Consumer buying process: o Problem/Need Recognition o Information Seeking o Evaluation of alternatives o Purchase decisions  Rational motives: logical evaluation of product attributes such as cost, quality, usefulness  Emotional motives: non-objective factors o Post-purchase evaluations  Organizational markets: o Industrial: businesses that buy goods to be converted into other products that will be sold to ultimate consumer o Reseller: intermediaries like wholesalers and retailers who buy finished products and resell them o Institutional: non-government organizations such as hospitals, churches, and schools  Differences in buyers – organizational buyers: o Professionals: trained in methods for negotiating purchase terms, reach agreements, arrange for formal contracts o Specialists: specialize in the purchase of various items o Experts: competing products and alternatives Chapter #6: Product  Value package: o Features: qualities, both tangible and intangible, that a company builds into its products o Value package: product marketed as a bundle of value adding attributes, including reasonable cost  Classifying Consumer Products: o Convenience goods/services: consumed rapidly and regularly. They are relatively inexpensive and are purchased frequently and with little expenditure of time and effort o Shopping goods/services: more expensive and purchased less frequently than convenience goods and services o Specialty goods/services: important and expensive purchases – generally accept no substitutes  Classifying Industrial products: o Expense items: materials and services consumed within a year (Ex. Raw materials processed into the final product) o Capital items: like capital assets, they are generally expensive and provide future benefit greater than a year.  The Product Mix: o Is the group of products a company has available for sale o Product line: group of similar products intended for a similar group of buyers who will use them in a similar fashion  Speed to market: strategy of introducing new products to respond quickly to customer and/or market changes – loses 12% of life-time profit potential if delayed for 3 months, 33% in 6 months  7 Step Development process: 1. Product ideas: actively seek out ideas to reward those whose ideas become successful ideas 2. Screening: eliminate all ideas that are unrealistic or would not work with the company’s abilities, expertise or objectives; marketing, engineering, and production must have input at this stage 3. Concept Testing: firms try to gather information on the customer’s opinion of the product to determine the benefits as well as potential pricing for the product 4. Business Analysis: determining the cost-benefit analysis of the product. Does not necessarily determine the exact profit it will earn, but rather the ability to meet minimum profitability goals 5. Prototype development: shaping the ideas and building a model, which can often be expensive as it requires the expertise of hand crating, tooling, development of components – but it can help to identify potential production problems 6. Product testing and test marketing: limited production of the product and is tested internally to see if it meets performance requirements – test marketing allows firm to observe customer’s satisfaction and response 7. Commercialization: mass production and advertisement begins if approved  Variations in the process for services: 1. Service ideas: service package: identification of the tangible and intangible features that define the service. 5. Service process design: service process design (instead of prototype development) – selecting the process, identifying worker requirements, and determining facilities requirements so that the service can be effectively provided  Product life cycle: concept that the profit-producing life of any product goes through a cycle of introduction, growth, maturity (leveling off), and decline  Stages in the Product Life Cycle: o Introduction: marketers bring awareness to potential customers. Generally no cash flow due to extensive promotional and development costs o Growth: if the product is satisfactory and demanded, it will begin to make a profit. Other firms will start to compete by creating a similar version o Maturity: most profit is earned in the beginning stages, but as firms create competitive products, sales start to decline o Decline: sales and profits continue to decline, companies remove or reduce promotional support  Extending Product life: An Alternative to New Products o Product extension: marketed globally instead of domestically o Product adaptation: product modification to have greater appeal in foreign markets o Reintroduction: reviving products that are becoming obsolete in old markets, in newer markets  Identifying Products: o Branding: use of symbols to communicate the qualities of a product made by a particular producer o Brand equity: degree of consumer’s loyalty to and awareness of a brand and its resultant market share o Brand loyalty: customers’ recognition of, preference for, and insistence on buying a product with a certain brand name o Trademarks: exclusive legal right to use a brand name o Patent: protects an invention or idea for a period of 20 years o Copyright: exclusive ownership rights granted to creators for the tangible expression of an idea  Packaging Products: o Physical container in which a product is sold, including the label  Labeling Products: o Part of a product’s packaging that identifies the product’s name and contents, sometimes its benefits Chapter #7: Price  Pricing: deciding what the company will receive in exchange for its product  Pricing objectives: goals that producers hope to attain in pricing products for sale  Pricing to maximize profit: o Too low: sell more units, but may lose money on each exchange o Too high: sell less units, may have excess inventory and need to reduce production  Consider: capital resources, materials, labour and marketing costs  Pricing for E-business Objectives: lower costs and prices, greater availability; comparison shopping, joining of other businesses  Market Share Objectives: o Market share: a company’s percentage of the total market sales for a specific product o Other pricing objectives: loss containment and survival  Price-Setting Tools: o Cost-Oriented Pricing: considers the firm’s desire to make a profit and takes into account the need to cover production costs  Markup-percentage: Markup/Sales Price o Break-Even Analysis:  Variable costs: the costs that change with the number of goods or services produced or sold  Fixed costs: those costs unaffected by the number of goods or services produced or sold  Break-even analysis: an assessment of how many units must be sold at a given price before the company begins to make a profit  Total fixed costs / (Price – Variable Cost) = Break-Even point (in units)  Pricing Strategies: o High prices: higher quality goods o Low prices: if they are able to maintain the same level of quality o Price leadership: the dominant firm in the industry establishes produce prices and other companies follow suit  Ex. – structural steel, gasoline, etc. – differ in quality, and use advertising campaigns, personal selling and service to differentiate, not price! o Price Skimming: price a new product as high as possible to earn the maximum profit on each unit sold  Cover developmental costs, and generate a profit o Penetration Pricing: price a new product very low to sell the most units possible and to build customer loyalty  Creates customer interest and stimulate trial purchases  Pricing Tactics: o Price Lining: practice of offering all items in certain categories at a limited number of predetermined price points o Psychological Pricing: practice of setting prices to take advantage of the non-logical reactions of consumers to certain types of prices  Odd-Even pricing: prices are not stated in even dollar amounts o Discounting: any price reduction offered by the seller to persuade customers to purchase a product  Cash discount: customers paying cash rather than credit, pay lower prices  Seasonal discount: lower prices are offered at a time of year when sales are traditionally low  Trade discount: given to firms involved in a product’s distribution  Quantity discount: customers buying large amounts of a product pays lower prices Chapter #8: Promotion  Promotion: any technique designed to sell a product  Information & Exchange Values: o Create customer awareness o Inform customers of the product o Attract customers and display benefits of the product o Encourage action through persuasion  Promotional Objectives: o Communicating information: informing consumers about the product – benefits, availability, etc. o Positioning: establishing a unique image of a product – generally appealing to only a certain market segment o Adding value: added benefits in products o Controlling sales volume: when experiencing slow growth (seasonal fluctuations), offering more promotions can help to smoothen the cycle  Promotional Strategies: o Push Strategy: aggressively pushes its product through wholesalers and retailers which persuade customers to buy it  Industrial products  Personal selling o Pull Strategy: company appeals directly to customers, who demand the product from retailers, which demand the product from wholesalers  Consumer products  Advertising  Promotional Mix: portion of marketing concerned with choosing the best combination of advertising, personal selling, sales promotions and publicity and public relations to sell a product o Advertising, personal selling, sales promotions and publicity & public relations 1. Potential consumers must recognize the need for a product – marketers use advertising to ensure they are aware of their products 2. Consumers would like to learn more about available products – educating 3. Consumers compare products – marketers should use personal selling to demonstrate product quality and performance 4. Consumers choose products to purchase – sales promotion is effective for an incentive to buy – personal selling can help by bringing products to convenient purchase locations 5. Consumers evaluate the product – advertising helps to remind customers of their wise purchases  Advertising Promotions: o Advertising: promotional tool consisting of paid, non-personal communication used by an identified sponsor to inform an audience about a product  Advertising Strategies: o Informative advertising: introductory stage of product life cycle – goal is to make potential customers aware of the existence of a product o Persuasive advertising: growth stage of product life cycle – influence customer to buy the firm’s product rather than the similar product of a competitor o Comparative advertising: maturity stage of product life cycle – influence the customer to switch from a competitor’s similar product to the firm’s product by directly comparing the two products o Reminder advertising: latter part of the maturity stage – keep the product’s name in mind  Advertising Media: o Advertising Medium: specific communication device – television, radio, newspapers, direct mail, magazines, billboards – used to carry firm’s advertising message to potential customers  Newspapers: widely used, but emphasis has shifted to the Internet  Television: appealing, however there is much competition and is expensive  Direct mail: printed advertisements such as flyers that are mailed directly to consumers  Radio: relatively inexpensive, and are programmed locally – high degree of customer selectivity  Magazines: allows for detailed product information, tend to have multiple exposures to readers  Outdoor advertising: billboards & signs – relatively inexpensive, effective  Word of mouth: buzz marketing – opinions about the value of products passed among consumers in informal discussions  The Internet: Ecommerce – buying and selling processes that make use of electronic technology; Internet Marketing – promotional efforts of companies to sell their products and services to consumers over the Internet  Advantages: convenience, selection, useful information control, reach, direct distribution, reduced expenses, relationship building, flexibility, feedback, etc.  Disadvantages: profitability for internet marketers, information overload, limited markets, security issues  Personal Selling: o Promotional tool in which a salesperson communicates one-on-one with potential customers o Very costly o Telemarketing: cut costs of personal sales visits  Sales Force Management: o Set goals at top of organization o Set practical objectives for salespeople o Organize sales force to meet objectives o Implement and evaluating success of a sales plan  Personal Selling Situations: o Retail Selling: selling a consumer product for the buyer’s own personal or household use o Industrial Selling: selling products to other businesses, either for manufacturing other products or for resale  Personal Selling Tasks: o Order processing: in personal sales, the receiving and follow-through on handling and delivery of an order by a salesperson o Creative selling: in personal sales, the use of techniques designed to persuade a customer to buy a product when the benefits of the product are not readily apparent or the item is very expensive o Missionary selling: in personal sales, the indirect promotion of a product by offering technical assistance and or promotion the company’s image  The Personal Selling Process: o Prospecting: identifying potential customers o Qualifying: determining whether potential customers have the authority to buy and the ability to pay for a product o Approaching: first few minutes that a salesperson has contact with a qualified prospect – gain credibility o Presenting and demonstrating: present promotional message including information of its features, uses, benefits, match with the user’s needs, should include a demonstration o Handling objections: show the salesperson they are interested but there are some aspects they would like to negotiate on, ex. Price o Closing: asking the customer to purchase the product (usually indirectly) o Following up: fast processing and on-time delivery  Sales Promotion: o Short-term promotional activities designed to stimulate consumer buying or cooperation from distributors and other members of the trade o Coupon: method of sales promotion featuring a certificate the entitles the bearer to stated savings off a product’s regular price o Point-of-purchase Display: method of sales promotion in which a product display is located in a retail store as to encourage consumers to buy the product o Premiums: method of sales promotion which some item is offered free or at a discount to consumers in return for buying a specified product o Trade shows: method of sales promotion which members of a particular industry gather for displays and product demonstrations designed to sell products – generally already well-established audience  Publicity & Public Relations o Publicity: information about a company that is made available to consumers by the news media, not controlled by firms but does not cost money o Public Relations: public-service announcements by the company designed to enhance the company’s image – Ex. Companies sponsoring community events Chapter #9: Place  Distribution Mix: combination of distribution channels a firm selects to get a product to end-users  Intermediaries: any individual or firm other than the producer who participates in a product’s distribution  Wholesalers: intermediaries who sell products to other businesses which in turn resell them to the end- users  Retailers: intermediaries who sell products to end-users  Distribution channel: path a product follows from the producer to the end user o Direct distribution of consumer products: product travels from the producer to the consumer without intermediaries (direct channel) o Retail distribution of consumer products: producers distribute products through retailers o Wholesale distribution of consumer products: wholesalers store merchandise and restock it frequently o Distribution through Sales Agents or Brokers: used to represent producers to sell to retails/wholesalers, receiving commission  Non-Direct Distribution: o Advantages: added value through time saving information, available quantities, o Disadvantages: high markups per distribution channel added  Distribution Strategies: o Intensive distribution: product is distributed in nearly every possible outlet, using many channels and channel members o Exclusive distribution: product’s distribution is limited to only one wholesaler or retailer in a given geographic area o Selective distribution: falls between intensive and exclusive – calling for the use of a limited number of outlets for a product  Wholesalers: o Merchant Wholesalers: buy and takes legal possession of goods before selling them to customers  Usually providing storage and means of delivery  Full service: provides credit, marketing and merchandising services o Agents & Brokers: they do not own the merchandise, but receive commission on what they sell  Use of their knowledge of markets and merchandising expertise  Keep them neatly arranged and attractively displayed  Retailing: o Product Line Retailers:  Department Stores: large retail stores that offer a wide variety of high-quality items divided into specialized departments – offer services such as generous return policies, credit plans and delivery  Supermarkets: large retail stores that offer a variety of food and food-related items divided into specialized departments – low prices, self-service and wide selection  Specialty Stores: small retail stores that carry one line of related products o Bargain Retailers:  Retail outlets that emphasize low prices as a means of attracting customers  Discount houses: bargain retail stores that offer major items such as TVs and large appliances at a discount  Catalogue Showroom: customers place orders or items described in a catalogue and pickup those items from an on-premises warehouse  Factory Outlets: owned by the manufacturers whose products they sell  Wholesale Club: huge, membership only, combined retail-wholesale operations that sell brand-name merchandise  Convenience Stores: offer high accessibility, extended hours, and fast service on selected items  Non-Store and Electronic Retailing o Non-store Retailing:  Direct-response: firms make direct contact with customers both to inform them about products and to receive sales orders  Direct selling: non-store retailing typified by door-to-door sales  Mail order: customers place orders for merchandise shown in catalogues and receive their orders via mail  Telemarketing: use of the telephone to sell directly to consumers o Electronic Retailing: information about the seller’s products and services is provided over the Internet, allowing consumers to receive the information and purchase the products at home  Internet-based stores: growing business – easier distribution and accessibility  Warehousing Operations: o Physical distribution: those activities needed to move a product from the manufacturer to the end consumer o Warehousing: part of the distribution process concerned with storing goods o Private warehouse: warehouse owned and used by just one company o Public warehouse: an independently owned and operate warehouse that stores the goods of many firms o Storage warehouse: warehouse used to provide storage of goods for extended periods of time o Distribution center: warehouse used to provide storage of goods for only short periods before they are shipped to retail stores o Inventory control: part of warehouse operations that keeps track of what is on hand and ensures adequate supplies of products in stock at all times o Materials handling: transportation and arrangement of goods within a warehouse and orderly retrieval of goods from inventory  Transportation Operations: o Truck, air and rail are the most common types of transportation o Trucks: flexibility, fast service and dependability – generally used for expensive items, short distances o Planes: most expensive, but fastest o Railroads: used to be the backbone, but is now used to transport heavy, bulky items o Water Carriers: least expensive, but slowest o Pipelines: slow, but provide a constant flow of product, unaffected by weather conditions  Changes in Transportation Operations: o Intermodal transportation: combined use of different modes of transportation o Containerization: the use of standardized heavy-duty containers in which many items are sealed at the point of shipment and opened only at the final destination o Order-fulfillment: all activities involved in completing a sales tr
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