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Chapter 15

Management II Chapter 15

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Department
Management (MGT)
Course
MGTA02H3
Professor
Chris Bovaird
Semester
Winter

Description
Chapter 15: Understanding Marketing Processes and Consumer Behavior What is Marketing - marketing: planning and executing the development, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy both buyers’ and seller’ objectives Value and Utility - value: relative comparison of a product’s benefit versus its costs (benefit of high value products is greater than cost value = benefits ÷ costs - benefits: the functions of a product and emotional satisfaction associated with owning, experiencing or possessing it - focus of marketing is to increase value to customers by using marketing resources (value can be added by keeping store opened for longer hours, reducing price, etc) - utility: ability of a product to satisfy a human want or need (marketers strive to provide 4 types of utility) o time utility: availability of products when customers want them (ornaments in time for Christmas) o place utility: availability of products where customers can conveniently purchase them (department stores have different sections for different types of products) o ownership utility: convenient transfer of ownership from store to customer o form utility: availability of products themselves (raw materials into finished goods) Goods, Services, Ideas - consumer goods: products purchased by individuals for their personal use (perfume) o firms that sell products to consumers for personal consumption are involved in consumer marketing - industrial goods: products purchased by companies to use directly or indirectly to produce other products (raw materials, earth move, etc) o firms that sell products to other marketers are involved in industrial marketing - services: intangible products, such as time, expertise, or an activity that can be purchased (insurance) o firms that provide services are involved in service marketing - markets also promote ideas (don’t drink and drive) Relationship Marketing - relationship marketing: a type of environment that emphasizes lasting relationships with customers and suppliers (can result in long term satisfaction and customer loyalty) < Harley Owners Group (H.O.G) Marketing Environment - external factors: outside factors that influence marketing programs by posing opportunities or threats (5 environments- political/legal, social/cultural, technological, economic, competitive o political/legal environment: ex. Cell phone bans in cars; to gain public support marketing uses ad campaigns for public awareness on issues of local, regional or national importance; they also lobby and contribute to political candidates (although contributions are restricted, they can help change laws) o social/cultural environment: ex. Women entering workforce, environmental movement; companies must adapt to changing social forces and they have to develop and promote new products o technological environment: creation of new goods and services (satellite dish, home television shopping); new products replace old ones (CDs replace cassettes) o economic environment: determine consumer, business and government spending patterns; marketers plans for product offerings, pricing, and promotional values depend on these variables; marketers must be aware of business cycle (unemployment, recessions, etc) o competitive environment: marketers must convince buyers to purchase their products instead of those of other customers; each marketing program tries to make its product look more attractive  marketing concept: the idea that the whole firm is directed toward serving present and potential customers at a profit - three types of competition: o substitute product: a product that is dissimilar from those of competitors but that can fulfill the same need (physical fitness programs and drugs can lower cholesterol) o brand competition: competitive marketing that appeals to consumer perceptions of similar products o international competition: competitive marketing of domestic against foreign products (competition is affected by alliances such as NAFTA) < ex. Air Canada vs. Swissair Strategy: The Marketing Mix - 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 requires management) - marketing plan: a detailed strategy for gearing the marketing mix to meet consumer needs and wants (marketing begins when a company identifies a consumer need and develops a product to meet it) - marketing mix: the combination of product, pricing, promotion, and distribution strategies used in marketing a product Product - product: a good, service or idea that satisfies buyers’ needs and demands (conceiving an idea is a constant challenge, marketers must also consider the factors of change *discussed above) - product differentiation: the creation of a product or product image that differs enough from existing products to attract consumers (Volvo has newer, better safety features) Price - price: that part of the marketing mix concerned with choosing the appropriate price for a product to meet the firm’s objectives and buyers’ purchasing objectives (price must cover cost and make profit, but cant be too high that consumers turn to competition) - price strategies can be effective in different situations> low prices = higher sales, high prices = limited market size but increase profit per sale Place (distribution) - distribution: that part of the marketing mix concerned with getting products from the producer to the buyer, including the physical transportation and choice of sale outlets (firms decide on outlets, warehouses, channels of distribution) Promotion - promotion refers to techniques for communicating information about products; promotional tools include advertising, personal selling, sales promotion and public relations - product, price, place and promotion (4 Ps) are the sellers perspective they are a mirror image of the buyer’s 4 Cs: customer solution (product), customer cost (price), customer convenience (place) and customer communications (promotion) Target Marketing and Market Segmentation - marketing managers know that their product cannot appeal to everyone - target marketing: any group of people who have similar wants and needs and may be expected to show interest in the same products - market segmentation: dividing a market unto categories according to traits customers have in common (Big and Tall sells to people who are taller and heavier than average) - once they have identified market segments, companies may adopt a variety of product strategies (GM makes almost every type of car, Rolls Royce specializes) Identifying Market Segments - geographic variables: geographical units that may be considered in a segmentation strategy (people buy more umbrellas in BC than in Arizona) – some products have universal acceptance (70% of Coke’s income is foreign, 22% for Pepsi) - demographic variables: characteristics of populations that may be considered in developing a segmentation of strategy (ex. Age distribution of a country’s population) - psychographic variables: psychological traits that a group has in common including motives, attitudes, activities, interests, and opinions (important to marketers because they can be changed by marketing efforts unlike geographic and demographic variables) < opinions held by public on certain companies or practices - behavioral variables: consumer characteristics based on the use of a product, benefits expected from it, reasons for purchasing it, and loyalty to it < ex. People buy athletic shoes for durability, comfort and performance (hard-core loyalists buy only one brand, switchers buy various brands) Market Segmentation: a caution - market segmentation must be done carefully; a lot of people may share one category (age) but be totally different in another (tastes) < ex. Canada has two dominant culture (English and
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