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Chapter 5

MGTA01H3 Chapter Notes - Chapter 5: Market Segmentation, Marketing Mix, Psychographic


Department
Management (MGT)
Course Code
MGTA01H3
Professor
Chris Bovaird
Chapter
5

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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
o Our needs and wants are the forces that drive marketing
Marketing concept: the idea that the whole firm is directed toward servicing present and
potential customers at a profit
o Consumers buy products that offer the best value when it comes to meeting their needs and
wants
Value: relative comparison of a product's benefits versus is costs
-benefits include not only the functions of the product, but also the emotional satisfactions
associated with owning, experiencing, or possessing it. Costs could include sales price, the
expenditure of the buyer's time, and the emotional costs of making a purchase decision
value=benefits/costs
--satisfied buyer is when benefits>costs
Marketing strategies focus on increasing value for customers
Utility: ability of a product to satisfy a human want or need
--marketing strives to provide four kinds of utility: time utilityavailability, place utility
convenience, ownership utilitytransferring ownership from store to customer, and form
utilityturning raw materials into finished goods
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
--service marketing
o Marketers also promote ideas (can be through the use of ads; ex. ads that stress the importance
of driving only when sober)
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
o In planning and implementing strategies, marketing managers develop the four basic
components (often called the "Four Ps") of the marketing mix the combination of (the "Four
Ps") product, price, place, and promotion strategies used in marketing a product
Product
o Marketing begins with a producta good, service, or idea that satisfies buyers' need or wants
--conceiving and developing new products is a challenge for marketers, who must always

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consider the factor of changechanging technology, changing consumers wants and needs, and
changing economic conditions
o Mass-customization allows marketers to provide products that satisfy very specific needs of
consumers
o Product differentiation: the creation of a product or product image that differs enough from
existing products to attract consumers
Price
o Price refers not only to the actual amount of money that consumers must pay for a product or
service, but also to the total value of things that consumers are willing to give up (opportunity
cost shit)
Price: that part of the marketing mix concerned with choosing the appropriate price for a
product to meet the firms profit objectives and buyers' purchasing objectives
--from the seller's perspective, determining the best price is often a balancing act. On the one
hand, prices must support a variety of costs. On the other hand, prices can't be so high that
consumers turn to competitors product. Successful pricing means finding a profitable middle
ground between these two, however both low and high-price strategies can be effective as well
--low prices, for example, generally lead to larger sales volumes
--high prices usually limit market size but increase profits per unit. High prices may also attract
customers by implying that a product is of high quality
Place
o In the marketing mix, place refers to distributionthat part of the marketing mix concerned
with getting products from the producer to the buyer, including physical transportation and
choice of sales outlets
o Decisions about warehousing, inventory control, transportation options, and channels through
which firms distribute products are all distribution decisions
Promotion
o The most highly visible component of the marketing mix is promotiontechniques for
communicating information about products
--the most important promotional tools include advertising, personal selling, sales promotions,
and public relations
o 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)
o Due to consumers' various needs and wants has led marketing managers to think in terms of
target marketing
Target markets: any group of people who have similar wants and needs and may be expected to
show interest in the same product(s)
o Target marketing clearly requires market segmentationdividing a market into categories
according to traits customers have in common
--note that segmentation is a strategy for analyzing consumers, not products
o In marketing, the process of fixing, adapting, and communicating the nature of the product itself
is called positioning
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