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EFFECTIVE MARKETING (Definition): the business function that aims to identify, influence and then satisfy consumer wants profitably. It is not just about advertising! IDENTIFYING A MARKET *Business creates new market *Aims at anyone who can afford *Target market comes later SEGMENT MARKET *Not all consumers are identical *Product ranges created to suit different consumers needs COHERENT BRAND IMAGE *Business uses 4 P's (Marketing mix - next) in successful and integrated way *Above creates coherent and attractive brand name that appeals to target market MARKET ORIENTATED MARKET *Create product based around market needs
MARKETING MIX Also known as the 4 P's: Price Place Product Promotion Before the company can use the marketing mix in an effective way they must first understand the market – this is done by researching (trends, products place in the market, market segments, target market, customer views on the product, reasons for possible success/failure and an understanding of competitors products/activity) and planning. Product Successful products are purchased for more than one reason e. g. consumers buy the i. Pod because they are physically benefiting (being able to take their music with them anywhere - except underwater) and are benefiting psychologically – consumers have bought in to a brand with a cool image. << They'll try sell anything these days. . .
Product (continued) Companies aim to differentiate their products from their competitors and create a UNIQUE SELLING POINT (U. S. P. ). These products usually have unique features such as how they look, taste or what they can do. There are two types of differentiation: Actual differentiation: product genuinely advantages in the consumer in some way e. g. unique taste, function, design or superior performance (such as a new Dyson Vac with Cyclone technology – proven to pick up dust better than a bag Vac) Imagined differentiation: where the differences are created in the consumers minds e. g. branding – a consumer buys a pair of Nike trainers over a pair of generic non-branded trainers simply because of the name
Product Life Cycle The idea is that this tool predicts in theory the stages of a products life. If the product goes unmodified the last two stages are inevitable. Although the first Play. Station was successful even it couldn't survive the last two stages due to new innovations one of which being the PSone (smaller design). Changes in demand as customers included better graphics and faster loading games and the PS 2 was an extension strategy to extended the PS's life cycle.
Product Portfolio Analysis This is done by using a Boston Matrix. It is a tool used to analyse the product portfolio of a company and helps when making decisions as to possible long term marketing strategies. Stars: * products experience high growth * experience high market share * potentially high revenue * potentially high profit Cash Cows: * high market share * low growth (at maturity in Product Life Cycle) * high cash revenue * established product – low cost Problem Child: * new products – need money spent on to Dogs: grow * low growth * low market share * low/declining market share * high growth * associated with negative cash flow * Can be associate with negative cash flow
Promotion General term which is used to describe all activity conducted by a business to let potential customers know about a product and tries to persuade them to purchase it. It is not just advertising! Long Term Promo: Branding – process of differentiating a product/service from its competitors though the name, sign, symbol, design or slogan link to that product/service Persuasive Advertising – Used to create a distinctive brand image e. g. Logos. mottos Public relations – gaining favourable publicity through the media which is also free so this is the most cost effective type of promotion Short term Promo: Sales Promotions – BOGOF (Buy one get one free), 3 for 2 etc Direct selling – door to door, cold calling Merchandising – impulse buys at point of sale (checkouts) in a store Advertising – TV/Radio adverts Direct Marketing – flyers/leaflets through doors (also known as Junk mail) Public Relations – features in the media
Promotion (Continued) Above The Line Promotion *Sales Promotion Price reduction Competitions Point of Sale Displays (e. g. chewing gum, sweets, magazines at checkouts) Demonstrations Free Samples Gifts (e. g. body lotions with perfumes in gift boxes) *Personal Selling *Public relations *Customer Service Providing Info Giving advice Exchagining goods Free delivery of goods Providing credit Below The Line Promotion *Types of advertising Persuasive Informative *Media used Internet TV Radio Magazines
Price Tactics (Short term): Loss Leader – firm sets a low price for it's product(s) in order to encourage consumers to buy other products that provide a profit for the firm e. g. customer buys Smart Price butter and Asda breaks even on the product but the consumer buys bread (a complimentary product) on which Asda make money. Psychological Pricing – gives the impression of value e. g. selling a product for £ 9. 99 rather than £ 10 Strategies (Long term): Predator/Destroyer Pricing – firm sets a low price to drive other firms out of the market Price Skimming – a high price is set to yield a high profit margin Price Penetration – low prices are set to break in to a market or achieve an increase in market share Price Taker – a small firm follows the price set by a price leader Price Leader – a big firm sets a market price that smaller firms tend to follow
Price (Continued) Factors which make affect pricing decisions: Target market (and their Personal Disposable Income Levels) Competition (and their prices) Cost of production Break even point Quality (associated with a higher price e. g. Marks and Spencers clothing) Price Elasticity of Demand (and how sensitive the products demand is to price) Demand increases as price decreases and vice versa in most cases
Price (Continued) Competitors Amount of competitors can affect price. Consumers in competitive markets have more choice so price becomes an important factor when deciding where to buy goods. Although in a monopoly situation businesses are able to charge higher prices. Consumers are more price concious if the product is readily available. Monopoly (Definition): In theory, a single producer in a market, but in practise a firm with a market share larger than 25% Oligopoly (Definition): A market dominated by a small number of large businesses
Price (Continued) Price Elasticity of Demand This is a way of measuring the responsiveness of demand to change in price. This can be done using the following formula; PED = % Change in quantity demanded % Change in price P = Price Q = Quantity D = Demand
Place This is not just concerned with the place of the business but also the distribution channel (how the product gets to the customer) and the point of sale (where the customer can purchase the product). Distribution Channels (Definition): channels/routes which a product takes when transferring from the producer to the consumer Distribution Targets (Definition): objectives given to firms staff (usually sales force) to encourage them to gain as much space in outlets as possible Point Of Sale (P. O. S. ) (Definition): place where sales are made i. e. store/corner shop Placement Within The P. O. S. (Definition): where the product is displayed inside the store
Place (Continued) Distribution Channel types: TRADITIONAL Producer ---> Wholesaler ---> Retailer ---> Consumer MODERN Producer ---> Retailer ---> Consumer DIRECT Producer ---> Consumer