Lesson 3: Marketing Concepts Problem Solving 1 1

What is the marketing mix? What you’ll learn... Marketing What is marketing? What does it involve? What is the marketing mix? 2

About Marketing 3 3

Marketing in the 21 century WHY 4 4

What is marketing? Marketing… is not ADVERTISING is not SELLING is not PROMOTION “The aim of marketing is to make selling unnecessary.” Peter Drucker (1973) 5 5

What is marketing? Businesses need to sell products if they are to achieve their objectives. Marketing is about ensuring that businesses can sell as many products as possible in order to make profits. 6

What does it involve? Marketing is a very complex concept. It involves: Research Product design Setting prices Making sure the customer knows about products Choosing how and where to sell products 7

Without careful marketing these products would fail Why is it needed? Each year millions of new products are launched: Without careful marketing these products would fail 8

“Marketing is the science and art of exploring, creating and delivering value to satisfy the needs and wants of a target market maintaining loyalty at a profit.” Professor Philip Kotler 9

Cheeseburger, Tuxedo, Car Needs Eat, Dress, Move Wants Cheeseburger, Tuxedo, Car Marketer 10

This Is Demand Wants Buying Power “Demand” 11 11

First Task: Detect Needs 12

Organization’s marketing focus Marketing’s first task: discovering consumer needs Organization’s marketing focus Discover consumer needs Information about needs Potential consumers: The market 13

What is a Market? Potential consumers make up a market, which is: 1. People 2. with the Desire and 3. with the Ability to Buy a specific product. 14

Organization’s marketing focus Marketing’s Second Task: Satisfying Consumer Needs Organization’s marketing focus Concepts for products Satisfy consumer needs Find the right combination of: Product Price Promotion Place Discover consumer needs Information about needs Goods, services, ideas Potential consumers: The market 15

The Target Market Because the organization obviously can’t satisfy all consumer needs, it must concentrate its efforts on certain needs of a specific group of potential consumers This is the target market -- one or more specific groups of potential consumers toward which an organization directs its marketing programme 16

Customer Development Suspects Prospects Clients Advocates Partners First-time customers Repeat customers Clients Advocates Partners Disqualified prospects Inactive or ex-customers 17

Marketing Management 18 18

The Marketing Mix The marketing mix is the combination of variables that a business uses to carry out its marketing strategy and meet customer needs. The marketing mix is often called the 4Ps: Product Price Place Promotion 19

The Marketing Mix The tools available to a business to gain the reaction it is seeking from its target market in relation to its marketing objectives 7Ps – Price, Product, Promotion, Place, People, Process, Physical Environment Traditional 4Ps extended to cope with today's changing environment 20 20

The Marketing Mix 21 21

Product 22 22

Product Product’ refers to the functions and features of a good or service Should satisfy the needs of the customer May have a Unique Selling Proposition (USP) ‘Product’ also includes a range of factors such as packaging, quality, warranties, after-sales service and branding 23

Product The firm must come up with a product or service that people will want to buy. It must fulfil some need or want. It must be (or at least seem) unique. 24

Product Methods used to improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g. Extension strategies Specialised versions New editions Improvements – real or otherwise! Changed packaging Technology, etc. Image copyright: www.freeimages.co.uk 25 25

The Product Life Cycle The product lifecycle looks at the sales of a product over time 26

Stages in the Product Lifecycle Development – high costs but no sales Launch – high expenditure on promotion and product development, low sales Growth – sales increase and product should break-even Maturity – sales stabilise, less expenditure on promotion needed, revenue & profit should be high Decline – sales decline, extension strategies can be adopted or the product withdrawn 27

Extension Strategies Extension strategies should maintain or increase sales. They include: Modifying the product Reducing the price Adding a feature Promoting to a different market sector 28

Excitement and leisure T-shirts – photos with players Product or service or brand Core Product Actual Product Augmented Product BMW Freedom to travel A motor car   Sheraton  Rooms Room service Egypt Air  Flight An airline journey Zamalek Football Club Excitement and leisure  T-shirts – photos with players ALICO Insurance policy Finance UNIONAIR  Cooling Warranty 29 29

Price 30 30

Price The price of a product will depend on: The cost to make it The amount of profit desired Other objectives of the business The price competitors charge The price customers are willing to pay Is there a high demand? Is demand sensitive to changes in price? 31

Price The price must be one that the customer thinks is good value for money. This is not the same as being cheap! Prices have a great psychological effect on customers. Pricing Strategy - International Comparative Cost plus 32 32

Price Leader/Taker Price leader – businesses that dominate the market can often dictate the price charged for a product. Other businesses follow this lead Price taker – businesses have to charge the market price. This is often the case where there are many small firms competing against each other 33

Pricing Strategies & Tactics Skimming Launching with a high price when there is little competition, then reducing the price later. Often used with technology. Penetration Low price charged initially to penetrate the market and build brand loyalty; prrice is then increased e.g. introductory offers on magazines. 34

Pricing Strategies & Tactics Competitive A similar price is charged to that of competitors’ products. Loss leader Products may be sold at a price lower than the cost to produce it. Often used by supermarkets to encourage people into the store where it is hoped they will buy other products. 35

Pricing Strategies & Tactics Psychological A price is set which customers perceive as lower than it is e.g. €39.99 instead of €40 36

Promotion 37 37

Promotion Strategies to make the consumer aware of the existence of a product or service NOT just advertising 38 38

Promotion The aims of promotion are to: Raise awareness Encourage sales Create or change a brand image Maintain market share Increase market share 39

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Promotion Above-the-line promotion This uses advertising media over which a firm has no direct control e.g. television, radio and newspapers Below-the-line promotion This uses promotional media which the firm can control e.g. direct mail, sales promotions and sponsorship 41

The promotional message should Grab Attention Stimulate Interest Create Desire Promote Action 42 42

Promotional Activities Advertising e.g. TV, billboards and internet. Sales promotions e.g. Loyalty cards, BOGOF, discounts & free gifts Sponsorship – a business pays to be associated with another firm, event or cause 43

Promotional Activities Direct mailing – promotional material is sent to potential customers by post/email Public relations – building the relationship between the firm and the public by enhancing its reputation 44

Promotional Mix Most businesses use a combination of different promotional activities. The chosen promotional mix will depend on: Cost Target market Product Competitors 45

Place 46 46

Place The means by which products and services get from producer to consumer and where they can be accessed by the consumer The more places to buy the product and the easier it is made to buy it, the better for the business (and the consumer?) 47 47

Place Products should be conveniently available for customers to buy ‘Places’ include: Stores Mail order Telesales Internet - The use of e-commerce (promoting and selling on the internet) has grown massively over recent years 48

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Jobber One that buys merchandise from manufacturers and sells it to retailers 50

People 51 51

People People represent the business The image they present can be important First contact often human – what is the lasting image they provide to the customer? Extent of training and knowledge of the product/service concerned Do staff represent the desired culture of the business? 52 52

People People represent the business The image they present can be important First contact often human – what is the lasting image they provide to the customer? Extent of training and knowledge of the product/service concerned Mission statement – how relevant? Do staff represent the desired culture of the business? 53 53

People People represent the business The image they present can be important First contact often human – what is the lasting image they provide to the customer? Extent of training and knowledge of the product/service concerned Mission statement – how relevant? Do staff represent the desired culture of the business? 54 54

Process 55 55

Process How do people consume services? What processes do they have to go through to acquire the services? Where do they find the availability of the service? Contact Reminders Registration Subscription Form filling Degree of technology 56 56

Physical Environment 57 57

Physical Environment The ambience, mood or physical presentation of the environment Packaging. Internet/web pages. Paperwork (such as invoices, tickets,…..). Brochures. Furnishings. Uniforms. Business cards. The building itself (such as prestigious offices or scenic headquarters). Mailboxes and many others . . . . . . 58 58

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Physical Environment The ambience, mood or physical presentation of the environment Smart/shabby? Trendy/retro/modern/old fashioned? Light/dark/bright/subdued? Romantic/chic/loud? Clean/dirty/unkempt/neat? Music? Smell? 60 60

Stages in Consumer Decision Process Word- of- Mouth Awareness Advertising Interest Channel Decision Product / Service Action Price Satisfaction 61

The Marketing Mix Blend of the mix depends upon: Marketing objectives Type of product Target market Market structure Rivals’ behaviour Global issues – culture/religion, etc. Marketing position Product portfolio Product lifecycle Boston Matrix 62 62

Marketing Model Target Market Aware Understand Believe Want Find Buy Intention to Purchase Understand Believe Cost Want Above the Line Find Below the Line Point of Purchase Buy Revenue Use Experience Value Prefe r Loyal Behavior 63

Marketing Management Philosophies Competing Philosophies Production Sales Market Societal Marketing 64 64

Marketing Management Philosophies Philosophy Key Ideas Production Sales Market Societal Focus on efficiency of internal operations Focus on satisfying customer needs and wants Focus on satisfying customer needs and wants while enhancing individual and societal well-being Focus on aggressive techniques for overcoming customer resistance 65 65

Focus on Customer Wants and Needs The Marketing Concept Focus on Customer Wants and Needs Achieve Organization’s Long Term Goals by Satisfying Customer Wants and Needs Integrate Organization’s Activities to Satisfy Customer Needs and Wants 66 66

Selling goods and services Comparing Sales and Market Orientations Organization’s Focus Firm’s Business For Whom? Primary Profit Goal? Tools to Achieve Inward Selling goods and services Everybody Maximum sales volume Primarily promotion Sales Orientation Market Orientation Outward Coordinated use of all marketing activities Customer satisfaction Specific groups of people Satisfying wants and needs 67 67

Competitive Advantage Customer Satisfaction Customer Relationships Developing Competitive Advantage Competitive Advantage Create Maintain Customer Value Customer Satisfaction Build Customer Relationships 68 68

Evolving Marketing Mix The marketing mix will evolve over time The product portfolio may grow as a business becomes more established More expensive promotional activities may be adopted as a firm’s revenue increases More outlets may be opened, or products sold via the internet Price may change as demand changes 69

Value and Satisfaction Expectation Performance 10 8 Expectation Performance 8 10 If performance is lower than expectations, satisfaction is low. If performance is higher than expectations, satisfaction is high. 70 70

Why Do So Many Products Fail? market size may have been overestimated actual product may not have been designed real well competitors fight back harder than expected priced too high advertised poorly Many new products fail due to many factors...the market may not have been researched properly and overestimated in size. The design of the product may not be the best The opposition or competition may be fierce competitors...more so than originally anticipated Your product may be priced too highly or poorly advertised and marketed utilizing the wrong medium to reach your target audience. Many times the corporate powers to be are not 110% behind a new product, thereby sentencing it to death even though it has an excellent potential and market. R&D may be too high Market positioning may be improper corporate politics despite poor marketing research findings costs of product development are higher than expected incorrectly positioned in the market 71 71

Marketing Mix Concept Existing Product Proposed Product Product Name Packaging Price Promotion (means) Place (Target Area) People (Target Customer) Process (Materials)