1. Marketing Principles of Business & Marketing

2. Marketing Basics  Marketing may be the most visible set of business activates to consumers, yet is also very misunderstood.  People often define marketing as advertising or selling.  While those are important, there are many other activities that are part of effective marketing.

3. Marketing Basics  The AMA definition of marketing shows how complex it is: “Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.  Marketing includes a range of activities and a number of businesses in the U.S. economy.

4. Marketing Activities  As a consumer you are exposed to and take part in marketing activities all the time.  You see brand names on packages of the food you eat and on the clothes you wear.  You interact with salespeople in your favorite store.  There are less obvious but equally important marketing activities like storing products in warehouses, distributing products to where they will be sold, establishing credit and payment procedures and gathering data on consumer needs.

5. Marketing Activities  A great deal of marketing is not even aimed at final consumers.  Businesses market products and services to other businesses.  More time and money is spent in business- to-business marketing than in marketing products and services to final consumers.

6. Marketing Businesses  All businesses must complete some marketing activities even if that is not their focus.  Marketing businesses include advertising agencies and marketing research firms.  Transportation companies move products from producers to consumers and shipping and delivery companies provide express pickup and delivery of packages.  Marketing activities, marketing businesses and marketing careers are an important part of the U.S. economy.

7. Marketing Functions  There are seven marketing functions.  Promotion  Pricing  Financial Analysis  Marketing Information Management  Selling  Distribution  Product & Service Management  Each function occurs every time a product or service is developed and sold. Businesses provide many of the marketing functions.  Consumers often take part in one or more of the functions when they make purchases.

8. Marketing Functions  Product and service management is designing, developing, maintaining, improving, and acquiring products and services that meet consumer needs.  Producers and manufacturers develop new products.  Distribution involves determining the best way for customers to locate, obtain, and use the products and services of an organization.  Careful shipping, handling and storing of products are needed for effective distribution.

9. Marketing Functions  Selling is communicating directly with potential customers to determine and satisfy their needs.  Selling can be face to face, over the phone or online.  Marketing-information management is obtaining, managing, and using market information to improve business decision-making and the performance of marketing activities.  MIM includes marketing research and the development of databases with informational bout products, customers, and competitors.

10. Marketing Functions  Financial analysis is budgeting for marketing activities, obtaining the necessary funds needed for operations, and providing financial assistance to customers so they can purchase the business’ products and services.  Pricing is setting and communicating the value of products and services.  Customers must be able to easily identify the price of items that interest them or they will move on to another choice.  Prices must be set low enough that customers are willing to pay but high enough that the business makes a profit.

11. Marketing Functions  Promotion is communicating information about products and services to potential customers.  Advertising and other promotional methods are used to encourage customers to buy.  Advertising may occur in a variety of ways – television, newspapers, magazines, radio, direct mail and the internet.

12. Marketing Strategy  Marketing activities often cost 50% or more of the selling price of a product or service.  Careful marketing will aid a company in understanding and meeting customer needs.  Successful marketing results in satisfying exchanges between businesses and consumers.

13. Marketing Planning  Marketing planning is aimed at satisfying customer needs better than competitors do, resulting in sales and profits.  A company’s plan that identifies how it will use marketing to achieve its goals is called a marketing strategy.  Developing a marketing strategy is a two step process.

14. Marketing Planning  The first step is to identify a target marketing which is a specific group of consumers who have similar wants and needs.  Many companies try to promote their products to a wide audience whose needs and wants are quite varied.  It’s not easy for the company to meet all of those needs.  Focusing on a target market makes it easier to develop products and services that specific groups of customers want.

15. Marketing Planning  The second step in a marketing strategy is to create a marketing mix which is the blending of four marketing elements, product, place (distribution), price and promotion.  A successful marketing mix satisfies the wants and needs of the target market and provides a profit for the company.

16. Develop a Successful Marketing Strategy  To increase the chances of developing a product or service that meets customer needs and can be sold at a profit, companies adopt a marketing orientation.  A marketing orientation considers the needs of customers when developing a marketing mix.  Business use research to study customers and their needs.  The results are used to plan a marketing mix designed to satisfy those needs.

17. Develop a Successful Marketing Strategy Example  A company that owns a fleet of cruise ships gathers information on people who might consider a cruise as a vacation.  First time cruisers will need different info than experienced cruisers.  Menu items, entertainment and travel all must be planned to appeal to potential customers.

18. Develop a Successful Marketing Strategy Example  The company will first study possible customers and the similarities and differences in vacation wants and needs.  They then select a target market that presents the best opportunity for a successful cruise.  Using the info gathered about the market, the company then develops the marketing mix.

19. Understand Customers  Effective marketing begins with customers.  Many new businesses fail because the owners have an idea for a product but fail to consider customers and their needs.  If a product appeals to a group of customers with unsatisfied needs, it has a real chance to succeed.  Businesses can develop products for two types of consumers.  Final consumers are persons who buy products and services mostly for their own use.  Business consumers are persons, companies, and organizations that buy products for the operation of a business, for incorporation into other products and services, or for resale to their customers.

20. Consumer Decision-Making  The specific sequence of steps consumers follow to make a purchase is known as the consumer decision-making process.  1. Recognize a need.  2. Gather information.  3. Select and evaluate alternatives.  4. Make a purchase decision.  5. Determine the effectiveness of the decision.

21. Consumer Decision-Making  Decision-making begins with a need.  People use information to make decisions by talking to friends, looking at ads or customer reviews.  Once you narrow your choices, you will compare them to determine if one appears to be a better choice or a better value than the others.  Based on that info you have gathered, you will make a decision that is best for you.  If you like the product, you will likely make the same decision next time, but, if you did not like the product, you will re-evaluate your purchase.

22. Buying Motives  The reasons consumers decide what products and services to purchase are called buying motives.  Understanding the motives of consumers helps businesses plan a marketing mix.  Emotional buying motives are reasons to purchase based on feelings, beliefs, and attitudes. (EX: buying gifts for friends)  Rational buying motives are guided by facts and logic. (EX: buying a fuel-efficient car)

23. 10.2 Create and Improve Products  In many cases, products that are identified as new in a company’s advertising are not new at all.  Generally, some type of change has been made in the product that may be a major improvement.  Many ideas for product improvements result from the ideas of consumers and from their experience in using current products.  Finding solutions to problems through carefully designed studies involving consumers is known as marketing research.

24. Plan Marketing Research  Many types of research procedures can be used to solve marketing problems.  Steps in Marketing Research:  1. Define the marketing problem.  2. Study the situation.  3. Develop a data collection procedure.  4. Gather and analyze information.  5. Propose a solution.

25. Plan Marketing Research  A great deal of information about consumers and competitors is available to businesses without doing new studies.  Analyzing existing information gathered for another purpose but used to solve a current problem is known as secondary research.  Studies carried out to gather new information specifically directed at a current problem is primary research.

26. Types of Research Studies  The most common type of marketing research study involves consumer surveys.  Surveys gather information from people using a carefully planned set of questions.  Focus groups are also used where a small number of consumers take part in a group discussion where they talk about their experiences with a product, react to new product ideas or make product improvement suggestions.

27. Types of Research Studies  Observations collect information by recording the actions of consumers rather than asking them questions.  Experiments present two carefully controlled alternatives to subjects in order to determine which is preferred or has better results.

28. Product Planning  A business must carefully plan each of its products to make sure it meets the needs of the target market better than similar products offered by competitors.  A product is everything a business offers to satisfy a customer’s needs.  It starts with the basic product, which is the simplest form of a product.  Additions and improvements to the basic product are known as product features. (Ex: cell phone camera, web browsing capabilities)

29. Product Planning  When customers are offered choices of features, the choices are known as options, like when purchasing a car.  A brand name provides a unique identification for a company’s products and companies try to develop a memorable brand name with an appealing image.  Packaging provides protection and security for the product before it is used.  The package is also a convenient way to provide information to customers that help them make a purchase decision or explain how to use the product.  Guaranties and warranties are also offered to build customer confidence in company’s products.

30. Product Planning Procedures  New product planning is a costly and time-consuming process.  Companies invest several million dollars and spend years developing new products.  There are many steps in new product planning….

31. Product Planning Procedures  1. Idea Development  Ideas come from the work of scientists, suggestions of employees, and from consumer surveys and focus groups.  2. Idea Screening  Companies develop a large number of new product ideas and then evaluate the ideas to determine which have the best chance to be successful.

32. Product Planning Procedures  3. Strategy Development  If a product idea appears to be workable, the net step is to develop a full marketing strategy.  There must be a strong need for the new product.  4. Production and Financial Planning  Next, the company develops a production procedure and identifies the facilities, equipment, people and cost that will be needed to produce the product.

33. Product Planning Procedures  5. Limited Production and Test Marketing  A company may produce a limited quantity of the product and test it in a small part of the market.  This allows the company to make sure the product can be produced and marketed as planned before a large investment is made.  6. Full Scale Production  Products that are fully screened have a much greater chance of being successful than new products that do not go through a planning procedure.

34. Services  Marketing is used for both products and services, but services are more difficult to market.  Services are activities that are consumed at the same time they are produced.  Services are intangible, meaning that they have no physical form.  Marketers must find ways to describe the service in understandable ways to prospective customers.

35. Services  Services are inseparable, meaning that they are consumed at the same time they are produced.  Marketers must determine where and when consumers want a service and must be able to provide it at that location and time.  Services are perishable, meaning that the availability of a service must match the demand for that service at a specific time.  Services are heterogeneous, meaning that there will be differences in the type and quality of service provided and there is less control over quality than is possible with products.

36. 10.3 Price and Distribute Products  Many factors go into a decision about a fair price.  Supply and demand  A product that has a ready supply will have a lower price than a product with a very limited supply.  If demand for a product is high, prices will increase and vice versa.  Uniqueness  When a product has few close competitors because it is unique, the price will be higher than products that are very similar to others.  Age  When products are first introduced to the market, prices will be quite high.

37. Price and Distribute Products  Season  Many products are used at a particular time of year and prices will be highest just before and at the beginning of the season.  Complexity  Highly complex and technical products have higher prices than simple products.  Convenience  If a product is easily available and the seller provides a high level of customer service, prices will go up.

38. Price a Product  Price is the money a customer must pay for a product or service.  The price is set by the business following a formula that identifies the components of the price.  Selling price = Product Costs + Operating expenses + Profit  Selling price is the price paid by the customer for the product.  Product costs are the costs to the manufacturer of producing the product or the price paid by other businesses to buy the product.

39. Price a Product  Operating expenses are all expenses of operating the business that are associated with the product and include salaries, storage, display equipment, taxes and utilities.  Profit is the amount of money available to the business after all costs and expenses have been paid.  The gross margin is the difference between the selling price and product costs.  It represents the amount of money on hand to pay for operating expenses and provide a profit.

40. Price a Product  Markup is the amount added to the cost of a product to set the selling price.  A markup is stated as a percentage of the product's cost or as a percentage of the product’s selling price. Ex: If a product costs $15 and has a 100% markup on cost, the selling price is $30.00. That $30 product would have a markup on selling price of 50%.

41. Price a Product  A markdown is a reduction from the original selling price.  A markdown should be thought of as a pricing mistake because it reduces the amount of money the business has to cover operating expenses and profits.

42. Channels of Distribution  Distribution involves determining the best methods and procedures to use so customers can find, obtain and use a product or service.  As a marketing mix element, distribution is the locations and methods used to make a product or service available to the target market.  The route a product follows and the businesses involved in moving a product from the producer to the final consumer are known as a channel of distribution.

43. Need for Distribution Channels  In complex economies, exchanges are much more difficult due to several differences that exist between producers and consumers.  Differences in Quantity  Businesses produce or sell large amounts of each product to many customers and each customer needs only a very small number of products at a given time.  Differences in Assortment  Businesses specialize in producing a specific type of product while consumers want to purchase a variety of products.

44. Need for Distribution Channels  Differences in Location  In today’s global economy, thousands of miles often separate producers and consumers.  Differences in Timing  Consumers may want to buy products at different times than when they are produced.  An effective channel of distribution takes the large quantities produced and breaks them into quantities customers want to buy.  Distribution channels store products from the time they are produced until customers want to buy them.

45. Need for Distribution Channels  In a direct channel of distribution, products move from the producer straight to the consumer with no other organizations participating.  In an indirect channel of distribution, one or more other businesses are between the producer and consumer.  The channel member may be a transportation company, a sales organization, or a financial institution.  Retailers are a well-known and important part of distribution channels for consumer products.

46. Need for Distribution Channels  Retailers are the final business organization in an indirect channel of distribution for consumer products.  Retailers offer a range of products at convenient locations for consumers.  Retailers assist manufacturers by storing, displaying, and advertising the products and often paying the manufacturer well before final consumers buy the products.

47. 10.4 Plan Promotion  Promotional messages from businesses, organizations, government agencies, and political candidates bombard you on a regular basis.  Promotion is any form of communication used to inform, persuade, or remind.  It is used to influence knowledge, beliefs, and actions about products, services or ideas.  Marketers must apply effective communication to interact with consumers in a way that results in information, understanding and action.

48. Communication Through Promotion  Promotion is an important form of communication.  A business needs to provide information to consumers in order to persuade them to make a purchase.  Choosing target markets and studying their needs and decision-making process can make promotion more effective.  Early messages get attention and give simple info about the product or service and the needs it satisfies.  Later promotions can compare the product to competing brands and point out advantages that are important to the target market.

49. Types of Promotion  There are many choices for promotional communications.  Personalized promotion communicates directly with each customer using info tailored to that person.  Mass promotion communicates with many people at the same time with a common message.

50. Personalized Promotion  Personalized promotion is the most effective form of marketing communication and is also the most expensive.  The most well known type is personal selling which is direct individualized communication with prospective customers to assess their needs and assist them in satisfying those need with appropriate products and services.  Personal selling can be done face-to-face, over the phone or the internet.  Salespeople gather info on the prospective customer and study product information.  During the meeting, the salesperson asks questions and provides information.  The salesperson then arranges payment or financing and contacts the customer after the sale to see if they have additional questions.

51. Mass Promotion  Reaching many people with the same message through mass media is much less expensive.  Advertising is the most known and used type of mass promotion.  Advertising is any paid form of communication through mass media directed at identified consumers to provide information and influence their actions.  The most common ad media are t.v., radio, newspapers, magazines, mass mailings, outdoor displays and the Internet.

52. Mass Promotion  Consumers are exposed to hundreds of communications including promotional communications in the media each day.  Most advertisements do not result in immediate sales, but rather, attempt to influence prospects to take additional action such as visit a store, gather more info or test the product.

53. Mass Promotion  Publicity is a non-paid promotional communication presented by the media rather than by the business or organization that is being promoted.  Public relations is an ongoing program of non-paid and paid communication.  It is planned to favorably influence public opinion about an organization.  Sales Promotion includes activities and materials designed to reinforce a company’s brand or image.  They include contests and games as well as the many products companies give away to consumers.

54. Mass Personalization  Mass personalization begins with promotion through mass media. Prospective customers see the ad and become interested in the product or service and the company then provides an easy-to-use method for the consumer to gather more personalized information.  Usually, consumers will contact an online representative who will help them with questions about the product or their purchase.