2. BM Unit 2 - LO21 Higher Business Management Unit 2 Learning Outcome 2 Marketing

3. BM Unit 2 - LO22 Marketing “The process involved in identifying, anticipating and satisfying consumer requirements profitably”.

4. BM Unit 2 - LO23 Marketing Role and Importance of Marketing  Identify consumer’ requirements – find out exactly what consumers want  Anticipate consumers’ requirements – future needs  Satisfy consumers’ requirements – service, quality + value for money?

5. BM Unit 2 - LO24 Marketing Anticipating Consumers’ Requirements  What do they want today?  What do they want in the future?  Trends must be considered to anticipate future needs  Volatile markets - fashion, toys, technology (mobile phones, computers, etc)

6. BM Unit 2 - LO25 Marketing Identifying Consumers’ Requirements  What do they want? Consumers must buy products and continue to do so  Fierce competition and consumers’ expectations mean that products must be constantly updated and altered to suit  Other factors - price, quality, prompt delivery, attractive packaging and after-sales service  Advertising and promotion play a big part

7. BM Unit 2 - LO26 Marketing Satisfying Consumers’ Requirements  “The customer is king!”  Businesses must be customer-focused  No customers no business  Must offer - good service, quality products, value for money, prompt delivery, good after-sales service (eg returns), well presented and packaged goods, at the right price and available at the right place

8. BM Unit 2 - LO27 Marketing “Marketing involves anticipating customers' needs and finding the right product or service to meet those needs, thereby encouraging high sales levels. Vodafone goes further by looking to impress on its customers not merely what its products are i.e. features, but also what they can increasingly do i.e, benefits. This involves effective communication. “ The essentials of marketing

9. BM Unit 2 - LO28 Marketing Role and Importance of Marketing All organisations need to carry out marketing activities to meet their objectives:  Public Sector – may develop services if research shows that is what the community wants  Private Sector – meet customers’ needs through market research  Voluntary Sector – competition for donations, therefore charities spend huge amount of money on marketing.

10. BM Unit 2 - LO29 Marketing Importance of Marketing Poor marketing can lead to failure:  The American car industry  The British motor cycle industry

11. BM Unit 2 - LO210 Marketing Good marketing can lead to success: Importance of Marketing  Swatch  Easyjet and Ryanair

12. BM Unit 2 - LO211 Marketing Marketing as a strategic activity Using marketing, organisations hope to achieve a number of objectives which are essential for success: To increase sales revenue and profitability To increase or maintain market share To maintain or improve the image of the business, its brand or its product To target a new market or a new segment of the market To develop new and improved products.

13. BM Unit 2 - LO212 Marketing – concerned with:  Inception/design  Price  Selling and promotion  Distribution  After-sales services Marketing What How When Where

14. BM Unit 2 - LO213 Marketing Market – a meeting place for buyers (consumers) and sellers

15. BM Unit 2 - LO214 Marketing Consumer Market Consumer market are made up of individuals who buy goods or services for their personal or domestic use. The 3 classifications are:  Convenience goods – non-durable goods  Shopping goods – durable goods  Speciality goods – eg cosmetics, fashion items.

16. BM Unit 2 - LO215 Marketing Industrial Market Goods and services bought on the industrial market can be similar to those in the consumer markets, eg consumers use banking services and so do businesses. However, industrial goods also include plant and machinery, raw materials, consumable supplies and business services.

17. BM Unit 2 - LO216 Product-led - Product Orientated  Putting a product on the market without prior market research  Assumption of best available and no real competition  Often new inventions like Dyson vacuum cleaners or Playstation 2  A risky approach which can fail - British motor bikes Marketing

18. BM Unit 2 - LO217 Market-led - Customer Orientated  Considering what the customers want before putting a product on to the market  Competition has led to companies focusing on the needs of the customer  Also looks at the influences on purchasing decisions Marketing

19. BM Unit 2 - LO218 The Marketing Environment THE MARKET Consumer trends and behaviour Technology GovernmentCompetition The economy Marketing

20. BM Unit 2 - LO219 Marketing Environment – Government Influence on marketing  Trade Descriptions  Monopolies and Mergers Act  Fair Trading and Competition Acts  Consumer Protection Laws  Code of Advertising Practice  Advertising Standards Marketing

21. BM Unit 2 - LO220 Marketing Environment – Competition  Close substitutes  Markets – Some markets dominated by a few big producers; other markets have many producers.  Unique Selling Points (USP)  Emotional Selling Proposition (ESP) Marketing

22. BM Unit 2 - LO221 Marketing Environment – Technology  Use latest technology to keep up with competition  Technological advances create new markets and cause decline of others, eg video tapes and DVDs  Sophisticated production methods allow high quality, faster and cheaper production  Improved communications and information Unique Selling Points (USP)  Internet and saturation usage of mobile phones allow businesses new ways to tap into new markets Marketing

23. BM Unit 2 - LO222 Marketing Environment – Economic forces  Interest rates – high rates, consumers buy less; organisations reduce borrowing and spending  Exchange rates affect - £ is low, UK exports become cheaper  Economic growth high consumer confidence and spending. Marketing

24. BM Unit 2 - LO223 Marketing Environment – Consumer trends & behaviour  Changes in the age distribution of the population  Disposable income  Household status, eg rise in single households – smaller ready meals  Social class  Location  Lifestyle taste and fashion, eg environmental issues, healthy lifestyle  Political Marketing

25. BM Unit 2 - LO224 The Marketing Mix Promotion Place Price Product Marketing In order to market or sell its product successfully, a business must develop a strategy based on 4 key elements:

26. BM Unit 2 - LO225 Product/Service  Core  Actual  Augmented  The basic product - eg toothpaste cleans teeth  The way the product is presented - design, brand name, packaging, etc (Colgate toothpaste - red packaging)  Additional features - protection against decay, fresh breath, attracting the opposite sex, etc Marketing

27. BM Unit 2 - LO226 The Product Life Cycle Time £000 Costs/Sales Idea New Product Launch/ Introduction DeclineSaturation Death Marketing GrowthMaturity

28. BM Unit 2 - LO227 Product Innovation  Generating an idea  Analysing the idea  Producing a prototype  Test market  Adapt product to solve problems  Launch the product Marketing

29. BM Unit 2 - LO228 Extending the Product Life Cycle/Extension Strategies  Developing new markets for existing products, eg computers  Providing line extensions - Mars: fun-sized, yoghurt, ice cream, mini-sized, giant-sized  Finding new uses for existing products  Develop a wider range of products  Develop styling changes  Promoting more frequent use of the product – mainly by reducing price Marketing

30. BM Unit 2 - LO229 Extending the Product Life Cycle/Extension Strategies  Improve the product – think soap powder  Change the packaging – perhaps to appeal to different market segment  Change the channel of distribution – internet shopping  Change product prices  Change promotion method  Rebrand the name of the product – Marathon to Snickers Marketing

31. BM Unit 2 - LO230 The Product Mix/Portfolio – range of products that a firm produces to spread risk.  Very few companies have only one product  Some companies have a range of related products eg Proctor & Gamble  Some companies have totally unrelated products in their product portfolios eg Imperial Group  It is important that you have new products being launched to replace products going into decline in your “Product Mix” Marketing

32. BM Unit 2 - LO231 The Product Mix/Portfolio Boston Matrix – used by some firms to analyse their product mix. Marketing Market Share HighLow Market Growth High Star Problem Child Low Cash Cow Dog

33. BM Unit 2 - LO232 Branding  Branding distinguishes a product from its competitors – product differentiation  Instantly recognisable by consumers  Often linked to quality and reliability  Can command a premium price Marketing

34. BM Unit 2 - LO233 Brands Benefits of branding: Instant recognition, eg Cadbury Brand loyalty, therefore repeat purchases Charge higher prices because of brand loyalty Easy to intro new products using brand name, eg Virgin Strong brand has money value in Balance Sheet Marketing

35. BM Unit 2 - LO234 Brands Marketing Drawbacks of branding:  Time taken to establish brand  Cost of promoting brand  Bad publicity affects all products of same brand  Imitations/fakes difficult to combat  Fashion brands can suffer when fashions change

36. BM Unit 2 - LO235 Own Brands  Products branded with the name of the store selling them  Most of the big supermarkets (Tesco) and chain stores (Boots) have their own brands  Often cheaper alternatives to branded goods  Make a list of as many “own brands” you can think of. Indicate which branded product they are designed to rival  Eg “Wheat Bisks” by Safeway to rival “Weetabix” Marketing

37. BM Unit 2 - LO236 Unique Selling Point (USP) Marketing  This is a feature that allows a product to stand out from its rivals.  Should offer the consumer some unique benefit that may motivate them to switch brands

38. BM Unit 2 - LO237 Unique Selling Point (USP)  Try to identify the USP of each of the products listed opposite  Think of how they are presented to you in the advertising you see daily on TV, in newspapers and magazines  Coca Cola  Nike  Kit Kat  Sunny D  Skoda Cars  Mercedes Cars  Baxter’s Soups  Fairy Liquid  Finish (dishwasher tablets) Marketing

39. BM Unit 2 - LO238 Price of a Product?  The price of a product is one of the main factors in buying that product. Too low a price could give the impression of poor quality and too high a price may not give the feeling of value for money  Price is influenced by:- the product being new, what competitors are charging, the product’s stage in its life-cycle, the selling location, the market segment and many other factors Marketing

40. BM Unit 2 - LO239 Long term pricing strategies:  Low-price strategy in a market with strong competition: price elasticity of demand.  Market-price strategy petrol – matching competitors  High-price strategy up-market, exclusive image Marketing

41. BM Unit 2 - LO240 Short-term pricing strategies  Skimming – high initial price for max profit  Penetration pricing – low initial price for new product  Destroyer – eliminating the competition (‘Go’ and ‘EasyJet’/’Ryanair’)  Promotional – lowering prices for a period to ‘promote’ more sales Marketing

42. BM Unit 2 - LO241 Short-term pricing strategies  Price discrimination (aka Demand- oriented) – charging different prices according to the level of demand eg cross- channel ferry fares in summer  Premium pricing – high prices to create exclusive image, eg Ferrari, Gucci  Loss leaders – use to entice customers  Competitive pricing – charge similar prices to avoid price war, eg petrol stations. Marketing

43. BM Unit 2 - LO242 Calculating a Selling Price Cost-plus pricing A manufacturer or retailer will calculate the cost of making or buying a product and add a set percentage profit to arrive at their selling price. Different businesses use different rates of mark-up. Method used by small businesses as it is the simplest. Contribution pricing A business will calculate the direct costs of making or buying a product (wages & raw materials). A contribution toward the fixed costs of the business (rent, loan repayments) are added. Any amount after covering fixed costs is profit for the business. Marketing

44. BM Unit 2 - LO243 Place The nature of the product or service will determine where a firm decides to sell – referred to as DISTRIBUTION. The Channel of Distribution is the route taken by a product as it passes from the producer to the consumer. Marketing

45. BM Unit 2 - LO244 Place - Distribution Channels Producer 1Producer 2Producer 3 ConsumerRetailerWholesaler RetailerConsumer Marketing

46. BM Unit 2 - LO245 The Channel of Distribution chosen depends on: o The nature of the product being sold o Finance available to the organisation o Reliability of companies in the chain o Desired image for the product o Government restrictions o Product’s life cycle o Manufacturer’s distribution capability Marketing

47. BM Unit 2 - LO246 The Wholesaler Function  Buys in bulk from producers (low transport costs) and sells to retailers in smaller quantities  Bears stock-holding risk  Offers a wide variety of goods in small quantities  Packages and labels goods  Offers advice to both producers and retailers as to which goods are selling well Marketing

48. BM Unit 2 - LO247 The Retailer Function  Breaks down bulk to quantities consumers wish to buy and store at home  Provides information to consumers through advertising, displays and trained staff  Stores a variety of goods, displays them and marks on prices  Offers range of related services - credit, HP, after-sales service and delivery Marketing

49. BM Unit 2 - LO248 Types of Retailer  Independent - convenience stores, corner shops  Multiple Chains - M&S, Dixons, Boots  Supermarkets - Tesco, Asda, Safeway, etc  Co-operatives  Department Stores - Harrods, Selfridges  Franchises - Benetton, Body Shop, McDonald’s  Discount Store – Matalan, Primark and TK Maxx Marketing

50. BM Unit 2 - LO249 Direct Selling  Internet selling – allows a business to reach a global market. Customer info is easily collected to target offers and promotions.  Mail Order – goods sold to customers through catalogues, Next, Kays. Credit facilities make this popular.  Direct mail – involves letters, brochures about products to homes, eg Reader’s Digest  Newspaper/magazine selling-customers respond directly to adverts.  Personal Selling – door-to-door or telephone, eg sales reps visit GPs, double-glazing sales. Marketing

51. BM Unit 2 - LO250 Promotion Promotion is the way in which customers are made aware of a product or service and is persuaded to purchase it. Marketing

52. BM Unit 2 - LO251 Aims of Promotion  Persuading - to purchase the products  Informing - telling consumers about the product  Reminding - that the product still exists Marketing

53. BM Unit 2 - LO252 Methods of Promotion  Advertising  Sales promotions  Public relations  Exhibitions and trade fairs  Merchandising  Direct mail  Personal selling Marketing

54. BM Unit 2 - LO253 Types of Promotion are categorised as being: Above the line:  Use of independent media, eg TV and newspapers to reach mass audience  A lot of waste – not targeted Below the line:  Directly controlled by the business  Sales promotion, direct mail, trade fairs - targeted consumers who may be interested Marketing

55. BM Unit 2 - LO254 Advertising  Informative advertising – new or improved products; Health info  Persuasive advertising – where consumers see little difference between one product and another  Corporate advertising – promoting whole company rather than single product, eg BA, BP Marketing

56. BM Unit 2 - LO255 Advertising  Generic advertising – promoting whole industry, eg Scottish Beef  Product endorsement – famous sports or showbiz personalities are paid to wear particular product, eg Adidas pay David Beckham  Product placement – paying for products to be used in films or TV progs, eg BMW and James Bond Marketing

57. BM Unit 2 - LO256 Advertising Decisions  The effect on Sales?  The target market?  Why do the consumers NOT buy the product?  Which is the best medium to use? Marketing

58. BM Unit 2 - LO257 Advertising Decisions Which is the best medium to use depends on:  Product  Market segment  Type of coverage – local, national  Advertising budget  How competitors advertise  How technical the product is  Size of the organisation  Legal restrictions, eg tobacco Marketing

59. BM Unit 2 - LO258 Types of Advertising Media  Print - newspapers and magazines, direct mail  Broadcast - TV, radio and cinema  Outdoor - billboards, posters, etc  Internet Marketing

60. BM Unit 2 - LO259 Sales Promotion Into the pipeline Offered by manufacturers to retailers to encourage them to stock their products.  Point of sale displays  Sale or return  Dealer competitions/bonu ses  Staff training  Credit facilities Marketing

61. BM Unit 2 - LO260 Sales Promotion Free samples Credit facilities Demonstrations Competitions Buy one, get one free Bonus packs Free offers Coupons, vouchers Out of the pipeline Offered by the retailer to final customer to encourage purchases to be made. Marketing

62. BM Unit 2 - LO261 Public Relations (PR)  Improving the image of the product and organisation  Supporting and promoting a charity  Sponsoring sporting or cultural events  Product endorsement by celebrities  Press conferences and press releases in times of difficulty or when good publicity can be obtained Marketing

63. BM Unit 2 - LO262 Target Markets Differentiated marketing: Different products sold to different groups within total market. Products altered to suit needs of different consumers. Market is split into different groups who have similar wants and needs – goods produced specifically for these groups. Use market segmentation. Undifferentiated (mass) marketing : Marketing directed at all consumers, the whole market. One product is sold to the entire market – high volume sales, economies of scale. Eg milk, Mars Bars Marketing

64. BM Unit 2 - LO263 Target Markets Marketing Niche marketing Niche marketing involves a business aiming a product at a particular, often very small, segment of the market (local or small national). Focus on needs of a market ignored or overlooked by other firms – no competition in short term. Disadvantage – attract competition in long term. Market too small for competition. Small number of consumers – more frequent swings in consumer spending than larger markets.

65. BM Unit 2 - LO264 Market Segmentation Advantages  Seller can meet buyers’ requirements  Advertising can be focused - less wasteful  Expertise developed for a specific market  Higher sales  Increased profits “Breaking down of markets into sub-groups that can be targeted with a specific marketing mix.” Marketing

66. BM Unit 2 - LO265 Methods of Segmentation  Age – Smash Hits  Gender - Heat  Socio-economic grouping – Daily Record  Education level – SundayTimes  Income – Ski Monthly  Religion  Residential area  Lifestyle preferences - hobbies, politics Marketing

67. BM Unit 2 - LO266 Methods of Segmentation Socio-economic groupings: Social classes are used by advertising and market research industries: AVery senior managers or professionals, top civil servants BMiddle managers, owners of small businesses C1Junior managers, non-manual workers C2Skilled manual workers DSemi-skilled and un-skilled workers, apprentices EPeople on long term benefits, casual workers Marketing

68. BM Unit 2 - LO267 Market share Percentage of total sales of product/service achieved by one organisation. Advantages: Larger the market, larger the profit Purchasing economies of scale – reduce costs R & D with large profits Costs – marketing, transport – spread over larger output Marketing

69. BM Unit 2 - LO268 Assessment of the Market  Where are the consumers of the product?  How many consumers are there?  What are their attitudes and preferences?  How effective are the distribution methods?  What are the strengths and weaknesses of competitors? Marketing

70. BM Unit 2 - LO269 Market Research -Definitions “Market research is the systematic gathering, recording and analysing of data about problems relating to the marketing of goods and services.” “Market research is the means by which those who provide goods and services keep themselves in touch with the needs and wants of those who buy these goods and services.” Marketing

71. BM Unit 2 - LO270 The Need for Market Research  Predict changes required in its product/service  Identify what is selling  Identify who is buying the product/service  Explain what is happening in the market  Investigate possible courses of action  Identify the size of the market  Discover what consumers think of the product  Discover what consumers are willing to pay  Discover if a promotion is appropriate  Discover if the packaging is appropriate  Identify what competition exists - now and in the future Marketing

72. BM Unit 2 - LO271 Methods of Research PRIMARY RESEARCH Information collected by the organisation itself or by a paid market research agency. SECONDARY RESEARCH Information already collected for another purpose, eg government statistics. Marketing

73. BM Unit 2 - LO272 Methods of Research - PRIMARY  By observation or asking people questions  Up-to-date  Collected for the exact purpose of the organisation  Not easily available to competitors  Time-consuming  Expensive Primary data is gathered by field research Marketing

74. BM Unit 2 - LO273 Techniques of field research  Surveys Personal interview, postal survey, telephone survey, purchase survey  Sampling – who, how many, how to choose  Random sampling, Stratified random sampling, Quota sampling  Test marketing  Consumer panel  Hall tests  Questionnaire – see notes 48-50  Collection of customer data – observation, loyalty cards, EPOS/bar codes, the internet Marketing

75. BM Unit 2 - LO274 Market Research – SECONDARY  Sales figures  Stock figures  Accounting records  Customer comments  Sales reps reports  Market research data gathered previously  Government publications - social and economic trends, annual statistics, population census  Competitors’ data - annual reports, promotions, price lists, web sites  Newspapers, trade magazines, Mintel (research org), etc External Sources Internal Sources Marketing Secondary data is gathered by desk research

76. BM Unit 2 - LO275 Market Research – SECONDARY  Value and reliability is limited because:  Much of the information is historic  Collected for another purpose  Available to competitors  Cannot normally go back to the initial source to check accuracy or ask follow-up questions Marketing

77. BM Unit 2 - LO276 ICT and Market Research  Databases compiled by research agencies  Electronic point of sale information (EPOS)  Supermarket loyalty cards  Stock control software gives sales breakdown  Web sites - customers can e-mail comments back to the company Marketing

78. BM Unit 2 - LO277 Problems with Market Research  Sampling Bias - small sample can give a wrong impression  Human Behaviour - opinions change rapidly  Interviewer Bias - leading questions may be asked  Time taken for research - expensive  Difficult to access secondary – time wasted  Larger the sample, more reliable the information. Marketing