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Principles of Marketing

STUDY GUIDE v2.0

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Kaplan Desired Graduate Attributes

Through the reading of this module, Kaplan Singapore intends to:

• Instill in students the value of lifelong and self- directed learning by stimulating intellectual curiosity, creative and critical thinking and an awareness of cultural diversity;

• Assist students in developing professional attributes, ethical values, social skills and strategies that will nurture success in both their professional and personal lives;

• Foster integrity, commitment, responsibility and a sense of service to the community;

• Prepare students to meet the ever-changing needs of their communities both now and in the future; and

• Promote innovative and effective teaching.

Culminating from these institutional values and educational goals, Kaplan Singapore’s Desired Graduate Attributes are:

Inquiry and criticality: Graduates will be able to critically collect, evaluate and apply information and data in order to make decisions in a wide variety of professional situations. This attribute is demonstrated when students:

• Undertake, evaluate and apply appropriate research, theories, concepts and tools to investigate problems and find solutions;

• Exercise critical thinking and independent judgement to assess situations and determine solutions; and

• Have an informed respect for the principles, methods, values and boundaries of their profession and the capacity to question these.

Ethicality and discernment: Graduates will be able to assess situations and respond in an ethically, socially and professionally responsible manner. This attributed is demonstrated when students:

• Act responsibly, ethically and with integrity in their profession;

• Hold personal values and beliefs and participate in the broad discussion of these values and beliefs while respecting the views of others;

• Understand the broad local and global economic, political, social and environmental systems and their impact as appropriate to their discipline and profession; and

• Acknowledge personal responsibility for their own judgments and behaviour

Ability to communicate well: Graduates will recognise the importance and value of communication in the learning and professional environment. This attributed is demonstrated when students:

• Create and present knowledge, arguments and ideas confidently and effectively using a variety of methods and technologies;

• Recognise the wide range of possible audiences for information and respond with communication strategies appropriate to those audiences; and

• Work collaboratively with people from diverse backgrounds and be aware of the different roles of team members and to function within that team.

Independent and reflective practitioner • Graduates will be able to work independently and

be self-directed learners with the capacity and motivation for continued professional learning and development; and

• They will be able to critically reflect on their own practice and evaluate and understand current capacity and further development needs

Embedded within the desired graduate attributes are the following skills: • Conduct research. • Analyse, organise and present data and

information. • Think and read critically. • Make an oral presentation. • Intellectual curiosity and awareness of culture and

diversity. • Develop professional ethos and practice that will

foster success in career and life. • Meet the ever changing needs of communities

now and in the future.

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Table of Contents

ii iii iv v vi vii

Kaplan Desired Graduate Attributes Table of Contents About this module Instructions to Students Scheme of Work Assessment Matters

Topic 1 Introduction to Marketing

Topic 2 Consumer Behavior

Topic 3 The Marketing Environment & Market Research

Topic 4 Marketing Strategy

Topic 5 The Marketing Mix - Product

Topic 6 The Marketing Mix: Place

Topic 7 The Marketing Mix: Price

Topic 8 The Marketing Mix - Promotion

Topic 9 Digital Marketing 75

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About this module

Marketing is a function of business and primarily entails identifying and targeting the right customers, preparing an effective marketing plan, and building a consistent image. Drucker (1954) contended that “business has two functions: Marketing and innovation. The rest are costs.”

In this module, students will examine the application of the theory of marketing and marketing research in the planning of a marketing strategy (STDP) and marketing mix (the 4Ps) for a real product. Through this process, students will formulate a marketing plan and experience the creative journey that marketing professionals go through in their work.

Module Learning Outcomes

Upon successful completion of this module, the student should be able to:

• Illustrate the strategic role marketing plays in modern globalised organisations with a real-life example • Describe the external and internal forces that affect marketing programs within an organisation • Create a strategic marketing mix for a novel product targeted at a specific target consumer segment • Create a robust marketing plan that includes relevant findings from macro-environment and marketing research • Describe developments and trends in marketing, including new & social media

Overview of Learning Resources

Recommended reading:

Kotler, P., Armstrong, G. (2015). Marketing. An Introduction, Global Edition (12th Ed.) Boston: Pearson Higher Education

Chitty, W., Barker, N., Valos, M., & Shimp, T. A. (2012) Integrated Marketing Communications (3rd Ed.). South Melbourne: Cengage Learning

Chitty, W., D’Alessandro, S., Hughes, A. (2012). Services Marketing. South Melbourne: Oxford University Press

Kotler, P., Armstrong, G. (2014). Principles of Marketing (15th Ed.). Boston: Pearson

Online Materials: For PESTEL Singstat and then Browse by Theme http://www.singstat.gov.sg/ ;

For BUSINESS Data Neilsen Company http://www.nielsen.com/ content/corporate/sg/en.html ; http://www. experian.com.sg/ ;

Small Business http://smba.org.sg/ ;

For INTERNET Use and user data Internet Data: http://www.clickz.com/category/ asia

Other sources:

See Proquest and Newslink databases linked to your Elearn LMS homepage. The National Library Board on North Bridge Road (databases are for Singaporean/PR only)

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Activity Sheets

It is imperative that you sincerely attempt all the activities in class and document your responses faithfully. These activity sheets are specially designed to scaffold your learning; working through the tasks is an integral part of developing the desired skills.

Also, by making your thinking visible through the activity sheets, it is then possible for your lecturer to provide you with growth producing feedback so that you may improve your performance or have your doubts clarified.

Instructions to Students

How to use this study guide

This study guide consists of written notes that form the main treatise of the subject matter of this module. You are strongly advised to study these notes carefully and thoroughly, as well as, examine the sources that have been cited.

Written quiz and examination will not test beyond the scope of the contents found in the study guide. However, in order to fully address the assessment requirements of the assignment, you will need to research beyond the confines of the study guide. Nevertheless, the materials herein are still a sound basis from which to build the assignment.

Further supporting materials

The study guide is supplemented by the following:

• Reproduced PowerPoint slides used by the lecturers

• Activity sheets

PowerPoint Slides

The PowerPoint slides are meant for the lecturers to signpost the flow of the lesson and for you to have a visual focus when in class. Outside of class, they can also serve to help you recall the activities that took place during the respective lessons so that you might be reminded of key learning points.

However, the PowerPoint slides must NOT replace the need for you to read the written notes in the study guide. The slides alone are INSUFFICIENT for you to gain the necessary understanding of the subject matter. As such, they will NOT prepare you adequately for the various summative assessment components.

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Scheme of Work

LESSON TOPICS 1 01 Introduction to Marketing

• The definitions and roles of marketing • The marketing process • Working in teams • Effective presentations

2 02 Consumer Behavior • Introduction to consumer behaviour • Consumer research • Factors influencing consumer behaviour • Consumer decision making process • Buyer decision process for new products

3 03 The Marketing Environment & Market Research • The marketing environment • Marketing information systems • Types of data • Online marketing research • Research instruments • Analysing and using market information

4 04 Marketing Strategy (STDP) • Segmentation • Targeting • Differentiation • Positioning

5 Informal Presentation 6 05 The Marketing Mix (Product)

• Products vs. Services • 7 P’s • Types of Products • 3 Levels of a Product • New Product Development Process • Product Life Cycle (PLC)

7 06 The Marketing Mix (Place) • Marketing Channels and Intermediaries • Direct vs. Indirect Selling • Value Delivery Network • Vertical and Horizontal Marketing Systems • Logistics Management

8 07 The Marketing Mix (Price) • Review of Demand and Supply • Cost vs. Value-Based Pricing • 5 Major Pricing Strategies • Internal and external pressures on price • Market Skimming and Penetration • Price Adjustment Tactics and Ethics

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9 08 The Marketing Mix (Promotion) • Media then and now • Push and Pull Strategies • 5 Main promotional tools • Integrated Marketing Communications • Media Types

10 Informal Presentation 2 11 Putting it All Together 12 09 Digital Marketing

• List the 7 online marketing tools • Describe the advantages & disadvantages of marketing online • Explain New Media and provide examples • Explain how social media is used in advertising and promotions • Explain new trends in collaborative social marketing, augmented reality and

gamification 13 Module Consolidation 14 Formal Presentation

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Assessment Matters

Assessment Overview

Assessment 1: Group Assignment (Informal Group Presentations I) Weightage: 10% (40 marks) Duration: 10 mins Date: Lesson 5 Format: Group presentation • All group members must be present for the

allotted presentation slot or a zero will be awarded for the absent member(s)

• Groups of 4 members only • All members must be active in the

presentation, to be permitted to sit the final exam

Assessment 2: Group Assignment (Informal Group Presentations II) Weightage: 10% (40 marks) Duration: 10 mins Date: Lesson 10 Format: Group presentation • All group members must be present for the

allotted presentation slot or a zero will be awarded for the absent member(s)

• Groups of 4 members only • All members must be active in the

presentation, to be permitted to sit the final exam

. Assessment 3: Group Assignment (Report) Weightage: 20% (80 marks) Word Limit: 2500 words (+/- 10%) Date: Lesson 12 Citation: APA References: You are required to consult and fully reference a MINIMUM of 10 different sources of information

Assessment 4: Group Assignment (Formal Presentations) Weightage: 20% (40 marks) Duration: 15 mins per group Date: Lesson 14 Format: Group presentation • All group members must be present for the

allotted presentation slot or a zero will be awarded for the absent member(s)

• Groups of 4 members only • All members must be active in the

presentation, to be permitted to sit the final exam

Assessment 5: Examination Weightage: 40% (80 marks) Duration: 2 hours Date: TBA Format: 4 Essay Questions

Important Policies

Penalties for Plagiarism

Plagiarism in any form is not tolerated by Kaplan Singapore. That said, direct quotations and general similarities of common terms and language mean the E-Learn LMS will often pick up every small similarity so the likelihood of a Turnitin Similarity report recording a result of 0% is unrealistic. After all, no technology is perfect and there is the need for some direct quotation (provided you reference using APA guidelines, of course) and to use commonly accepted terms and language.

TOP TIP: The surest way to succeed is to ensure all work is correctly referenced. Keep a copy of the Kaplan Singapore Academic Works and APA Guide handy when you are typing your assignments and use it to guide you as to correct referencing, citation and other aspects of academic writing.

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Penalties for late submissions

Kaplan Singapore prepares students for the realities of the workforce and further education by requiring students to meet deadlines and submit all work on time. As such, students are required to seek approval and penalties will be imposed on late assignment submissions in accordance with the table below and cited in the Programme Handbook:

No of days late Penalty 1 – 5 days 10% deduction per day from the

marks attained by students. After 5 days Assignments that are submitted

more than 5 days after the due date will not be accepted and it will be deemed as “No Submis- sion”. Student will be required to re-module.

Assignments and Kaplan Learning Management System

Kaplan Singapore School of Diploma Studies requires you to submit Assignments through the Learning Management System (E- Learn LMS). When submitted, your assignment is checked for plagiarism by software called Turnitin linked to the E-Learn LMS. The software is intended to provide one more tool to improve the quality of academic writing and as such will be compulsory for use. It is important to note that this is merely one of many tools available to you and that final decisions about the quality of your work rest with your lecturer.

Assigment Submission: How to Use E-Learn LMS for Assignment Submission

1. You will be enrolled by the School of Diploma Studies Programme Management into the E-Learn LMS system only after your fee payment is confirmed.

2. You will be sent your USER NAME and PASSWORD via email.

3. Reset your password as prompted. 4. Enter the site at the following address:

https://elearn-diploma.kaplan.com.sg 5. To submit assignment please refer to the

LMS Manual

Please refer to your Student Handbook for more details on Penalties for Plagiarism, Misconduct, Examinations Rules and Regulations. Should you have any queries, please contact [email protected]

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Topic 1: Introduction to Accounting Topic 2: Double Entry Book-keeping and Trial Balance Topic 3: Final Day Adjustments Topic 4: Preparation of Basic Financial Statements Topic 5: Ratios Analysis Topic 6: Introductiont to Management Accounting Topic 7: Budgeting Topic 8: Standard Costing and Variances Topic 9: Cost Volume Profit Analysis and Decision Making Topic 10: Capital Budgeting

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Topic 1: Introduction to Marketing

1.1 Learning Objectives

 Reflect on prior knowledge of marketing.  Understand the role of marketing in organizations.  Define a team and understand the need for teamwork in marketing.  Form a team and select a product for the semester-long Major Team

Assignments.

1.2 Topic Overview

Welcome to Marketing Principles! This Marketing Principles module is an introductory course for you, the student, to learn, understand and be able to demonstrate key skills using principles and concepts of the marketing process. The module will culminate in the creation of a marketing plan of a real-life product, for which you will work in teams. Marketing is a vital concept in its own right for all students of business, finance, media/communications and related disciplines. Moreover, you are constantly exposed to aspects of marketing in your daily lives as a consumer, which means that you already have some basic knowledge and experiences in the field of marketing.

Marketing is a huge subject area and rapidly changing so not everything can be covered within this module. Do not fear if something you are interested in is not discussed. It may appear in another module in this programme or later on in your degree studies. Given the introductory level of the module, it will focus on only eight (8) major concepts. These concepts will be looked at some depth and you will be required to apply them to the marketing plan of a real product. These concepts are the building blocks of marketing and essential for working in and studying further marketing. Also essential in marketing is the ability to communicate and you will be rewarded through your various assessments for your communication, culminating in the final ‘pitch’ and report for this module. For this Marketing Principles module, it must be noted that the focus is on product and not services marketing. For the difference between the two, you will need to investigate the next few topics of this study guide. Lecturers will also guide you through a product selection, which is essential in completing the required team assessments. Through interactive lectures, short presentations, in-class activities, real-life assignments and quizzes, you are expected to be an active participant in the learning process. Your attendance and punctuality is vital for your teammates’ and your own learning and marks.

This module looks at you as already possessing some knowledge in relation to marketing. In view of this, you will be challenged to become critical observers and participants in your daily experiences as customers and/or marketers, applying what you have learned to the world around you. This will add a reflective component to the module. We look for you to be responsive, “thinking doers”, where marketing is concerned. The aim of this first session is to allow you to honestly assess your personal knowledge and ability in the

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area of marketing and identify any gaps you may have, and to start to think about how marketing affects you in your daily life as a citizen and customer. You have chosen to study the discipline of marketing, services or communications and so the ability to reflect critically on your experiences is the first step to taking on your professional calling. Enjoy the journey!

1.3 Definition of Marketing

Before proceeding to understand the various elements of the marketing process, it is important to be able to define the concept of marketing. This is important, as the following topics within this study guide will only make sense to the reader if a clear understanding of the concept of marketing has been established. Perhaps one of the first questions to be addressed is why is marketing important? To answer this question, consider the following quote:

“Business has only two functions, marketing and innovation. The rest are costs.”

The above was mentioned by Peter Drucker, a pioneer of the modern management approach. Drucker sees marketing, and not operations, finance, sales or any other functionality, as the key determinant of business success (cited in Kotler & Keller, 2012, p.20). While this seems very bold, it is hard to argue against. In an increasingly competitive business environment, businesses revolve around identifying, choosing and servicing customers and their purchases.

Marketing, simply put, is the set of processes involved with finding out who the customer is, and what it is they need and want, and then communicating to them. It is therefore important to note that marketing is a process consisting of many different activities and cannot be confined to just the output that we see and hear every day in advertisements. Kotler and Armstong (2018) added that while most people think of marketing only as selling and advertising, marketing is a process by which companies engage customers, build strong customer relationships, and create customer value in order to capture value from customers in return. In view of the many activities that make up marketing, various writers have developed several definitions for the concept of marketing. Here are some definitions of marketing for you to consider:

1. “… the social and managerial process by which individuals and organizations obtain what they need and want through creating and exchanging value with each other” (Kotler & Armstrong, 2011, p.33).

2. “Marketing is managing profitable customer relationships” (Kotler & Armstrong, 2011, p. 32).

3. “Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings

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that have value for customers, clients, partners, and society at large” (American Marketing Association, 2013).

A comparison of the aforementioned definitions reveals that some of the key components within the function of marketing include needs, wants, market research, value, relationships and profit. Therefore, if organizations give customers what they need and want where they can find it and at a price they are willing to pay that is profitable, the product or service on offer will ‘sell itself’. This is what Drucker means when he writes, “… the aim of marketing is to make selling unnecessary” (cited in Burnett, 2008, p.21). Within this module, marketing is defined as,

“The process enabling organizations to find out who their customers are and communicate effectively with them to develop an on-going, mutually-beneficial relationship with them in order to understand and provide goods and service that the customers value and that are profitable to the organization.”

The aforementioned is really a definition constructed from the ideas of the marketing gurus, Kotler, Armstrong and Drucker. It further includes two ideas more explicitly. The first is communication. Marketing uses marketing communication tools (advertisements, press releases and personal selling) and departments or functions (Public Relations, Events and Social Media Groups) to provide messages about the organization and its products and services to existing and potential customers. An illustration of the key components within the definition of marketing is provided in Exhibit 1 below.

Exhibit 1: Key Components within the Definition of Marketing

Definition of

Marketing

Conduct Market Research

Identify Needs & Wants

Create Specific Products/ServicesAdd Value

Build Relationships

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The second addition to the definition is the idea of mutual benefit, a feature of the relationships emphasized in the first two definitions and vital for Customer Relationship Management (CRM). Consumers need products and services for a variety of reasons from the very noble ‘it will change my life’ to the more superficial ‘it is cool’. Within the context of for-profit businesses, organizations need to make profits. Marketing therefore meets the needs of diverse stakeholders (Anderson & Sullivan, 1997). The term stakeholders refers to buyers, sellers, investors in a company, community residents, and even citizens of the nations where goods and services are made or sold (Brown, 1987). Thus, marketing is about satisfying everyone involved in the marketing process (Kotler & Armstong, 2018; Solomon, Marshall & Stuart, 2017). A discussion on the marketing process is provided next.

1.4 The Marketing Process

The definition of marketing provided in the previous section referred to marketing as being a process. This essentially means that marketing is not a one-time operation (Houston, 1986). Rather, it requires a decision process in which marketing managers determine the strategies that will help the organization to meet its long-term objectives and then execute those strategies using the tools they have at their disposal (Solomon et al., 2017). The marketing process involves the following steps:

1. Understand the marketplace and customer needs and wants. 2. Design a customer-driven marketing strategy. 3. Construct a marketing mix program that delivers superior value. 4. Build profitable relationships and create customer delight. 5. Capture value from customers to create profits and customer quality.

Firstly, in Step 1 of the marketing process, organizations will have to understand the marketplace and customer needs and wants. In fact, the best marketing organizations go to great lengths to learn and understand their customers’ needs, wants, and demands through the conduct of market research. While the concept of market research will be covered in one of the future lectures, it is important to understand the meaning of needs and wants at this point, which is explained as follows (Solomon et al., 2017):

 Needs are states of felt deprivation. They include physical, social, and individual needs. These needs were not created by marketers; they are a basic part of the human makeup. For example, when a person is feeling thirsty, he needs water to quench his thirst.

 Wants are the form human needs take as they are shaped by culture and individual personality. Using the previous example, a person needs water hen thirsty but wants Coca-Cola. When backed by buying power, wants become demands.

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The marketer therefore tries to understand the aforementioned needs and wants of consumers by asking them a series of questions in relation to the following:

Exhibit 2: Needs and Wants of Consumers

Product What are the expected features, specifications, colors, design (and etc) expected by consumers within the product?

Place Should the products be distributed within own boutiques, the use of retailers, online platforms (and etc)?

Price What is the actual price willing to be paid by the consumers for the products?

Promotion What would be the best media and communication platforms to be used to effectively reach out to consumers?

Once the needs and wants of consumers are fully understood, organizations strive to fulfill these needs and wants through market offerings. Market offerings can therefore be said to be some combination of products, services, information, or experiences offered to a market by an organization to satisfy a need or want. A product is said to deliver a benefit when it satisfies a need or want. For marketers to be successful, they must develop products that provide one or more benefits that are important to consumers. Customers therefore form expectations about the value and satisfaction that various market offerings will deliver and buy accordingly (Jobber & David, 2004; Kotler & Keller, 2007). . The next step of the marketing process is the development of a marketing strategy. The marketing strategy is a highly significant component of the marketing activities of an organization. It basically involves the understanding by organizations that a single product that satisfies all consumers is not possible (Ferrell, Hartline, Lucas & Luck, 1998; Solomon et al., 2017). The marketing strategy therefore entails that organizations will have to segment (S) the market in groups of consumers with similar needs and wants. Once this is done, segments that the organization is targeting (T) to do business with will require the organization to create products and services that satisfy the specific needs and wants of the respective chosen segments. To stand out from the rest of the other competitors that may also be seeking to serve the targeted segment(s), the organization will have to differentiate (D) itself from its rivals. Lastly, the marketing strategy requires the organization to position this differentiation from its competitors in the minds of its consumers such that consumers have a desired perception or positioning (P) of the brand/product. This, in a nutshell, is referred to as the marketing strategy (STDP). An entire topic has been dedicated to the marketing strategy and further attention to this topic will be covered later within this study guide.

Step 3 of the marketing process requires the development of a marketing mix

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strategy that is tailored to the requirements of the intended target segment(s). This effectively means that attributes pertaining to the product, place, price and promotion (4Ps) strategies of the product are individually manipulated to suit the specific requirements of the intended target audience (Kotler & Keller, 2012). The marketing mix process forms another major portion of the marketing activities of an organization after the marketing strategy. Each of these four Ps is covered in detail within this study guide with at least a topic’s focus for each P.

Next, Step 4 highlights the importance of building relationships with consumers. It is important to understand the importance of building such relationships with customers. Of key importance is that such relationships often lead to increased customer satisfaction and more importantly, repeat purchases (Kotler & Armstong, 2018; Solomon et al., 2017). Repeat purchases lead to not only higher revenues, but also sustained revenue generation, which is key for many successful organizations. Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers switch to competitors and disparage the product to others.

In the final step, companies reap the rewards of creating superior customer value. By creating value for consumers, they in turn capture value from consumers in the form of sales, profits, and long-term customer equity. Customer value and customer satisfaction are key building blocks for developing and managing customer relationships (Anderson, Fornell & Mazvancheryl, 2004).

The aforementioned marketing process forms the basis in which marketing activities within organizations are carried out. Similarly, this marketing process highlights the structure that has been adopted for this study guide. As you go through the different topics within this study guide, you will realize how the different concepts discussed within each topic build towards the formulation of this marketing process. Before we go into that, let us have a quick look at what constitutes a team (you are required to work in these) and the basics of effective presentations (you will be delivering a few of these). These will be addressed in the subsequent two sections.

1.5 Working in Teams

Given the range of skill sets needed from research to creativity to design and people skills, the marketer cannot work alone! It is for this specific reason that this entire module has been set with an increased focus on teamwork. A significant portion of the assessments (60%) within this module are based on how you and your members perform as a team. As such, you need to understand how teams function to select one.

A team, simply put, is a small number of people with complementary skills who are committed to a common purpose, performance and goals, and

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approach for which they hold themselves mutually accountable (Frisch, 2011). In order to function effectively, teams need:

 Complementary skills: Work with those whose skills you don’t have and who don’t have your skills

 Commitment: As a team, you need to see commitment from each other. Make sure your definition of commitment is observable & measurable. E.g. meet twice a week, deliver one page of notes by Friday etc.

 Common goals: For what grade are you working? No good working with people who are only willing to work for a Pass if you want a Distinction.

 Mutual Accountability: As Alexandre Dumas wrote: “All for one and one for all”. Your lecturer is marking one team, not four individuals so you have to act, think, report and present as one.

With the aforementioned in mind, your next task inviolves choosing the respective members within your class that you would like to work in for the duration of this term. Do remember that as opposed to choosing friends that you are comofrtable with, it makes more sense to choose members who would help you to achieve likeminded targets and goals. Every member of the team must be on the same page and fulfil the criteria that has been discussed above. The creation of a Team Charter (like a contract) will assist to clarify the roles/responsibilities of the respective members within the team. It is always important to remember that within this Marketing Principles module, you will live and die by the team. With that in mind, choose your members carefully!

1.6 Effective Presentations

Presenting (Pitching) to an audience is part of the marketers everyday and is compulsory and will become a habit in this module. Presentations in class are worth 40% of your team’s mark (20% for the Informal Presentations made up of two team pitches throughout the module and 20% for the Final Formal Presentation). This focus on presentations within this module can be attributed to that fact that this is a key skill sought by the industry. The good news is it is a skill that can be learned but not without getting out in front of a crowd as often as you can. At Kaplan, we offer a safe and supportive place for just this so you should feel encouraged to participate. It order to deliver an effective presentation, some basic pointers are provided as follows:

10-20-30 Rule A PowerPoint slide should have no more than 10 points, last no longer than 20 minutes and have no text less than 30-point font. You are the star of the

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show not Power Point. Use the medium to support you only and reinforce the key idea. One great trick is to only use one word per slide as it forces you to know your content and avoid turning around to look at the screen 15-Word Summary Can you summarize your idea in fifteen words? If not, rewrite it and try again. What are the important fifteen words that should be repeated? Your job is to communicate an idea in terms accessible to EVERYONE. One tip is to break down the idea into three parts. Three things are easy to remember and have a natural rhythm.

20-20 Rule Twenty slides each lasting exactly twenty seconds. The 20-20 Rule forces you to be concise and to keep from boring people.

Be Entertaining Speeches should be entertaining and informative. Appeal to their emotions. Jokes should relate to the topic and suit the audience. A nice contextual joke will lighten the mood but also focus the audience on the topic.

Slow Down Nervous and inexperienced speakers tend to talk way too fast. Consciously slow your speech down and add pauses for emphasis. Some speakers imagine their pace as the same as when they’re giving directions to someone on the street. That helps to slow you down and be very clear and even use gesture to support the message.

Eye Contact Match eye contact with everyone in the room. Pick 3 points (that’s that number again!) of the room, one left, one right and one central and always deliver the big message or the central theme to the centre of the room.

Don’t Read It shows you don’t really understand your message, no to mention that spoken and written language is very different and reading reports verbatim means you miss the nuances of conversation.

Speeches are About Stories Great speakers know how to use a story to create an emotional connection between ideas for the audience. Story-telling is universal and the things our parents do before we can read so we tend to remember stories.

Project Your Voice Nothing is worse than a speaker you can’t hear. Projecting your voice doesn’t mean yelling.

Script What will be said and points to be covered. Do not leave it to chance. A read speech (as long as it’s in spoken form) is much better than a poorly performed one without.

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Complete academic argument Use an introduction and conclusion. In a team presentation, the speakers will still need to present a coherent argument.

Stay disciplined When not presenting, stand a step or two back and don’t fidget. Also do not check your phone! Look at the speaker out of respect but also so that any straying eyes of audience members are diverted back to the speaker.

Rehearse Time your presentations. You will have to ensure that you do not far exceed of fall short of the time requirements set.

1.7 Summary

This topic provided an overview discussion of the basics of marketing. Some of the key concepts related to marketing that were discussed included the various definitions of marketing as well as the five-step marketing process. In addition, a short discussion on the requirements of teams and effective presentation was also provided given the nature of the assessments within this module. The factors influencing consumer behavior is discussed in the following topic.

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Topic 2: Consumer Behavior

2.1 Learning Objectives

• Reflect and expand on the knowledge of key marketing terms • Describe each component of the marketing process • Explain the marketing process as a whole • Explain, with examples, the factors that affect the way consumers

behave and decide on purchases • Describe the decision making process for new products

2.2 Introduction to Consumer Behavior

Consumer behaviour refers to the behaviour that consumers display when searching, buying, consuming, evaluating and disposing of the products and services that they expect will satisfy their needs (Smith, 2016). This behaviour needs to be the focus of marketing research and specifically consumer research. The central question for marketers is therefore,

“How do consumers respond to various marketing efforts that the company might use?”

Put simply, several characteristics of the consumers influence how they perceive and react to stimuli such as the four Ps (product, price, place and promotion) as well as economic, technological, social, and cultural factors within the environment (Jobber, 2004). The marketer, therefore, wants to understand how the stimuli are changed into responses inside the consumer’s mind (Ferrell et al., 1998).

By getting into the minds of consumers, marketers can then successfully create value for their customers and build meaningful relationships with them. Companies can therefore use these customer insights to develop a competitive advantage and ultimately use the information gained from customers to develop product and service offerings that better meet the needs and wants of their consumers. Organizations collect customer and market information from a wide variety of sources (Tanner & Raymond, 2015), which is briefly discussed in the following section.

2.3 Consumer Research

As discussed in the previous topic, marketing research constitutes a significant element of the marketing process. It can be said that organizations conduct market research through the use of a variety of methods. Similarly, consumer research involves the use of several methods as well. For example, a marketing information system (MIS) consists of people and procedures for assessing information needs, developing the needed information, and helping decision makers to use the information to generate and validate actionable customer and market insights (Solomon et al., 2017). MIS provides information to the company’s marketing and other managers and external

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partners such as suppliers, resellers, and marketing service agencies.

A good marketing information system balances the information users would like to have against what they really need and what is feasible to offer (Armstrong et al., 2015; Solomon et al., 2018). It is important to note that too much information can be as harmful as too little. This includes information on the organization’s consumers as well. The MIS must monitor the marketing environment to provide decision makers with information and insights they should have to make key marketing decisions. The organization must then decide whether the value of insights gained from additional information is worth the costs of providing it, and both value and cost are often hard to assess (Kotler & Armstong, 2018). At this stage of your marketing journey, all that is required from you is to understand that organizations intending to carry out successful marketing engage in marketing research and that there are several ways to conduct this research. The detailed exploration on research is approached in more depth in Topic 3. Let us shift our focus back on consumer research in terms of examining the various key factors influencing consumer behavior. This is discussed in turn.

2.4 Factors Influencing Consumer Behavior

A recurring theme that is evident in your marketing journey thus far is that no product or service will appeal to all. As such, marketers constantly look for groups of people with things in common so that products and services are tailored specifically to meet their respective needs and wants. The key factors influencing consumer behaviour include cultural, social, personal and psychological factors.

Exhibit 3: Factors Influencing Consumer Behaviour

•Lifestyle •Economic Situation •Age and Life Cycle Point •Personality

•Perception

•Reference Groups •Family •Social Roles and Status

•Culture •Sub‐Culture •Social Class

Cultural Social

PersonalPsychological

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Each of these abovementioned factors will be discussed in detail over the next few sections.

2.4.1 Cultural Factors

For many consumers, their respective cultures, or cultural beliefs, influence their purchase behavior. The cultural beliefs of a consumer can either prompt a purchase or, alternatively, prevent a purchase from happening. Cultural factors that influence consumer behavior include culture, subculture and social class (Kotler & Armstong, 2018), as discussed below.

Culture Culture is the shared set of basic beliefs, customs, wants, values, language and behaviors that societies develop over time (Schein, cited in Shafritz and Ott, 2001). Culture is the most basic cause of a person’s wants and behavior. Marketers are always trying to spot cultural shifts. The Chinese culture, for examples, depicts red as an auspicious color. During the Lunar New Year period, many Chinese purchase items (such as clothes) in red in line with this cultural belief. Their purchase behavior is therefore influenced by their cultural beliefs.

Subculture Subculture is a group of people with shared value systems based on common experiences and situations (Bearden, 2006). Subcultures are groups of people with shared value systems based on common life experiences and situations (Kotler & Armstrong, 2011). The U.S. Hispanic market consists of more than 55 million consumers. More than 44 million African-American consumers wield nearly $1.3 trillion in annual buying power. Asian Americans are the most affluent U.S. demographic segment. Many marketers now embrace a total market strategy—the practice of including ethnic themes and cross-cultural perspectives within their mainstream marketing (Kotler & Armstrong, 2018).

Social Class Armstrong, Kotler, Harker and Brennan, (2015), refer to social classes as society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. They add that social classes are not determined by a single factor but are measured as a combination of occupation, income, education, wealth, and other variables. Major American social classes include (Kotler & Armstrong, 2018):

 Upper Class  Middle Class  Working Class  Lower Class

The four social classes listed above are discussed in detail in Exhibit 4.

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Exhibit 4: Types of Social Class

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Kotler and Armstrong, (2018), add that social classes show distinct product and brand preferences in areas such as clothing, home furnishings, travel and leisure activities, financial services, and automobiles. Our real and/or even our perceived social class (could be our own aspiration) will affect the way we consume and what we consume. Singapore, on the one hand, is known by theorists to be a price-sensitive culture in one way but a highly aspiration culture on the other in terms of social class. One social commentator (anon.) has even remarked that “In Singapore everyone thinks they’re Upper Class.” You may wish to debate this statement but it may go some way (there are other factors, of course) to explaining the conspicuous consumption on Orchard Road and the proliferation of high-end brands of consumables readily on display.

2.4.2 Social Factors

Groups and Social Networks. Many small groups, including membership groups, aspirational groups and reference groups, influence a person’s behavior. Marketers use word-of- mouth influence and buzz marketing to spread the word about their brands. Opinion leaders are people within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert social influence on others (Kotler & Keller, 2007). Online social networks are online communities where people socialize or exchange information and opinions (Solomon et al., 2017).

Family The family is the most important consumer buying organization in society. According to Kotler and Armstrong, (2018):

 Forty-one percent of men identify themselves as primary grocery shoppers in their households, and 39 percent handle most of their household’s laundry.

 Women account for 60 percent of all new technology purchases and influence more than 80 percent of all new car purchases.

 The nation’s kids and tweens influence an estimated $1.2 trillion of spending annually.

Roles and Status. A role consists of the activities people are expected to perform. Each role carries a status reflecting the general esteem given to it by society. When marketers used to refer to reference Groups pre-2003 they would talk about ‘groups of friends in 2’s or 3’s meeting at school or in the workplace’ to discuss the trends of the day (and the not so trendy). With the proliferation of social media, most notably Facebook in 2003, reference groups have taken on a whole new magnitude because of the relative proximity one may have to others or many, known as the ‘6 degrees of separation’ philosophy. In simple terms this philosophy refers to the idea that one person may be able to link

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themselves to any other person randomly nominated by linking through a friend who, in turn, can link themselves to another friend and so on in 6 or less ‘moves’ (Kotler & Armstong, 2018).

2.4.3 Personal Factors

Age and Life Stage. People change the goods and services they buy over their lifetimes. Tastes in food, clothes, furniture, and recreation are often age-related. Buying is also shaped by the stage of the family life cycle. Marketers often define their targets in terms of life-cycle stage and develop appropriate products and marketing plans for each stage (Elliott & Jobber, 1995). Consumer information giant Nielsen’s PRIZM Lifestage Groups system places U.S. households into one of 66 consumer segments and 11 life-stage groups based on affluence, age, and family characteristics. Life-stage segmentation provides a powerful marketing tool for marketers in all industries to better find, understand, and engage consumers (Kotler & Armstrong, 2018).

Occupation. A person’s occupation affects the goods and services they purchase. For example, a white-collar worker is more likely to buy office wear such as suits for wok. An employee within the construction sector, in comparison, will more likely purchase safety boots and more durable lines of clothing for work.

Economic Situation. A person’s economic situation will affect store and product choice. Marketers watch trends in spending, personal income, savings, and interest rates. This economic situation is also in relation to the economic performance of a country and/or region. A person’s spending typically moves in line with the economic performance of the country/region.

Lifestyle Lifestyle is a person’s pattern of living as expressed in his or her psychographics. This involves measuring major AIO dimensions such as activities (work, hobbies, shopping, sports, social events), interests (food, fashion, family, recreation), and opinions (about themselves, social issues, business, products). It profiles a person’s whole patters of acting and interacting in the world.

Personality and Self-Concept Personality refers to the unique psychological characteristics that distinguish a person or group (Eysenck & Eysenck, 1985). A brand personality is the specific mix of human traits that may be attributed to a particular brand. One researcher identified five brand personality traits:

1. Sincerity (down-to-earth, honest, wholesome, and cheerful) 2. Excitement (daring, spirited, imaginative, and up-to-date) 3. Competence (reliable, intelligent, and successful) 4. Sophistication (upper class and charming) 5. Ruggedness (outdoorsy and tough)

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The basic self-concept premise is that people’s possessions contribute to and reflect their identities; that is, “we are what we have.”

2.4.4 Psychological Factors

Motivation A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction (Kotler & Keller, 2007). Psychoanalyst Sigmund Freud suggested that a person’s buying decisions are affected by subconscious motives that even the buyer may not fully understand. Motivation research refers to qualitative research designed to probe consumers’ hidden, subconscious motivations. Abraham Maslow sought to explain why people are driven by particular needs at particular times. He determined that human needs are arranged in a hierarchal fashion.

Perception Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world (Kotler & Keller, 2007). Selective attention is the tendency for people to screen out most of the information to which they are exposed. Selective distortion describes the tendency of people to interpret information in a way that will support what they already believe. Selective retention involves retaining information that supports personal attitudes and beliefs (Solomon et al., 2018).

Learning Learning describes changes in an individual’s behavior arising from experience. A drive is a strong internal stimulus that calls for action (Kotler & Armstong, 2018). Learning describes changes in an individual’s behavior arising from experience. “Never shop when you’re hungry” goes the old saying. The grocery bill tends to be rather large if you do. This is because that primal need for food will transcend our rational ability to make sound purchasing decisions. This seems to be so but usually, and assuming all other things being equal (belly full, life in order) we consumers go about consuming in a rather logical way and this is important for marketers to realize so that they can understand how their customers decide and ensure the products the marketers represent have these factors in mind when distributed and marketed.

The aforementioned explored the different ways in which the four factors (namely cultural, social, personal and psychological) influence consumer behavior. In many instances, these factors combine to either result in consumer choosing to purchase a product or avoid the purchase all together. The following section explores the consumer decision-making process.

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2.5 Consumer Decision Making Process

The Buyer Decision Process The buyer decision process consists of five stages as illustrated in Exhibit 4 below.

Exhibit 5: Consumer Decision Making Process Model

The various stages of the consumer decision-making process model, as postulated by Kotler and Armstong (2018), are discussed briefly in turn.

Need Recognition The buyer recognizes a problem or need triggered by either internal stimuli or external stimuli.

Information Search Information search may or may not occur. Consumers can obtain information from any of several sources.

 Personal sources (family, friends, neighbors, acquaintances)

 Commercial sources (advertising, salespeople, Web sites, dealers, packaging, displays)

 Public sources (mass media, consumer-rating organizations, Internet searches)

 Experiential sources (handling, examining, using the product)

Need Recognition

Information Search

Evaluation of Alternatives

Purchase Decision

Postpurchase Behavior

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Commercial sources inform the buyer. Personal sources legitimize or evaluate products for the buyer.

Evaluation of Alternatives Alternative evaluation is how the consumer processes information to arrive at brand choices. How consumers go about evaluating purchase alternatives depends on the individual consumer and the specific buying situation. In some cases, consumers use careful calculations and logical thinking. At other times, the same consumers do little or no evaluating; instead, they buy on impulse and rely on intuition. Many a times, it involves the consumer weighing the pros and cons of proceeding with each of the options within an identified shortlist.

Purchase Decision Generally, the consumer’s purchase decision will be to buy the most preferred brand. Two factors can come between the purchase intention and the purchase decision.

Postpurchase Behavior The difference between the consumer’s expectations and the perceived performance of the item purchased determines the degree of consumer satisfaction. If the product falls short of expectations, the consumer is disappointed; if it meets expectations, the consumer is satisfied; if it exceeds expectations, the consumer is said to be delighted. Having explored the consumer decision-making process model, the following section will discuss the buyer decision process for new products.

2.6 The Buyer Decision Process for New Products

People differ greatly in their readiness to try new products. The five adopter groups, provided below, have differing values (Kotler & Armstrong, 2018):

1. Innovators are venturesome—they try new ideas at some risk.

2. Early adopters are guided by respect—they are opinion leaders in their communities and adopt new ideas early but carefully.

3. The early mainstream are deliberate—while rarely leaders, they adopt new ideas before average persons.

4. The late mainstream are skeptical—they adopt an innovation only after a majority of people have tried it.

5. Lagging adopters are tradition bound—they are suspicious of changes and adopt the innovation only when it has become something of a tradition itself.

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2.7 Summary The topic provided an overview of the various factors that influence consumer behavior. By now, you should be able to identify, explain and provide examples on how cultural, social, personal and psychological factors influence consumer purchases. The topic further provided a discussion on the consumer decision-making process model. This five-step model described how consumers typically behave in purchasing expensive and important purchases. Lastly, the topic illustrated the buyer decision process for new products, which highlighted how groups of consumers typically purchased newly launched products. A discussion on the marketing environment as well as the marketing research process is provided in the next topic.

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Topic 3: The Marketing Environment & Market Research

3.1 Learning Objectives

• Review and Explain the differences between micro and macro environments

• Review the company environment • Describe sources of information on marketing • Use Proquest databases (Elearn LMS) to research two credible pieces

of secondary data for your macro analysis.

3.2 Topic Overview This topic comprises of two key marketing concepts; the environment and market research. The topic will firstly illustrate that marketing operates in a complex and constantly changing environment. Several factors within this environment, such as suppliers, intermediaries, customers, competitors, publics, and others, may either work with or against the company. In addition, major environmental forces such as demographic, economic, natural, technological, political, and cultural factors may provide marketing opportunities or pose significant threats to the company. As such, an organization must develop effective marketing strategies by firstly understanding the environment in which it operates. This topic then looks at how companies develop and manage information about important market- place elements. In addition, this topic will explore marketing information systems designed to assess the organization’s marketing information needs, develop the needed information, and help managers to use the information to gain actionable customer and market insights.

3.3 The Marketing Environment A company’s marketing environment, as displayed in the diagram below, comprises of the microenvironment and the macroenvironment (Burnett, 2008; Solomon et al., 2018).

Exhibit 6: The Marketing Environment

The Marketing Environment

Microenvironment Macroenvironment

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The microenvironment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers (Pahwa, 2018). The microenvironment consists of the actors close to the company that affect its ability to service its customers. The macroenvironment consists of larger societal forces that affect the microenvironment. These two environments will be explored in the subsequent sections.

3.3.1 The Microenvironment Micro analysis is a process that includes some factors, which gives an explicit impact on business performance and decision-making. This should be done before the firm corporate business strategy (Pahwa, 2018). The marketer’s job is to build relationships with customers by creating customer value and satisfaction. This involves the interaction will several companies as described below in Exhibit 6.

Exhibit 6: The Microenvironment of an Organization

The various elements of the microenvironment of a company are detailed in the following sections.

Microenvironment

Company

Suppliers

Marketing Intermediaries

Competitors

Public

Customers

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The Company All the interrelated groups form the internal environment. All groups must work in harmony to provide superior customer value and relationships.

Suppliers Suppliers provide the resources needed by the company to produce its goods and services. The company must treat suppliers as partners to provide customer value.

Marketing Intermediaries Marketing intermediaries help the company to promote, sell, and distribute its products to final buyers (Tanner & Raymond, 2015).

 Resellers are distribution channel firms that help the company find customers or make sales to them. These include wholesalers and retailers.

 Physical distribution firms help the company to stock and move goods from their points of origin to their destinations.

 Marketing services agencies are the marketing research firms, advertising agencies, media firms, and marketing consulting firms that help the company target and promote its products to the right markets.

 Financial intermediaries include banks, credit companies, insurance companies, and other businesses that help finance transactions or insure against the risks associated with the buying and selling of goods.

Today’s marketers recognize the importance of working with their intermediaries as partners rather than simply as channels through which they sell their products (Kotler & Armstong, 2018).

Competitors Marketers must gain strategic advantage by positioning their offerings strongly against competitors’ offerings in the minds of consumers. No single competitive marketing strategy is best for all companies (Kotler & Keller, 2007).

Publics A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives (Kotler & Armstrong, 2011).

 Financial publics influence the company’s ability to obtain funds.  Media publics carry news, features, and editorial opinion.  Government publics. Management must take government

developments into account.  Citizen-action publics. Consumer organizations, environmental

groups, and others may question a company’s marketing decisions.

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 Local publics include neighborhood residents and community organizations.

 General public. The general public’s image of the company affects its buying.

 Internal publics include workers, managers, volunteers, and the board of directors.

Customers There are five types of customer markets. The company may target any or all of these.

1. Consumer markets are individuals and households that buy goods and services for personal consumption.

2. Business markets buy goods and services for further processing or for use in their production process.

3. Reseller markets buy goods and services to resell at a profit. 4. Government markets are composed of government agencies that buy

goods and services to produce public services. 5. International markets are buyers in other countries, including

consumers, producers, resellers, and governments.

3.3.2 The Macroenvironment

Demographic Environment Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics. The demographic environment involves people, and people make up markets. Demographic trends include changing age and family structures, geographic population shifts, educational characteristics, and population diversity. Changes in the world demographic environment have major implications for business Brownlie, 1994). Thus, marketers keep close track of demographic trends and developments in their markets, both at home and abroad. Demographic trends include (Kotler & Armstong, 2018):

 Baby Boomers, born between 1946 and 1964, account for nearly 26 percent of the population and control 70 percent of the nation’s disposable income, as well as half of all consumer spending. As they reach their peak spending years, boomers will continue to constitute a lucrative market for many products and services. It would be a mistake to think of older boomers as phasing out or slowing down. Today’s boomers think “young” no matter how old they are.

 Generation X. The baby boom was followed by a “birth dearth,” creating another generation of 49 million people born between 1965 and 1976. Author Douglas Coupland calls them Generation X. The GenXers developed a more cautious economic outlook, and are a more skeptical bunch, though they are more likely to be receptive to

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irreverent ad pitches that make fun of convention and tradition.

 Millennials (also called Generation Y or the “echo” boomers). Born between 1977 and 2000, these children of the baby boomers number 83 million or more. Though they are larger than the baby boomer segment, they are the most financially strapped generation. Just because of their numbers, though, they make up a huge and attractive market, now and in the future.

 Generation Z, born after 2000, totals approximately 82 million, and includes several age cohorts:

 Kids (under age 10)  Tweens (age 8–12)  Teens (age 13–18)

They represent tomorrow’s markets and are now forming brand relationships that will affect their buying well into the future.

Economic Environment The economic environment consists of factors that affect consumer purchasing power and spending patterns. Before the Great Recession, American consumers fell into a consumption frenzy, amassing record levels of debt. However, consumers have now adopted a back-to-basics sensibility in their lifestyles and spending patterns. Value marketing means just the right combination of product quality and service at a fair price.

Income Distribution Income distribution in the United States is highly skewed. The rich have grown richer, the middle class has shrunk, and the poor have remained poor. This uneven distribution of income has created a tiered market.

The Natural Environment The natural environment involves the natural resources that are needed as inputs by marketers, or that are affected by marketing activities.

Trends in the natural environment include: 1. Growing shortages of raw materials 2. Increased pollution 3. Increased government intervention

Companies developing strategies and practices that support environmental sustainability. This means meeting present needs without compromising the ability of future generations to meet their needs.

Technological Environment The technological environment is perhaps the most dramatic force now shaping our destiny. Technology has released such wonders as antibiotics, robotic surgery, miniaturized electronics, smartphones, and the Internet. Our attitude toward technology depends on whether we are more impressed with

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its wonders or its blunders. New technologies can offer exciting opportunities for marketers. In the United States, government agencies investigate and regulate products. These regulations can impact new technologies and new product development.

The Political and Social Environment Marketing decisions are strongly affected by developments in the political environment. This consists of laws, government agencies, and various pressure groups that influence or limit various organizations and individuals in a given society.

Legislation Regulating Business Governments develop public policy to guide commerce. Legislation affecting business around the world has increased steadily over the years. Business legislation has been enacted for a number of reasons:

1. To protect companies from each other 2. To protect consumers from unfair business practices 3. To protect the interests of society against unrestrained business

behavior

Because government agencies have discretion in enforcing laws, they can have an impact on a company’s marketing performance. Many companies think the marketing environment is an uncontrollable element to which they must react and adapt. Other companies take a proactive stance toward the marketing environment. Rather than assuming that strategic options are bounded by the current environment, these firms develop strategies to change the environment. By taking action, companies can often overcome seemingly uncontrollable environmental events.

3.4 Marketing Information Systems Far from lacking marketing information, marketers are overloaded with data and often overwhelmed by it (Kotler & Keller, 2012). The value is in the customer insights gained from the information and how marketers use these insights to make better decisions. The real value of marketing research and marketing information lies in how it is used—in the customer insights that it provides (Solomon et al., 2018).

Customer insights teams collect customer and market information from a wide variety of sources. To create value for customers and build meaningful relationships with them, marketers must first gain fresh, deep insights into what customers need and want. Such customer insights come from good marketing information. Companies use these customer insights to develop a competitive advantage. Companies are forming customer insight teams that include all company functional areas. Their job is to develop actionable insights from marketing information and work strategically with marketing decision makers to apply those insights (Kotler & Armstong, 2018).

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A marketing information system (MIS) consists of people and procedures for assessing information needs, developing the needed information, and helping decision makers to use the information to generate and validate actionable customer and market insights (Chaffey & Ellis-Chadwick, 2012). MIS provides information to the company’s marketing and other managers and external partners such as suppliers, resellers, and marketing service agencies (Solomon et al., 2017).

A good marketing information system balances the information users would like to have against what they really need and what is feasible to offer (Chaffey & Ellis-Chadwick, 2012). Too much information can be as harmful as too little. The MIS must monitor the marketing environment to provide decision makers with information and insights they should have to make key marketing decisions. The company must decide whether the value of insights gained from additional information is worth the costs of providing it, and both value and cost are often hard to assess. Marketers obtain information from internal data, marketing intelligence, and marketing research (Kotler & Armstong, 2018).

3.4.1 Internal Data Internal databases are electronic collections of consumer and market information obtained from data sources within the company network (Tanner & Raymond, 2015). Information in the database can come from many sources and is available quickly and cheaply. Problems with internal data:

 It may be incomplete or in the wrong form for making marketing decisions.

 Keeping the database current requires a major effort because data ages quickly.

 Managing all of the information requires highly sophisticated equipment and techniques.

3.4.2 Competitive Marketing Intelligence Competitive marketing intelligence is the systematic collection and analysis of publicly available information about consumers, competitors, and developments in the marketplace (Burnett, 2008). Social media makes it easier than ever for people to converse, share opinions, needs, ideas, and complaints. Companies use specialized software to track trends and better respond to consumers (Kotler & Armstong, 2018).

Competitive marketing intelligence gathering has grown dramatically. Firms use competitive intelligence to gain early warnings of competitor moves and strategies. Much competitor intelligence can be collected from people inside the company. Competitors often reveal intelligence information through their suppliers, resellers, key customers, and the Internet. The gathering of competitive marketing intelligence raises a number of ethical issues. Most

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companies are now taking steps to protect their own information (Solomon et al., 2017).

3.4.3 Marketing Research Marketing research is the systematic design, collection, analysis, and reporting of data relevant to a specific marketing situation facing an organization (Bearden, 2006). The marketing research process has four steps as follows:

1. Defining the Problem and Research Objectives 2. Developing the Research Plan 3. Implement the Research Plan 4. Interpreting and Reporting the Findings

The marketing research process therefore begins with the defining of the problem and research objectives. Defining the problem and research objectives is often the hardest step in the research process. A marketing research project might have one of three types of objectives:

1. Exploratory research: to gather preliminary information that will help define the problem and suggest hypotheses.

2. Descriptive research: to describe things, such as the market potential for a product.

3. Causal research: to test hypotheses about cause-and-effect relationships.

Start with exploratory research and later follow with descriptive or causal research. The next step involves the developing of the research plan. The research plan outlines sources of existing data and spells out the specific research approaches, contact methods, sampling plans, and instruments that researchers will use to gather new data. Research objectives must be translated into specific information needs. The research plan should be presented in a written proposal that covers the management problems addressed, research objectives, information needed, how the results will help management decisions, and budget. Researchers should present important findings and insights that are useful in the major decisions faced by management. However, interpretation should not be left only to researchers. Managers should work closely alongside them (Chaffey & Ellis-Chadwick, 2012; Kotler & Keller, 2018, Solomon et al., 2017)

3.5 Types of Data Two types of data available to researchers include secondary and primary data.

3.5.1 Secondary Data Secondary data consist of information that already exists somewhere, having been collected for another purpose. Researchers usually start by gathering

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secondary data. Using commercial online databases, marketing researchers can conduct their own searches of secondary data sources. Secondary data is usually obtained more quickly and at a lower cost than primary data. Secondary sources can provide data an individual company cannot collect on its own. Secondary data can present problems.

 The needed information may not exist.  The data might not be very usable.

o Relevant (fits research project needs) o Accurate (reliably collected and reported) o Current (up-to-date enough for current decisions) o Impartial (objectively collected and reported)

3.5.2 Primary Data Primary data consist of information collected for the specific purpose at hand. Primary data collection methods include (Kotler & Armstong, 2018):

 Observational research involves gathering primary data by observing relevant people, actions, and situations. Observational research can obtain information that people are unwilling or unable to provide through questioning.

 Ethnographic research involves sending trained observers to watch and interact with consumers in their “natural habitat.” Ethnographic research often yields the kinds of details that don’t emerge from traditional research questionnaires or focus groups.

 Survey research, the most widely used method for primary data collection, is the approach best suited for gathering descriptive information. The major advantage of survey research is its flexibility.

 Experimental research is best suited for gathering causal information. Experimental research tries to explain cause-and-effect relationships.

The contact methods available in collecting primary data include mail, telephone, and personal interviewing. Mail questionnaires can be used to collect large amounts of information at a low cost per respondent. Respondents give more honest answers to personal questions. No interviewer is involved to bias the respondent’s answers. However, there are several disadvantages pertaining to:

 Not very flexible  Take longer to complete  Very low response rate  As a result, more marketers are now shifting to email and online

surveys.

Telephone interviewing is the one of the best methods for gathering information quickly, and it provides greater flexibility than mail questionnaires.

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Interviewers can explain difficult questions. Response rates are higher than with mail questionnaires. However, the disadvantages include:

 Cost per respondent is higher than with mail questionnaires.  People may not want to discuss personal questions with an interviewer.  Introduces interviewer bias  Different interviewers may interpret and record responses differently.  Increasingly high rates of hang-ups

Personal interviewing takes two forms—individual and group interviewing.

 Individual interviewing involves talking with people one-on-one.  Group interviewing (focus group interviewing) consists of inviting six

to ten people to meet with a trained moderator to discuss a product, service, or organization.

Many companies are now moving away from traditional, formal research approaches and employing new ways of listening to consumers.

3.6 Online Marketing Research Increasingly, researchers are collecting primary data through online marketing research. Online research usually costs much less than research conducted through mail, phone, or personal interviews. The Internet is well suited to quantitative research, but researchers are also adopting qualitative approaches. A primary qualitative Web-based research approach is online focus groups. Web-based research has drawbacks, including control of who is in the online sample. In addition, consumer privacy is a major ethical concern.

3.7 Research Instruments The questionnaire is the most common data collection instrument. Closed-end questions include all the possible answers, and subjects make choices among them. Open-end questions allow respondents to answer in their own words. Care should be given to the wording and ordering of questions. Researchers also use mechanical instruments to monitor consumer behavior. People meters and checkout scanners are examples (Kotler & Keller, 2012).

Neuromarketing techniques can measure consumer involvement and emotional responses, but these can be difficult to interpret. Implementing the Research Plan. The data collection phase of the marketing research process must be carried out carefully to make sure the plan is implemented correctly. Researchers must process and analyze the collected data to isolate important information and findings (Solomon et al., 2017).

3.8 Analyzing and Using Marketing Information Companies capture information at every possible customer touch point. Customer relationship management (CRM) is used to manage detailed

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information about individual customers and carefully manage customer touch points to maximize customer loyalty. CRM integrates everything that a company knows about individual customers to provide a 360-degree view of the customer relationship. By using CRM to understand customers better, companies can provide higher levels of customer service and develop deeper customer relationships. They can use CRM to pinpoint high-value customers, target them more effectively, cross-sell the company’s products, and create offers tailored to specific customer requirements.

3.9 Summary This topic has provided a detailed discussion of the environment that impacts on the marketing operations of an organisation. This environment, comprising of both the micro- and macro- factors must be effectively analysed to strategize the marketing activities of an organisation. The topic then proceeded to discuss the marketing research activities that provide value to an organisation. The following topic will explore the marketing strategy of an organization.

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Topic 4: Marketing Strategy

4.1 Learning Objectives  Describe segmentation and provide relevant examples.  Describe targeting and provide relevant examples.  Describe differentiation and provide relevant examples.  Describe positioning and provide relevant examples.

4.2 Topic Overview

This topic looks further into key customer-driven marketing strategy decisions. This involves exploring how to divide markets into meaningful customer groups (segmentation), choosing which customer groups to serve (targeting), creating market offerings that best serve targeted customers (differentiation), and positioning the offerings in the minds of consumers (positioning). Following this, the subsequent topics will explore the tactical marketing tools—the Four Ps—by which marketers bring these strategies to life. The subsequent section will begin with a discussion on the concept of marketing strategy.

4.3 Marketing Strategy

Most companies have moved away from mass marketing. Instead, many companies today are moving toward target marketing. This involves identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each (Doyle, 2009). Marketing Strategy involves four major steps in designing a customer value-driven marketing strategy, which is provided in Exhibit 7.

Exhibit 7: Steps in Marketing Strategy

Segmentation

Targeting

Differentiation

Positioning

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Market segmentation involves dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes (Kotler & Armstrong, 2012). Market targeting consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter (Kotler & Armstrong, 2006). Differentiation involves actually differentiating the firm’s market offering to create superior customer value (Stafford, 2014). Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers (Kotler & Armstrong, 2004). Each of the aforementioned key steps of the marketing strategy is discussed in the next sections.

4.4 Market Segmentation

Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs (Kotler & Keller, 2007). They may require separate marketing strategies or mixes.

 Segmenting consumer markets  Segmenting business markets  Segmenting international markets  Requirements for effective segmentation

The major variables that might be used in segmenting consumer markets are included in Exhibit 8 below.

Exhibit 8: Major Variables in Segmentation

Bases of Segmentation

Geographic

Demographic

Psychographic

Behavioral

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These four bases of segmentation are discussed next.

4.4.1 Geographic Segmentation Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods (Kotler & Armstong, 2018) . 4.4.2 Demographic Segmentation Demographic segmentation divides the market into groups based on variables such as:

 Age  Gender  Family size  Family life cycle  Income  Occupation  Education  Religion  Race  Generation  Nationality

Demographic factors are the most popular bases for segmenting customer groups. Age and life-cycle segmentation means offering different products or using different marketing approaches for different age and life-cycle groups. Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines. Income segmentation has long been used by the marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel.

4.4.3 Psychographic Segmentation Psychographic segmentation divides buyers into different groups based on:

 Social class  Lifestyle  Personality characteristics

Marketers also use personality variables to segment markets.

4.4.4 Behavioral Segmentation Behavioral segmentation divides buyers into groups based on their:

 Knowledge  Attitudes  Uses  Responses to a product

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Occasion segmentation means grouping buyers according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item. Benefit segmentation means grouping buyers according to the different benefits that they seek from the product. User status involves segmenting markets into nonusers, ex-users, potential users, first-time users, and regular users of a product. Usage rate means grouping markets into light, medium, and heavy product users. Loyalty status means dividing buyers into groups according to their degree of loyalty (Solomon et al., 2017).

4.4.5 Using Multiple Segmentation Bases Marketers rarely limit their segmentation analysis to only one or a few variables.

4.5 Market Targeting Hooley, Saunders, Piercy and Nicoulaud (2012) refers to targeting as a step in which marketers evaluate the attractiveness of each potential segment and decide in which of these groups they will invest resources to try to turn them into customers. The customer group or groups they select are the organization’s target market.

4.5.1 Evaluating Market Segments In evaluating different market segments, a firm must look at three factors:

1. Segment size and growth 2. Segment structural attractiveness 3. Company objectives and resources

The largest, fastest-growing segments are not always the most attractive ones for every company. The company also needs to examine major structural factors that affect long-run segment attractiveness.

 A segment is less attractive if it already contains many strong and aggressive competitors.

 The existence of many actual or potential substitute products may limit prices and the profits.

 The relative power of buyers also affects segment attractiveness.

A segment may be less attractive if it contains powerful suppliers who can control prices.

4.5.2 Selecting Target Market Segments A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve (Kotler & Armstong, 2018).

 Undifferentiated Marketing Using an undifferentiated marketing (or mass-marketing) strategy, a firm might decide to ignore market segment differences and target the whole market with one offer. This mass-marketing strategy focuses on what is common in the needs of consumers rather than on what is

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different .

 Differentiated Marketing Using a differentiated marketing (or segmented marketing) strategy, a firm decides to target several market segments and designs separate offers for each. It hopes for higher sales and a stronger position within each market segment. But it also increases the cost of doing business.

 Concentrated Marketing Using a concentrated marketing (or niche marketing) strategy, instead of going after a small share of a large market, the firm goes after a large share of one or a few smaller segments or niches.

It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments. It can market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably (Doyle, 2009).

4.6 Differentiation

To the extent that a company can differentiate and position itself as providing superior customer value, it gains competitive advantage. It can differentiate along the lines of product, service, channel, people, or image. A competitive advantage should be (Kotler & Armstong, 2018):

 Important: The difference delivers a highly valued benefit to target buyers.

 Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way.

 Superior: The difference is superior to other ways that customers might obtain the same benefit.

 Communicable: The difference is communicable and visible to buyers.

 Preemptive: Competitors cannot easily copy the difference.

 Affordable: Buyers can afford to pay for the difference.

 Profitable: The company can introduce the difference profitably.

4.7 Positioning

Positioning means developing a marketing strategy to influence how a particular market segment perceives a good or service in comparison to the competition. To position a brand, marketers have to clearly understand the criteria target consumers use to evaluate competing products and then convince them that their product, service or organization will meet those needs (Solomon et al., 2017). Value proposition refers to how a company will

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create differentiated value for targeted segments and what positions it wants to occupy in those segments. A product position is the way the product is defined by consumers on important attributes. Kotler and Keller (2007) propose four steps to decide just how to position products or services as follows:

 Step 1: Analyze Competitors’ Positions The first stage is to analyze competitors’ positions in the marketplace. To develop an effective positioning strategy, marketers must understand the current lay of the land.

 Step 2: Define Your Competitive Advantage The second stage is to offer a good or service with a competitive advantage to provide a reason to perceive the product as better than the competition’s. A positioning statement can frame how a product is positioned so that marketing communication remains focused on articulating the specific value offered.

 Step 3: Finalize the Marketing Mix Once they settle on a positioning strategy, the third stage is to finalize the marketing mix as they put all the pieces into place. The elements of the marketing mix must match the selected segment. The good or service must deliver benefits that the segment values, such as convenience or status.

 Step 4: Evaluate Responses and Modify as Needed In the fourth and final stage, marketers evaluate the target market’s responses so they can modify strategies. The firm may need to change which segments it targets or alter a product’s position to respond to marketplace changes.

Positioning Maps

Exhibit 9: Positioning Map of Kit-Kat

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Perceptual positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions. perceptual map, which is a vivid way to construct a picture of where products or brands are “located” in consumers’ minds (Kotler & Keller, 2007). Exhibit 9 provides such a positioning map of Kit-Kat. It can be seen that Kit-Kat is positioned as being low priced slightly below average quality.

Developing a Positioning Statement Company and brand positioning should be summed up in a positioning statement. The statement should follow the form: To (target segment and need) our (brand) is (concept) that (point of difference). Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to target consumers. All the company’s marketing mix efforts must support the positioning strategy. Once a company has built the desired position, it must take care to maintain the position through consistent performance and communication.

4.8 Summary

This topic provided an overview of the marketing strategy. Marketing strategy comprises of the four steps of segmentation, targeting, differentiation and positioning. Understanding very well that a single type of product would not be able to satisfy the diverse needs and wants of customers, organizations increasingly engage in the marketing strategy to provide a clear indication of their intended target audience. Upon identifying the target segments, organizations must then create distinct competitive advantages to stay ahead of the completion. The topic will discuss the first element of the marketing mix, product.

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Topic 5: The Marketing Mix - Product

5.1 Learning Objectives

 List the 7 P’s and isolate the 4 P’s of marketing  Differentiate between a product and a service  Define the following terminology in your own words:

Product: branding, packaging, labeling, support services, line  Reflect on what you know in terms of new product development and

relate this to the product life cycle (PLC)

5.2 Topic Overview This topic will look at how companies develop and manage products and brands. The product is usually the first and most basic marketing consideration. This topic begins with exploring what products are. It will then look at ways to classify products in consumer markets. The topic will then discuss the important decisions that marketers make regarding individual products, product lines, and product mixes. Next, the topic will examine the development of new products and managing products through their life cycles. The key differences between product and services is examined first in the following section.

5.3 What are Products and Services?

A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need (Kotler & Armstrong, 2015). Broadly defined, “products” also include services, events, persons, places, organizations, ideas, or mixes of these. Services are a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything (Armstrong et al., 2015).

A company’s market offering often includes both tangible goods and services. At one extreme, the offer may consist of a pure tangible good, such as soap or toothpaste. At the other extreme are pure services, for which the offer consists primarily of a service. As products and services are becoming more commoditized, to differentiate their offers, marketers are creating and managing customer experiences with their brands or company (Kotler & Armstong, 2018). The nature and characteristics of services are explored next.

5.4 The Nature and Characteristics of a Service

A company must consider four service characteristics when designing marketing programs: intangibility, inseparability, variability, and perishability (Solomon et al., 2017).

 Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled before they are bought.

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 Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. Because the customer is also present as the service is produced, provider-customer interaction is a special feature of services marketing.

 Service variability means that the quality of services depends on who provides them as well as when, where, and how they are provided.

 Service perishability means that services cannot be stored for later sale or use.

5.5 Types of Products

Consumer products are products and services bought by final consumers for personal consumption. Consumer products include the following (Kotler & Armstrong, 2011). The various types of consumer products are discussed in Exhibit 10 below.

Exhibit 10: Types of Products

From Exhibit 10, it can be seen that (Kotler & Armstong, 2018) :

 Convenience products are consumer products and services that customers usually buy frequently, immediately, and with a minimum of comparison and buying effort.

 Shopping products are less frequently purchased consumer products

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and services that customers compare carefully on suitability, quality, price, and style.

 Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.

 Unsought products are consumer products that the consumer either does not know about or knows about but does not normally think of buying.

5.6 Levels of Product and Services

Product planners need to think about products and services on three levels (Solomon et al., 2017).

 Core customer value, which addresses the question: What is the buyer really buying?

 Actual product

 Augmented product, which is created around the core benefit and actual product by offering additional consumer services and benefits

When developing products, marketers first must identify the core customer value that consumers seek from the product. They must then design the actual product and find ways to augment it to create this customer value and the most satisfying customer experience (Burnett, 2008). Each of the above levels of products is detailed in the subsequent sections.

5.7 Actual Product: Product Decisions

Product and Service Attributes Developing a product or service involves defining the benefits that it will offer. These benefits are communicated and delivered by product attributes such as quality, features, and style and design (Tanner & Raymond, 2015).

Product quality is the characteristics of a product or service that bear on its ability to satisfy stated or implied customer needs (Jobber, 2004). Total quality management (TQM) is an approach in which all the company’s people are involved in constantly improving the quality of products, services, and business processes. Product quality has two dimensions: level and consistency. The quality level means performance quality or the ability of a product to perform its functions. Quality conformance means quality consistency, freedom from defects, and consistency in delivering a targeted level of performance (Jobber & Ellis-Chadwick, 2012).

Product features are a competitive tool for differentiating the company’s product from competitors’ products. The company should periodically survey

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buyers who have used the product and ask these questions: How do you like the product? Which specific features of the product do you like most? Which features could we add to improve the product?

Product style and design is another way to add customer value. Style describes the appearance of a product. Design contributes to a product’s usefulness as well as to its looks.

Branding A brand is a name, term, sign, symbol, or design, or a combination of these, that identifies the maker or seller of a product or service (Kotler & Armstong, 2018). Branding helps buyers in many ways.

 Brand names help consumers identify products that might benefit them.  Brands say something about product quality and consistency.

Similarly, branding gives the seller several advantages.

 The brand name becomes the basis on which a whole story can be built about a product.

 The brand name and trademark provide legal protection for unique product features.

 The brand name helps the seller to segment markets.

Packaging Packaging involves designing and producing the container or wrapper for a product.

Labeling and Logos Labels perform several functions.

 The label identifies the product or brand.  The label describes several things about the product.  The label promotes the brand.

Labeling also raises concerns. As a result, several federal and state laws regulate labeling. Labeling has been affected in recent times by:

 Unit pricing (stating the price per unit of standard measure)  Open dating (stating the expected shelf life of the product)  Nutritional labeling (stating the nutritional values in the product)

Augmented Product: Product Support Services

The first step in designing customer support services is to survey customers periodically to assess the value of current services and to obtain ideas for new ones. Next, the company can take steps to fix problems and add new services that will both delight customers and yield profits to the company.

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5.8 Product Line Decisions

A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges.

Product line length is the number of items in the product line.

Product line filling involves adding more items within the present range of the line.

Product line stretching occurs when a company lengthens its product line beyond its current range.

 Companies located at the upper end of the market can stretch their lines downward.

 Companies located at the lower end of the market can stretch their product lines upward.

 Companies located in the middle range of the market can stretch their lines in both directions.

5.9 Product Mix Decisions

Product mix (or product portfolio) consists of all the product lines and items that a particular seller offers for sale (Solomon et al., 2017). A company’s product mix has four dimensions: width, length, depth, and consistency.

 Product mix width refers to the number of different product lines the company carries.

 Product mix length refers to the total number of items the company carries within its product lines.

 Product mix depth refers to the number of versions offered of each product in the line.

 Product mix consistency refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

The company can increase its business in four ways (Kotler & Armstrong, 2018):  It can add new product lines, widening its product mix.  It can lengthen its existing product lines.  It can add more versions of each product, deepening its product mix.  It can pursue more product line consistency.

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5.10 New Product Development Strategy

A firm can obtain new products in two ways (Kotler & Armstrong, 2011).

 Acquisition—by buying a whole company, a patent, or a license to produce someone else’s product

 New product development efforts

There are a number of reasons new products may fail. Innovation can be expensive and risky. New products face tough odds. An idea may be good, but the market size may be overestimated. The product may be poorly designed, launched at the wrong time, priced incorrectly, or poorly advertised. Below are the eight major steps in the new product development process:

Idea Generation Idea generation is the systematic search for new product ideas. Using internal sources, the company can find new ideas through formal research and development. Or it can pick the brains of employees—from executives to scientists, engineers, and manufacturing staff to salespeople.

Companies can also obtain good new product ideas from a number of external sources, such as distributors and suppliers, or even competitors. Perhaps the most important source of new product ideas is customers themselves.

Crowdsourcing throws the innovation doors wide open, inviting broad communities of people into the new product innovation process. When it comes to helping to improve products and services, many heads are better than one. Crowdsourcing can produce a flood of innovative ideas.

Idea Screening The first idea-reducing stage is idea screening, which helps spot good ideas and drop poor ones as soon as possible.

Concept Development and Testing A product idea is an idea for a possible product that the company can see itself offering to the market. A product concept is a detailed version of the idea stated in meaningful consumer terms. A product image is the way consumers perceive an actual or potential product.

Concept Development In concept development, several descriptions of the product are generated to find out how attractive each concept is to customers. From these concepts, the best one is chosen.

Concept Testing Concept testing calls for testing new product concepts with groups of target consumers.

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Marketing Strategy Development Marketing strategy development involves designing an initial marketing strategy for introducing a product to the market.

The marketing strategy statement consists of three parts.

 A description of the target market; the planned value proposition; and the sales, market share, and profit goals for the first few years.

 Outline of the product’s planned price, distribution, and marketing budget for the first year.

 Description of the planned long-run sales, profit goals, and marketing mix strategy.

Business Analysis Business analysis involves a review of the sales, costs, and profit projections for a new product to find out whether they satisfy the company’s objectives.

Product Development In product development, R&D or engineering develops the product concept into a physical product. The product development step calls for a large jump in investment. The new product must have the required functional features and must also convey the intended psychological characteristics.

Test Marketing Test marketing is the stage at which the product and marketing program are introduced into realistic market settings. The amount of test marketing needed varies with each new product. Test marketing costs can be high, and it takes time that may allow competitors to gain advantages. When the costs of developing and introducing the product are low, or when management is already confident about the new product, the company may do little or no test marketing. In fact, test marketing by consumer-goods firms has been declining in recent years. Companies often do not test-market simple line extensions or copies of competitors’ successful products.

However, when introducing a new product requires a big investment, when the risks are high, or when management is not sure of the product or its marketing program, a company may do a lot of test marketing. In controlled test markets new products and tactics are tested among controlled groups of customers and stores. Within test stores, such factors as shelf placement, price, and in-store promotions for the products being tested can be controlled.

In simulated test markets, researchers measure consumer responses to new products and marketing tactics in laboratory stores or simulated shopping environments. Many marketers use online simulated marketing technologies to reduce the costs of test marketing and speed up the process.

Commercialization Commercialization means introducing the new product into the market. Decisions must be made concerning:

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 Timing  Where to launch the new product  Market rollout

5.11 Product Life-Cycle Strategies

The product life cycle has five distinct stages as illustrated in Exhibit 11 below.

Exhibit 11: The Product Life Cycle

 Product development begins when the company finds and develops a new product idea. During product development, sales are zero, and the company’s investment costs mount.

 Introduction is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction. The introduction stage starts when the new product is first launched. Profits are negative or low, promotion spending is relatively high, and only basic versions of the product are produced.

 Growth is a period of rapid market acceptance and increasing profits. The growth stage is where sales begin to climb quickly. New competitors will enter the market. They will introduce new product features, and the market will expand. The increase in competitors leads to an increase in the number of distribution outlets. Prices remain stable or decrease slightly. Profits also may increase during the growth stage.

 Maturity is a period of slowdown in sales growth because the product

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has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition. The maturity stage is characterized by slowing product growth. The slowdown in sales growth results in many producers with many products to sell. Competitors begin marking down prices, increasing their advertising and sales promotions, and upping their product-development budgets to find better versions of the product. These steps lead to a drop in profit. Product managers should consider modifying the market, product, and marketing mix. In modifying the market, the company tries to increase the consumption of the current product. In modifying the product, the company tries changing characteristics such as quality, features, style, or packaging to attract new users and to inspire more usage. In modifying the marketing mix, the company tries changing one or more marketing mix elements.

 Decline is the period when sales fall off and profits drop. The sales of most product forms and brands eventually dip. This is the decline stage. Management may decide to maintain its brand without change in the hope that competitors will leave the industry. Management may decide to harvest a product, which means reducing various costs (plant and equipment, maintenance, R&D, advertising, sales force) and hoping that sales hold up. Management may decide to drop the product from the line.

The PLC concept can describe a product class (gasoline-powered automobiles), a product form (SUVs), or a brand (the Ford Escape).

5.12 Summary

This topic has provided a detailed overview of the concepts relating to product, within the marketing mix. The types of products, levels of a product as well as the key characteristics were explored. In addition, the new product development process typically in place in organizations as well as the product life cycle were illustrated and discussed. The subsequent topic will discuss the next element of the marketing mix, place.

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Topic 6: The Marketing Mix: Place

6.1 Learning Objectives

 Understand how a product reaches a customer and vice-versa  Define the term ‘channel’ in your own words  Describe traditional and non-traditional channels  Explain the value delivery network using a product example  Explain the importance of location, inventory and transportation to

both marketing strategy and the customer

6.2 Topic Overview

This topic deals with distribution. An individual firm’s success depends not only on how well it performs but also on how well its entire marketing channel competes with competitors’ channels. The topic explores the nature of marketing channels and the marketer’s channel design and management decisions. Concepts covered will include direct and indirect distribution, channels of distribution, vertical marketing systems and distribution strategies. The topic will then briefly examine physical distribution—or logistics—an area that is growing dramatically in importance and sophistication. The topic begins with a discussion on direct and indirect distribution.

6.3 Direct Versus Indirect Distribution

A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer (Coughlan, Anderson, Stern & El-Ansany, 2006). Channels are broken into direct and indirect forms as illustrated in Exhibit 12 below.

Exhibit 12: Direct Versus Indirect Distribution

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Produced goods and services have to find a way to reach consumers. The role of the distribution channel is to transfer goods and services efficiently. They can either be sent to a retail store or directly to a customer's residence. There are advantages and disadvantages to direct distribution channels. The same goes for indirect channels. It is the job of the managers and others involved in corporate governance to find the most effective means based on the firm's specific needs (Kotler & Armstong, 2018).

A direct distribution channel is organized and managed by the firm itself. Firms that use direct distribution require their own logistics teams and transport vehicles. Direct channels tend to be more expensive to start running and can sometimes require significant capital investment. Warehouses, logistics systems, trucks and driving staff will need to be set up. However, once those are in place, the direct channel is likely to be shorter and less costly than an indirect channel. Direct selling can be difficult to manage on a large scale, but it often allows the manufacturer to have a better connection to its consumer base (Solomon et al., 2017).

An indirect distribution channel relies on intermediaries to perform most or all distribution functions, otherwise known as wholesale distribution. Those with indirect distribution channels have to set up relationships with third-party selling systems. The most challenging part of indirect distribution channels is that another party has to be entrusted with the manufacturer's products and customer interaction. However, the most successful logistics companies are experts at delivering receivables in a way that most manufacturers cannot be. Indirect channels also free the manufacturer from any startup costs. With the right relationship, they are much simpler to manage than direct distribution channels (Kotler & Armstrong, 2011; Tanner & Raymond, 2015). The next section examines the nature and importance of marketing channels.

6.4 The Nature and Importance of Marketing Channels

Producers try to forge a marketing channel (or distribution channel), which is a set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user. The role of marketing intermediaries is to transform the assortments of products made by producers into the assortments wanted by consumers (Rosenbloom, 2012).

Members of the marketing channel perform many key functions. Some help to complete transactions:

 Information—gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange.

 Promotion—developing and spreading persuasive communications about an offer.

 Contact—finding and communicating with prospective buyers.

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 Matching—shaping and fitting the offer to the buyer’s needs, including activities such as manufacturing, grading, assembling, and packaging.

 Negotiation—reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred.

Others help to fulfill the completed transactions:  Physical distribution—transporting and storing goods.

 Financing—acquiring and using funds to cover the costs of the channel work.

 Risk taking—assuming the risks of carrying out the channel work.

The question is not whether these functions need to be performed, but who will perform them, at what cost. An important consideration is also the number of channel levels, which is explored next.

6.5 Number of Channel Levels

A channel level is a layer of marketing intermediaries that performs some work in bringing the product and its ownership closer to the final buyer (Jobber & Ellis-Chadwick, 2012). A direct marketing channel has no intermediary levels; the company sells directly to consumers. An indirect marketing channel contains one or more intermediaries. This is illustrated in Exhibit 13 below.

Exhibit 13: Channels of Distribution

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The number of intermediary levels indicates the length of a channel. From the producer’s point of view, a greater number of levels mean less control and greater channel complexity. All members in the channel are connected by flows, which include physical flow, flow of ownership, payment flow, information flow, and promotion flow (Kotler & Armstrong, 2018).

6.6 Channel Behavior and Organization

A marketing channel consists of firms that have partnered for their common good. Each channel member depends on the others. Each channel member plays a specialized role in the channel. The channel will be most effective when each member assumes the tasks it can do best. Disagreements over goals, roles, and rewards generate channel conflict.

 Horizontal conflict occurs among firms at the same level of the channel.

 Vertical conflict occurs between different levels of the same channel.

Vertical Marketing Systems A conventional distribution channel consists of one or more independent producers, wholesalers, and retailers. Each is a separate business seeking to maximize its own profits, perhaps even at the expense of the system as a whole. A vertical marketing system (VMS) consists of producers, wholesalers, and retailers acting as a unified system. One channel member owns the others, has contracts with them, or wields so much power that they must all cooperate (Solomon, 2019). A depiction of VMS is provided in Exhibit 14 below.

Exhibit 14: Vertical Marketing Systems

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There are three main types of vertical marketing systems:

 A corporate VMS integrates successive stages of production and distribution under single ownership.

 A contractual VMS consists of independent firms at different levels of production and distribution who join together through contracts to obtain more economies or sales impact than each could achieve alone. The franchise organization is the most common type of contractual relationship. A channel member called a franchisor links several stages in the production-distribution process.

 In an administered VMS, leadership is assumed not through common ownership or contractual ties but through the size and power of one or a few dominant channel members.

6.7 Channel Design Decisions

Disintermediation occurs when product or service producers cut out intermediaries and go directly to final buyers, or when radically new types of channel intermediaries displace traditional ones.

Number of Marketing Intermediaries Companies must also determine the number of channel members to use at each level. Three strategies are available as shown in Exhibit 15 below:

Exhibit 15: Distribution Strategies

Exclusive

Selective

Intensive

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 Intensive distribution is ideal for producers of convenience products and common raw materials. It is a strategy in which they stock their products in as many outlets as possible. Solomon (2019) concurs that intensive distribution aims at maximizing market coverage by selling a product through all wholesalers or retailers that will stock and sell the product. Availability is more important than any other consideration in customers’ purchase decision. Products such as gum, milk, and soft drinks are intensively distributed.

 Exclusive distribution is when producers purposely limit the number of intermediaries handling their products. The producer gives only a limited number of dealers the exclusive right to distribute its products in their territories. Solomon (2019) adds that exclusive distribution means limiting distribution to a single outlet in a particular region. Some cars, pianos, and products with high price tags are sold this way. The grey market is a distribution channel in which a product’s sale to a customer is technically legal, but is viewed as inappropriate by the manufacturer of the related product. Grey markets often emerge around high-end luxury goods sold through exclusive distribution.

 Selective distribution involves the use of more than one, but fewer than all, of the intermediaries who are willing to carry a company’s products. Solomon (2019) contends that Selective distribution fits when demand is so large that exclusive distribution is inadequate, but selling costs, service requirements, or other factors make intensive distribution a poor fit. Selective distribution is suitable for shopping products such as household appliances and electronic equipment.

6.8 Marketing Logistics Functions

Marketing logistics (also called physical distribution) involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit. The goal of marketing logistics should be to provide a targeted level of customer service at the least cost. The major logistics functions include (Kotler & Armstrong, 2018):

Warehousing A company must decide on how many and what types of warehouses it needs and where they will be located. Storage warehouses store goods for moderate to long periods. Distribution centers are designed to move goods rather than just store them.

Inventory Management Just-in-time logistics systems: Producers and retailers carry only small inventories of parts or merchandise, often only enough for a few days of operations.

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Transportation Trucks have increased their share of transportation steadily and now account for nearly 40 percent of total cargo ton-miles in the United States. Trucks are highly flexible in their routing and time schedules, and they can usually offer faster service than railroads. They are efficient for short hauls of high-value merchandise.

Railroads account for 37 percent of total cargo ton-miles moved. They are one of the most cost-effective modes for shipping large amounts of bulk products—coal, sand, minerals, and farm and forest products—over long distances.

Water carriers account for 5 percent of cargo ton-miles and transport large amounts of goods by ships and barges on U.S. coastal and inland waterways.

Although the cost of water transportation is very low for shipping bulky, low-value, nonperishable products, it is the slowest mode and may be affected by the weather.

Pipelines account for about 1 percent of cargo ton-miles. They are a specialized means of shipping petroleum, natural gas, and chemicals from sources to markets.

Air carriers transport less than 1 percent of the nation’s goods. Airfreight rates are much higher than rail or truck rates.

The Internet carries digital products from producer to customer via satellite, cable, or phone wire.

Logistics Information Management Electronic data interchange (EDI) is the computerized exchange of data between organizations. Vendor-managed inventory (VMI) systems or continuous inventory replenishment systems involve the customer sharing real-time data on sales and current inventory levels with the supplier. The supplier then takes full responsibility for managing inventories and deliveries.

6.9 Summary

The topic dealt with the place, or distribution, aspect of the marketing mix. It was established that distribution can either be direct or indirect. The various ways in which intermediaries can add value to the distribution channel was explored. Next, the various distribution strategies were examined together with a brief discussion on Vertical Marketing Systems. The next topic will elaborate on the element of price within the marketing mix.

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Topic 7: The Marketing Mix: Price

7.1 Learning Objectives

 Understand what a price is and how it is determined.  Explain and Apply the 5 major pricing strategies.  Understand the tactics available to firms when the price changes.  Explain the internal and external considerations that affect pricing

decisions.

7.2 Topic Overview

Organizations successful at creating customer value with the other marketing mix activities must capture this value in the prices they earn. This topic addresses the importance of pricing, explores five major pricing strategies, and looks at internal and external considerations that affect pricing decisions. Companies today face a fierce and fast-changing pricing environment. Value- seeking customers have put increased pricing pressure on many companies. Yet, cutting prices is often not the best answer. No matter what the state of the economy, companies should sell value, not price.

7.3 What is Price?

In the narrowest sense, price is the amount of money charged for a product or service. More broadly, price is the sum of all the values that customers give up in order to gain the benefits of having or using a product or service (Jobber & Shipley, 2012). Price is the only element in the marketing mix that produces revenue. Price is one of the most flexible marketing mix elements.

Exhibit 16: Pricing Strategies

The key pricing strategies are reflected in Exhibit 16 above and discussed in the next sections.

Pricing Strategies

Value‐Based

Cost‐Based

Competition‐ Based

Market Penetration

Market Skimming

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7.4 Pricing Strategies

7.4.1 Value-Based Pricing

Customer value-based pricing uses buyers’ perceptions of value, not the seller’s cost, as the key to pricing. Price is considered along with the other marketing mix variables before the marketing program is set (Solomon et al., 2017). Two types of value-based pricing are good-value pricing and value- added pricing.

 Good-value pricing involves offering just the right combination of quality and good service at a fair price. Everyday low pricing (EDLP) involves charging a constant, everyday low price with few or no temporary price discounts. High-low pricing involves charging higher prices on an everyday basis but running frequent promotions to lower prices temporarily on selected items.

 Value-Added Pricing is the strategy of attaching value-added features and services to differentiate their offers and thus support higher prices.

7.4.2 Cost-Based Pricing

Cost-based pricing is often product driven. Value-based pricing reverses this process. The company first assesses customer needs and value perceptions, and then sets its target price based on customer perceptions of value (Houston, 1986). Cost-based pricing involves setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk.

Exhibit 17: Types of Costs

 Fixed costs (also known as overhead) are costs that do not vary with production or sales level.

 Variable costs vary directly with the level of production. They are called variable because their total varies with the number of units produced.

 Total costs are the sum of the fixed and variable costs for any given level of production.

The simplest cost-based pricing method is cost-plus pricing—adding a

Fixed Costs

Variable Costs

Total Costs

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standard markup to the cost of the product. Markup pricing remains popular for many reasons:

 Sellers are more certain about costs than about demand.  When all firms in the industry use this pricing method, prices tend to be

similar and price competition is minimized.  Many people feel that cost-plus pricing is fairer to both buyers and

sellers.

Another cost-oriented pricing approach is break-even pricing, or a variation called target return pricing. The organization tries to determine the price at which it will break even or make the target profit it is seeking. Target return pricing uses the concept of a break-even chart that shows the total cost and total revenue expected at different sales volume levels. The manufacturer should consider different prices and estimate break-even volumes, probable demand, and profits for each.

7.4.3 Competition-Based Pricing Competition-based pricing involves setting prices based on competitors’ strategies, costs, prices, and market offerings (Tanner & Raymond, 2015). Consumers will base their judgments of a product’s value on the prices that competitors charge for similar products. No matter what price you charge relative to the competition—high, low, or in-between—be certain to give customers superior value for that price. Pricing in the different types of markets is reflected in Exhibit 18.

Exhibit 18: Competition-Based Pricing

Pricing in Different Markets

Pure Competition

Pure Monopoly

Oligopolistic Competition

Monopolistic Competition

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 Pure competition: The market consists of many buyers and sellers trading in a uniform commodity. No single buyer or seller has much effect on the going market price. In a purely competitive market, marketing research, product development, pricing, advertising, and sales promotion play little or no role. Thus, sellers in these markets do not spend much time on marketing strategy.

 Monopolistic competition: The market consists of many buyers and sellers who trade over a range of prices rather than a single market price. A range of prices occurs because sellers can differentiate their offers to buyers.

 Oligopolistic competition: The market consists of a few sellers who are highly sensitive to each other’s pricing and marketing strategies. There are few sellers because it is difficult for new sellers to enter the market.

 Pure monopoly: The market consists of one seller. The seller may be a government monopoly, a private regulated monopoly, or a private unregulated monopoly.

7.4.4 New Product Pricing Strategies Companies bringing out a new product face the challenge of setting prices for the first time. They can choose between two broad strategies.

Market-Skimming Pricing Many companies that invent new products set high initial prices to “skim” revenues layer-by-layer from the market. This is called market-skimming pricing. Market skimming makes sense only under certain conditions:

 The product’s quality and image must support its higher price, and enough buyers must want the product at that price.

 The costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more.

 Competitors should not be able to enter the market easily and undercut the high price.

Market-Penetration Pricing Rather than setting a high price to skim off small but profitable market segments, some companies use market-penetration pricing. They set a low initial price to penetrate the market quickly and deeply—to attract a large number of buyers quickly and win a large market share. Several conditions must be met for this low-price strategy to work:

 The market must be highly price sensitive so that a low price produces more market growth.

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 Production and distribution costs must fall as sales volume increases.

 The low price must help keep out the competition, and the penetration price must maintain its low-price position—otherwise, the price advantage may be only temporary.

7.5 Other Internal and External Considerations Affecting Price Decisions

Overall Marketing Strategy, Objectives, and Mix Before setting price, the company must decide on its overall marketing strategy for the product or service. Pricing strategy is largely determined by decisions on market positioning. Price is only one of the marketing mix tools that a company uses to achieve its marketing objectives.

Price decisions must be coordinated with product design, distribution, and promotion decisions to form a consistent and effective integrated marketing mix program. Companies often position their products on price and then tailor other marketing mix decisions to the prices they want to charge. Target costing starts with an ideal selling price based on customer-value considerations, and then targets costs that will ensure that the price is met. Companies may de-emphasize price and use other marketing mix tools to create non-price positions.

Organizational Considerations In small companies, prices are often set by top management rather than by the marketing or sales departments. In large companies, pricing is typically handled by divisional or product line managers. In industrial markets, salespeople may be allowed to negotiate with customers within certain price ranges. In industries in which pricing is a key factor, companies often have pricing departments to set the best prices or to help others in setting them.

The Market and Demand

The relationship between the price charged and the resulting demand level is shown in the demand curve. In the normal case, demand and price are inversely related—that is, the higher the price, the lower the demand. In a monopoly, the demand curve shows the total market demand resulting from different prices. If the company faces competition, its demand at different prices will depend on whether competitors’ prices stay constant or change with the company’s own prices.

Price Elasticity of Demand Price elasticity is how responsive demand will be to a change in price. If demand hardly changes with a small change in price, we say demand is inelastic. If demand changes greatly with a small change in price, we say the demand is elastic. Buyers are less price sensitive when the product they are buying is unique or when it is high in quality, prestige, or exclusiveness; when substitute products are hard to find or when they cannot easily compare the quality of substitutes; and when the total expenditure for a product is low

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relative to their income or when the cost is shared by another party. If demand is elastic rather than inelastic, sellers will consider lowering their prices. A lower price will produce more total revenue.

The Economy Economic conditions can have a strong impact on the firm’s pricing strategies. A boom or recession, inflation, and interest rates affect consumer spending, consumer perceptions of the product’s price and value, and the company’s costs of producing and selling a product. In the aftermath of the recent Great Recession, consumers have rethought the price-value equation.

Other External Factors The company must also know what impact its prices will have on other parties in its environment, such as resellers and the government. Social concerns may have to be taken into account.

7.6 Price Adjustment Strategies

Companies usually adjust their basic prices to account for various customer differences and changing situations. The seven price-adjustment strategies are:

Discount and Allowance Pricing Most companies adjust their basic price to reward customers for certain responses, such as early payment of bills, volume purchases, and off-season buying. One form of discount is a cash discount, a price reduction to buyers who pay their bills promptly. A typical example is “2/10, net 30,” which means that although payment is due within 30 days, the buyer can deduct 2 percent if the bill is paid within 10 days. A quantity discount is a price reduction to buyers who buy large volumes. A functional discount (trade discount) is offered by the seller to trade-channel members who perform certain functions, such as selling, storing, and record keeping. A seasonal discount is a price reduction to buyers who buy merchandise or services out of season. Allowances are another type of reduction from the list price. Trade-in allowances are price reductions given for turning in an old item when buying a new one. Promotional allowances are payments or price reductions to reward dealers for participating in advertising and sales support programs.

Segmented Pricing Companies will often adjust their basic prices to allow for differences in customers, products, and locations. In segmented pricing, the company sells a product or service at two or more prices, even though the difference in price is not based on differences in costs.

 Under customer-segment pricing, different customers pay different prices for the same product or service.

 Under product-form pricing, different versions of the product are priced differently but not according to differences in their costs.

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 Under location pricing, a company charges different prices for different locations, even though the cost of offering each location is the same.

 Using time-based pricing, a firm varies its prices by the season, the month, the day, and even the hour.

For segmented pricing to be an effective strategy, certain conditions must exist:

• The market must be segmentable, and the segments must show different degrees of demand.

• The costs of segmenting and watching the market cannot exceed the extra revenue obtained from the price difference.

• The segmented pricing must be legal.

• Segmented prices should reflect real differences in customers’ perceived value.

Psychological Pricing Price says something about the product. For example, many consumers use price to judge quality. In using psychological pricing, sellers consider the psychology of prices, not simply the economics. Another aspect of psychological pricing is reference prices—prices that buyers carry in their minds and reference when looking at a given product.

 The reference price might be formed by noting current prices, remembering past prices, or assessing the buying situation.

 Sellers can influence or use these consumers’ reference prices when setting price.

For most purchases, consumers don’t have all the skill or information they need to figure out whether they are paying a good price. They may rely on certain cues that signal whether a price is high or low. Even small differences in price can signal product differences.

Promotional Pricing With promotional pricing, companies will temporarily price their products below list price and sometimes even below cost to create buying excitement and urgency. Promotional pricing takes several forms.

 The seller may simply offer discounts from normal prices to increase sales and reduce inventories.

 Sellers will also use special-event pricing in certain seasons to draw more customers.

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 Manufacturers sometimes offer cash rebates to consumers who buy the product from dealers within a specified time.

 Some manufacturers offer low-interest financing, longer warranties, or free maintenance to reduce the consumer’s “price.”

Promotional pricing can have adverse effects.  Used too frequently and copied by competitors, price promotions can

create “deal-prone” customers who wait until brands go on sale before buying them.

 Constantly reduced prices can erode a brand’s value in the eyes of customers.

 Marketers sometimes use price promotions as a quick fix instead of sweating through the difficult process of developing effective longer- term strategies for building their brands.

Promotional pricing can be an effective means of generating sales in certain circumstances, but it can be damaging for other companies or if taken as a steady diet.

Geographical Pricing A company also must decide how to price its products for customers located in different parts of the country or world.

 FOB-origin pricing is a practice that means the goods are placed free on board (hence, FOB) a carrier. At that point the title and responsibility pass to the customer, who pays the freight from the factory to the destination.

 Uniform-delivered pricing is the opposite of FOB pricing. Here, the company charges the same price plus freight to all customers, regardless of their location. The freight charge is set at the average freight cost.

 Zone pricing falls between FOB-origin pricing and uniform-delivered pricing. The company sets up two or more zones. All customers within a given zone pay a single total price; the more distant the zone, the higher the price.

 Using basing-point pricing, the seller selects a given city as a “basing point” and charges all customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped.

 The seller who is anxious to do business with a certain customer or geographical area might use freight-absorption pricing. Using this strategy, the seller absorbs all or part of the actual freight charges in order to get the desired business.

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Dynamic and Online Pricing Dynamic pricing offers many advantages for marketers. Internet sellers can mine their databases to gauge a specific shopper’s desires, measure his or her means, instantaneously tailor products to fit that shopper’s behavior, and price products accordingly. Buyers also benefit from the Web and dynamic pricing.

International Pricing Companies that market their products internationally must decide what prices to charge in the different countries in which they operate. In some cases, a company can set a uniform worldwide price. However, most companies adjust their prices to reflect local market conditions and cost considerations.

The price that a company should charge in a specific country depends on many factors, including economic conditions, competitive situations, laws and regulations, and development of the wholesaling and retailing system. Consumer perceptions and preferences also may vary from country to country, calling for different prices. Or, the company may have different marketing objectives in various world markets that require changes in pricing strategy.

Costs play an important role in setting international prices. Travelers abroad are often surprised to find that goods that are relatively inexpensive at home may carry outrageously higher price tags in other countries. In some cases, such price escalation may result from differences in selling strategies or market conditions. In most instances, however, it is simply a result of the higher costs of selling in another country—the additional costs of product modifications, shipping and insurance, import tariffs and taxes, exchange rate fluctuations, and physical distribution.

7.7 Responding to Price Changes If a company decides that effective action can and should be taken, it might make any of four responses (Kotler & Armstrong, 2018):

 It could reduce its price to match the competitor’s price. The company should try to maintain its quality as it cuts prices.

 The company might maintain its price but raise the perceived value of its offer. It could improve its communications, stressing the relative quality of its product over that of the lower-price competitor.

 The company might improve quality and increase price, moving its brand into a higher-price position. The higher quality justifies the higher price that in turn preserves the company’s higher margins.

 The company might launch a low-price “fighter brand”—adding a lower- price item to the line or creating a separate lower-price brand. This is necessary if the particular market segment being lost is price sensitive and will not respond to arguments of higher quality.

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7.8 Illegal Pricing

Price competition is a core element of our free-market economy. In setting prices, companies are not usually free to charge whatever prices they wish. Many federal, state, and even local laws govern the rules of fair play in pricing. In addition, companies must consider broader societal pricing concerns. The most important pieces of legislation affecting pricing are the Sherman, Clayton, and Robinson-Patman Acts, initially adopted to curb the formation of monopolies and to regulate business practices that might unfairly restrain trade (Solomon et al., 2017).

Pricing within Channel Levels Federal legislation on price-fixing states that sellers must set prices without talking to competitors. Otherwise, price collusion is suspected. Sellers are also prohibited from using predatory pricing—selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business. This protects small sellers from larger ones who might sell items below cost temporarily or in a specific locale to drive them out of business.

Pricing Across Channel Levels The Robinson-Patman Act seeks to prevent unfair price discrimination by ensuring that sellers offer the same price terms to customers at a given level of trade. Price discrimination is allowed if the seller can prove that its costs are different when selling to different retailers. Or, the seller can discriminate in its pricing if the seller manufactures different qualities of the same product for different retailers. The seller has to prove that these differences are proportional.

Retail (or resale) price maintenance is prohibited—a manufacturer cannot require dealers to charge a specified retail price for its product. Although the seller can propose a manufacturer’s suggested retail price to dealers, it cannot refuse to sell to a dealer who takes independent pricing action, nor can it punish the dealer by shipping late or denying advertising allowances.

Deceptive pricing occurs when a seller states prices or price savings that mislead consumers or are not actually available to consumers. This might involve bogus reference or comparison prices, as when a retailer sets artificially high “regular” prices then announces “sale” prices close to its previous everyday prices. Deceptive pricing issues include scanner fraud and price confusion. The widespread use of scanner-based computer checkouts has led to increasing complaints of retailers overcharging their customers.

Price confusion results when firms employ pricing methods that make it difficult for consumers to understand just what price they are really paying. Treating customers fairly and making certain that they fully understand prices and pricing terms is an important part of building strong and lasting customer relationships.

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7.9 Conclusion This topic examined the price component of the marketing mix. Through this topic, we were able to explore the various pricing strategies available to organizations as well as the internal and external factors impacting on the pricing decisions of organizations. Also discussed were the various pricing strategies as well as the public policies governing the pricing strategies of organizations. The next topic will conclude the discussion on the marketing mix by exploring promotion.

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Topic 8: The Marketing Mix - Promotion

8.1 Learning Objectives

 Understand and give examples of the FIVE (5) main categories of promotion in the Promotion Mix.

 Define Integrated Marketing Communications (IMC) in your own words and provide and example of a complete IMC.

 Understand how IMC theory works in practice.  Describe the different forms of media and their pros and cons.  Reflect on the 4 P’s and how they interrelate to form the overall

marketing mix.

8.2 Topic Overview

Companies use promotion to clearly and persuasively communicate the value of the organization. Promotion is not a single tool but, rather, a mix of several tools. Under the concept of integrated marketing communications (IMC), the company must carefully coordinate these promotion elements to deliver a clear, consistent, and compelling message about the organization and its brands. Next, the topic discusses the various tools of the marketing mix, namely advertising, sales promotion, personal selling, public relations and direct marketing. The aforementioned tools must be carefully integrated with other elements of the promotion mix, which is discussed next.

8.3 The Promotion Mix

A company’s total promotion mix, also called its marketing communications mix, consists of the specific blend of advertising, sales promotion, public relations, personal selling, and direct-marketing tools that the company uses to pursue its advertising and marketing objectives, and to communicate customer value and build customer relationships (Fill, 2011). The various tools of the marketing mix are illustrated in Exhibit 19.

Exhibit 19: Promotion Mix Tools

The five major promotion tools are defined as follows:

Promotion Mix

Advertising Sales Promotion Personal Selling Public Relation Direct Marketing

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1. Advertising Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor

2. Sales promotion Short-term incentives to encourage the purchase or sale of a product or service

3. Personal selling Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships

4. Public relations Building good relations with the company’s various publics by obtaining favorable publicity, building up a positive corporate image, and handling or heading off unfavorable rumors, stories, and events

5. Direct marketing Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships—using telephone, mail, e-mail, the internet, and other tools to communicate directly with specific customers.

Marketers can choose from two basic promotion mix strategies. A push strategy involves “pushing” the product through distribution channels to final consumers. The producer directs its marketing activities (primarily personal selling and trade promotions) toward channel members to induce them to carry the product and to promote it to final consumers. Using a pull strategy, the producer directs its marketing activities (primarily advertising and consumer promotion) toward final consumers to induce them to buy the product (Jobber & Shipley, 2012; Kotler & Armstrong, 2018).

If the pull strategy is effective, consumers will then demand the product from channel members, who will in turn demand it from producers. Thus, under a pull strategy, consumer demand “pulls” the product through the channels. Most large companies use some combination of both. Companies consider many factors when designing their promotion mix strategies, including type of product and market. For example, the importance of different promotion tools varies between consumer and business markets. Each of the aforementioned tools of the promotion mix is discussed in the subsequent sections 9Solomon et al., 2017).

8.4 Promotion Mix Strategies

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8.4.1 Advertising Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. The four decisions to make when developing an advertising program are:

 Setting advertising objectives  Setting the advertising budget  Developing advertising strategy  Evaluating advertising campaigns

Advertising objectives should be based on past decisions about the target market, positioning, and the marketing mix, which define the job that advertising must do in the total marketing program. An advertising objective is a specific communication task to be accomplished with a specific target audience during a specific period of time. Advertising objectives can be classified by primary purpose (Kotler & Armstrong, 2018):

 Informative advertising is used heavily when introducing a new product category.

 Persuasive advertising becomes important as competition increases. Here, the company’s objective is to build selective demand.

 Comparative advertising involves directly or indirectly comparing one brand with another.

 Reminder advertising is important for mature products—it helps to maintain customer relationships and keep consumers thinking about the product.

The major steps in advertising media selection are:

(1) Defining reach, frequency, impact and engagement; (2) Choosing among major media types; (3) Selecting specific media vehicles; and (4) Choosing media timing.

Defining Reach, Frequency, Impact, and Engagement. Reach is a measure of the percentage of people in the target market who are exposed to the ad campaign during a given period of time. Frequency is a measure of how many times the average person in the target market is exposed to the message. The advertiser must determine the desired media impact—the qualitative value of a message exposure through a given medium. Typically, the advertiser wants to choose media that will engage consumers rather than simply reach them. Measures of engagement are difficult to find, though consumer expressions, such as a “Like” can be counted (Kotler & Armstrong, 2018; Solomon, 2018).

Choosing Among Major Media Types. The media planner has to know the reach, frequency, and impact of each major media type. As summarized in

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Table 15.2, the major media types are newspapers, television, direct mail, radio, magazines, outdoor, and the Internet. Each medium has advantages and limitations. Media planners must also decide between narrowcasting and the shotgun approach. More and more, advertisers are turning to alternative media in an effort to get their message through. A comparison of the main media types is provided in Exhibit 20 below.

Exhibit 20: Media Types

Selecting Specific Media Vehicles. The media planner now must choose the best media vehicles—specific media within each general media type. Media planners must compute the cost per 1,000 persons reached by a vehicle. The media planner must also consider the costs of producing ads for different media (Roosenbloom, 2012). The media planner must balance media costs against several media effectiveness factors:

 Audience quality  Audience engagement  Editorial quality

Deciding on Media Timing. The advertiser must decide how to schedule the advertising over the course of a year. Some marketers do only seasonal advertising. Most do some seasonal advertising. The advertiser has to choose the pattern of the ads. Online and social media let advertisers create ads that respond to events in real time.

Measuring advertising effectiveness and the return on advertising effectiveness has become a hot issue for most companies. Measuring the communication effects of an ad or ad campaign tells whether the ads and media are communicating the ad message well. Sales and profit effects of advertising and other content are often harder to measure. Sales and profits are affected by many factors besides advertising—such as product features, price, and availability. One way to measure the sales and profit effects of advertising is to compare past sales and profits with past advertising expenditures.

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8.4.2 Sales Promotion Sales promotion consists of short-term incentives to encourage the purchase or sale of a product or service now. Sales promotion tools are targeted toward final buyers (consumer promotions), retailers and wholesalers (trade promotions), business customers (business promotions), and members of the sales force (sales force promotions). Today, in the average consumer packaged-goods company, sales promotion accounts for 60 percent of all marketing expenditures. Several factors have contributed to the rapid growth of sales promotion:

 Product managers face greater pressures to increase their current sales.

 The company faces more competition, and competing brands are less differentiated.

 Advertising efficiency has declined.

 Consumers have become more deal oriented.

The growing use of sales promotion has resulted in promotion clutter. Consumers are increasingly tuning out promotions, weakening their ability to trigger immediate purchase. Sales promotions should help to reinforce the product’s position and build long-term customer relationships. Many tools can be used to accomplish sales promotion objectives. Descriptions of the main consumer, trade, and business promotion tools follow. Consumer promotions include a wide range of tools.

 Samples are offers of a trial amount of a product.

 Sampling is the most effective—but most expensive—way to introduce a new product or to create new excitement for an existing one.

 Coupons are certificates that give buyers a savings when they purchase specified products. Most major consumer goods companies are issuing fewer coupons and targeting them more carefully.

 Rebates (or cash refunds) are like coupons except that the price reduction occurs after the purchase rather than at the retail outlet.

 Price packs (also called cents-off deals) offer consumers savings off the regular price of a product.

 Premiums are goods offered either free or at low cost as an incentive to buy a product.

 Advertising specialties, also called promotional products, are useful articles imprinted with an advertiser’s name, logo, or message that are

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given as gifts to consumers.

 Point-of-purchase (POP) promotions include displays and demonstrations that take place at the point of sale.

 Event marketing (or event sponsorships) allows companies to create their own brand marketing events or serve as sole or participating sponsors of events created by others.

 Contests, sweepstakes, and games give consumers the chance to win something.

 A contest calls for consumers to submit an entry to be judged.

 A sweepstakes calls for consumers to submit their names for a drawing.

 A game presents consumers with something every time they buy.

8.4.3 Personal Selling

Personal selling is one of the oldest professions in the world. The people who do the selling go by many names: salespeople, sales representatives, district managers, account executives, sales consultants, sales engineers, agents, and account development reps to name just a few.

The term salesperson covers a wide range of positions. At one extreme, a salesperson might be an order taker, such as the department store salesperson standing behind the counter. At the other extreme are order getters, whose positions demand creative selling and relationship building for products and services ranging from appliances to industrial equipment.

Personal selling is the interpersonal arm of the promotion mix. The role of personal selling varies from company to company. Some firms have no salespeople at all—for example, companies that sell only online or through catalogs, or companies that sell through manufacturer’s reps, sales agents, or brokers. In most firms, however, the sales force plays a major role.

8.4.4 Public Relations

Public relations is designed to build good relations with the company’s various publics by obtaining favorable publicity, building a positive corporate image, and managing unfavorable rumors, stories, and events. Public relations departments may perform any or all of the following functions:

 Press relations or press agency: Creating and placing newsworthy information in the news media to attract attention to a person, product, or service.

 Product publicity: Publicizing specific products.

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 Public affairs: Building and maintaining national or local community relations.

 Lobbying: Building and maintaining relations with legislators and government officials to influence legislation and regulation.

 Investor relations: Maintaining relationships with shareholders and others in the financial community.

 Development: Working with donors or members of nonprofit organizations to gain financial or volunteer support.

Public relations is used to promote products, people, places, ideas, activities, organizations, and even nations. Public relations can make a strong impact on public awareness at a much lower cost than advertising can. The company does not pay for the space or time in the media. If the company develops an interesting story or event, it could be picked up by several different media, having the same effect as advertising that would cost millions of dollars. And, it would have more credibility than advertising. Public relations is sometimes described as a marketing stepchild because of its often limited and scattered use. Public relations professionals use several tools (Solomon et al., 2017).

 PR professionals find or create favorable news about the company and its products or people.

 Another common PR tool is special events, including news conferences, press tours, or educational programs designed to reach and interest target publics.

 Public relations people also prepare written materials to reach and influence their target markets. These materials include annual reports, brochures, articles, and company newsletters and magazines.

 Audiovisual materials, such as slide-and-sound programs, DVDs, and online videos are being used increasingly as communication tools.

 Corporate identity materials can also help create a corporate identity that the public immediately recognizes.

 Companies can improve public goodwill by contributing money and time to public service activities.

The Web is also an increasingly important PR channel. Websites, blogs, and social networks such as YouTube, Facebook, and Twitter are providing interesting new ways to reach more people. A company’s Website can be a good public relations vehicle and is ideal for handling crisis situations.

8.4.5 Direct Marketing

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Direct marketing involve engaging directly with carefully targeted individual consumers and customer communities to both obtain an immediate response and build lasting customer relationships (Tanner & Raymond, 2015).

Companies use direct marketing to tailor their offers and content to the needs and interests of narrowly defined segments or individual buyers. In this way, they build customer engagement, brand community, and sales. Most companies still use direct marketing as a supplementary channel or medium. For a growing number of companies, direct marketing constitutes a complete model for doing business. Firms employing this new direct model use it as the only approach. The major forms of direct marketing are:

 Face-to-face selling  Direct-mail marketing  Catalog marketing  Telemarketing  Direct-response television marketing  Kiosk marketing

Direct-mail marketing involves sending an offer, announcement, reminder, or other item to a person at a physical or virtual address. Direct mail (including both catalog and non-catalog mail) accounts for 30 percent of all U.S. direct marketing spending. Characteristics:

 Well suited to direct, one-to-one communication  Permits high target-market selectivity  Can be personalized  Is flexible  Allows easy measurement of results  Costs more than mass media per thousand people reached, but the

people reached are much better prospects

New digital forms of delivery have become popular, including email and mobile (cell phone) marketing. But the disadvantage is that traditional mail provides something tangible to hold, and can be used to send samples. It creates an emotional connection a digital message cannot.

Catalog marketing is direct marketing through print, video, or digital catalogs that are mailed to select customers, made available in stores, or presented online. With the internet, more and more catalogs are going digital. A variety of web-only catalogers have emerged, and most print catalogers have added web-based catalogs. Advantages of web-based catalogs:

 Eliminate production, printing, and mailing costs  Allow real-time merchandising  Allow unlimited amount of merchandise  Interactive content

Telemarketing involves using the telephone to sell directly to consumers and

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business customers.

8.5 The Marketing Communications Model

Several major factors are changing the face of today’s marketing communi- cations (Kotler & Armstrong, 2018).

 Consumers are changing. They are better informed and more communications empowered.

 Marketing strategies are changing. As mass markets have fragmented, marketers are shifting away from mass marketing. More and more, they are developing focused marketing programs designed to build closer relationships with customers in more narrowly defined micromarkets.

 Sweeping changes in digital technology are causing remarkable changes in the ways in which companies and customers communicate with each other.

Although television, magazines, and other mass media remain very important, their dominance is declining. Advertisers are now adding a broad selection of more-specialized and highly targeted media to reach smaller customer segments. The new media range from specialty magazines, cable television channels, and made-for-the-Web videos to Internet catalogs, e-mail, blogs, blogs, mobile phone content, and online social networks. Information tools include smartphones, tablets, satellite, and cable television systems.

Many large advertisers are shifting their advertising budgets away from network television in favor of more targeted, cost-effective, interactive, and engaging media. It seems likely that the new marketing communications model will consist of a shifting mix of both traditional mass media and a wide array of exciting new, more-targeted, more-personalized, more-engaging media. Marketers more often now are identified as content marketing managers.

8.6 The Need for Integrated Marketing Communications

Customers don’t distinguish between message sources the way marketers do. In the consumer’s mind, advertising messages from different media and different promotional approaches all become part of a single message about the company. Conflicting messages from these different sources can result in confused company images and brand positions.

Too often, companies fail to integrate their various communications channels. Mass-media advertisements say one thing, while a price promotion sends a different signal and a product label creates still another message. Company sales literature says something altogether different and the company’s Web site seems out of sync with everything else.

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The problem is that these communications often come from different company sources. Today, more companies are adopting the concept of integrated marketing communications (IMC). Under this concept the company carefully integrates and coordinates its many communications channels to deliver a clear, consistent, and compelling message about the organization and its brands.

IMC calls for recognizing all contact points where the customer may encounter the company, its products, and its brands. Each brand contact will deliver a message, whether good, bad, or indifferent. The company must strive to deliver a consistent and positive message with each contact. IMC builds brand identity and strong customer relationships by tying together all of the company’s messages and images. Brand messages and positioning are coordinated across all communication activities and media.

8.7 Summary This topic provided an overview of the promotion mix, or the main tools used by organizations in promoting their products and/or services. A focus on advertising was then followed by a discussion on integrated marketing communication as well as the steps involved in effective IMC. The next topic will explore electronic marketing.

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Topic 9: Digital Marketing

9.1 Learning Objectives

 List the 7 online marketing tools  Describe the advantages & disadvantages of marketing online  Explain New Media and give examples  Explain how social media is used in advertising and promotions  Explain new trends in collaborative social marketing, augmented

reality and gamification

9.2 Topic Overview

This Topic looks at the final IMC element, direct marketing, and at its fastest- growing form, online marketing. In many ways, direct marketing constitutes an overall marketing approach—a blend of communication and distribution channels all rolled into one. Remember, although this topic examines direct marketing as a separate tool, it must be integrated with the other elements of the promotion mix.

9.3 Digital Marketing Digital marketing involve engaging directly with carefully targeted individual consumers and customer communities to both obtain an immediate response and build lasting customer relationships (Jobber & Ellis-Chadwick, 2012). Companies use direct marketing to tailor their offers and content to the needs and interests of narrowly defined segments or individual buyers. In this way, they build customer engagement, brand community, and sales.

Most companies still use direct marketing as a supplementary channel or medium. For a growing number of companies, direct marketing constitutes a complete model for doing business. Firms employing this new direct model use it as the only approach. Direct marketing has become the fastest-growing form of marketing. U.S. companies spent almost $163 billion on direct and digital marketing in 2016. Total digital advertising spending now accounts for the largest share of media spending, even more than television spending. By 2019, mobile ad spending is expected to account for 29 percent of total U.S. ad spending (Kotler & Armstong, 2018).

Much of the world’s business today is carried out over digital networks that connect people and companies. These days, people connect digitally with information, brands, and each other at almost any time and from almost anywhere. The digital age has fundamentally changed customers’ notions of convenience, speed, price, product information, service, and brand interactions. Today, it’s hard to find a company that doesn’t have a substantial online presence. Even companies that have traditionally operated offline have now created their own online sales, marketing, and brand community channels. In fact, omni-channel retailing companies are having as much online success as their online-only competitors (Solomon et al., 2017).

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Online marketing is marketing using company websites, online ads and promotions, email, online video, and blogs. The marketing website engages consumers in an interaction that will move them closer to a direct purchase or other marketing outcome. Brand community websites do not try to sell anything. Instead, their primary purpose is to present brand content that engages consumers and creates customer-brand community. Such websites waste no time trying to turn the inquiry into a sale, and then into a long-term relationship (Tanner & Raymond, 2015).

As consumers spend more and more time online, companies are shifting more of their marketing dollars to online advertising to build brand sales or attract visitors to their internet, mobile, and social media sites. Online advertising has become a major promotional medium. The main forms of online advertising are display ads and search-related ads. Together, display and search-related ads account for the largest portion of firms’ digital marketing budgets. The main online marketing tools is discussed below:

9.3.1 Search Engine A mega index (Google, Yahoo) for searching the worldwide web of networks. It drives consumers to the business web site so the higher up the rank order (the more Optimised) the business, the better. Companies can sponsor a higher position for impact.

9.3.2 Affiliate Ads This is using partnered companies or intermediaries’ sites to advertise. This includes web sites and user groups; an online version of cross marketing.

9.3.3 Email Marketing Similar to traditional approaches of telephone and mail but faster and more scalable. Companies maintain a database of customers and communicate offerings. Privacy policy like Singapore Personal Data Protection Act 2012 should be heeded before ‘blasting’. Email marketing remains an important and growing digital marketing tool. “Social media is the hot new thing,” says one observer, “but email is still the king.” By one estimate, 72 percent of adults prefer that companies communicate with them via email; 66 percent of all emails are now opened on mobile devices. Not surprisingly, then, a recent study found that 25 percent of companies say that email is their top channel in terms of return on investment.

Worldwide, more than 200 million emails are sent out every minute of every day. Email marketing lets marketers send highly targeted, tightly personalized, relationship-building messages. But marketers walk a fine line between adding value for consumers and being intrusive and annoying. Spam is the unsolicited, unwanted commercial email messages that clog up e-mailboxes. To address these concerns, most legitimate marketers now practice permission-based email marketing, sending email pitches only to customers who “opt in.”

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9.3.4 Viral Marketing This is the Internet version of Word of Mouth (WOM) Marketing. Usually customer-to-customer (real or contrived) that is contagious and sought out by other customers. Viral marketing is the digital version of word-of- mouth marketing. Viral marketing involves creating videos, ads, or other marketing content that is so infectious that customers will want to pass it along to their friends. Brands also conduct online marketing through various digital forums that appeal to specific special-interest groups.

Blogs (or web logs) are online forums where people and companies post their thoughts and other content, usually related to narrowly defined topics. Blogs can be about anything, from politics or baseball to haiku, car repair, brands, or the latest television series. Many bloggers use social networks such as Twitter, Facebook, Tumblr and Instagram to promote their blogs, giving them huge reach. Such numbers can give blogs—especially those with large and devoted followings—substantial influence. For example, Wendy Cheng, better known by her pseudonym Xiaxue is a Singaporean blogger who writes about her life, fashion and local issues in a provocative style. She has more than 185,000 followers on Twitter making her an influence marketers can use. Marketers look for seeders or community influencers on Social Media. These are individuals who have a sizeable following and can thus “ignite the spark” and create awareness.

Viral marketing can also include online videos, which involve companies posting digital video content on brand websites or on social media sites. Some are made for the web and social media. Others are ads that are used on TV and other media but are posted online to extend their reach and impact. Good online videos can draw audiences in the millions. Marketers hope that some of their videos will go viral.

9.3.5 Guerrilla Marketing First used by Levinson in 1984 for creative campaigns in the traditional spaces, this is a tool that low spend companies often utilise. Very targeted and often quirky through blogs or community forums in the niche market.

9.3.6 Mobile Marketing Using MMS or SMS to advertise or, increasingly, via apps. Mobile marketing features marketing messages and promotions delivered to on-the-go consumers through their mobile devices. Marketers use mobile marketing to reach and interact with customers anywhere, anytime during the buying and relationship-building processes. The widespread adoption of mobile devices and the surge in mobile web traffic have made mobile marketing a must for most brands. Today’s rich-media mobile ads can create substantial engagement and impact. But companies must use mobile marketing responsibly or risk angering ad-weary consumers.

In all, digital direct marketing continues to offer both great promise and many challenges for the future. Online marketing has become a successful business

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model for some companies. However, for most companies, online marketing will remain as one important approach to the marketplace that works alongside other approaches in a fully integrated marketing mix.

9.3.7 Social Media A platform for many of the above but also a channel in its own right that is best when user-generated for the benefit of word of mouth impact. Social media are independent and commercial online communities where people congregate, socialize, and exchange views and information. Facebook, Google+, Twitter, Instagram, Pinterest, YouTube, and Snapchat are just a few digital communities; according to one survey, nearly 92 percent of U.S. companies now use social media networks as part of their marketing mixes. In addition to these large, general-interest sites, numerous niche and interest- based social networks have also emerged to cater to the needs of smaller communities of like-minded people.

Social media in the West is largely dominated by Facebook and Twitter. Facebook set itself apart from competitors by gradually integrating external applications and positioning itself as an international advertising hub. Twitter, on the other hand, distinguished itself by focusing on current affairs (largely through the omnipresent ‘hashtag’) and its ‘trending’ feature. Both sites continue to attract users at an impressive rate and their dominance remains largely unthreatened.

Although social media in China is largely dominated by Tencent in terms of users, this grip is primarily held through mobile networking. When looking at desktop-based social networking, there is a huge amount of variation. With sites such as Sino Weibo (effectively the Chinese spin on Twitter), RenRen (the Chinese Facebook, both in terms of functionality and style) and Douban (similar to MySpace and popular with niche communities) all boasting well over 100 million accounts, the social media make-up of China expands far beyond a single dominant monopoly or duopoly. Add to that the fact that Facebook and Twitter are not entirely obsolete in China due to the increasing accessibility of VPNs,the social media landscape in China is both varied and complex. However, being the most populous country in the world, it is not one that many businesses can afford to ignore

Advantages include that social media are targeted and personal. They are also interactive, making it easy to start and participate in customer conversations and listen to customer feedback. They lend themselves to real- time marketing, as they are immediate and timely, as well as cost effective. The strongest advantage is the engagement and sharing capabilities. Some social networks are huge!

Many companies are still learning how to use social media effectively, and results are hard to measure. A significant challenge is the lack of control that a company experiences. Once a conversation has begun, the company cannot control the direction it takes, though it can impact it. Integrated Social

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Media Marketing is not as simple as posting some messages and promotions on a brand’s Facebook page. Those companies that use social media successfully are integrating a broad range of diverse media to create brand- related social sharing, engagement, and customer community.

With 1.3 Billion members, Facebook is a leviathan and, in the way of all things online, this once commercial-free space has become commercialized. However, there are still many free aspects for the social user. In fact, in the management of the product that is Facebook, the company is merely adhering to the 3 levels of product we discovered in Topic 4 on Product. Whereas the core and actual product are for the most part free, the augmented services are user-pays, which means that where once early adopting marketers may have used this media for free to place their business or product they might now pay. Of all these services, perhaps the most sought after is the access to precise data on the preferences, wants and needs as determined by the user profile data (_graphics) of Facebook members. Before we look at the advertising that results from such data, it must be noted that serious ethical debates are taking place which question how appropriate it is to access, use and, moreover, share this data without the user consent. As students of marketing, you must be willing to join that debate.

In Topic 8, when we looked at promotion, we looked at the idea of the message matching the medium, and we later saw a great example in the Volkswagen Safety Campaign. Facebook has adhered to this philosophy in its approach to advertising for clients. Here are two examples:

 “Engagement Ads”: These look like regular Facebook posts and other regular activity. Users can leave comments, make recommendations, follow links through to the company’s Facebook page and Like the advertisement.

 Collaborative Marketing: As social media takes over the email space for many of its users, so too companies will now provide a link to Facebook from their own corporate web site concurrently. Amazon was one of the first to do this in a win-win for both companies. This is slightly different from Cross Marketing (see overleaf) in that here both work in tandem whereas with cross marketing the arrangement drives business from Facebook to the company website in a pay per use arrangement.

The secret to effective social media marketing is to ensure the content is or seems to be user-generated in keeping with the genre. This involves the use of Customer-to-Customer marketing (C2C). Cross-Marketing, which drives business to a client company’s website, or calculates the number of clicks or Likes as the key transaction, needs to ensure it leverages off the story-like style of Facebook in line with a C2C strategy. For example, “sponsored stories” might embed a company or brand within the context of a post.

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9.4 Gamification

Another growing area is Gamification. In 2011, Facebook made 12% of its revenues from gaming. Games like Playmonk, Geewa, Wooga and Zynga. Again, users can play for free but might like to buy in-game virtual goods to enhance the experience (value-add). Every time a user buys one of these enhancements Facebook takes 30% of the revenue

According to Adverlab, the first example of a brand integrated into game play actually appears in a 1973 version of Lunar Lander. If you landed at exactly the right spot, a McDonald’s appeared. The astronaut would come out, walk over to the McDonald’s and order a Big Mac to go, walk back and take off again. If you crashed ON the McDonalds, it would print out “You clod! You’ve destroyed the only McDonald’s on the Moon. It is estimated that the incorporation of advertisements into a game can increase publisher profits from $5 to $8 per unit sold, which is a massive increase. Most mobile games are entirely funded by advertising in two main forms:

 Static ads are hardcoded into the game.  Dynamic ads change when a new one is slotted to the ad server and

when the user goes online.

In keeping with the strength of online to provide personalized, customized experiences through the enablement of digital technology, an emerging trend of which marketers need to be aware is the proliferation of augmented reality. In an increasingly sedentary and urbanized world, the need for escapism online is prevalent but the further need to integrate and enhance ‘real’ experiences with those enabled by this technology is also increasing. The example of the Terra Cotta Warriors app on IPhone shows how a tourist’s trip to the attraction is brought to life as Computer Generated Images (CGI) of the Warriors show them vividly in battle and users can even take part virtually.

The possibilities this offers marketers are endless. The excellent marketing blog, creativeguerrillamarketingshows, among its Top Ten examples for 2014: a running app in which runners can encounter zombies to enhance the runner’s adrenalin and performance; TryLive, which allows users to ‘try on’ virtual pictures of fashion goods and accessories without leaving home through their smart phone; and Google Glasses that impose imagery on the inside of user’s glasses to enhance the world around (including using Google Maps to guide a walker/runner/ driver through unknown territory.

9.5 Benefits to Buyers

For buyers, direct marketing is convenient, easy, and private. Buyers can interact with sellers by phone or on the seller’s website or mobile app to create exactly the configuration of information, products, or services they want and then order them on the spot. Finally, for consumers who want it, digital marketing through online, mobile, and social media provides a sense of brand engagement and community—a place to share brand information and experiences with other brand fans.

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9.6 Benefits to Sellers

There are several benefits associated to sellers such as:

 Can target small groups or individual consumers  Low-cost, efficient, speedy alternative for reaching their markets  Results in lower costs, improved efficiencies  Provides opportunities for building close customer relationships  Offers greater flexibility to adjust prices and programs and engage in

real-time marketing  Gives sellers access to buyers that they could not reach through other

channels

9.6 Weaknesses of Online Marketing

Some of the key weaknesses of online marketing is summarized below:

 Threatens privacy  No service personal with whom to form a client relationship and guide

the sale  May not be trusted as a payment recipient  There are language and cultural issues  Often no one to advise the customer  Crush sales and/or reputation with one bad blog  Businesses whose logistics are not coordinated may not necessarily

have it in stock

While online marketing has emerged and continues to be a focus, it has not meant (as some theorists thought) the total destruction of so-called traditional media like television and radio. In fact, advances in technological possibilities may even have saved television to some extent. Broadcasters use online distribution channels enabling content to be accessed through various devices, thereby reaching out to audiences they have otherwise lost or new audiences through scheduled telecasts of television programmes. This idea of media forms coming together is known as Media Convergence. By way of example, here are some Singaporean distributors:

 Toggle is an interactive service by MediaCorp Singapore that goes beyond the television set, bringing entertainment, lifestyle tips, news and information to viewers across multiple devices. The service is available online, on smart phones, tablets and connected TVs, allowing viewers to stay engaged wherever they are.

 StarHub TV Anywhere is an Internet TV Platform that is accessible through any Internet connection in Singapore. This service offers streaming of StarHub TV Channels and On Demand Videos to any Internet-enabled device via starhubtvanywhere.com or via StarHub TV Anywhere app on App Store and Google Play.

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 SingTel mio TV GO is an app for the second screen experience and allows users to stream content to their mobile devices.

These legitimate companies and their property are facing challenges for audiences from illegal streaming and other means of getting content.

9.7 Summary

This topic provided an overview of digital marketing, or the main tools used by organizations in promoting their products and/or services online. A focus on the various ways in which an organization can engage in marketing online was then followed by a discussion on some of the key benefits and weaknesses of online marketing.

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MP_Intro_v1.2
3. Section B

Topic 1-Introduction to Marketing
Topic 2-Consumer Behavior
Topic 3-The Marketing Environment & Market Research
Topic 4-Marketing Strategy
Topic 5-Marketing Mix_Product
Topic 6-The Marketing Mix-Place
Topic 7-Marketing Mix_Price
Topic 8-Marketing Mix_Promotion
Topic 9-Digital Marketing
Bibliography

CMCA_INDD

IDC Study Guide Cover.pdf

PHTM_Section B_Study Guide_complete 1
PHTM_Section B_Study Guide_complete 2

Section B

Topic 01-Computer Architecture_edited
Topic 02-Memory Hierarchy_edited
Topic 03-Base Conversions I_edited
Topic 04-Base Conversions II_edited
Topic 05-Matrix Algebra_edited
Topic 06-Boolean Algebra_edited
Topic 07-Boolean Algebra_II_edited
Topic 08-MATLAB Intro_edited
Topic 09-MATLAB Plotting_edited
Topic 10-MATLAB Programming_edited