HSC BUSINESS STUDIES TOPIC 3

MARKETING
ROLE OF MARKETING
Marketing is defined as the total system of interacting activities designed to plan,
price, promote and distribute products to present and potential customers.
Marketing is used primarily by a business as a method of enhancing its revenue
streams and increasing the markets awareness of its products.

STRATEGIC ROLE OF MARKETING GOODS AND SERVICES

The Strategic role of marketing is primarily focused on translating the goal (profit
maximisation) into a reality through developing and implementing a marketing
plan that sets out a series of actions or strategies that can be used to attain
greater sales.
Marketing today places a strong emphasis on a customer-oriented approach.
Thus in order to develop customer awareness and demand, an organised
marketing campaign is necessary starting with the development of a marketing
plan (lists activities aimed at achieving particular marketing outcomes in relation
to a good or service).
This plan is developed upon careful research and design that has the potential to
increase a business market share. Market share refers to the percentage of total
sales a business has compared with its competitors in a particular market. It
increases the businesss sales and profitability.

INTERDEPENDENCE WITH OTHER KEY BUSINESS FUNCTIONS

Interdependence refers to the mutual dependence that each of the key business
functions have in terms of relying on each other to perform effectively and at full
capacity.
Marketing & Operation: As sales of a product decline over time,
operations management and marketing management have consultations
to design and develop new products that can be successfully marketed.
Operations affects marketing decisions by determining the capabilities and
constraints in pricing, product design and development
Marketing & Human Resources: HRM hires and trains employees,
hence the best HR will hire the appropriate staff to successfully allow
marketing to bring the product to the customer
Marketing & Finance: Allocation of adequate funds to the marketing
function in order to advertise, thereby generating sales. Finance function

provides information to assist the marketing function with product design

and development as well as developing a marketing plan
PRODUCTION, SELLING, MARKETING APPROACHES
The marketing concept is a philosophy that states all sections of the business are
involved in satisfying a customers needs and wants while achieving the
business goals.
The idea of the marketing concept evolved in the early 1960s. Prior to this, there
were two different approaches to marketing: production and sales.
PRODUCTION APPROACH
Relies on the view that consumers base their purchasing decisions on the actual
product. Mass production of a standardised product was used to increase output
and decrease production costs so the products were more affordable to
consumers. The wants of the customer were not considered.
SELLING APPROACH
Is based on the belief that a business will be successful in selling a product if it is
able to promote the benefits of the product to its target market. It does not listen
to the target market. Persuasive sales techniques (door-to-door salesmen) were
the focus in order to convince customers to buy a particular product.
MARKETING APPROACH (1960s to present)
Customer is at the core of all business activities. It involves adopting a customer
orientation with the belief that all actions in the business should be aimed at
satisfying the needs of the customer. There was more focus on relationship
marketing (the development of long-term and cost-effective relationships with
individual customers).

TYPES OF MARKETS RESOURCE, INDUSTRIAL, INTERMEDIATE,

CONSUMER, MASS, NICHE

A market is a group of individuals, organisations or both that:

need or want a product
have the money to purchase the product
are willing to spend their money to obtain the product
are socially and legally authorised to purchase the product.
There are Six main types of markets:
RESOURCE MARKETS

The resource market consists of those individuals or groups that are engaged in
all forms of primary production, including mining, agriculture, forestry and
fishing. Examples are BHP Billiton & Rio Tinto
INDUSTRIAL MARKETS
An industrial market includes industries and businesses that purchase products
to use in the production of other products or in their daily operations. Tip Top
Bakery, for example, buys
flour to make bread, and Sony buys plastics and metals to produce televisions.
INTERMEDIATE MARKETS
The intermediate market consists of wholesalers and retailers who purchase
finished products and sell them again to make a profit. E.g. Woolworths
CONSUMER MARKETS
Sell directly to the individual customer such as the many shops in a large
regional shopping centre.
MASS MARKETS
Apply to goods and services that appeal to all types of consumers such as milk or
bread.
NICHE MARKETS
Also known as a concentrated or micro market, is a narrowly selected target
market segment for more specialized goods and services that only a few people
are interested in or can afford such as luxury cars.

INFLUENCES ON MARKETING

FACTORS INFLUENCING CUSTOMER CHOICE PSYCHOLOGICAL,

SOCIO-CULTURAL, ECONOMIC, GOVERNMENT

Customer choice (buying behaviour) refers to the decisions and actions of

customers when they search for, evaluate, select and purchase goods and
services.
Customer choice is influenced by four main factors:

Psychological: are influences within an individual that affect his or

her buying behaviour. They include:
Perception - Individuals act on perceptions of reality rather than reality
itself thus marketing managers must create a positive perception in the

mind of the customer through certain images such as being trendy and
classy.
Motives - A motive is the reason that makes an individual do something.
Main motives (comfort, health, safety etc.). Advertising attempts to
influence an individuals motives to ensure purchase
Attitudes - An attitude is a persons overall feeling about the product. It
generally influences the success or failure of a businesss marketing
strategy.
Lifestyle - Different lifestyles attract different types of products and
services.
Personality & Self-concept - The way we view ourselves and the way we
respond to other peoples perception of us. People that do not care about
luxury will not buy Rolex watches.

Socio-cultural: are forces exerted by other people and groups

that affect an individuals buying behaviour.
- Family and Roles: Everyone occupies different roles in within the
family and groups within the wider community. For Example Men are
more likely to be seen purchasing tools and cars whereas women
purchase health care and laundry products. However, roles are
changing and marketers are beginning to understand that as well
- Reference (Peer) Groups: A group of people with whom a person
closely identifies, adopting their attitudes, values and beliefs. E.g. if
a friend tells someone that they had a bad experience at a certain
store, then that person will most probably alter their buying
behaviour.
Social Class: Social class influences the type, quality and quantity
of products a customer buys. People from a high socioeconomic
status background, for example, are usually willing to buy products
that are perceived to be prestigious.
Culture & Subculture: Culture is all the learned values, beliefs,
behaviours and traditions shared by a society. Culture influences
buying behaviour because it infiltrates all that we do in our
everyday life. It determines what people wear, eat etc.
Economic Influences: The level of economic activity fluctuates
and its four distinct phases influences the marketing environment.
- Boom: Period of low unemployment and high economic growth
which lead to higher incomes. Customers are willing to spend and
businesses attempt to increase their market share by promoting
heavily. The potential marketing during this phase is usually large
with more sales.
- Recession: Unemployment reaches high levels and incomes falls
dramatically. There is a lack of confidence in the economy and a
very small level of spending. Marketing during this time should
concentrate on maintaining existing market share.

 Government Influences: Government policies influence business

activity and customers spending habits, and will influence the
marketing plan.
- Interest rates
are significant in determining the level of expenditure in the
economy and the level of credit that consumers and business will
access.
- The government uses fiscal and
monetary policies, microeconomic reform and age restrictions
placed on the purchase of specific products to influence consumer
spending.
laws such as the Competition and Consumer Act 2010 (Cwlth),
Sale of Goods Act 1923 (NSW) and the Fair Trading Act 1987 (NSW)
influence marketing decisions.

CONSUMER LAWS
o DECEPTIVE AND MISLEADING ADVERTISING
o PRICE DISCRIMINATION
o IMPLIED CONDITIONS
o WARRANTIES

Role of consumer laws

The Competition and Consumer Act 2010 (Cth) is used by the government
to control business behaviour. It attempts to promote fair and competitive
behaviour in the marketplace.
The Australian Competition and Consumer Commission (ACCC) has been
set up by the federal government to make sure that businesses do not reduce
competitiveness.
The Office of Fair Trading in NSW assists consumers and businesses with
their problems.
The following are some of undesirable & misleading practices that are illegal
under the Competition & Consumer Act
DECEPTIVE AND MISLEADING ADVERTISING
Occurs when businesses are not truthful with their advertising. This is a major
problem when it causes consumers to make choices based on incorrect or
misleading information. Examples of deceptive and misleading advertising under
the Competition and Consumer Act 2010 (Cth) are overstating the benefits of
that a product provides, special offers that do not exist and bait and switch
advertising that promotes a product to be heavily discounted even though there
is very few supplied (When the consumer comes into the store & expresses an
interest in buying the product, the salesperson will attempt to switch the
consumers interest to a more profitable item).
PRICE DISCRIMINATION

Is the charging of different prices for identical products among different groups of
consumers. Groups are being discriminated against by being forced to pay a
higher price for a product that is identical. Under the Competition and Consumer
Act 2010 (Cth), sellers must offer the same product at the same price for
everyone.
IMPLIED CONDITIONS
Implied conditions are the unspoken and unwritten terms of a contract. These
conditions are assumed to exist regardless of whether they were especially
mentioned or written into a contract. The most important implied term relating to
customer purchases refers to the products acceptable quality.
It is a breach of the law to suggest that a product has a particular characteristic
that it does not have. It is illegal, for example, to state that a motor vehicle has a
certain fuel-consumption performance, when it does not.
WARRANTIES
A warranty is a guarantee made by a business that they will attempt to correct
any defects in the goods they produce or the services with which they deliver.
False or misleading statements concerning the existence, exclusion or certain
conditions of the warranty are prohibited under the Competition and Consumer
Act.
They give consumers protection and help to ensure producers maintain quality
products

ETHICAL-TRUTH, ACCURACY AND GOOD TASTE IN ADVERTISING,

PRODUCTS THAT MAY DAMAGE HEALTH, ENGAGING IN FAIR
COMPETITION, SUGGING

Critics of marketing argue that the industry does not always adopt ethical
practices in that it lacks a strong code of professional conduct and sometimes
blurs the lines between what is ethically right and wrong.
The main ethical criticisms of marketing include:
Creation of needs materialism (Individuals desire to constantly acquire
possessions). Involves using powerful promotional strategies to persuade and
manipulate customers
Stereotypical images of males and females
Use of sex to sell products. - Advertisers use sex appeal to suggest to
consumers that the product will increase the attractiveness or charm of the user.
Product placement

TRUTH, ACCURACY AND GOOD TASTING IN ADVERTISING

The truth can be misrepresented via a no. of ways:
1. By concealed information: Eg. Coke advertised that Coke doesnt rot your
teeth(but only if you brush your teeth after drinking). By concealing this
fact consumers are lead into a misinterpretation of the product.
2. Exaggerated claims:
- Puffery refers to claims about the product that cant be proven
- Eg. Sparkling weater advertidsing that bubbles wer natural & bottled at
the source. This was shown to be misleading for bubbles were added later
in the bottling process
3. Vague statements - Can misrepresent the true benefits of a product
Eg: In HK they sell fruit juices that help people in overcoming illness &
improving productivity. As the word help is deliberately vague it is
difficult to prove that it doesnt actually do what it claims to achieve
4. Invasion of privacy:
- A recent trend on line is the tracking of web users to target advertising to
them; Prresently most websites infer consent for this tracking
PRODUCTS THAT MAY DAMAGE HEALTH Another Ethical issue relating to
advertising
The federal and state governments have sought to restrict the provision of
various goods and services that may act as a health detriment to the consumer,
without applying a ban on their sale
Examples include: the sale of cigarettes and alcohol, restrictions on tobacco
sponsorship and entries into casinos
ENGAGING IN FAIR COMPETITION
Because the amount of competition in the marketplace can be intense, there is a
temptation for some businesses to engage in unfair marketing strategies, which
ultimately result in consumer exploitation (When the rights of consumers are
ignored). Some common exploitative practices include advertisements that make
false promises or are highly exaggerated. When consumers discover that
advertisements are untrue or inaccurate, they may stop buying the product &
complain to the relevant government agencies.
In order to engage in fair competition, a business should develop and adopt an
ethical marketing policy, that acts as a standard against which to assess the
businesss ethical performance.
The Australian Competition and Consumer Commission (ACCC) is a federal Govt.
independent authority that promotes competition and fair trade to benefit
consumers, businesses and the community. Its responsibility is to ensure that
consumers and businesses comply with competition, fair trading and consumer
protection laws
SUGGING

Is a sales technique involving selling under the appearance of a survey disguised

as market research. This technique is not illegal, however, it does raise several
ethical issues including invasion of privacy and deception.

MARKETING PROCESS
INTRODUCTION
A marketing plan gives a purpose and direction to all the businesss activities
(lists activities aimed at achieving particular marketing outcomes in relation to a
good or service).
The steps involved in developing a marketing plan are shown below;

The Executive
Summary
The executive
summary
provides a brief
description of
current
issues facing the business. It provides an overview of the goals and strategies
that are to be featured in the plan.

SITUATIONAL ANALYSIS SWOT, PRODUCT LIFE CYCLE

The situational analysis provides the firm with an opportunity to examine its
current position within the market. There are two key elements to a situational
analysis.
SWOT

A SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis provides

the information needed to complete the situational analysis and assesses the
businesss position compared with its competitors.
-

The Strengths (i.e. Do we have a skilled & motivated workforce?) &

Weaknesses (i.e. Have we experienced past failures?) of the business are
internal forces as they operate inside the business and are controlled by it
Opportunities (i.e. What other business can we acquire to expand the
organisation?) and Threats (i.e. Are current competitors taking over our
market share?) are the external forces as they operate outside the
business and cannot be controlled by the business.

PRODUCT LIFECYCLE
The Product life cycle consists of the stages a product passes through. There are
four phases, or stages, to the business life cycle:
ESTABLISHMENT
When the new product is first launched. Profits are limited because of the lack of
revenue, while costs, which include fixed expenses (Rent & Insurance), are high.
The business is developing a loyal customer base. Low pricing policies will be
used to establish quick entry into the market ( This Pricing strategy is known as
penetration pricing).
GROWTH
Profitability will grow as sales expand, and costs will increase during this stage.
Competitors will compete for market share and marketing strategies will need to
change. Businesses may choose to lower their price to deal with the increased
threat of competitors in the market. It is also expected that promotional costs will
increase during this stage in a products life cycle.
MATURITY
The maturity stage is the period of the product life cycle where sales will begin to
slow.
The business is faced with a steady income stream with limited prospects for
growth. Marketing strategies are modified to ensure profit continues. Business
attempts to differentiate themselves by price differentiation, after-sales service,
or making it easier for consumers to access the product.

POST MATURITY
-

Final phase of the business life cycle; Increased competition and changing
consumer preferences may create the need for change.
During this phase the long-term future of the business will be dictated by
one of 4 paths:\

O Decline-competition and changes in the business environment. Business

begins to decline and lose market share
O Renewal- products revitalised, new promotional campaigns, brand altered. New
strategies may be developed to attract a new audience.
O Steady state- no change, profits stay the same
O Cessation- the business is shut down.

MARKET RESEARCH

Market research is the process of systematically collecting, recording and

analysing information concerning a specific marketing problem.
To obtain reliable and accurate information; marketers follow a three-step
approach:
Step 1: Determining information needs. The problem is clearly stated to
determine what needs to be measured and the issues involved.
Step 2: Data Collection (Primary & Secondary Sources)
Marketing data refers to the information, usually expressed as facts and figures,
relevant to the defined marketing problem.
Primary Data are the facts and figures collected from original sources for the
purpose of the specific research problem. This data can be collected by the
business itself but it is very expensive and time consuming which is why it is
usually outsourced. Three types are:
-

Survey: personal interviews, questionnaires and telemarketing,

Observation: personal and mechanical look at research and surveillance
footage such as asking questions.
Experimental: field tests to evaluate cause and effect. E.g. showing a film

Secondary Data is information that has already been collected by some other
person or organisation. The two types of secondary data are:
-

Internal data: information that has been collected from internal sources
such as statistics, feedback and reports,
External data: published data from other sources such as magazines,
internet and the ABS.

Step 3: Data analysis and interpretation

Statistical interpretation analysis is the process of focusing on the data that
represents average, typical or deviations from typical patterns. Businesses will
analyse and interpret the collected data so management can gain a better

understanding of the impact of the data on the operations of the business, and
determine the course of action.

ESTABLISHING MARKET OBJECTIVES

Marketing objectives are the realistic and measurable goals to be achieved

through the marketing plan.
Businesses generally adopt a SMART approach to setting objectives; that is an
objective needs to be:
o

S = specific the objective needs to be clear

M = measurable the business needs to find ways to measure

success

A = achievable the business needs to have the resources

R = realistic the objective should be reasonable

T = time there should be a time frame

Three common marketing objectives include:

INCREASING MARKET SHARE
Market share refers to the percentage of total sales a business has compared
with its competitors in a particular market
Increasing market share is an important marketing objective for businesses that
dominate the market, because small market gains often translate into large
profits
EXPANDING THE PRODUCT RANGE
Product mix is the total range of products offered by a business. Businesses are
usually keen to expand their product mix since:
1. It will increase profits in the long term
2. The same product mix will not be effective in the long term due to the
changing tastes & preferences of consumers
MAXIMISING CUSTOMER SERVICE
Customer service means responding to the needs and problems of the customer
& is perhaps the most important objective.
High levels of customer service will result in improved customer satisfaction and
a positive reaction from customers towards the products they purchase. This
establishes a sound customer base with the possibility of repeat purchases.

IDENTIFYING TARGET MARKETS

The target market is a group of customers with similar characteristics (age,

income, lifestyle etc.) that a business aims its product at.
Sometimes a business may be able to identify a primary and a secondary target
market.
A Primary target market is the market segment at which most of the marketing
resources are directed.
A Secondary target market is usually a smaller and less important market
segment.
A business identifies and selects a target market so it can direct its marketing
strategies to that group of customers.
In identifying and selecting a consumer target market a Business can choose one
of three approaches:
Mass Marketing Approach
A mass marketing approach seeks a large range of customers such that the
seller mass-produces, mass-distributes and mass-promotes one product to all
buyers.
Market Segmentation
Market segmentation occurs when the total market is subdivided into groups of
people who share one or more common characteristics. Segmenting a market
enables a business to design a marketing plan that meets the needs of a
relatively uniform group.
Niche Market Approach
A Niche Market is a narrowly selected target market segment whereby a good or
service is provided in order to satisfy these customers.

DEVELOPING MARKETING STRATEGIES

Marketing strategies are actions undertaken to achieve the businesss marketing

objectives through the marketing mix.
Marketing mix refers to the combination of the four elements of marketing, the
four Ps product, price, promotion and place/distribution that make up the
marketing strategy.

Product- The product is a combination of: quality, design, name,

warranty, packaging and exclusive features. Customers buy
products that satisfy their needs as well as provide them with
intangible benefits.
Price- The right price needs to be chosen to prevent the product
from not selling at all if the price is too high or receiving lower
turnover as well as a cheap image if the price is too low.
Promotion- The promotion strategy is the method that is to be used
by the business to inform, persuade and remind customers about its
products.
Place- Deals with the distribution of the good or service and consists
of two parts which are: transportation and the number of
intermediaries (i.e. Wholesaler or retailer) involved.

Once the four Ps have been established, the business must then determine the
emphasis it will place on each of the variables that will largely be dictated by the
present stage in the product life cycle.

IMPLEMENTATION, MONITORING & CONTROLLING DEVELOPING A

FINANCIAL FORECAST; COMPARING ACTUAL AND PLANNED
RESULTS, REVISING THE MARKETING STRATEGY

Implementation is the process of putting the marketing strategies into operation.

Implementation of the marketing plan involves establishing lines of
communication, motivating the employees and making them familiar with the
marketing objectives and strategies.
Once the marketing plan has been implemented, it must be carefully monitored
and controlled.
Monitoring means checking and observing the actual progress of the marketing
plan. The information collected during the monitoring stage is used to control the
plan.
Controlling involves the comparison of planned performance against actual
performance and taking corrective action to make sure the objectives are
achieved. The controlling process requires the business to outline what is to be
accomplished by establishing a performance standard (KPIs) which is a forecast
level of performance against which actual performance can be compared.
Three Key Performance Indicators used to measure the success of the marketing
plan are:
1. Sales Analysis - is the comparing of actual sales with forecast sales to
determine the effectiveness of the marketing strategy. The main strength
of sales analysis is that sales figures are relatively inexpensive to collect
and process. Their main weakness, however, is that data for sales revenue
do not reveal the exact profit level

2. Market Share Analysis/ratios By undertaking a market share analysis, a

business is able to evaluate its marketing strategies as compared with
those of its competitors. This evaluation can reveal whether changes in
total sales, either increases or decreases, have resulted from the
businesss marketing strategies or have been due to some uncontrollable
external factor.
3. Marketing Profitability Analysis - is a method in which the business breaks
down the total marketing costs into specific marketing activities (i.e.
advertising, transport). By comparing the costs of specific marketing
activities with the results achieved, a marketing manager can assess the
effectiveness of each activity.
Revising the Marketing Strategy
Once the results of the sales, market share and profitability analysis have been
calculated, the marketing plan can be revised (modified). The marketing plan can
be revised by either:
Changes in The Marketing Mix
As the marketing plan is operating in a dynamic business environment, the
marketing mix will constantly need to be revised; Changes could include the
following:
Product Modifications (Continual Upgrading Competitive advantage)
Price Modifications (In response to changes in the external business
environment)
Promotion Modifications (Corresponding to the life cycle of the product)
Place Modifications (As a products success increases, the distribution channels
will need to be expanded to cater for the growing market)
New Product Development
New Products must be developed for a business to maintain a competitive
advantage although new product design is a lengthy & expensive process in
which many businesses dont have the finance, knowledge or time for this.
Product Deletion
Is the elimination of some lines of products, in order to maintain an effective
product mix.
Developing a Financial Forecast
A business must develop a financial forecast that details the revenues and
expenditures for each strategy when evaluating alternatives. Cost benefit
analysis is a helpful tool used to itemise fixed and variable costs and draw up a
profit forecast showing profit and return.

Developing a financial forecast requires:

-

Cost estimates: How much the marketing plan is expected to cost, which
can be divided into four major components: market research; product
development; promotion, including advertising and packaging; and
distribution.
Revenue estimates: How much Revenue (sales) is the marketing plan
expected to generate?

MARKETING STRATEGIES

MARKET SEGMENTATION, PRODUCT/SERVICE DIFFERENTIATION

AND POSITIONING

Marketing segmentation involves dividing the total market into segments based
upon one or more common characteristics. A business selects one of these
segments to become the target market. The ultimate aim of market
segmentation is to increase sales, market share and profits by better
understanding & responding to the desires of the different target customers.
Methods of Market Segmentation
Demographic Segmentation
Is the process of dividing the total market according to particular features of a
population, including the size of the population, age, sex, income, cultural
background and family size.
Age and gender are two of the most widely used demographic variables for
segmentation purposes. The marketing of sparkling and still beverages is typical
of this. Coca-Cola, for example, targets 15- to 35-year-old males with the energy
drink Mother
Geographic Segmentation
Is the process of dividing the total market according to geographic locations.
Businesses may divide the consumer market into regions because consumers in
different geographical locations have different needs, tastes and preferences.
Climate also has an impact on segmenting markets for businesses selling heating
and cooling systems as well as clothing.
Psychographic Segmentation

Is the process of dividing the total market according to personality

characteristics, motives, opinions, socioeconomic group and lifestyles. When
segmenting a market according to physiographic variables, a business would
research a consumers brand preferences, favourite music, radio and television
programs, reading habits, personal interests and hobbies, and values.
Behavioural Segmentation
Is the process of dividing the total market according to the customers
relationship to the product. This includes customers knowledge of, attitude
towards, use of, or benefits sought from the product.
Identifying what the customers want from the product the benefits sought
is an important aspect of behavioural segmentation. By determining the benefits
desired, marketers can design products that directly satisfy these desires.
PRODUCT/SERVICE DIFFERENTIATION AND POSITIONING
Product Differentiation is the process whereby a business distinguishes the
attributes and features of a product from those of its competitors products. The
purpose of this is to create a competitive advantage for the product.
Four important points of differentiation are customer service, environmental
concerns, convenience, and social and ethical issues.
Customer Service
Consumers expect a high level of customer service. Pre-sales and after-sales
service are very important to consumers purchasing expensive items such as
cars or electrical appliances.
Environmental Concerns
People are increasingly concerned with the physical environment, hence a
business may seek to adopt a green philosophy and produce environmentally
friendly products in order to increase their sales
Convenience
Because todays consumers are busy, they will often select products that are
convenient to use, thus a business can attempt to differentiate their product with
regards to this aspect.
Social and Ethical Issues
Ethical consumerism provides businesses with opportunities to satisfy the
demands of this growing number of consumers through producing products that
are not harmful to the environment, animals and society.
-

In response to the dislike of genetically modified (GM) foods by some

consumers, various producers are labelling their products as GM-free.

The Fair Trade movement is gaining in influence with consumers

increasingly prepared to pay more for guarantees of fair labour practices
and sustainable, organic products.
The cosmetic industry is delivering more natural products that are not
tested on animals

PRODUCT/SERVICE POSITIONING
Refers to the technique in which marketers try to create an image or identity for
a product compared with the image of competing products. Price, quality,
perceived benefits and competition are key methods of positioning a product in
the minds of customers.

PRODUCTS GOODS AND/OR SERVICES

o BRANDING
o PACKAGING

Products are goods or services that can be offered in an exchange for the
purpose of satisfying a need or want. A product offers a consumer tangible and
intangible benefits. Tangible benefits refer to the physical attributes of the
product such as design style and colour. Intangible benefits refer to non-physical
benefits a consumer associates with purchasing a product such as customer care
help desks, warranties and maintenance checks.
Most products are combinations of tangible and intangible benefits the total
product concept.
PRODUCT BRANDING
Involves the development of names and symbols in the form of logos and
trademarks for a product or service. A brand symbol or logo is a graphic
representation that identifies a business or product to thereby help differentiate
it from competitors.
BRANDING Strategies
Brands are usually classified according to who owns them.
Manufacturers brand or national brands are those owned by a manufacturer (i.e.
Sunbeam appliances). These brands are recognised across the country, are
widely available and offer reliability with constant quality.
A private or house brand is one that is owned by a retailer or wholesaler. These
products are often cheaper since the retailer or wholesaler can buy at lower
costs. E.g. Myer sells products from its own label.
Generic brands are products with no brand name at all. Carrying only the name
of the product and in plain packaging; these generic brands have been available
in supermarkets since the mid-1970s (E.g. No frills, Home Brand)

PACKAGING
Packaging involves the development of a container and the graphic design for a
product. Packaging protects and secures the product, but it has also become a
specialized tactic for attracting the attention of new customers, making the
product distinct and encouraging repeat buyers.
LABELLING
Is the presentation of information on a product or its package. Marketers can use
labels to promote other products or to encourage proper use of products and
therefore greater consumer satisfaction with products.

PRICE INCLUDING PRICING METHODS COST, MARKET,

COMPETITION-BASED
o PRICING STRATEGIES SKIMMING, PENETRATION, LOSS LEADERS,
PRICE POINTS
o PRICE AND QUALITY INTERACTION

Price is the amount of money a business charges for the purchase of its products.
A brand that is well-established and highly regarded may sell for a higher price.
The price of a product needs to be set so production costs are covered in the
long term, but are at a level where the product will continue to be bought.
There are three main pricing methods: cost-based, market-based and
competition-based. These pricing methods provide a basic price for each
product.
COST BASED PRICING
Is a pricing method derived from the cost of producing or purchasing a product
and then adding a mark-up {is a predetermined amount (usually expressed as a
percentage) that a business adds to the cost of a product to determine its basic
price}

(Selling Price)
-

Very Simple & straightforward pricing policy & is used mainly by

wholesalers and retailers

Two major drawbacks:

-

Difficulty in accurately determining an appropriate mark-up percentage. If

the mark-up is too low, the business is losing profit they could have easily
obtained.
The product is priced after production and associated costs are incurred
without taking into account the other elements of the marketing mix or
the state of the market.

MARKET BASED PRICING

Market-based pricing is a method of setting prices according to the interaction
between the levels of supply and demand. When demand for a product is greater
than its supply, there will be a shortage in the market. This will force up the price
of the good. The prices of products, therefore, are constantly changing due to
fluctuations in the levels of supply and demand, meaning this method can be
difficult to apply.
COMPETITION-BASED PRICING
Competition-based pricing is where the price covers costs (cost of raw materials
and the cost of operating the business) and is comparable to the competitors
price. It is often used when there is a high degree of competition from businesses
producing similar products. A business can select a price that is below, equal to
or above that of the competitors.
Once the basic price has been set using the preferred pricing method, pricing
strategies are then used to adjust the basic price, depending on the marketing
objectives and conditions within the marketplace.
The four main pricing strategies include:
-

Price Skimming - When a business charges the highest possible price for
the product during the introduction stage of its life cycle. This is used,
especially for innovative products. The objective is to recover the costs of
research and development as quickly as possible, before competition
enters the market.
Price Penetration - When the business charges the lowest price possible for
a product/service to achieve a larger market share. The objective is to sell
a large number of products during the early stages of the life cycle and
thus discourage competitors from entering the market
Loss leader - Product sold at or below cost price. Customers may enter the
store to buy these products but leave the store buying other products as
well, sold at regular prices so the business covers the loss. This is
commonly used by Woolworths.
Price Points - Where a business sets different prices for similar products.
The products are differentiated by their features. An example is when a
retailer has models clustered around particular prices: two around $25 and
two around $55. Consumers who want to spend at max $30 can look
around the $25 price point.

PRICE AND QUALITY INTERACTION

-

The price-quality relationship is such that higher prices indicate high

quality & status. This pricing strategy is referred to as Prestige or premium
pricing and is designed to encourage status-conscious consumers to buy
the product. This is evident in clothes, expensive technology, Gemstones
and wine.

PROMOTION
o ELEMENTS OF THE PROMOTION MIX ADVERTISING, PERSONAL
SELLING AND RELATIONSHIP MARKETING, SALES PROMOTIONS,
PUBLICITY AND PUBLIC RELATIONS
o THE COMMUNICATION PROCESS OPINION LEADERS, WORD OF
MOUTH

Promotion describes the methods used by a business to inform, persuade and

remind a target market about its products. Its objective is to create an image of
the product that will generate sales.
The Promotion mix refers to the various promotion methods a business uses in
its promotional campaign. It consists of:

Advertising Advertising is a paid, non-personal message

communicated through a mass medium. The purpose of advertising
is to inform, persuade and remind. It includes radio, television and
the internet.
Personal Selling - Involves the activities of a sales representative
directed to a customer in an attempt to make a sale. Although
personal selling is an expensive promotional method, businesses
are willing to spend the money on it because it offers three unique
advantages.
- The message can be modified to suit the individual customers
circumstances.
-The individualised assistance to a customer can create a long-term
relationship resulting in repeat sales.
- The sales consultant can provide after-sales customer service in
relation to product features, installation, warranties and servicing.
Relationship Marketing - Relationship marketing is the development of
long-term, cost effective and strong relationships with individual
customers. The ultimate aim is to create customer loyalty by meeting the
needs of customers on an individual basis thereby creating reasons to
keep customers coming back. E.g. In 2007, the Woolworths Everyday
Rewards Scheme offers rewards to those loyal customers who spend
specified amounts or make repeat purchases.
Sales Promotion - is the use of activities or materials as direct
inducements to customers. Sales promotion techniques are used primarily
to increase the effectiveness of other promotion activities, especially
advertising. Examples of special promotions include:
- Coupons (offer discounts on particular items at the time of purchase)
- Premium (Gift offered in return for using a product)
- Refunds
- Samples
- Point-of-purchase displays
Publicity and Public Relations

Publicity is any free news story about a businesss products. It is free and
its timing is not controlled by the business. Publicity raises awareness of a
product & highlights the businesss favourable features.
Public Relations are those activities aimed at creating and maintaining
favourable relations between a business and its customers. PR exposes a
business or idea to an audience by using often unpaid third parties as
outlets (i.e. Working with the media). PR is often more effective than paid
advertising. There are 4 main ways Public Relations activities can assist a
business in achieving increased sales:
Promoting a positive image
Effective communication of messages
Issues monitoring
Crisis management

THE COMMUNICATION PROCESS

Marketing managers can use a variety of channels (methods) to deliver a
message including print and electronic media advertising.
Often customers may be more willing to purchase a product if the message is
communicated via a respected and trusted channel, such as an opinion leader, or
by word of mouth.
Opinion Leader
Business use individuals in the community that are highly respected such as
celebrities, sportspeople or experts in their field such as dentists. They have
knowledge and expertise and will create a link between the leaders image and
reputation.
Word of Mouth
Involves consumers relating to others during conversation with regards to their
reaction to the use of a product, including the degree to which they were
satisfied with the product. When they communicate their experiences to others,
this can promote the business if they had positive experiences (Friends
recommendations - powerful influence). Businesses are increasingly using social
media platforms such as Facebook and Twitter to engage in a form of word-ofmouth communication.

PLACE/DISTRIBUTION
o DISTRIBUTION CHANNELS
o CHANNEL CHOICE INTENSIVE, SELECTIVE, EXCLUSIVE
o PHYSICAL DISTRIBUTION ISSUES TRANSPORT, WAREHOUSING,
INVENTORY

Place or distribution are activities that make the products available to customers
when and where they want to purchase them.

Channels of distribution or marketing channels are the routes taken to get the
product from the factory to the customer. This process usually involves a number
of intermediaries (***business that purchases the final product and then takes on
the responsibility of selling this product to the consumer), such as the
wholesaler, retailers.
The four most commonly used channels of distribution are:
1. Product to Customer: The good or service is produced by an
individual/organisation and is then passed directly onto the consumer.
There are no intermediaries. Virtually all services i.e. tax advice use this
method
Advantage: Allows the producer to maintain control over all
areas of the product and provides the producer with a direct point of
contact with consumers.
2. Producer to Retailer to Customer: A retailer is an intermediary who
buys from producers and resells to customers. This channel is often used
for bulky or perishable products such as furniture or fruit.
Advantage: Allows the producer to concentrate on
manufacturing. There is greater distribution and access to the good.
3. Producer to Wholesaler to Retailer to Customer: This is the most
common method used for the distribution of consumer goods. A
wholesaler is an intermediary who buys in bulk, from the producer, then
resells in smaller quantities to retailers who pass it onto consumers.
Advantages: Allows the producer to hold lesser amounts of idle
stock. Marketing and sales tend to be the responsibility of the retailer so
less costs.
4. Producer to Agent to Wholesaler to Retailer to Customer: An agent
distributes products to wholesalers but never owns the product. Agents
are paid a commission by the producer. Used for inexpensive & frequently
used products.
CHANNEL CHOICE
The choice of distribution channel will influence the type of customers the
product attracts, & the ease with which the consumer is able to access the
product.
There are 3 distribution channel categories:
1. Intensive distribution: The product is readily available to a wide
selection of stores or locations. Used for convenience items like bread.
2. Selective distribution: Involves the use of a limited number of stores to
distribute a product. This method allows a business to control where its
product is sold thereby ensuring that the product will reach its target
market. Clothing, furniture and electrical appliances are often distributed
using this method.
3. Exclusive distribution: A form of distribution where there is a restriction
on the number of products and/ or availability of the product in a large
geographic area. (Product is available at a very limited no. of outlets). This

method of distribution is commonly used for exclusive, expensive products

(i.e. Watches and luxury cars).

PHYSICAL DISTRIBUTION ISSUES TRANSPORT, WAREHOUSING,

INVENTORY
Physical distribution is all those activities concerned with the efficient movement
of the products from the producer to the customer.
Transport
Refers to the process of moving goods from one location to another.
Transportation can be expensive and the type of good needs to be considered.
The four most common methods of transportation are rail, road, sea and air.
Warehousing
Is a set of activities involved in receiving, storing and dispatching goods. A
warehouse acts as a central organising point for the efficient delivery of
products. Some goods can only be warehoused for a very limited time before
losing use (i.e. foods)
Inventory
A business must ensure that it has sufficient stock to satisfy demand. They also
must not overstock otherwise clearance sales are needed, which reduces profits.
To avoid this, businesses may implement an inventory control system (Maintains
quantities & varieties of products appropriate for the target market)

PEOPLE, PROCESSES AND PHYSICAL EVIDENCE

Three more Ps have been added (to the original 4 making up the 7Ps of
marketing) people, processes and physical evidence, which apply especially to
intangible products (services) such as tourism, entertainment and hospitality.
People
The people element refers to the quality of interaction between the customer
and those within the business who will deliver the service. Consumers base their
perceptions and make judgements about a business based on how the
employees treat them. Consequently, all businesses should develop a culture of
customer focus and put it into practice.
Processes
Refers to the flow of activities that a business will follow in its delivery of a
service. Without a tangible product, the processes must be highly efficient to

achieve customer satisfaction. Any business that has inefficient processes will
lose customers and damage its reputation. E.g. a restaurant should not keep
customers waiting for hours between courses.

Physical Evidence
Refers to the physical appearance of the product across every aspect of its
presentation to the consumer, with specific regards to the size, shape, colour,
material and label of the packaging of the product. Physical evidence can also
refer to the people within a business and how they appear to the client. A
business should provide high-quality physical evidence to create an image of
value and excellence.

E-MARKETING

Technological mediums such as the internet have provided businesses with an

opportunity to interact with customers, thereby serving as an area of
personalised marketing, sales growth and brand awareness.
E-marketing (electronic marketing) is the practice of using the internet to
perform marketing activities. (It allows a business with online operations to reach
a global audience)
The main technologies presently available for e-marketing include:
Web Pages
A web page is a display of detailed information regarding the business (location
of the business premises, available products & online ordering facilities) that is
accessible on the web through a web browser and is therefore considered a
powerful marketing tool.
Podcasts ***
Podcasting involves the distribution of digital audio or video files over the
internet. Businesss main use of podcasts is for marketing and advertising
purposes.
SMS
Short message service (SMS) is the means by which text messages can be sent
between mobile phones. Text messages can be used to alert regular customers
of any special deals on offer and notify suppliers of the arrival of a goods
shipment.
Blogs

A blog is an online journal that can be added to by readers. Many businesses set
up external blogs, which allow for communication between the business and its
existing and potential customers.
An external blog can have the following advantages for a business:
1.

It allows for the establishment of a reputation for expertise, by providing

detailed information on products and services.
2. New ideas for products can be put to the public to gain feedback.
3. A blog is informal, so it can present a human face to the public that builds
trust with its customers.
Web 2.0
Refers to the transformation of the World Wide Web into an interactive platform
for information sharing.
The development of social networking sites has made it easier for individuals and
businesses to create and share many different types of content on the web.
Social Media Advertising
Social media advertising (SMA) is a form of online advertising, using social media
platforms such as Facebook, YouTube, and Twitter to deliver targeted commercial
messages to potential customers. It enables businesses to constantly build
relationships with their customers.
Although, SMA raises concerns including issues of privacy, accuracy, honesty and
consumer trust.

GLOBAL MARKETING
o GLOBAL BRANDING
o STANDARDISATION
o CUSTOMISATION
o GLOBAL PRICING
o COMPETITIVE POSITIONING

Many businesses operate in countries beyond their domestic operations. This

provides the business with an opportunity to increase sales, further their brand
awareness and establish markets in new countries. Therefore a businesss
marketing plan must be modified and adapted to suit overseas markets.
GLOBAL BRANDING
Global branding is the worldwide use of a name, term, symbol or logo to identify
the sellers products, thus increasing brand awareness. It can be cost effective
because one ad can be used in a no. of locations & the successful brand name
can be linked to new products being introduced into the market. Powerful global
brands include Google, Microsoft and Coca-Cola.

STANDARDISATION
A standardised approach is a global marketing strategy that assumes the way
the product is used and the needs it satisfies are the same the world over.
Examples of standardised products Electrical equipment, mobile phones etc.
This strategy has cost savings for businesses in that production runs can be
longer, thereby achieving economies of scale.
CUSTOMISATION
A customised approach is a global marketing strategy that assumes the way the
product is used and the needs it satisfies are different between countries.
Adopting this philosophy requires the marketing plan to be customised according
to the economic, political and sociocultural characteristics of the target country.
For example, McDonalds serves beer in France and Germany, sake in Japan and
noodles in the Philippines.
GLOBAL PRICING
Global pricing is how businesses coordinate their pricing policy across different
countries. A businesss global pricing strategy is a major determinant of profits.
A Global business can implement one of three global pricing strategies.
Customised Pricing
Customised pricing occurs whenever consumers in different countries are
charged different prices for the same product. In determining the price for an
overseas market, many global businesses practise the cost-plus method because
of the added expense associated with exporting.
Market-customised pricing
Market-customised pricing sets prices according to local market conditions. This
strategy allows for even more flexibility than the customised pricing strategy.
However fluctuations in the exchange rate can change the prices charged across
countries and is a major risk for global businesses.
Standard worldwide price
Standardised pricing is the practice of charging customers the same price for a
product anywhere in the world. It will only succeed if the foreign marketing costs
remain low enough not to affect overall costs.
COMPETITIVE POSITIONING
Relates to how a business will differentiate its products. It focuses on how a
business will carve out a place in the competitive marketing environment.
Differentiation is the key to positioning as once customers know what the
business is offering is different to others, it is relatively easy to build market
share.