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FUNCTIONAL AREA. MARKETING. In this unit you will learn about. Difference between Market and Marketing Market Share and growth Objectives of Marketing The consumer Branding and Generic goods 4Ps. What is a market?. A meeting place for buyers (consumers) and sellers.

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in this unit you will learn about
In this unit you will learn about
  • Difference between Market and Marketing
  • Market Share and growth
  • Objectives of Marketing
  • The consumer
  • Branding and Generic goods
  • 4Ps
what is a market
What is a market?
  • A meeting place for buyers (consumers) and sellers.
  • Shop, restaurant, telephone, internet, etc.
  • Consumer markets - individuals who purchase goods or services for personal or domestic use.
  • Industrial markets - organisations which purchase goods or services to use in the production of other goods and services.
what is marketing
What is marketing?

“…the process involved in identifying, anticipating and satisfying consumer requirements profitably”

The Chartered Institute of Marketing

Aims of marketing:

  • to identify consumers’ requirements
  • to anticipate consumers’ requirements
  • to satisfy consumers’ requirements
why is marketing important
Why is marketing important?
  • Marketing ensures that firms produce what people want – it also makes customers aware of what a firm is producing.
  • If a firm can produce what customers want then they have a good opportunity to reach their objectives.
  • Marketing also allows firms to launch new products.
  • All firms will undertake

marketing – including charities.

market share market growth
Market Share & Market Growth
  • Most firms start off small.
  • A common objective of new firms is to grow in size.
  • Market growth can be obtained by increasing market share.
  • Market share is the firm’s percentage of all the sales in the market. For example, if the market for PCs in the UK is work a total of
  • Market growth is more difficult in an established market than a new growing market - due to the competition.
objectives of marketing
Objectives of Marketing
  • Marketing is linked to the overall objectives of the organisation and will therefore be different depending on the nature of the organisation.
  • For example, Charities will wish to increase donations to assist good causes, whereas public sector firms will wish to improve the service they deliver.
objectives of marketing8
Objectives of Marketing
  • In the main the objectives of marketing include –
    • To target new markets or market segments
    • Increase revenue and profitability or income
    • Increase or maintain market share
    • Improve the image of products or the organisation
    • Improve existing products or develop new products
business orientation
Business Orientation
  • A business will adopt a focus of attention with the hope of obtaining set corporate objectives.
  • Traditionally, the focus of attention of the business will centre on the product or the market (customers).
  • The orientation adopted will affect all the activities of the business.
product led organisations
Product-led Organisations
  • Focus on product and production process.
  • Emphasis on developing technically sound product.
  • Advertising will focus on how good the product is – rather than how the product will satisfy the needs of customers.
  • Many publicly funded organisations – like universities – advertise what they can provide rather than focusing on how they can satisfy the needs of customers.
product led concorde
Product-led: Concorde
  • Focus on Research and Development - was the aircraft technically possible?
  • Consumers and commercial viability viewed as being less important.
  • Developers assumed a supersonic aircraft would sell itself.
concorde after launch
Concorde – After Launch
  • British Airways and Air France only buyers - mainly due to governmental involvement.
  • Other airlines deterred by high price and low passenger capacity.
  • Several airports - including New York - indicated possible ban due to noise pollution.
  • Technical success does not guarantee commercial success.
market led organisations
Market-led Organisations
  • Focus on the customer and what they want.
  • The firm will alter their product offering in line with what customers want.
  • Market research methods will be employed to identify the needs of target customers.
  • Many publicly funded organisations – like universities – advertise what they can provide rather than focusing on how they can satisfy the needs of customers.
  • Realise that their success depends on meeting the needs of customers better than competitors.
market led ford model t
Market-led: Ford Model T
  • Henry Ford - one of the first to adopt a market orientated approach.
  • Before production he researched the market and identified a price that would allow large quantities to be sold.
  • Consumers’ needs were central to his decision-making.
branding
Branding

The name given by a producer to a product or range of products is known as a brand.

The aim of branding is to distinguish the product from its competitors and to make it instantly recognisable to the consumer. A brand can be -

  • Company name - Heinz, Coco-Cola
    • Name given to a range of products - Fairy, Mr Kipling
how does a firm brand its products
HOW DOES A FIRM BRAND ITS PRODUCTS?

To brand a product a firm will use packaging and advertising.

brand names
Brand Names

Have a massive influence on purchasing decisions. So much so that the brands themselves are sold for considerable sums of money.

Nestlé purchased Rowntree Mackintosh to obtain Kit-Kat, Polo and Smarties.

brand loyalty
Brand Loyalty

Some customers are faithful to one particular product.

Marketeers strive to persuade customers that their product is better than competitors’ products and obtain brand loyalty which would allow them to charge higher prices.

Firms may add an existing brand name to a new product to increase the products chances for success.

strong brand loyalty
STRONG BRAND LOYALTY
  • Strong branding means that the firm can charge a premium price because the product is perceived as high quality, it has high visibility due to the amount of advertising and brandloyalty
  • Brands are facing challenges – customers are more price conscious and there has been an increase in the number of quality “own brands”
own brands
Own Brands
  • Many Large retailers – Tesco, Asda, Boots, etc… - sell a wide range of products under their own brand name.
  • Own brands now account for more than 20% of all retail sales.
  • Own brands have been successful at challenging well established brands by developing products of a similar quality, with similar packaging but at

cheaper prices.

generic goods
Generic Goods
  • Very little marketing is carried out by companies who sell generic goods.
  • They are seen by consumers to have no differences between them – eg light bulbs, matches, etc,
the marketing function
The Marketing Function

Marketing decisions centre on four functional activities, known as the 4p’s.

  • Product
  • Price
  • Place (distribution)
  • Promotion

When combined these four areas are known as the Marketing-Mix.

product
Product
  • The product must meet the needs of customers and provide benefit to the customer.
  • Remember – a product can be a good or service.
  • Different versions of the same basic product (known as the core product) vary in quality, style, packaging and many other ways from their competitors’ products – eg cola and crisps.
  • These additional components of the core product are known as the augmented product.
motor car
Motor Car

Core Product

Safety

Fuel Economy

Comfort

Mode of transport

Performance

Credit Terms

Style

Warranty

Augmented Product

slide25

Our Life Cycle

We are born and introduced to the world.

Then we grow into teenagers.

Then we mature into adults.

Finally, we get old and our health declines.

slide26

The Life of a Product

  • Like humans, products have a limited life.
  • The Sega Mega Drive, Subbuteo and ‘O’ Levels have all been withdrawn from the market.
  • Before being withdrawn, a product will pass through four stages –

known as the Product Life Cycle.

slide27

Launch

  • The first stage of the product life cycle begins when the product is introduced into the marketplace.
  • Products recently launched include: Wiiand Divine.
slide28

Growth

  • As more target customers become aware of the product, the popularity and sales of the product will increase.
  • Mobile phones and internet shopping are examples of growth products.
slide29

Maturity

  • Once target customers are fully aware of the product, the popularity and sales of the product will level off.
  • Products in their maturity stage include Sunny-D and the Spice Girls.
slide30

Decline

  • The popularity of the product will eventually drop.
  • Customers will stop buying the product and sales will fall.
  • Products in their decline stage include - Butlins Holidays, Power Rangers and Cassette Tapes.
slide31

Product Life Cycle Chart

Sales

Maturity

Growth

Decline

Launch

Time

slide32

Variations in Product Life Cycles

Sales

Sales

Peter Andre

Coca-Cola

Time

Time

slide33

Companies use Product Life Cycles to:

  • determine the futureof their products.
  • decide when to introduce new products.
  • decide when to withdraw products in decline.
  • decide which products to invest in.
slide34

Extending the life of a product

Sales

Time

Product Extension Strategies

- change/modify product - new variants

- alter packaging - alter channel of distribution

- change pricing strategy - alter promotional support

price
Price
  • The price is what the customer has to pay in order to obtain the product.
  • The product must be priced so that an organisation covers its costs and can make a profit.
  • If the product is priced too high – customers will not buy it (especially if a competitor has a similar more reasonably priced product on the market).
pricing decisions
Pricing Decisions
  • The main pricing decision that a firm takes is whether to charge:
  • A low price in order to attract sales. This makes it possible for a successful firm to sell large quantities at low costs.
  • An average price in relation to competitors. The firm will need to use other elements of the marketing-mix to compete.
  • A high price. Firms can charge a high price if they are seen as being better than their rivals in meeting the needs of customers.
slide38

The Price is Right

CK be by Calvin Klein

HIGH PRICE

slide39

The Price is Right

Ford Focus

AVERAGE PRICE

slide40

The Price is Right

Chocolates from Thorntons

HIGH PRICE

slide41

The Price is Right

Gola Trainers

LOW PRICE

slide42

The Price is Right

Jeans from Marks and Spencer

AVERAGE PRICE

price quality relationship
Price-Quality Relationship
  • Having a lower price than competitors does not guarantee success.
  • Most people associate a high price with a high quality product.
  • Would you expect to pay more for a Rolls-Royce or a Skoda?
  • Why?
pricing strategies
Pricing Strategies

Cost-plus pricing

  • The most common method of pricing in the UK
  • Companies calculate the cost of producing one item then add a profit ‘mark-up’, say 20%, to determine the selling price.
  • The extent of the mark-up will vary from industry to industry - car dealers will usually add 17% onto the cost they pay manufacturers whereas fashion clothing retailers may add between 100%-200%.

+

pricing strategies45
Pricing Strategies
  • A low price is set for a new product to attract customers and penetrate an existing market where there is likely to be strong competition.
  • Losses may be incurred in the short-term, however once a foothold in the market has been obtained prices may be increased to allow profits to be made.

Penetration pricing

  • Brand products launched into consumer markets will use penetration pricing. For example, breakfast cereals such as Kellogg’s Golden Grahams.
pricing strategies46
Pricing Strategies

Going-rate pricing

  • Also known as competitive pricing.
  • The firm will set the price of its products at a level similar to competitors.
  • This occurs in markets where businesses try to avoid price wars. Firms will set their prices at roughly the same level.
  • Companies offering petrol for cars adopt going-rate pricing.
pricing strategies47
Pricing Strategies

Hour-based pricing

  • The firm sets a price for a service based on time.
  • The company will offer a quote for the service demanded by a customer - based on an estimate of the time for completion and an hourly charge rate.
  • Car mechanics and cleaners use hour-based pricing.
pricing strategies48
Pricing Strategies

Skimming

  • Involves setting a high price for a new product.
  • Once the first target segment is saturated, the producer will lower the price in order to tap a fresh segment of the market. The process continues until a large section of the total market is catered for.
  • Electronic and pharmaceutical manufacturers often use skimming pricing.
pricing strategies49
Pricing Strategies

Destroyer pricing

  • Employed to undermine the sales of rivals.
  • The price of an existing product is reduced to an artificially low level in order to destroy competitor’s sales.
  • Only adopted by very large businesses with sufficient resources.
  • Stagecoach buses applies destroyer pricing when starting new bus routes.
place
Place
  • The ‘place’ where the final exchange occurs.
  • Refers to all activities undertaken by companies in distributing products to targeted consumers.
what is meant by distribution
What is meant by distribution?
  • The steps implemented by a company to make goods available for customers to buy.
  • Objective of distribution = to make the product available in the right place at the right time.
  • The company must make decisions about the channels of distribution through which the product will pass and the methods of transport to use.
channels of distribution
Channels of Distribution
  • The means by which an organisation and its customers are brought together in a particular place in order to buy and sell.
  • This may be in a shop, over the telephone, on the internet or in an office.
  • The channel of distribution that a manufacturer may select to get products to target consumers may include intermediaries.
intermediaries
Intermediaries
  • Intermediaries - commonly known as ‘middlemen’ - may assist in the distribution of products to consumers.
  • The two main types of intermediaries are:

Wholesalers who buy from manufacturers and then sell to retailers. For example Cash and Carry firms.

Retailers who buy from wholesalers or direct from manufacturers then sell onto consumers. For example, RS McColls.

which channel of distribution

Producer

C

A

B

-

Whole -

salers

Retailers

Retailers

Customers

Which Channel of Distribution?
effects of technology on place
Effects of Technology on Place
  • New technology has changed the ‘place’ where the final exchange occurs.
  • For example, banking was always carried out across the counter in a bank.

We now use:

    • automated tellers
    • telephone banking
    • online computer banking
the internet
The Internet
  • Developments in satellite and internet technology have greatly increased the number and variety of products being made available for customers to buy from their homes.
  • People can now purchase goods quickly and often at less cost from the comfort of their own homes.
the marketing environment
The Marketing Environment

Competitors

Consumers

THE MARKET

Government

Technology

Economy

promotion
Promotion
  • any form of communication used in an attempt to draw attention to a product/service – to make customers .
  • Three aims - persuade, inform and remind.
  • Two main types:
  • Above-the-line promotion - aka Advertising
  • Below-the-line promotion – other methods of promotion which can be controlled by the firm – eg direct marketing
advertising
Advertising
  • using the media to communicate messages
  • to customers.
  • Two main types - persuasive and informative.
  • Choice of advertising media will depend on -
  • cost, audience, competitors, impact, the law and the other components of the marketing-mix.
  • Controls on advertising include - the ASA, ITC, pressure groups and the Trades Descriptions Act 1968.
advertising control
Advertising Control
  • The British Code of Advertising Practice
  • The Advertising Standards Authority (ASA)
  • The Independent Television Commission
forms of advertising
Forms of Advertising

TV/Radio Posters

Magazines Billboards

Sponsored events Newspapers

Network of shops/outlets Cinema

Word-of-mouth

Packaging

Internet

Sales People

Direct Mail

slide62

Advertising Media

  • Television: Ads can reach millions and you can target people who watch particular programmes but it is very expensive.
  • Cinema: Ads have a high visual and sound impact and you can target particular films. You have a captive audience but they are expensive
  • Leaflets and Junk Mail: They are cheap to produce and distribute but they’re easy to ignore.
  • Newspapers and Magazines: They know a lot about their readership so it’s easy to target effectively. They’ll often be read more than once.
slide63

Advertising Media

Radio: Ads are usually cheaper and you can still target listeners of particular programmes but it’s sound only and audiences are usually smaller.

Posters and Billboards: Ads have a high visual impact and stay in place for a long time. Can be seen by lots of people but usually only for a short time so they can’t contain much information.

Internet Sites: Ads can have a high visual impact, be interactive and link directly to buying the product.

sales promotion
Sales Promotion

Shops may hold sales to encourage customers to buy what they may not have purchased at the full price.

Sales may encourage customers who would not normally go to the shop to venture in.

market research
Market Research
  • Market research provides managers with information about what customers want and need and what will influence them to buy a product.
  • Market research is used to find out:
    • Consumer wants regarding existing products
    • What makes consumers buy a firm’s products
    • What customers think of new products
    • What customers what from future products
    • What competitors are doing to satisfy customers
importance of mr
Importance of MR
  • Market research:
  • Indicates the size of a market and potential growth
  • Provides information about the best place to sell products
  • Helps identify customers’ needs and wants
  • Allows firms to identify what makes some products successful
  • Helps firms avoid costly mistakes – buy launching unwanted products
  • Gives firms ideas on how to promote products
  • Takes some risk out of launching new products
  • Allows firms to identify who their target customers are.
methods of mr
Methods of MR
  • There are two methods of market research:
  • Primary (Field) - information collected by the company itself.
  • Secondary (Desk) - information already collected for another purpose
field research
Field Research
  • Questionnaires/Surveys – questions specifically designed for the task. May be face-to-face, over the telephone, by mail or over the internet. The number of respondents will depend on the firm’s budget. The ‘sample’ must represent the total market.
  • Test Market – launching a new product into a small section of the market to measure it’s suitability
  • Consumer Panel – where a selected group of people are given a product and asked to comment in detail
field research69
Field Research
  • Advantages
  • It is first hand
  • It is more likely to meet the needs of the organisation
  • Disadvantages
  • It is more expensive
  • It takes time to gather
using a questionnaire
USING A QUESTIONNAIRE
  • Questionnaires are used to obtain meaningful information from a large and varied group of consumers.
  • The business will analyse the responses and modify the product/service to appeal to the market
hints on preparing questionnaires
HINTS ON PREPARING QUESTIONNAIRES

When designing a questionnaire you

should:

  • Keep it short
  • Make it simple and easy to understand
  • State clearly the purpose of the questionnaire
hints on preparing questionnaires72
HINTS ON PREPARING QUESTIONNAIRES
  • Questions should not rely heavily on the respondent’s memory
  • Begin with a few factual, easy to answer questions
  • Include some closed Yes/No response question
  • Follow up closed questions with open questions
  • Finish with a filter question designed to place the respondent in a market segment
desk research
Desk Research
  • Internal Sources - Sales figures, Stock figures, Accountancy records, Customers comments, etc…
  • External Sources - Government Stats, Competitor information, Trade Journals, Market Research Organisations, Newspapers, Magazines, CD-ROMS, etc...
desk research74
Desk Research
  • Advantages
  • It is cheaper than field research
  • It is quicker than field research – as long as the information is available
  • Disadvantages
  • Data may be out-of-date
  • The information will be available to competitors
effect of new technology on market research
Effect of New Technology on Market Research
  • Databases
  • EPOS
  • Loyalty Cards
  • Internet
problems with market research
Problems with Market Research
  • Sampling bias
  • Human behaviour
  • Interviewer bias
which market research method
Which Market Research Method?
  • Depends on:
  • Cost
  • Time available
  • Alternatives
  • What will happen without the research
the importance of marketing for different types of organisations
The Importance of marketing for different types of organisations
  • Marketing is important to all organisations – they all must meet customers needs and make target customers aware of what the firm offers.
  • However, marketing may be carried out differently depending on the type of organisation and the product they offer
  • For marketing to be successful for any organisation, they must combine:
    • The right product
    • Sold at the right price
    • In the right place
    • Using the most suitable promotional methods
charities reason method of marketing
Charities: Reason & Method of Marketing
  • Advertising and promotion encourages people to donate money
  • Tend to concentrate on letting people know what good things they have done – in the hope that target viewers will think the charity is worth giving to
  • Some charities try to obtain donations from all sections of the community – rather than specifically targeting a particular segment. Others – eg Greenpeace and Amnesty International target particular groups – as do local charities – eg for a local hospital appeal.
public funded service providers eg schools hospitals reason method of marketing
Public funded service providers (eg schools/hospitals): Reason & Method of Marketing
  • Will develop promotional documentation to attract and reassure customers. Many customers of such organisations will not have much choice of an alternative service provider.
  • Such documentation will be in the form of prospectuses, handbooks or through positive publicity in local newspapers.
  • The organisation will on be viable if customers continue to use the service on offer.
  • Not as much money will be invested by such firms on marketing – these firms are non-profit making organisations and tend to to have high marketing budgets
private firms offering a service eg a restaurant or bank reason method of marketing
Private firms offering a service (eg a restaurant or bank): Reason & Method of Marketing
  • Marketing may be carried out differently as the company cannot illustrate the service easily – eg bank services
  • Sales personnel will require specialised training to deliver the service
  • If the company is a chain or franchise – it may benefit from national advertising but local firms will market their business on a much smaller scale.
  • Marketing is important to maintain or increase the market share available to the business.
market segmentation
Market Segmentation
  • Business Organisations can divide the market into different types of customers to meet their individual requirements:
    • Demographics
    • Socio-cultural groups
market segmentation83
Market Segmentation
  • Demography is the division of the population into different social groups
market segmentation84
Market Segmentation

Markets are segmented into different groups

of people. The main segments are:

  • Age distribution of the population
  • Gender
  • Location
  • Social class – A- professions to E - unemployed
  • Culture or religion
other consumer related factors
Other consumer related factors

We’re all

different ages -

we want

different

things

  • Taste, fashion and lifestyle
  • Disposable income
  • The Government
  • Technology
  • Economic forces
  • Household class
private firms offering a product eg a food car manufacturers reason method of marketing
Private firms offering a product (eg a food/car manufacturers): Reason & Method of Marketing
  • These companies are dependent on customers buying their products to make a profit
  • Without marketing consumers will not be aware of the products or companies and will buy competitors products
  • Privately owned companies usually have a budget for marketing and often have a marketing department.
  • Such firms will usually invest a great deal in marketing and promotional activities
customer service
Customer Service
  • This is what affects the relationship between customer and business, ie
    • the way the customer is treated by sales staff
    • how queries and complaints are handled
    • use of technology, eg phone system, press 1 for sales, press 2 for information, press 3 for advisor, and so on.
protecting the consumer
Protecting The Consumer
  • The Sale of Goods Act, 1979
  • The Trade Descriptions Act
  • The Weights and Measures Act
  • The Food and Drugs Act
  • The Food Safety Act
advice for the consumer
Advice for The Consumer
  • Trading Standards
  • Environmental Health
  • Citizens’ Advice Bureau
  • Trade Associations, eg BETA
  • Utilities watchdogs, eg gas, water, electricity
  • The Consumers’ Association – they produce Which? magazine
more information on marketing
MORE INFORMATION ON MARKETING

You will need this information to prepare your study notes for the Marketing Topic.

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