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Marketing and Distribution. Marketing. Once, as a business, you have a good or service, what must you do? Marketing: all activities involved in moving goods and services from the producer to the consumer

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  • Once, as a business, you have a good or service, what must you do?
  • Marketing: all activities involved in moving goods and services from the producer to the consumer
    • Some economists estimate that close to 50% of the price people pay is for the cost of marketing the product
  • Thesole purpose of marketingis to convince consumers that a certain product will add to their utility
    • Utility: the amount of satisfaction you receive from a good or service
  • Four types of utility:
    • Form utility: converting raw materials into products (refining crude oil into gasoline; cotton into shirts)
    • Place utility: having a good or service where people want to buy it; being in the right place (gas stations at a busy corner)
    • Time utility: having a good or service at the right time (taco bell being open late; Wal-Mart being open 24/7)
    • Ownership utility: satisfaction by simply owning a product (MTV cribs with celebrity houses and cars; diamond engagement rings)
market research
Market Research
  • Market research: finding out what consumers want, by gathering, recording, and analyzing data on consumer preferences.
    • Usually done before product is offered/released (helps determine production of the product—features, quality)
    • To get initial consumer response, research is done immediately after product release (Xbox 360)
market research1
Market Research
  • Market survey: information on who maybe possible product users, based on characteristics such as age, gender, income, education, location (Best Buy survey, warranty cards, focus groups, individual interviews)
  • Before national or large distribution, most companies use test-marketing: offering a product for sale in a small area for a limited amount of time to see how successful it will be
marketing mix
Marketing Mix
  • Product:
    • What should be produced?
    • What services should be offered with product? (warranties, rebates)
    • How should the product be packaged? (“new & improved”; size, color, design, catch phrase, coupons)
    • Product Identification: How should product be identified? (logos, endorsements, songs)
    • Determined by supply and demand (companies must consider costs of production, advertising, selling & distribution, as well as profits)
    • Price leadership: selling products at a price of similar established products
    • Penetration pricing: setting price lower on a new product to attract consumers away from already established products
    • Where the product should be sold?
    • Based on past experiences of similar products
  • Promotion: advertising to convince a consumer that a new & improved product is available and they should purchase it
    • Depends on 3 factors: product, target consumers, and money (budget)
    • Direct-mail advertising: mail informing about products and order forms (“junk mail” to most)
product life cycle
Product Life Cycle
  • Product life cycle:the stages a product travels through, from introduction to withdrawal from the market
    • Typical life cycle: Introduction, growth, maturity, decline
      • Marketing and price are different in each stage of the product life cycle
      • Many producers try to extend the product’s life cycle by redesigning the product (looks, uses, advertising)
distribution channels
Distribution Channels
  • Channels of distribution: routes which goods are moved from producers to consumers
  • Consumer Goods:
    • Manufacturer → Consumer
    • Manufacturer → Retailer → Consumer
    • Manufacturer → Wholesaler → Retailer → Consumer (most common)
  • Raw materials and Producer goods:
    • Producers → Business
    • Producers → Wholesaler → Business
  • Wholesaler: businesses that purchased large quantities of goods from producers for resale to other businesses (Sam’s club)
Retailers: businesses that sell consumer goods directly to the public
    • Growing more and more is e-commerce: business conducted over the internet (“virtual companies”)
  • Storage and Transportation: producers, wholesalers, or retailers may store products
    • Most retailers keep some inventory: lengthy supply of products for future sales
    • Transportation of products depends on type of good (speed, weight, shipping costs)
Distribution channels have grown in the past years:
    • Club warehouse stores: require membership, usually groups oriented (Sam’s club)
    • Direct marketing: done mainly through catalogs and the internet (avoid most state sales taxes); increases sales because of ease and convenience of ordering products on consumers own timeline; order almost anything with valid credit card