Objectives of this unit The following topics will be covered in this chapter. • What is Marketing? • Marketing Management • The Marketing Strategy • The Marketing Mix • Product • Price • Place • Promotion • Evaluation of the Marketing Mix • Break-even Analysis
What is marketing “Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitability”
Marketing Process • This is the process that takes the product through the different stages, from the potential customer to the satisfied customer.
Marketing management Functions of the Marketing Manager • To carry out market research to learn the exact requirements of consumers. • To prepare sales forecasts. • To identify the different markets for the firms’ products. • To decide on the selling price of new products. • To ensure that goods are attractively packaged for shop display. • To plan the marketing campaign for both new and existing products.
Marketing Strategy “A plan to achieve marketing objectives” Stages in developing a marketing strategy or plan: • Opportunity analysis – investigate the market to identify new business opportunities. • Market segmentation – divide the market into categories. • Target market selection – decide which segments of the market to serve. • Market research – carry out research into the needs and demands of the selected target market. • Marketing mix – formulate a marketing mix relating to the four P’s: product, price, place, promotion.
Market Segmentation • Dividing the market into consumers with similar characteristics e.g. Age, income, location. • http://www.ford.ie/Cars • Markets can be segmented by • Geographical location • Demographic segmentation • Psychographic segmentation • Social class, lifestyles, personality or attitudes etc
Marketing Blunders • Electrolux: Scandinavian vacuum manufacturer Electrolux sold products successfully in the United Kingdom using the slogan "Nothing sucks like an Electrolux". The slang disparagement "sucks" is an example of Americanism, so many Americans think this is an example of such a blunder. • Pepsi: Pepsi allegedly introduced their slogan into the Chinese market "Come alive with the Pepsi Generation" translated into Chinese it read "Pepsi brings your ancestors back from the grave". • The Chevrolet Nova automobile sold poorly in Latin America, as "no va" means "won't go" in Spanish.
Marketing Blunders • LanciaDedra: this car sold poorly outside Italy, particularly in English-speaking markets, where research showed that people associated it with danger (apparently affected by the name's similarity to the word "dead") • McDonald's: In January 2005, McDonald's published banners proclaiming Double cheeseburger? I'd Hit It. In this obvious blunder, the copywriters mistook the strictly sexual slang expression for a term of general approval. • Kentucky Fried Chicken: An advertising campaign in China attempting to translate the slogan Finger lickin' good! into Chinese failed miserably, proclaiming Eat your fingers off.
Marketing Blunders • When people chuckled at General Motors’ Chevy Nova in Latin America, the automotive giant was perplexed. Until, that is, someone pointed out that ‘Nova’ means ‘It doesn’t go’ in Spanish. • Toyota’s Fiera car proved controversial in Puerto Rico, where ‘fiera’ translates to ‘ugly old woman’. • The Brand ‘Irish Mist’ didn’t go down to well in the German market, where it translated as…
Target market • The market in which a firm is planning to sell its goods.
Niche Market • A small speciality market in which there is a specific or unserved need.
1. product What makes a successful product? • It must satisfy consumer requirements. • It must meet the quality standards required by consumers. • It must have a competitive selling price. • Design must be attractive. • If relevant, an after-sales service must be provided. • The image of the manufacturer is very important.
1. Product • What are the most valuable brands in the world? Benefits of Branding: • Branding helps to remind consumers about a product. • Branded goods are more likely to be accepted by consumers than non-branded goods. • Branded goods are easily identified on display stands, so selection is easy for consumers. • Manufacturers promoting branded goods find it easier to introduce new products into the range.
a. Development • Research and development costs are high. • Focus is on the product. • Communication is vital. • More cash outflows than inflows.
b. Introduction • Launch of new product. • Price place and promotion are important. • Advertising costs are high. • Initially sales are low so outflows are more than inflows.
c. Growth • Sales start to rise. • Production is increased. • Competitors come on stream. • Competitive advertising intensifies. • Price may have to be lowered. • However there should be more inflows than outflows.
d. Maturity • Sales peak. • Attracting new customers is difficult. • New features may be added. • Aggressive advertising. • A lot of cash inflows.
e. Saturation • Everybody has the product. • Sales start to slow down. • Less cash inflows.
f. Decline • Sales start to fall. • Short term gimmicks used to try to boost sales. • Less cash inflows.
How can the Product Life Cycle be extended? • Reduce prices to increase sales. • Target a new market segment. • Introduce a new sales promotion scheme. • Launch a new advertising campaign. • Find a new use for the product.
2. Price Price is the most flexible element of the marketing mix. If the price is too high, sales will be lost to competitors. • Factors that determine the selling price: • The selling price of the competitors products. • The production and distribution costs. • The target market for the product. • The advertising spend. • The brand name of the product. • Is the product aimed at a new customers? • Government legislation. • The products current position in the product life cycle.
2. Price Functions: • To raise revenue for the business. • To influence demand. Note: • There are many methods of pricing a product.
Pricing Policies 1. Cost Plus Pricing • The cost of making the product is calculated and a % profit is added. • The average household good has a margin of at least 25% 2. Tactical/Discount Pricing • Discounts given for: • bulk buying, cash payment. • moving slow stock, attract customers
Pricing Policies 3. Loss Leader • Charge a price at below cost on a popular product. • Customers while in the shop may purchase other expensive items. • Eg. Bread, milk, Lotto • http://www.tesco.ie/press/Petrol.html 4. Competitive Pricing • Charging a little less than rivals.
Pricing Policies 5. Premium Pricing • With high-quality items, consumers expect to pay high prices for such products. 6. Destroyer pricing • Charging a lot less than competitors to put them out of business. • E.g. Ryanair v’s AerArann
Pricing Policies 7. Price Skimming • Charge a lot when the product is new and popular. • E.g. iPhone4Gs launches at $499. Price falls to zero plus contract after a few months. 8. Break Even • Charge a price at which you neither make a profit nor a loss.
Break even Analysis • The break even point is where income and costs are equal. That is when the firm is just covering its costs, neither making a profit not a loss. Expenditure Income
Costs • Fixed Costs • These are costs that remain constant regardless of the levels of output. Eg. Rent, insurance, salaries. • Variable Costs • These are costs that vary directly with the level of production. Eg. Raw materials and labour • Total variable costs = variable cost per unit x number of units produced • Total Cost = Fixed costs + total variable costs
Revenue • Revenue is the money received by a firm from the sale of its goods and services. • Total Revenue = Quantity Sold x Selling Price
Contribution • This is a measure of the amount of money that each unit sold contributes towards the fixed costs of a business. Contribution per Unit = Selling Price per unit – Variable Costs per Unit
Break even chart question • Illustrate by means of a break-even chart the following information: • Fixed costs: €20,000 • Sales price per unit: €10 • Estimated output: 14,000 • Variable cost per unit: €8
Promotion • Promotion consists of all communication used by a business to let customers know about the products on offer and to get them interested in buying them • Methods of promotion are: • Advertising • Sales promotion • Public relations • Personal selling Promotion Mix
Advertising • Advertising is the communication of information to persuade customers to buy a particular product or service • Functions of advertising: • Provide information • Persuade consumers • Remind consumers • Distinguishes products from competitors • Increase sales and profits
Advertising examples In relation to the advertising examples, answer the following questions. • What is the target market for this advertisement? • What message is this advertisement trying to get across? • What type of advertisement is this? • In your opinion, is this advertisement effective?
Advertising Media • Television • Newspapers • Magazines and journals • Radio • Cinemas • Online • Billboards • Public transport