24108 - Marketing Foundations Final Exam notes PDF

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Marketing Foundations EXAM NOTES LECTURE 1: Introduction to Marketing and the Marketing Environment What is marketing?  “The activity, set of institutions + processes for creating, communicating, delivering, exchanging offers that have value for customers, clients, partners and society at large”  Marketers need to learn what customers / clients / partners / society want  Marketers use info, develop new ideas + offer something unique/special  ongoing process Why study marketing?  Marketing oriented firms better performance o Better profits, sales volume, market share, ROI  drives economic growth / stimulates consumer demand The Marketing Evolution Changed from: o Trade o Production Orientation o Sales Orientation (e.g. black vs blue) o Market orientation (i.e. what colour do you want + matching the product) o Societal market orientation (e.g. to stop consumerism)  Used by small + large orgs o those selling goods/services, private, public, profit and non-for-profit Marketing Exchange  Mutually beneficial transfer of offerings of value between buyer + seller o Two / more parties, both have something of value o All must benefit o Exchange must meet expectations of both parties What is value? - “A customers overall assessment of the utility of an offering based on perception of what is received and given” - Refers to the ‘total offering’ What is the market? - Group of customers with heterogeneous (different) needs + wants (e.g. geographic, demographic, product markets) o Customers o Consumers o Clients (customers of non-for-profit) o Partners (all who are involved in activities of exchange process) o Society

Stakeholders  Individuals, organisations + groups with a rightful interest in the activities of a business o Owners o Employees o Customers (and clients) o Partners o Government Ethics and Corporate Social Responsibility  Ethics = a set of moral principles that guide attitudes/behaviour  Law + regulatory bodies govern conduct of individuals/orgs  Sustainable Marketing = promotion environmental + socially responsible products, practices, brand values  Corporate social responsibility = businesses have obligation to act in the interests of the societies that sustain them o Trade Practices Act, ACCC The Marketing Mix  Set of variables a marketer can exercise control over in creating an offering for exchange o

4P’s: Product, Price, Promotion, Place

o Services Marketing Mix: People, Process, Physical Evidence The Marketing Mix: Product  Product: good/service/idea offered to the market for exchange  Demand: a want the customer has ability to satisfy  Brand: collection of symbols creating a differentiated image  Good: tangible offering capable of being delivered  Service: intangible offering that does not involve ownership The Marketing Mix: Price  Price: amount of money a business demands in exchange for its offering  Must consider: o Production, communication + distribution costs o Required profitability o Partners’ requirements o Competitors prices The Marketing Mix: Place  Distribution: making the offering available to the customer at the right time/place  Logistics: concerned with supply/transport  Supply chain: parties involved in providing all raw materials/services to get a product into the market The Marketing Mix: Promotion  Promotion: activities that make potential customers/partners/society aware of + attracted to the businesses offering  Examples: o Advertising o Loyalty scheme o Sales promotion o Product trials  Product may be established / modified / new / form of info

The Marketing Environment  = all internal + external forces that affect marketer’s ability to create, communicate, deliver, exchange offerings of value  Environmental analysis = breaking marketing environment into smaller parts to gain better understanding

Internal  parts , people + processes in the org used to create, communicate, deliver and exchange offerings that have value  Can be directly controlled  Measured by strengths + weaknesses External  people + processes outside the org  cannot be directly controlled, only influenced  Such as when outsourcing (transferring internal function to external provider)  Measured as opportunities + threats

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external environment includes: o Micro-Environment  “Forces within an org’s industry that affect its ability to serve customers/clients” - Customers, clients, marketers need to understand current + future needs - Partners e.g. logistics firms, financers, advertising agencies, suppliers - Competitors  Not directly controllable o Macro-Environment 

PESTEL: political, economic, sociocultural, technological, environmental, legal   

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Political = effect of political issues on marketing Economic = prices, level of savings/debt, credit availability Social and cultural = attitudes, beliefs, behaviours, preferences, customs, lifestyle o can be influenced by demographics Technology = changes expectations/behaviours o affects how suppliers work Environmental = natural disasters, weather, climate change o Growing ecological awareness. o Social changes influence how firms will operate Legal = enacted law + regulations govern what marketing can/can’t do o e.g. fair trading, consumer safety, prices, intellectual property

Situational Analysis and Marketing Planning  SA= identifies key factors  used as basis for development of marketing strategy o ROI, customer satisfaction, market share, brand equity (%’s and information) o SWOT analysis  Strengths: attributes of org that help achieve its objectives  Weaknesses: attributes of org that hinder achiev. Objectives  S/W = internal, directly controllable  Opportunities: external factors potential help ach. objectives  Threats: external factors potential hinder ach. objectives 

Marketing planning = ongoing process that combines organisation objectives + situational analyses to formulate / maintain a marketing plan o moves the organisation to where it wants to be o Executive summary, introduction, situational analysis, objectives, target market, marketing mix strategy, budget, implantation, evaluation, future recommendations

LECTURE 2: Market Research What is market research?  Business activity that gathers info of use in making marketing decisions o Understand (market research i.e. willingness to pay), create (product), communicate (promotion), deliver (place)

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Informs different types of decisions o e.g. market segmentation, sales performance, attitudes + behaviours, 4 Ps Begins with issue, discovers info,  allows informed decisions (how to report)  results in outcomes that match marketing goals Involves: o Define research problem  Question that research intends to answer  Clearly specified problem o

Design research method  Need to create a market research brief  Brief = a set of instructions/requirements that states the problem, info required and specifies budget/time frame etc.  Generally includes executive summary, introduction, background, problem definition, time + budget, reporting schedule, appendices

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Collect data  Research design = methodology created to guide project  Hypothesis = tentative explanation that can be tested  Types of research include: - Exploratory research: loosely defined e.g. focus groups - Descriptive research: solves particular e.g. 90% of 60/older - Causal research: assumes variables affect outcome  Types of data include: - Secondary: originally gathered for another purpose - Primary: specifically for current project - Data mining: processing large data sets to find patterns - Qualitative: numerical e.g. surveys - Qualitative: rich, deep + detailed info about attitudes + emotions e.g. interview/focus group  This process may include ‘sampling’ - Probability sampling: every member of population has a known chance of being selected - Non-probability sampling: no way of knowing the chance of a particular member - Sampling error: measure of extent to which results from sample differ from population

Analyse + draw conclusions  Must be collect data according to methods in research design  Can be conducted in-house or outsourced  Data analysis involves filtering / organising data - Quantitative analysis: converts numerical data into knowledge to be used for decision-making - Qualitative analysis: reductions + coding used to interpret non-numerical data o Presenting results and making recommendations - Written research report should include: cover page/executive summary / contents / background / methodology/findings / statement of limitations / conclusions / recommendations / appendices Results in decisions that take the form of marketing plans/strategies Essential to understand market o

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However, before undertaking you need to consider: o Relevance o Timing o Availability of resources o Need for new information o Cost-benefit analysis o Ethics Only valuable if  contributes to improved performance

LECTURE 3: Consumer behaviour What is consumer behaviour?  Analysis of behaviour of individuals/households who buy goods / services for personal consumption  Consumers make decisions along a continuum o Habitual decision making  extended decision making  Once we know our target market we want to work out: o Why they behave in a certain way o Why they have preference for certain brands Influences on consumer behaviour

Situational Physical location Social interaction Time available Purchase motivation Mood

Group Cultural Culture Subcultural Social class

Social Reference groups Family Roles and status

Individual (independent of social circumstances) Personal Psychological Demographics Motivation e.g. age, Perception occupation, Beliefs and attitudes income Lifestyle

Group Influences – Cultural factors  Influences on behaviours that operate at a level of the whole society, or major groups within the society Culture and Subculture  Culture = a system of knowledge, beliefs, values, rituals by which society/other large group defines itself o Includes tangible + intangible e.g. clothing, food, laws, customs  Examples of influences: o Power distance i.e. degree of acceptable inequality within culture o Uncertainty avoidance o Individualism o Masculinity (or nurturing) o Long-term orientation  Subculture = group of individuals who share common attitudes/values/behaviours that distinguish them from broader culture in which they are immersed Group Influences – Social factors  Influences on the individual to behave in a way that reflects group norms Social Class  Individuals of similar rank within social hierarchy  Defined by values / lifestyles  Indicators = income, occupation, education

Reference groups  Any group to which an individual looks for guidance o Membership – individual already belongs o Aspiration – would like to belong o Dissociative – does not wish to belong Family  Family life cycle = series of characteristic stages most families pass through  Family decision-making roles = differing responsibility for specific types of decisions  Pester power = influence of children on parents purchasing decision Role and status  Individuals play a no. of roles with complex set of expectations o Parents, child, neighbour, employee, employer, customer, friend  Influence of status lies in perceived status of individual o Criteria such as formal role, age, social popularity, technical competence Individual influences - Personal  Demographic, lifestyle + personality factors that influence consumer behaviour Demographics  Vital + social characteristics of populations e.g. age, education Lifestyle  Involves how an individual spends their time/interacts with others Personality  Unique set of psychological characteristics + behavioural tendencies that characterise an individual o Combination of genetics and experiences Individual influences – Psychological  Internal factors, independent of situational / social circumstance  shapes thinking, aspirations, expectations + behaviours Motivation  Drive to satisfy unfulfilled needs or achieve goals Maslow’s hierarchy of needs  Suggests people seek to satisfy needs according to hierarchy that places low order ‘biogenic’ before higher order ‘psychogenic’ needs o Physiological (hunger/thirst), safety, belongingness, esteem, selfactualisation Perception  Psychological process that filters, organises, attributes meaning o Selective exposure, attention, distortion, retention Beliefs  Descriptive of evaluative thoughts that an individual holds (regards knowledge of person/idea/product)  May be based on objective knowledge, opinions, faith

Attitudes  Individual’s relatively stable + consistent thoughts, feelings and behaviours towards an object/idea Learning theories  Behavioural learning theory: o stresses role of experience + repetition o Relevant in low involvement purchases  Cognitive learning theory: o Stresses rational problem solving, emphasising acquisition + processing of new information o Relevant in high involvement purchasing decisions Types of consumer decision making  Habitual: low engagement, small, routine, low-risk products  Limited: infrequently bought but familiar products  Extended: high engagement, high price, high-risk, infrequent / unfamiliar products Consumer Decision Making Steps  Need/Want recognition o Become aware of unsatisfied n/w o Marketer stimulates/creates awareness of new n/w  Information Search o Seeks info from sources about how to solve problem  Evaluation of Opinion o Develop evaluation criteria, rank alternatives, consider not purchasing/other uses of money  Purchase o Choose product + brands, decide to purchase or not  Post-purchase Evaluation o Continue to evaluate product, deal with post-purchase cognitive dissonance o Assess attitude towards product/bank/seller in relation to future purchases  Cognitive dissonance: purchaser has doubts

LECTURE 4: Markets- Segmentation, Targeting and Positioning The market  Groups of customers with heterogeneous needs and wants  Markets can have a variety of characteristics: o Common wants, needs and demands o Unique wants, needs and demands o Contains subgroups  Market segments = subgroups within the total market that are relatively similar in regards to certain characteristics What is targeting marketing?  An approach to marketing based on identifying, understanding, developing an offering for segments of the total market that the org can best serve

Mass marketing  A single product will meet the needs of most people in the market (undifferentiated approach)  Producing large volumes at a lower cost per unit  makes it possible to sell at a lower price + capture very large markets One-to-one marketing  Unique, customised offering to meet individual needs  Results in  higher unit costs + more restricted market Differentiated targeting strategy (in between mass + one-to-one)  Developing a different marketing mix for each target market segment o Product specialisation: concentrated on offering a single product range to a no. of marketing segments e.g. barcode scanner o Market specialisation: focused on meeting a wide range of needs within a particular market segment e.g. travel agent o Product-market specialisation: offering a single product to a single market segment e.g. sweet + salty popcorn  involves high costs to achieve high profits  requires higher retail prices, higher market share + strong customer loyalty

The target marketing process

Market segmentation – Stage 1 of the diagram  Segmentation variables: characteristics that buyers have in common and that might be closely related to their purchasing behaviours  These variables fall into four broad categories: Demographic (most commonly used) Age, education, income

Geographic

Psychographic

Behavioural

Climate, local population, market density, region, topography, urban vs. suburban

Lifestyle, motivates, personality attributes, based on how you live your life reflected in hobbies / choice of entertainment

Based on actual purchase and/or consumption behaviours e.g. brand loyalty, occasion, price sensitivity, volume usage

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Effective segmentation involves: o Measurability o Accessibility o Substantiality (at least 100) o Practicability o Stability (stays long enough to produce results)

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Market segment profile: description of the typical potential customer in the market segment

Marketing targeting – Stage 2 of the diagram  = the selection of target markets resulting from an evaluation of identified market segments  Potential is influenced by : o market potential of target market o level of marketing activity in the industry o effectiveness of an organisation’s promotional spending o Market potential: total sales of a product category that all orgs in an industry are expected to sell (in specified period of time)  Sales revenue: total volume of sales x average selling price  Market share: proportion of the total market share held by organisation o Company sales potential: estimate of the max. sales revenue + market share that an org can expect to achieve for a specific product Market positioning – Stage 3 of the diagram  = way in which target market segments perceive an org’s offering in relation to competing offerings o Company positioning: designed to create a perception of the entire org in relation to its competitors o Brand positioning: designed to create a market perception of a particular brand, usually based on product attributes

LECTURE 5: Product Definitions  Product: good/service offered to the market for exchange  Good: tangible offering capable of being delivered to customer  Service: intangible offering that does not involve ownership  Idea: concept, issue, philosophy offered to the market  Product item: particular version of a product  Product line: set of product items related by characteristics e.g. end use, target market, technology / raw materials  Product mix: set of all products that an org makes available to customers Product: ‘Consumer’ vs. ‘B-to-B’  Consumer products: purchased by households/individuals for private consumption  sbBusiness to business products: purchased by individuals/orgs for use in production or for daily business operations Consumer product classifications  Shopping products: moderate to high engagement with purchase based on consideration of features, quality and price e.g. washing machine  Convenience products (‘fast-moving consumer goods’): little engagement, inexpensive, frequently purchased  Speciality products: highly desired with unique characteristics that consumers will go to considerable effort to obtain e.g. Ferrari  Unsought products: purchased to solve a sudden, unexpected need

B-to-B product Classifications  Parts and materials: products that form part of the purchasing business’s products  Equipment: capital + accessory equipment used in production of business’s products  Services and suppliers: products essential to business operations but do not directly form part of the production process Total product concept  To understand how the products value is perceived by customers, it is useful to describe it in four levels: o Core product = fundamental benefit o Expected product = attributes that deliver that benefit o Augmented product = bundle of benefits that buyer may not require o Potential product = possibilities that could become part of total product The Product Life Cycle (PLC)  Typical stages: o New product development  Idea generation  Screening  Concept evaluation  Marketing strategy  Business analysis  Product development  Test marketing  Commercialisation (not all products make it to the market) o Introduction (see production adoption process) o Growth o Maturity o Decline

Product Adoption Product Adoption Process  Awareness o Consumer becomes aware of product but knows little...