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eBook

BSBMKG501B Identify and evaluate marketing opportunities

BSBMKG501

IDENTIFY AND
EVALUATE
MARKETING
OPPORTUNITIES

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BSBMKG501 Identify and evaluate marketing opportunities

Contents
Introduction ...................................................................................................... 4
1

Identify marketing opportunities ............................................................... 6


1.1 Analyse information on market and business needs to identify marketing
opportunities .................................................................................................. 7
1.1.1

SWOT Analysis .................................................................................. 8

1.1.2

The marketing mix .......................................................................... 11

1.1.3

Ethics and regulation in marketing .................................................... 13

1.1.4

Law and regulation .......................................................................... 15

1.1.5

Is marketing the same as selling? ..................................................... 17

1.2 Research potential new markets and assess opportunities to enter, shape or
influence each market, and the likely contribution to the business ....................... 18
1.3 Explore entrepreneurial, innovative approaches and creative ideas for their
potential business application, and develop into potential marketing opportunities 22
1.3.1
2

Tools and techniques for generating ideas .......................................... 25

Investigating marketing opportunities ..................................................... 30


2.1 Identify and analyse opportunities in terms of their likely fit with
organisational goals and capabilities ................................................................ 30
2.2 Evaluate each opportunity to determine its impact on current business and
customer base .............................................................................................. 31
2.2.1

Knock out factors ............................................................................ 32

2.2.2

Present value analysis ..................................................................... 33

2.2.3

Forecasting..................................................................................... 34

2.3 Use an assessment of external factors, costs, benefits, risks and opportunities
to determine the financial viability of each marketing opportunity ....................... 38
2.4

Determine probable return on investment and potential competitors ........... 40

2.4.1

The risk versus benefit ..................................................................... 44

Media differences ....................................................................................... 46


2.5 Describe and rank marketing opportunities on their viability, and likely
contribution to the business ........................................................................... 47
3

Evaluate required changes to current operations ....................................... 49


3.1 Identify and document changes needed to current operations to take
advantage of viable marketing opportunities .................................................... 49

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3.2 Ensure organisational changes to service an increased or different customer


base including provision for continued quality of service to existing customers...... 50
3.3

Estimate resource requirements for changed operations ............................ 52

3.4 Determine and communicate viability of making changes to current operations


to key stakeholders ....................................................................................... 54
3.5

Document newly identified marketing opportunities and required changes ... 56

Appendix - Useful templates and guides ............................................................. 57


Conclusion ...................................................................................................... 60
Appendix - Types of marketing strategies ........................................................... 61
The marketing mix ..................................................................................... 64
Product ..................................................................................................... 64
Price ......................................................................................................... 69
Place ........................................................................................................ 74
Promotion ................................................................................................. 80
References ...................................................................................................... 83

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Introduction
This unit describes the performance outcomes, skills and knowledge required to
identify, evaluate and take advantage of marketing opportunities by analysing market
data, distinguishing the characteristics of possible markets and assessing the viability
of changes to operations.
It applies to individuals working in senior marketing management roles that, together
with a marketing team, identify, investigate and evaluate marketing opportunities to
determine whether they meet organisational and marketing objectives. Based on this
evaluation, changes to current business operations can be determined to take
advantage of marketing opportunities.
Lets consider a few important facts about marketing before we continue.
Principles of marketing
Marketing is an organisational function, and a set of processes for creating,
communicating, and delivering value to customers, and for managing customer
relationships in ways that benefit the organisation and its stakeholders.
Kotler et al (2007).

What is value? How does understanding this benefit a business?


Value is generally determined by a customers needs, wants and demands.

Needs = a state of felt deprivation

Wants = the form taken by human needs as they are shaped by culture and
individual personality

Demands = human wants that are backed by buying power


Kotler et al (2007).

Answering these questions about what we need and want can be complex. Marketing
has historically been considered a creative discipline. In reality, marketing is scientific
and follows a common scientific method:

Ask a question

Do background
research

Analyse your
data and draw a
conclusion

Communicate
your results

Construct a
hypothesis

Test your
hypothesis by
doing an
experiment

Marketing is a social science related to why humans behave the way they do, and
how we can work with or modify that behaviour to make a profit for our business.
What makes people purchase goods? To answer this question you need to undertake
the above steps.

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Customer satisfaction
This depends on a products perceived performance in delivering value relative to a
buyers expectations. In other words:

What do buyers expect?

What was the perceived performance of the product?

How did these two compare?

If the (perceived) performance is higher than the expectation, the customer is


satisfied. If not, the customer is dissatisfied. The key is to match customer
expectations with product performance, because satisfied customers make repeat
purchases and tell others about their good experiences with the product and the
company providing the product.
Example

We dont expect much from a wooden train set. It costs $10, and we
may be very satisfied with it. Electric sets cost more but it also does
more. Because our expectations are higher we may not be satisfied.

Exchange is the act of obtaining a desired object or service from someone by


offering something of value in return. Exchange is not the only way we can get things
that we need/want.
If we are hungry we can hunt, fish, plant, harvest, beg or steal. By exchanging,
people can concentrate on making things they are good at, and trade them for
needed items made by others thus creating a wider variety of products.
Exchange is central to marketing, and requires a few important conditions:

Two parties must be involved

Each must have something of value to the other

Each must want to deal with the other

Each must be able to accept or reject the others offer

They must be able to communicate with each other

If all conditions exist, both parties can exchange, and hopefully be satisfied.
Transaction is the unit of measurement used in marketing. A transaction is a trade
of units of value between two parties.
In a transaction, we must be able to say that one party gives X to another party and
gets Y in return. Not all transactions involve money. Sometimes we exchange goods
or services (barter).
Beyond just transactions, marketers today need to build and maintain relationships
between themselves and other important parties. This is what is known as
relationship marketing.
Relationship marketing is the process of creating, maintaining and enhancing strong,
value-laden relationships with customers and other stakeholders.

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Identify marketing opportunities

A marketing opportunity is considered to be an identified need, want or demand a


business can work with because the need, want or demand is not being addressed by
competitors.
Needs that are unmet are marketing opportunities.
Needs - can be those need that are unmet or which are the result of change. Change
in consumption, use of technology, attitudes and behaviours of consumers, or many
other factors which cause a need to exist.
What does the
organisation want to
achieve?

How will we do
that?

Understand the
situation, our
customers and
environment we
operate in

How will we know


that?

Research and
gathering of
information

Information comes
from customers and
from industry.
Examin behaviour
from many sources

Before business can begin to determine marketing opportunities it is important to


understand information regarding two areas:

Internal impacts on the business itself. Where are we going? What are the
objectives of the business? In short we need to conduct a business review so
that we understand what the business needs to do

External impacts for the market: What is happening in the market itself? Are
their more innovations being developed that will impact on the existing buyers?
How does the industry or competition impact on the sales of your business?
What are the external forces that will impact on the business within that
market?

In general we could consider the following to be the principles of marketing:

Clarify your business objectives

Use innovation and creativity to know and understand:


o

Your target group and your customers behaviour

Your USP (unique selling proposition) unless you can do this you
cannot target your marketing properly and effectively - understand
what makes your business or product different or unique

The business purpose

The market needs and how they will access your product, company
and brand

Segment your customers, where do they belong, what matters to them?

Know your consumer buying behaviour successful brands encourage the


participation of their customers

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1.1 Analyse information on market and business


needs to identify marketing opportunities
What are markets?
A market is the set of all the actual and potential buyers of a product. Members of a
market share common needs or wants. It is up to the marketers to identify the need
and meet it for their customers (or other stakeholders).
The size of a market will depend on the number of people who have a particular need
or want and have the resources and willingness to exchange for them.
Company looks at all of these people to determine their market:

Customers

Suppliers

Distributors

Partners

Stake
holders

Share
holders

Dealers

Business needs to ask itself?

Who are your customers, what do they need?

Where are they and how do you reach them?

How do they make their decisions to buy and where do they buy?

How do you find out the answers to this information? You ask, research and read.
There is a great deal of information available online and from your own business.
Gather as much information as possible to do with your customers, the potential
market and your business.

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Potential market - all the


people who could buy
your product
Available market - all
the people who can
afford your product

Qualified available market


- those who can legally
buy your product
Target market- people
your business wants to
service with your
product

Penetrated market
current customers

Marketing is a decision making process where business and marketers decide on


strategies to make sure the long terms objectives of the organisation are met. There
are many different strategies that may or may not work for your business, there is a
comprehensive list of possible strategies in the appendix of this eBook.
Planning for the marketing of your business is an important step in understanding
your customers and what you are able to do to meet their needs. It is important to
assess the marketing environment. Consider undertaking an analysis of strengths,
weaknesses, opportunities and threats (SWOT).

1.1.1 SWOT Analysis


SWOT is a method for considering the pros and cons of a situation:

Internally we look at strengths and weaknesses (factors that belong to the


organisation)

Externally examine opportunities and threats (factors that belong to the


situation and environment)

SWOT analysis is used as a first step to developing a strategy for achieving specific
objectives and is useful for generating new ideas and opportunities.
In marketing we need to consider the impact of current strengths and weaknesses of
our operation. What will help us to develop and market products that successfully
meet the needs of our customers? What will prevent us achieving our goals?

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Current opportunities and threats help us to understand the external influences that
can help us or stop us from achieving our goals. What are our competitors doing?
What changes can impact on our success? In this table there are several generic
SWOT examples that can be applied to a wide range of business applications:
SWOT analysis
Strengths

Weaknesses

Corporate governance

Total dependence one supplier or source

Experience and knowledge

Gaps in supply chain management

Capabilities and innovation

Limited finances and cash flow

Competitive advantages

Operational limits and inefficiencies

Operational capacity and efficiency

Lack of competitive positioning

Experienced sales force

Unsustainable deadlines

Advertising networks

No accreditation or certification

Existing quality management systems

Under developed processes and systems

Financial reserves and capabilities

Lack of experience and knowledge

Accreditations

High turnover of staff

Reputation and branding

Inadequate marketing

Cost advantages
Opportunities

Threats

New partnerships and distribution channels

Loss of financial backing

Improvements to business technology

Loss of staff

Implementation of social media networking


strategies

Competitor impact

New product research and development

Changes to legislation or regulations

Improved sustainability and environmental


impact

Restricted supply

Global market reach


Changes to demographics and target market
needs

Decrease in market share

Cancelled contracts or partnerships


Global financial impacts
New technologies or advances

You can audit your strengths and weaknesses against quality, time, cost, competitor
or industry benchmarks or performance indicators.
SWOT analysis can be used in many situations such as:

Commercial viability

Product positioning

Branding

Sales forecasting

Acquisition strategies

Risk management

Organisational design

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Marketing planning requires us to know the answers to many questions regarding the
direction to be taken as a business and the attitudes of our target audience.
We need to consider the impact of attitudes to a wide range of attitudes and beliefs.
These can include but are not limited to:

Environmental considerations what attitudes will our customers adopt in relation


to manufacturing of certain products

What do we do better than our competition?

Where might new customers come from?

How will technology help us, or not? With our products with our business in
general or with the way we operate?

How will the political landscape affect us and our customers?

What legal factors will impact on our production or operation?

What are the needs of specific groups of customers?

There is not one size fits all in marketing consider the needs and attitudes of a range
of customers.
Strategy in marketing refers to the long term direction the organisation chooses to take
so they can meet their objectives and plans. The plan to ensure the success of the
business. Forming a strategy that works for your organisation will take into account:

How people in the organisation think, are they willing to think creatively to
make sure the objectives are met?

Actively search out new opportunities and ways of performing in the business
and the market place

Understanding what your customers want and how to deliver, which of the
opportunities to fill those needs work and which may not?

Areas that provide high yield improvement deserve the most resources

Maintain competitive advantage

What kind of media campaign is being used? Can it be expanded to include


cross media (includes more than one media eg: television, print, web, direct
mail and in house promotions)

Are your plans inclusive of social media? This is an important area to market
how will you address your strategy to capture this opportunity?

Promotional strategies allow for sampling of products, if this works for your
product how will this roll out across the organisation? Who needs to be
involved?

How are you going to manage Loyalty of your customers? Is there a loyalty
program? Does it work well? How do you know?

Alliance marketing is a strategy where more than one entity joins together to
promote and sell products, services, ideas. All parties in the alliance stand to
gain as much as the other

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Whether your business decides to pursue heavy web based marketing or print media
or social media, it is important to decide on a strategy or strategies which meets the
objectives and goals already determined by the organisation. Your marketing needs to
drive business to your organisation. How will your customer reach you? Consider all
the elements of the marketing mix in your strategy.

1.1.2 The marketing mix


The marketing mix is the set of controllable marketing variables that the company
blends to produce the response it wants in the target market. Kotler et al (2007)
It refers to the various elements making up the practice of marketing in its totality.
Often referred to as the Four Ps:
Product

Quality and features. Why do your customers need what you are
selling? What are the perceived benefits of your product? Product is a
good service, idea, place or person - whatever is for sale whatever we
are selling. Considered to include core - benefits the product offers
the customer, actual which is the physical product and augmented
the whole package including warranty, delivery and after sales
options for example.

Price

List price, discounts, allowances etc. what will make them part with
their money? What the customer is willing to exchange for the
product that they want. Consider price as well as all the costs, time,
social, lifestyle for example.

Place

Retailers, locations, warehousing where do your customers go to fulfil


their needs? How available is the product to your customers? This
relates to channels of distribution as well as actual places the product
is available from.

Promotion

Advertising, personal selling, sales promotions. All activities, actions


taken to let customers know about the product benefits and how this
product fits their needs.

The Four Ps are closely linked to the consumers Four Cs:

Product

Customer needs and wants

Price

Cost to the customer

Place

Convenience

Promotion

Communication

The extended marketing mix


In recent years, the marketing mix has been extended to include people, process and
physical evidence. This is largely as a result of the marketing of services.
People

Important particularly in the marketing of services.

Process

Customers migrate to other service providers when the


process is not providing customer value.

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Physical evidence

Examining every aspect that customers use in their


perceptual field to assess such a service.
Process
Product

Place

Physical
evidence

People

Price

Target
market
intended
position

Promotion

There is a significant amount of information relating to the marketing mix. There is


additional content in the appendix of this eBook.
When you are considering the information available to you regarding the market and
your own business make sure you answer questions regarding the marketing mix.
You have a new product to sell, is it enough to create a product and launch it onto the
market to sell?
The simple answer is of course not. You need to understand why your customers
would want to buy your product. What motivates and interests them, who are they?
What alternatives are available in the market place already?
Case study
Lets assume you are intending to open a caf in a suburban area to cater for stay at
home mums and their children. There will be a crche in the caf to give the mothers
a break while the children are looked after by qualified child care staff.
You would be foolish to begin a business based on what you think? Ask yourself what
other cafes are in the area? Why would someone choose to come to your caf over
the alternatives? Do your potential customers want to go out with their children or is
it easier to stay at home with them.
It is important to understand some particular questions about your customers,
otherwise known as the target audience.
What price are customers prepared to pay to come to your caf?
If the neighbourhood is a relatively low socio economic area there may be
problems with paying for the service you intend to provide
Are there fathers who stay at home in this area? Perhaps they want different
kinds of outings in the day for them and their children to mothers and children
What kinds of promotion opportunities will work with your audience? Are they
all social media users or not? If they are not your work may be lost if you
choose to market via social media exclusively
Is the location you have chosen convenient? Since customers will be coming
with prams is there space for them in the caf or is there a pram parking lot?
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Is your business able to support this idea, is the market


Doing this initial planning and research is critical to the success and identification of
marketing opportunities. Remember a marketing opportunity is considered to be an
identified need, want or demand a business can work with because the need, want or
demand is not being addressed by competitors.
Ask the hard questions to gather the answers to help you with your planning.

1.1.3 Ethics and regulation in marketing


Marketing imposes a great deal of influence on the social landscape. The onus is on
you to behave in a responsible way to use your power wisely. Your decision as a
business owner or operating in business is to be ethical and to do the right thing,
always. Competition is one thing, using your competitive advantage is different
matter. You cannot use your position to disadvantage any person or group of people.
For example:

Children who are inexperienced and vulnerable

Elderly who may not understand the intricacies of technological change

Manufacturing a product which is unsafe or defective

Poor ethical practice can also involve:

Providing misleading information

Fixing prices to reduce competition

Exploitative behaviour in any way

There are a range of ethical and legal boundaries in the Australian marketing
landscape:

Unfair pricing

Financial responsibility and accountability

Planned obsolescence and deceptive practices

Consumerism

Environmentalism

Globalisation

Corporate social responsibility

Unfair pricing
Consumers often complain of high prices as a result of the high costs of distribution,
high advertising and promotion costs and excessive profit margins of middlemen.
There is the argument (rightly or wrongly) that intermediaries in the marketing
channel, mark up their prices beyond what is fair so as to make excessively high
profit margins. As a result, the distribution costs too much and consumers are forced
to pay the price.
Marketers are also accused of pushing up prices to cover the costs of inflated or
ineffective advertising media.
Example

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A heavily promoted brand of aspirin is 10 times more expensive than a


less promoted brand. Differentiated products e.g. cosmetics, detergents
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or toiletries include promotion and packaging costs, sometimes up to 40%


of the manufacturers price to the retailer. These are passed on to the
consumer. Additional charge occur when margins are inflated to extreme
levels. E.g. it is common in the pharmaceutical industry to sell a pill that
costs 5 cents to produce at between 40 and 90 cents. Some of this is
invested in research and development of new drugs, however, the
arguments continue.
Financial responsibility and accountability
Making sure marketing expenses relate to the appropriate activities means we are
able to measure the impact on the profit margin. Is the percentage of expense spent
on marketing the product reasonable and able to be justified?
Planned obsolescence
Another criticism often levelled at businesses is that they develop products with built
in obsolescence. That is, that products are designed to break down so that consumers
need to buy a new product earlier than is reasonable, or that products are released
without certain features so new models can be released that are more desirable than
the previous model. This concept is most often applied to electronic and computer
goods manufacturers.
Deceptive practices
Refer to any practice that leads consumers to believe that they will get more value
than they actually do. They usually fall into one of three categories:
Deceptive pricing
May relate to falsely over or
under stating factory or
wholesale prices, or a large
reduction in a fake
Recommended Retail Price
(RRP)

Deceptive promotion

Deceptive packaging

Relates to the overstatement


of a products features or
performance, attracting
customers to the store for a
bargain that is out of stock,
or even running rigged
competitions

Can include exaggerating the


contents of the product using
unrelated or unrealistic
images or design, not filling
the package to the required
level, misleading terms or
language

Consumerism
The increased involvement of government agencies and consumer interest groups
pushing and monitoring regulations designed to protect consumer rights.
Environmentalism
We must become increasingly aware of the impact on the environment of marketing
decisions ranging from product design and development through to promotional
strategies. As more and more people are demanding sustainable options we need to
be ahead in all aspects of business, not just marketing.
Globalisation
The increase of globalisation explains why competition is stronger, communication is
better, we have an increased access to cheaper labour and materials, and transport is

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more efficient. In short the world is becoming smaller and we need to consider this
with our marketing approaches.
Increasing global connectivity and integration in economic, social, technological,
cultural, political and ecological spheres causes issues in marketing.
There are two schools of thought, globalisation may result in:

A convergence of patterns of production and consumption and a


homogenisation of culture

The potential to take many diverse forms

Often considered in this context is the concept of exploitation of third world and
emerging economies to benefit the wealthiest 10% of the worlds population in first
world economies. These third world countries provide lower costs in terms of
resources and labour but also open up broader markets of people with disposable
income to become consumers of all manner of goods and services.
Corporate social responsibility
Organisations are obligated to take responsibility for the impact of all aspects of their
operations. Customers, employees, shareholders, communities and the environment
can all be impacted positively and or negatively. This obligation is seen to extend
beyond the statutory obligation to comply with legislation and sees organisations
voluntarily taking further steps to improve the quality of life for employees and their
families as well as for the local community and society at large.
The term triple bottom line has traditionally referred to people, planet and profit.
How we look after the people in our organisation and our customers, how we impact
on our community and planet from a social and environmental perspective and our
financial responsibility of course needs to be observed in balance with the other
issues. Experts now refer to the quadruple bottom line and includes governance and
how we behave as an organisation. It does seem to be difficult to describe the actual
four, with words like cultural, social, sustainable, economic, spirituality and purpose.
Whichever headings you subscribe to this refers to an expanded spectrum of values
and criteria for measuring organisational (and societal) success: economic, ecological
social and responsible wellbeing for all.

1.1.4 Law and regulation


Marketing is covered by many pieces of legislation and peak body regulations. These
include, but are not limited to:

Australian Consumer Law 2011

Competition and Consumer Act 2010 is a commonwealth law formerly Trade


Practices 1974

Fair Trading Acts

Privacy laws

Protection of Intellectual Property, Trademarks and Copyright

Australian Competition and Consumer Commission (ACCC)

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Australian Communication and Media Authority (ACMA) Do Not Call Register

Australian Advertising Standards Bureau (ASB)

ACMA Australian e-marketing Code of Practice

Australian Direct Marketing Association (ADMA) Code of Practice

Australian Marketing Institute (AMI) Code of Conduct

Australian Association of National Advertisers (AANA) Code of Ethics

Australian and New Zealand Standard Industrial Classification

Anti-Discrimination Act

National Classification Scheme

SPAM Act enforced by ACMA

Consider the organisations that advocate for fair information and legal cases to support
consumer rights for example, Choice, is a publication by the Australian Consumers
Association and Consumer Action is a consumer based website that takes action against
unfair practices on behalf of consumers who cant take the fight themselves.
Go to the Advertising Standards Bureau website for the Codes administered by ABS
www.advertisingstandardsbureau.com.au.
Regulation of advertising
Advertising media are regulated by a number of internal and external bodies.
Internal regulators
Australian Publishers
Bureau APB

An advisory opinion body to its publisher members and their


constituent publications, on legal and other issues affecting
advertising.

Aust. Assoc. of National


Advertisers - AANA

The AANA is the peak advertising industry body


representing the rights and responsibilities of Australias
major advertisers and their industry partners.

Advertising Federation of
Aust. - AFA

The AFA is the peak body representing companies in


advertising and marketing communications to industry,
government, media and the public.

Federation of Aust. Radio


Broadcasters - FARB

FARB is the national industry body representing the


interests of Australian commercial radio broadcasters. FARB
provides a forum for discussion of industry matters and acts
as a political advocate on behalf of the industry

Commercial Television
Industry Code of Practice

Regulates the content of free-to-air commercial television.

Codes of practice are important guidelines which dictate how industry should behave
towards its customers.
Example

The objectives of the code of practice of the Australian Direct


Marketing Association (ADMA) are to:

Ensure business and consumers have access to the product and service
information they need to make informed choices

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Minimise the risk of members breaching the Trade Practices Act 1974, Privacy
Act 1988 including the National Privacy Principles (NPPs), Spam Act 2003 or
State fair trading legislation

Promote a culture among members of conducting their businesses fairly,


honestly, ethically and in accordance with best practices; and increase business
and consumer confidence in doing business with ADMA members' (ADMA 2012)

The Free TV Australia Commercial Television Industry has a code of practice which
regulates marketing on commercial television. It ... covers matters prescribed in
Section 123 of the Broadcasting Services Act and other matters relating to program
content that are of concern to the community ... (Free TV Australia 2010).
The Australian Guidelines for Electronic Commerce (Attorney General's Department
2012), which replaced the Australian E-commerce Best Practice Model, offer guidelines
for fair trading and protection of both consumers and traders who are engaged in ecommerce or online trading.
External regulators
Aust. Competition and
Consumer Commission ACCC

Competition and Consumer


Act 2010 - replaces Trade
Practices Act 1974

Privacy legislation

Aust. Communication and


Media Authority ACMA

The ACCC promotes competition and fair trade in the


market place to benefit consumers, business and the
community. Its primary responsibility is to ensure that
individuals and businesses comply with the Commonwealth
competition, fair trading and consumer protection laws.
Promotes competition and fair trading to protect
consumers. The Act deals with almost all aspects of the
marketplace: relationships between suppliers, wholesalers,
retailers, competitors and customers. It covers unfair
market practices, industry codes, mergers and acquisitions
of companies, product safety, product labeling, price
monitoring, and the regulation of industries such as
telecommunications, gas, electricity and airports.
Australias privacy regimes involve a range of
Commonwealth and state/territory enactments, judicial
decisions, industry codes of practice and action by
individual players (consumers, businesses, other entities).
ACMA is responsible for regulating online content, including
internet and mobile phone content, and enforcing
Australia's anti-spam law.

1.1.5 Is marketing the same as selling?


Analysis of the information gives the organisation a base on which to build future
marketing activities.
Marketing is not exactly the same as selling Rix (2011, p.11) says:
Under the sales approach, a company first makes a product and then uses various
selling methods to persuade customers to buy it. Just the opposite occurs under the
marketing approach i.e. the company finds out what the customer wants and then
tries to develop a product that will satisfy that want and still yield a profit.
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Bangs (1989, p. 27) modifies this by saying,


That's fine if you have the luxury of choosing your target market and
product/service mix. Most of us, though, are limited by our experience and
interests, to say nothing of other limitations such as money, family obligations and
so forth.
These two statements sum up the theory and the practical reality of marketing.
Marketers in the real world must collect and analyse data so they understand the
requirements of their markets and find products which match them. They must also
constantly search for new markets which require their existing products. Bangs
(1989, p. 27) advocates that it is advisable to:
Change gradually to a marketing orientation. Understand your target markets in depth,
and measure the products/services you offer against the demands of those markets.
Marketers use data analysis to refine existing marketing and suggest new
activities.

1.2 Research potential new markets and assess


opportunities to enter, shape or influence each
market, and the likely contribution to the
business
Finding new markets can provide opportunities to improve sales volume, growth,
market share and profitability. Before entering a new market, thorough research
must be done to balance potential advantages against risks in entering the new
market. New markets can be similar to, or radically different from the existing market
the organisation currently operates in.
What is a new market? It is a market your business has not previously trade into. Or
it is a brand new opportunity. The internet and online sales was a new market for
many businesses at the beginning of the technology boom. Now if your business
doesnt have an online presence there is a problem!
The internet provides opportunities for organisations to enter the e-commerce
market. Within the e-commerce market which is huge, we need to target effectively.
Example

Amazon and Cars guide both operate in the e-commerce market, but their
target markets, even though they could have large numbers of common
customers are very different. An individual consumer might buy books
one day and a car another day, but for marketing purposes they are part
of two separate markets.

E-commerce should not be viewed as a market, but as a tool which opens up


previously unreachable markets. Small retailers have traditionally had their markets
limited by geography and storage space. E-commerce removes restrictions by giving
them access to any market connected to the internet and allowing them to ship
goods directly from the wholesaler without the need to first stock it in their store.

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If an organisation traditionally markets only within its own country, export markets
can be a source of new markets. Exporting is another tool rather than a
homogeneous market. Japan and the United Kingdom could both be export markets
for Australian canned tuna, but they are clearly not one market because of their
geographic separation and cultural differences. Exporting can be a rewarding tool for
opening up new markets.
Regardless of which tools they use, organisations can develop new markets by
targeting market segments they have not yet penetrated. Marketers subdivide the
whole market into groups or segments, whose members have something in common
that marketers can use.
The members of a group or segment will be similar to each other, with respect to
what influences their demand for the particular good or service. Rix 2011, p. 116
There are many ways to segment the market; the final choice for any organisation
will depend on products and culture. Most marketers make a fundamental division
between business markets, which buy goods and services to use in a business or to
re-sell, and consumers, who buy goods and services for their own personal use.
When organisations target demographically based segments they must ensure that
they do not breach anti-discrimination legislation.
Example

A halal restaurant is likely to target Muslim people, while a female friendly


mechanic would target women. Both can say positive things about their
target markets and indicate that the target groups can trust them to
provide good, friendly service and not take advantage of them in any
way. They must not denigrate or exclude other groups.

Organisations seeking to penetrate new markets must first define the market and
research its characteristics. They must then find new or existing products which
match the requirements of this market.
Example

A hardware store currently supplies mainly to the local consumer market


and decides to market to tradespeople. Tradespeople is too broad a
segment (it can include all building trades as well as trades like
hairdressers, mechanics and bakers etc.). The target needs to be limited
to building trades. Even building trades is very broad. Carpenters,
plumbers and electricians all have some common requirements, but each
trade also has unique requirements.

After defining the market it is time to research requirements:

Acquire a database of potential customers from your target market. Business


can do this in a number of ways, including finding details from the Yellow Pages,
using competitions and questionnaires in the store, sending a representative to
visit specific areas or employing a market research organisation

Promote suitable products from its current range to the market and also obtain
new products if research shows that lines which are not currently stocked were
important to the market

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Conduct your SWOT analysis, consider a PEST analysis Political, Economic,


Socio-cultural and Technological factors that can affect your opportunities to
enter markets

Organisations can start with a product and find new markets for it.

What does the


organisation want to
achieve?

How will we know that?

How will we do that?

Research and gathering


of information

We need to understand
the situation, our
customers and
environment we operate
in

Information comes from


customers and from
industry. Examination of
behaviour from a
number of sources

There are several methods of research:

Primary- this is information gathering for your own data. You may conduct a
questionnaire or contract someone to survey your customers for you. This kind
of research may be as a result of information you found out at the stage of
conducting secondary research. This level of research allows us to focus on a
specific issue. It can be somewhat expensive and time consuming

Secondary research focuses on the analysis of the results of primary research. As a


marketer we need to ask if the information we need has already been gathered by
others. If it has we can gather that information from a range of sources to draw a
picture of our audience, their needs and of our market or industry. Secondary
research refers to the analysis of the information already available

Sources of information can come from:

Tailor made surveys and questionnaires and market research specifically


targeting your issue (primary)

Records of company performance historical and financial records, academic


research, specialist information (secondary). Analysis of the figures will provide
you with performance based results, understand the impact of profit, cash flow,
earnings per share, return on equity will be discussed further in the eBook

Government research Australian Bureau of Statistics gathers information


every 5 years and aims to measure each household and their occupants, this
provides information for marketers regarding the population, where they live,
how much money they earn, family size and structure, the level of information
is comprehensive and valuable (secondary)

Creative workshops using focus groups and brainstorming sessions with a


diverse group to come up with potential opportunities to evaluate and consider
as options for your business (primary)

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Example

In 2011 (the last census) Brisbane had grown by 11.5% since the 2006
census information. The next census will be held in August 2016.

Case study
In the case of the caf this may be providing a different slant on the caf experience in the
area. It may have been established that no competitors are offering the same service and
that this is considered to be valuable by our target audience.
At this stage we would conduct a SWOT analysis to determine the strengths, weaknesses,
opportunities and threats of our plan.
We should also conduct a PEST analysis.
Through your research (which may mean looking at census results for your intended location
and area, focus groups and brainstorming) you may discover that the target market cares
about the environment and about growing and eating healthy food with no preservatives.
This will inform your menu choices, organised activities and approach you offer to child care.
If you werent aware of these opportunities you may provide options for your customers that
are at odds with their values. Plastic disposable cups may aggravate your target market
instead of providing a choice to reuse all cups for coffee which may be a basic expectation
for them.
Be prepared and understand what is happening for the community, your competitors and
your target audience.
Your primary research may lead to an opportunity to work with an organic fruit and
vegetable supplier to hold a market onsite each Saturday, a chance to develop a new
business opportunity to support your business and fill a need for your clientele.

A hardware store could obtain the agency for a line of trade quality battery operated
power saws. The combination of portability, power and battery life make it ideal for
use on building sites.
Analysis of the market might show that carpenters use portable power saws more
than all the other trades combined on a building site, and therefore have most to gain
from a safer, more efficient product. The store could embark on a marketing
campaign promoting the benefits of no power leads or air lines, time saving,
increasing safety and improving profitability. Research has already identified
carpenters have the most to gain from these benefits so the initial campaign could be
directed at them. Expansion to other trades may be an offshoot from this.
A large retail business could consider advances in technology to improve their
outcomes. They would need to take into account weaker consumer demand (by
analysis of financial results). Understand the actions of the competition and why they
are doing what they are, is it working, can you incorporate changes to your
opportunities? If you have a large checkout element to your organisation consider
how improvements to access, technology and process can improve the outputs. For
example do self-service checkouts help your business? Using the marketing mix in
the appendix how do these important marketing considerations help you with your
planning and when identifying new opportunities?

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Organisations sometimes create new opportunities by entering a market


with deliberate intentions of changing it.
Example

Apple's introduction of the iPad. Apple introduced the iPad into the
personal computer market with the intention of changing the market.

Another example, on a much smaller scale, is a cooperative called The People's


Supermarket, which was established in London in May 2010. It entered the local food
market with the clearly stated intention of winning customers from the major
supermarket chains and changing their shopping habits and expectations. Its mission
statement says:
We seek ... to create a community supermarket that highlights the possibilities of
consumer power and challenges the status quo (The People's Supermarket 2012).
Social media, such as Facebook, Linked In or Twitter, are other tools to develop new
markets. It would be appropriate to use social media to target products developed for
single people in their twenties. Facebook advertisements can be specifically targeted
to be seen specifically by the target market.
There are entire libraries dedicated to the statistical analysis of data. You must do
work on making sure your research is reliable and valid, these are statistical terms
referring to how likely it is that the data can produce reliable and useful results. Did
the research measure what it was supposed to? This is a measure of its validity. You
also need to be sure your data is free from errors.
Remember to keep your original question in mind when looking at your research.

1.3 Explore entrepreneurial, innovative


approaches and creative ideas for their
potential business application, and develop
into potential marketing opportunities
Thinking differently and innovatively is an essential driver for creating solutions that
maximise potential for new and improved marketing opportunities. The following
diagram has been adapted from the website
http://www.dukeven.com/Home/Evaluation/Market-Opportunity

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Environment
What is the potential customers
current environment?
What behaviour or processes
exist?
What is the need or problem to be
filled or solved?

Segments
Are there important differences
among potential customers
(relative to the need/problem you
have identified)?

Buying process
How does your customer buy
from you? Is there only one way?
What are major barriers or
obstacles to purchase/use of a
solution to the identified need or
problem?

Is any part of the process affected


by monopoly or concentrated
power?
If so, how does your proposed
solution align with the powerful
firms?

Potential customers
What characteristics create this
need/problem?
How many customers are there?
How does this equate to
consumption? Are there issues
affecting use and frequency of
use?

Value
How severe is the need or problem
identified? Do your customers
recognize that they have this
need? How can you measure the
value of a solution?

Is the solution completely


independent or are other,
complementary products/services
required? If the latter, who
supplies these products and
services? Can you integrate this
with your proposed solution?

Are any people or groups


threatened by your product or
service? Are any relationships
threatened? Are you relying on
other industries and/or products
or technologies to be adopted?

Consideration of these factors will assist your business in making the right decisions
for their innovative thinking and approaches. Can any of these areas be useful to work
on to fit with the overall strategic direction?

Consumer demand (change in consumer needs)

Changes in technology

Impact of international players competition in local area

Diversifying to increase/protect market share

Reducing cost of labour

If any areas increase the potential for profit, it is worth exploring further.
Case study
Our caf is getting organised, they believe they have a good idea of who the target market
is and what they want. Now it is time to challenge the ideas they already have.
Their current thoughts to date are to:

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Case study
Employ a child care expert to manage the crche and a caf manager to run the caf. They wont

need an overall manager because the other two can report to the owner easily enough

The crche is to be open from 9 3 pm. The rationale is that most people have after
school sport and other children to look after

The caf will close at 3.30 pm. The menu will be quite complex to cater for breakfast
and lunch as well as snacks

At the moment the caf has to decide if they have a solution to a problem for their customer
or a change in need and use of a product. Does the potential customer for the caf
understand that they have this need for an uninterrupted conversation and cup of coffee
with other adults? All while their children are being actively amused by a qualified carer?
The owners and managers hold a brainstorming session with the team and other select
people from the community they ask the following questions (italics) and receive the
following information:

How do your customers buy from you? Is there only one way? Parents need a place to
get good healthy options for afternoon tea and coffee to take to the sporting field,
closing at 3.30 causes a problem for those customers

What behaviour or processes exist? They dont want too much choice and love to eat
breakfast all day, with a few healthy and gluten free cakes for a treat

Is the solution completely independent or are other, complementary


products/services required? If the latter, who supplies these products and services?
Can you integrate this with your proposed solution? The crche could do more
business with after school care assuming they are licensed to do this, closing early
however will put a stop to this activity. After school activities are highly sought after,
there is an opportunity for older children to take part in art classes in the crche, it
may require another provider but this is an additional service which could be very
lucrative, especially in the holidays

What does our customer want but cannot buy? Customers indicated that they wanted
to be able to take home roast dinners especially after late school based sporting
events

As you can see there are many other options than the traditional caf approach. Think
innovatively to solve the new marketing opportunities creatively.

Ask and watch. Observe research and brainstorm alternative approaches to solutions
to best suit your target audience and what is important to them. The stage of market
research are predominately these. Understand your customer by watching and
listening. Talk to them and others to determine what is important to them. Pay
attention to the overall environment, the closeness of another business may prompt
an opportunity to work with them to build both businesses. Only an aware business
person is willing to think creatively to provide solutions to the needs of their
customers.
Consider how many people are available to take up your idea? Are their enough
customers to make it viable and successful? How can you be sure of your figures?
What will make them take up your opportunity? What will stop them?
What if your opportunity is a great idea but not one people are willing to pay for? Are
their cultural issues to be overcome before this can be used fully by your audience?

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Are their barriers to the technology? Perhaps there are too many alternatives available
for your options to be attractive.
The first step is to develop a conscious mind set of looking for ideas and
opportunities because without this there will be fewer ideas and many
opportunities will pass unnoticed.
Entrepreneurs do not have a magic gift. They train their minds and practice focussing
their awareness. They are observant and prepared to take calculated risks, knowing
that some of their ideas could fail. Entrepreneurs have ideas and see new options and
opportunities to be developed into businesses. Anyone can adopt an entrepreneurial
approach to their marketing by developing their ideas and being prepared to take on
new opportunities.
Example

In 1938 Heublein purchased the United States rights to Smirnoff vodka.


Sales were very slow until they changed the product to use whiskey
corks.... In Kentucky sales rocketed as the distributor started marketing
Smirnoff as white whiskey, no taste, no smell (Wikipedia 2012).

1.3.1 Tools and techniques for generating ideas


Entrepreneurial ideas come from creative thinking.
Professional marketing organisations have creative teams, whose function is to
generate new, creative ideas. It is possible to use idea generation techniques in
smaller teams to learn creative thinking and use your team to come up with
innovative solutions.
In order to manage marketing for your business or organisation you sometimes need
to think outside the box. This is not always easy to do. Being proficient in using some
well-known strategies to generate ideas is a critical management skill.
The goal of idea generation is to come up with a variety of new approaches or
solutions to an issue at hand. Whether done alone or in groups, idea generation is
more productive when you follow a few guidelines and use various techniques that
encourage divergent thinking (suggesting many different options) and deliberate
mental processes of attention, escape (challenging an existing concept), and
movement (generating ideas freely).
Brainstorming
Alex Osborn, the developer of the brainstorming technique, suggests basic guidelines
for generating ideas:

Criticism is not allowed, participants are encouraged to express any idea

The more ideas, the better, each idea is explored in detail to see whether there
is potential to develop it into a new marketing opportunity

All ideas are recorded without regard to their relevance or usefulness, even
ridiculous, irrelevant ideas expressed by one member can trigger valuable ideas
in another member, outlandish ideas are welcomed, the wilder the better

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The whole list is examined. Silly, irrelevant or unworkable ideas are removed
(and set aside in case they are valid at another time) so the final list contains
only ideas which have potential to be developed

Building on and improving ideas is encouraged

Brainstorming is a popular tool that helps you generate creative solutions to a


problem by gathering a list of ideas spontaneously contributed by a group or an
individual.
It is particularly useful when you want to break out of stale, established patterns of
thinking, to develop new ways of looking at things. This also helps overcome many of
the issues that can make group problem-solving a sterile and unsatisfactory process.
It asks that people come up with ideas and thoughts that can at first seem to be a bit
crazy. Some of the ideas can be crafted into original, creative solutions to a problem
you're trying to solve, others can spark still more ideas. This approach aims to get
people unstuck, by jolting them out of normal ways of thinking.
While group brainstorming is often more effective at generating ideas than normal
group problem-solving, there have been many studies showing that when individuals
brainstorm on their own, they come up with more ideas (and often better quality
ideas) than groups of people who brainstorm together.
Partly this occurs because, in groups, people arent always strict in following the rules
of brainstorming, and bad group behaviours creep in. Mostly, though, this occurs
because people are paying so much attention to other peoples ideas that they're not
generating ideas of their own or they're forgetting these ideas while they wait for
their turn to speak. This is called blocking.
Brainstorming does have limitations however. A number of studies have found that a
large quantity of ideas/solutions does not necessarily lead to quality ideas or
solutions. Groups have been found to perform better than individuals when the
emphasis is placed on finding a quality idea rather than a large number of ideas.
There is also evidence that brainstorming actually performs poorly in terms of idea
generation compared with other techniques or variations due to:

People interrupting each other

The effect of the group on the individual (like attention seeking behaviour and
shyness)

Self-interested laziness (like social loafing and free-riding)

To avoid productivity losses associated with brainstorming it is suggested that:

Brainstorming groups are kept small in size

Authoritative observers should not be present

Group members write down ideas rather than vocalising them

Group members should still generate ideas together rather than alone

Evaluating is an important part of the generation of quality ideas/solutions

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If ideas are to be vocalised, group participants must be aware of rules dealing


with interruptions, shyness/attention seeking behaviour and laziness

Mind maps
Mind Maps were popularised by author and consultant, Tony Buzan. They use a twodimensional structure, instead of a list format conventionally used to take notes.
Mind maps are more compact than conventional notes. They help you make
associations easily, and generate new ideas. If you find out more information after
drawing a mind mapyou can easily integrate it with little disruption.
More than this, mind mapping helps you break large projects or topics down into
manageable chunks, so you can plan effectively without becoming overwhelmed or
forgetting something important.
A good mind map shows the shape of the subject, the relative importance of
individual points, and the way in which facts relate to one another. This means that
they're very quick to review, as you can often refresh information in your mind just by
glancing at one. In this way, they can be effective mnemonics - remembering the
shape and structure of a mind map can give you the cues you need to remember the
information within it.
Scenario analysis
Scenarios are stories about the way the world might turn out if certain trends continue
and if certain conditions are met. A simple five step method is:

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Define a focal issue or decision:


Scenarios should look at the future by focussing on a specific issue. E.g.How
could a change in government policy affect our business operations? What
happens if the Australian dollar devalued / increased in value?
Identify driving forces
Social, economic, environmental, political, and technological factors most
relevant to the issue being reviewed. They should be prioritised according to
their level of predictability and importance in affecting the desired outcome.
Write scenario plots
Stories that explain what effects there is on business operations or strategic
direction. Good scenarios combine a solid understanding of present trends
with a focus on outcomes sought by decision makers. To make the scenario
realistic conduct research to obtain relevant data. Data may come from
internal and external sources.
Consider the implications
Once scenarios are developed, decision makers within the organisation should
review implications that outcomes uncovered by the scenario would have on
the organisation.
Disseminate scenarios
Once scenarios have been built and refined, they should be written in easyto-read language. Contingency plans for scenario outcomes should be
integrated into organisational procedures. Use or modify existing systems to
monitor progress toward operational goals as well as changes in the external
environment.

Scenario planning is a useful way of challenging the assumptions you naturally tend to
make about the situation in which your plans will come to fruition.
By building a few scenarios, you can foresee more unknowns that may come to pass,
and be able to plan measures to counteract or mitigate their impact.
An organisation's competitors can provide ideas for marketing. The entrepreneurial
approach is not to just copy them, but to ask and answer the question, 'What are
they trying to achieve, and how can we do it better?' It is often easier to look
objectively at another organisation than at one's own, especially in very small
organisations with only a few people.
Customers, sales representatives, other personnel and suppliers can also be sources
of entrepreneurial ideas which have potential to turn into marketing opportunities.
Adopting an entrepreneurial approach to marketing is a very creative activity and it is
impossible to give a set of step-by-step instructions for creativity. Organisations and
their personnel who wish to adopt an entrepreneurial approach must first analyse
current circumstances to use as the starting point for future plans.

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Once an organisation has explored entrepreneurial, innovative ideas it must develop


them into marketing opportunities. This requires them to:

Identify the market and its requirements

Specify the product if a new product is being developed

Plan the marketing campaign

Test the marketing plan

Refine the marketing plan

Implement the marketing plan

What is a marketing plan? It is a written plan to describe and direct the marketing
activities of the organisation. It is a road map that helps business decide where they
are, where they want to go and how they will get there. It helps clarify how to appeal
to your audience and what they need. It can include strategies, budgets and goals.
This is similar to any other marketing campaign. An entrepreneurial approach to
marketing is really only different from other approaches because it uses a more
creative method of generating ideas and has the potential to develop ideas which are
radically different from previous marketing campaigns.
We have moved through the first two steps of this process, in the next section we will
look at the evaluation of the ideas to see how they fit within the overall organisations
direction.

Gather all the


ideas together

Sort through
ideas. Screen the
ideas for suitability

Concept and test


your ideas

Analyse the
business and
strategy for
marketing

Fine tune your


prototype, develop
a firm idea of your
business

Test again

Proceed after final


changes

Review again in a
specific time frame

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Investigating marketing opportunities

2.1 Identify and analyse opportunities in terms of


their likely fit with organisational goals and
capabilities
We need to understand clearly what the organisations looking to achieve. What are
the financial goals, the social aims, the environmental priorities and the brand
considerations?
You and your team now have determined a list of options for marketing opportunities.
Do they fit with the organisations goals? If they dont, then go back to the drawing
board. If they do then move onto the next stage of realising the value of the
marketing opportunities.
Consider the strategic and operating plans for the business. What are the objectives
for the short term and the long term? How will you be able to plan for long term
objectives with your marketing opportunity?
Is your business capable of working with the increased demand? It is
counterproductive to sell more products if the manufacturing capacity is limited to the
current levels. This will not fit with the organisational goals and capabilities, the
organisation would be better to work with increasing capacity first.
Identifying the opportunities for marketing for the business is part one, can the
business achieve the objectives within the new direction, what trends will impact on
the new plans or opportunities? What impact will your competition have on your
plans?
Case study
The initial planning of the caf is to achieve the following operational goals:

A 10% net profit in the first 6 months

They are hopeful of employing another staff member after this time

Hold a local market onsite within 3 months to become involved in the local market scene to
work on expanding their business
How do the ideas work with these goals?
Remember these results from their brainstorming and idea generation?
Idea: Provide good healthy options for afternoon tea and coffee to take to the sporting field
Solution: Now closing at 4.30, picnic options to be included in the menu.
Idea: Limit choice on the menu, offer breakfast all day, with healthy and gluten free cakes
Solution: Menu is simplified with seasonal changes, makes less waste, simpler planning and
more consistency, works in with the option for takeaway healthy choices
Idea: After school care and activities are highly sought after.
Solution: Offer older children art and cooking classes in the crche as an alternative to the
sport only activity only being offered in the community.
Idea: Customers indicated that they wanted to be able to take home roast dinners

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Case study
especially after late school based sporting events
Solution: Consider this option in the second part of the first year of trading work on the
other ideas first.

Other businesses may look to expand their market share by becoming more visible,
more stores, and greater opportunities for online sales for example. They could
develop new products in response to consumer demand or changes in trends.
Example

Grocery stores could consider the changes in working hours and the
fact that many families have both parents working. Healthy, preprepared meals could be an important area of growth a new
opportunity. Also home delivery could be another area of growth. If
the grocery chains werent paying attention to trends and
developments they may miss the potential of this opportunity. Many of
the larger grocery chains have expanded into alcohol sales and
discount stores to broaden their exposure and to provide more
products for their customers, more opportunities!

Do your markets value ethics and environmental values in their products? Are organic
products important to your markets? How do you know if they do or dont? Pay
attention once again, ask them and listen to them when they talk. We have already
discussed the importance of ethical and fair behaviour in marketing it is just as
important to appeal to your customers and help them make fair purchasing decisions.

2.2 Evaluate each opportunity to determine its


impact on current business and customer base
Each marketing opportunity will impact on your business in some way. The key here is
to understand the impact on your business as it operates currently and your existing
customers.
Armed with all the research you conducted in the first phase to identify the needs and
wants of your target audience we can now evaluate the benefit or limitation of each
idea. How do we do this?
This is part of the process of screening ideas for suitability. Will they help or hinder
your business and overall organisational goals and objectives?
One way to evaluate is to provide a ranking for all the ideas that you know fit with the
organisational capabilities and goals. Rank them in order of likely success, most
potential for profit or most beneficial for the overall brand of the product or business.
Consider if the opportunity performs well in a ranking system against these questions?

How easy will the idea be to implement? From starting to market entry?

Does it have strong short term potential or long term potential or both?

Will it add value to another product already on offer?

How well does it fit with the organisational profit, environmental, image or
social goals?

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How much risk is associated with the opportunity?

An important evaluation techniques is to consider how these ideas will affect the
current customers of the business.
Example

You own an inner city bar located near many banks and other financial
institutions. Traditionally your customers are middle and senior level
executives who come in for lunch meetings, after work drinks and use the
bar as a place to network. You have noticed an increase of younger
executives out and about at lunch who are becoming active in the
networking scene. They are much more inclined to drink and become loud
and insist on other kinds of food on the menu. Is it cost effective to attract
the younger market at the expense your usual clientele? You will need to
evaluate this decision and opportunity for your business carefully to avoid
changing the nature of the business completely.

Remember there is more to the value of the opportunity than purely financial. Maybe
a different (new) group are more fickle and will move on to the next big thing in a
short time. What if you have alienated existing customers in pursuit of a new market
opportunity?

2.2.1 Knock out factors


New market opportunities must be evaluated to determine their impact.
It is critical all potential impacts are evaluated, unforeseen consequences of taking
the new opportunity could damage or destroy the business.
Knock out factors must be evaluated. Some would knock out the entire business,
while others would only knock out one of its markets. New products can have a knock
out effect. Entering a new market could knock out an existing one.
Opportunity

What could happen

Outcome

A supermarket
examines entering
the home delivery
market.
A greengrocer can
buy all of their eggs
from a battery farm
at a fraction of their
current cost.

Increase in overheads
required to purchase and
maintain suitable vehicles,
plus extra staff required.
The supermarket has to
agree to stock that supplier's
eggs exclusively.

Reduction in cash flow to an


unsustainable level

A music store could


have the opportunity
to enter the teenage
market as a new
market.

Teenagers would be
attracted to the store in
large groups to listen to
music, dance and generally
make a lot of noise, as large
groups of teenagers do.

This might knock out the over


60's market, because many of
these people are annoyed by the
normal behaviour of groups of
teenagers, so would go and buy
their music elsewhere.

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This knocks out the market for


free range eggs and those who
oppose battery farming. Super
market needs to determine
significance of this knock out.

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2.2.2 Present value analysis


Before considering new opportunities, organisations often conduct a present value
analysis in which they evaluate their current business in terms of the criteria which
will be used to evaluate the new opportunity. This gives a base on which to judge the
new opportunity.
Analysis of information
Information

Analysis

Value to the organisation

Comparative
market
information

Can compare performance and


profitability in different market
segments and plan accordingly.

Competitor
performance

Compare performances in
different market segments,
e.g. a fashion retailer could
compare performances in the
teenage market and the 30
40 year old market.
An organisation analyses what
its competitors are doing.

Customer
requirements

Collecting and analysing


feedback from customers.

Legal
requirements

Analysing legislative changes


to determine their effects on
the organisations marketing
strategies.
Analysing marketing activity
in terms of the organisations
ethics.

Ethical
requirements

Market trends
and
developments

New and
emerging
markets
Profitability

Sales figures

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Making sure that the


organisation understands
positive and negative trends in
its markets.
Example: weaker consumer
demand, increased
competition, rising costs.
Identifying new and emerging
markets. Consider
technological improvements.
Analysing the profitability of
each market segment.
Analysing sales figures from
each market segment.

The organisation can compare with its


competitors and plan ways to compete
against them.
This can also be a source of ideas for
future marketing.
Knowing what customers want is
crucial to planning new marketing.
Customer feedback can also be a
source of ideas for new products.
Reveals threats and opportunities
enabling plans to be made for both.

Provides opportunities to promote


ethics and integrity of the organisation
into markets with similar values and
ethics.
Enables the organisation to take
advantage of positive trends and
minimise impact of negative trends.

Allows the organisation to position


itself, ready to serve these markets.
Reveals opportunities to expand
profitable markets and withdraw from
unprofitable ones.
Used in conjunction with profitability,
sales figures aid planning for future
marketing.

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Marketing activities are monitored in terms of their return on investment (ROI) see
the next section. Assessing new market opportunities and planning campaigns in
current markets should be evaluated in terms of their expected costs and expected
revenue. The ROI is the difference between these and can be expressed in dollar
terms or as a percentage.
New opportunities must be evaluated against the same criteria as were used for the
present value analysis. The exact criteria used will depend on the organisation, its
markets and its products. They can be evaluated according to their impact and their
importance. Impact could be measured by a score where -10 is an extremely
negative impact, zero is no impact and +10 is an extremely positive impact.
Example

Part of a music store's evaluation of its opportunity to enter the teenage


market could include the following information.

Criteria

Score

Weight

Comments

Sales revenue

+8

Important

Bigger market.

Profit

+9

Critical

Margins are similar across the board but


teenagers on average buy more per sale,
which reduces the average overheads per sale.

Neutral

Will knock out over 60s but this will be


compensated for by the large increase in
overall market.

Important

More customers, buying more items will


stretch current staff. Can be overcome by
employing casual juniors at peak times. Impact
is acceptable.

Critical

Increased customers who will be careless with


equipment will incur extra repair costs, but
this can be absorbed by the expected increase
in profit.

Impact on
current markets
Customer
service
standards

Overheads

10

2.2.3 Forecasting
The process of looking to the future and determining what your business will need to
support your plans. Consider the impact of:

Numbers of employees and their skill levels

Investments required in production, capacity and distribution

How to promote your activities

Resources required

Estimate sales levels required to achieve your goals

Forecasting is a process of prediction, as such you need to be able to respond to


changes quickly to remain ahead of your plans. There are two main kinds of
forecasting:

Macro Forecasts markets in total, in particular total market demand

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Micro detailed sales forecasts, considers market share and what will happen
to their share of the market in the future

Business needs to consider what will happen in their markets in the short term and in
the long term, how else will they be able to predict or forecast what their future
impact will be?
Firstly it is important to fully understand or be able to predict total market demand.
For example how many people will go to a caf at all, not just our caf in our case
study? Then we need to forecast how many of those people will go to our caf. How is
our caf, service and product positioned in relation to the other cafs our customers
could go to?
Next we predict the forecast sales based on the information we have and the strategy
we believe will be the most successful for our business based on our goals.
It is a far cry from using your intuition only. This is an educated process where you
use the research and information carefully to shape a view of the world you believe
exists in relation to your product.
Quantitative or qualitative
Interpreting data requires one of two approaches. Quantitative or qualitative:
Quantitative
Quantitative research is conclusive,
and takes a more logical, data-led
approach.
Due to the specific nature of
quantitative data it is particularly
useful for assessing performance of
the individual, the team and the
organisation.
Generates numerical data or
information which can be converted
into numbers.
Rates the likelihood as a probability
or frequency of the risk using
numerical weighting e.g. 1 in 200
cases will exhibit this behaviour.
Quantitative data can be verified and
manipulated statistically.
Goals

Instruments
for data
gathering

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Counting and classifying.


Constructing statistical models and
figures to explain outcomes.
Narrow hypothesis and conclusive
research.
Questionnaires, surveys,
measurements, Audits, Points of
purchase, Click-streams
Trend analysis can only be

Qualitative
Qualitative research is exploratory. It
is used when we do not know what
expect, and need to define or develop
an approach to the problem.
It focuses primarily on the issues of
interest, looking at how people feel,
what they think and why they make
certain choices.
Generates non numerical data.
Rates the likelihood using words and
alphabetical ratings e.g. Extremely
Likely = A.
Examination of non-measurable data
such as reputation, brand image, or
feelings people may have. E.g. Rate
risk in terms of low, medium or high,
or not important, important or very
important.
Describing and explaining.
Complete and detailed descriptions
Whole picture with exploratory
research.
Interviews, focus groups, observation,
In-depth interviews, Participation/observation
Tools that are useful include mind
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Types of
data

successfully interpreted using


Quantitative style questions that
provides you with information based
on multiple choice, rank in order or
measurements such as frequency.
Numbers, tables.
Objective. Seeking precise
measurements and analysis of
concepts.

maps, brainstorming.
Information derived from qualitative
data (text) on its own may not be all
that useful for trend analysis.
Words, images objects, graphs.
Subjective. Researchers seeks to
understand human behaviour and why
we make the choices we do.

The decision which type of research to use is, of course, dependant on what you are
aiming to achieve with your research. If you want to use numerical information to
support your theory then use quantitative, if you need to explain why something is
the case then use qualitative. In order to analyse market trends, you need to ensure
the correct research is used.
Another consideration with gathering information especially qualitative which of
course is based on feelings and impressions rather than numbers and facts, is how
you ask questions to gain appropriate responses that are useful not just answers that
make you feel better about your business.
Open and closed are two types of questions you can use that are very different in
character and usage.
Open questions
Definition
Examples

Characteristics

Pointers and
why to use
them

Words

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Is likely to receive an answer that is long and detailed


Although any question can receive a long answer, open questions
deliberately seek longer answers, and are the opposite of closed
questions.
What did you do on you holidays?
How do you keep on track at work?
What's keeping you awake these days?
Why is that so important to you?
They ask the respondent to think and reflect.
They will give you opinions and feelings.
They hand control of the conversation to the respondent.
This makes open questions useful in the following situations:
To develop a conversation and open people up
To find out more about a person, their wants, needs, problems.
To get people to realise the extent of their problems (to which, of course,
you have the solution).
To get them to feel good about you by asking after their health or
otherwise demonstrating human concern about them.
You're looking down. What's up?
Using open questions can be scary, as they seem to hand control over to
the other person.
Well-placed questions do leave you in control as you steer their interest
and engage them where you want them.
Open questions begin with such as: what, why, how, describe.
When opening conversations, a good balance is around three closed
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Open questions
questions to one open question. The closed questions start the
conversation and summarize progress, whilst the open question gets the
other person thinking and continuing to give you useful information
about them.
A neat trick is to get them to ask you open questions. This then gives
you the floor to talk about what you want. The way to achieve this is to
intrigue them with an incomplete story or benefit.

Closed questions
Definition
Examples
Characteristics

Pointers and
why to use
them

Words

can be answered with either a single word or a short phrase.


Also referred to as yes /no questions.
How old are you?
Where do you live?
Are you happy?
They give you facts
They are easy to answer
They are quick to answer
They keep control of the conversation with the questioner
For setting up a desired positive or negative frame of mind in them -ask
questions with obvious answers yes / no
For achieving closure
As opening questions in a conversation, it makes it easy for the other
person to answer, and doesn't force them to reveal too much about
themselves.
Its great weather, isn't it?
Where do you live?
For testing their understanding
So, you are looking to buy a blue suit?
For setting up a positive or negative frame of mind
Are you happy with your current supplier?
Do they give you all that you need?
Would you like to find a better supplier?
Seeking yes answers to important questions
If I can deliver this tomorrow, will you sign for it now?
Turn any opinion in to a closed question which forces a yes/no answer.
Add isn't it?, don't you? or can't they? to any statement.
The first word of a question sets up the closed question and signals the
easy answer ahead. Note how these are words like: do, would, are, will, if.
Do you like this suit?

Gaining information and making a reliable statistical analysis of this information is


critical. Among the other sources of information marketers look at the following:

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Trends or seasonal factors

Sales levels

Where is your product in the


cycle of popularity?
Is it waning or growing?
It your market dependant on
the seasonas?
Is the market optimistic?

Current sales -what are your


customers buying?
Past sales behaviour may
provide information to help
you

Random events
There will always be some
unexpected event that
impacts on your business
How prepared are you to
take advantage of an
opportunity or able to
respond to a problem?

Remember to start at the beginning. What were your original goals when you began
to gather information to evaluate each of your opportunities for marketing your
business? Once you have gathered it all you need to put all the information into
perspective. Ask yourself?

What did I expect? What can I use from the information to support the new
opportunity?

Does any information exist to help with forecasting?

What are the strengths in terms of what exists, weaknesses?

How will all of this impact on existing customers and levels of service we are
able to provide?

Understanding the financial results will help you to evaluate the results. We will
discuss costs and benefits in the next section. Some of the indicators of success are
earnings per share, income growth as well as profit levels. Comparing from one
quarter to the one in the previous year provides the change which will allow you to
understand what has happened to effect the changes.

2.3 Use an assessment of external factors, costs,


benefits, risks and opportunities to determine
the financial viability of each marketing
opportunity
When assessing the financial viability business needs to consider the following
external factors:

Policies and procedures that impact on the business from other stakeholders

Codes of practice imposed on them by industry

Regulations and legal aspects of their business

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Policies and guidelines

Codes of practice

From a marketing
perspective, internal
organisational policies and
guidelines influence
marketing behaviour
If a restaurant had a policy
of using only locally
produced, seasonally
available ingredients, it
would not offer meals
requiring ingredients out of
season locally and/ or
imported from overseas
External policies and
procedures that can impact
on the business could be
those of your reseller,
supplier, freight handler or
importer. These companies
that impact on your
business may create a
situation which is no longer
viable for that particular
opportunity

Set out specific standards


of conduct for an industry
to deliver to its customers
How an industry should
behave to its customers
Mandatory codes of
practice enforced by law
Voluntary codes of practice
are enforced by industry
usually enforced by the
peak industry body, which
has the power to expel
non-compliant members
In Australia, most codes of
practice are developed in
consultation with the
industry and drafted into
legislation so that they are
enforced by bodies such as
the ACCC or consumer
protection agencies of
state governments

Legislation and regulations

All commercial activity in


Australia is governed by
legislation
Regulations can be made
by local, state or federal
government, and affect
marketing activity
E.g. many local
governments regulate
against sticking posters
onto light poles or
buildings. Health
regulations control how
restaurants, cafes and
other food sellers can
present their products to
their markets
Business needs to be fully
conversant with their legal
compliance requirements

An organisation will only enter new markets, if benefits outweigh risks.


Determining this is an important part of research into the new market and considers
four main areas:
ONE: Sales volume
Generally entry into a new market should increase sales volume (usually beneficial).
The organisation needs to ensure it has the ability to manage the increased sales. An
increase in sales at the cost of reduced customer service would be counterproductive.
It could also cause cash flow problems if the financial consequences were not
managed properly.
If entry into a new market is accompanied by abandoning an old one, sales volume
could decrease. This could be beneficial if the abandoned market had high volumes
with little profit, while the new one had lower volumes but high profit.
Example

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A greengrocer could decide to switch from selling low cost fruit and
vegetables at discount prices to selling organic produce. He would lose the
market which buys on price, but would attract new consumers prepared
to pay a premium for organic food. The margins on the organic produce
may be higher than on the discount lines so the decrease in sales volume
could be beneficial in terms of gross profit, reduced overheads (such as
wages) and reduced waste.

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TWO: Growth
Organisations often reach a limit in their growth within one market and so enter new
markets to allow continued growth of the business. A real estate organisation might
reach a level in the domestic housing market and believe that it would be
uneconomical to try to expand their market share any more, they could continue
overall business growth by entering the commercial property market. The risk of
rapid growth might be a lack in infrastructure and expertise to properly manage the
listings in the new market. Growth of an organisation needs to be carefully planned
and monitored.
THREE: Market share
Increasing market share is not technically entering a new market, but the benefits
and risks are similar. An increased market share:

Can result in increased sales and growth

In one market could require a decrease in another market. If the expanding


market is profitable and the diminishing market less profitable, the change
would be beneficial to the organisation

Example

A business could find it beneficial to reduce their share of the consumer


market to concentrate on increasing their share of the business market.
This may allow them to cater to a segment of the market with more
specific needs than the broad ranging consumer market. The business
may be able to:

Limit stock to lines which are required by their businesses customers

This could reduce capital tied up in inventory and increase operational


efficiency because most businesses have a standard stationery requirement
purchased regularly

It could also increase turnover - businesses tend to make larger one off
purchases than consumers

FOUR: Profitability
The ultimate purpose of all marketing activity is to improve profitability of an
organisation. The financial impact of any marketing proposal must be analysed in
detail and an assessment made of how long it would take for the activity to return a
profit. This and the level of profit expected must be considered against start-up costs
and the risk of the activity failing. The organisation has to make a decision that the
cost of start-up and risk of failure are outweighed by potential profits and the
likelihood that they will be achieved within an acceptable time.

2.4 Determine probable return on investment and


potential competitors
Entry into new markets has initial (start-up) costs as well as ongoing costs. Start-up
costs could include new equipment, increases in inventory and staff training. All of

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these could be required to enter the new market. In addition, all marketing
campaigns have ongoing costs such as advertising and campaign design.
Organisations must analyse costs of marketing and balance these costs against the
revenues which it expects to generate. This analysis should be repeated at set
intervals throughout the campaign. At the end of the campaign there should be a
final analysis based on actual costs and revenues. If an organisation monitors its
marketing costs it can tell which opportunities were successful and which should be
abandoned.
Return on investment (ROI) is a profitability ratio. It is used to evaluate the efficiency
of an investment. In business it usually refers to the ratio of net profit by the amount
invested in assets. In marketing (or any other aspect of the business) we use it to
demonstrate the value of the investment to the business. How much profit has been
generated by the investment?
When calculating the ROI for a marketing campaign for example consider the amount
of income generated from that campaign. Calculate the costs associated with the
process and the profit that results. Take care to include the appropriate costs into
your calculations marketing can include a range of costs:

Creative, including printing

Technology websites etc.

Wages and salaries of staff and managers

The actual cost of sales (costs to actually produce the product or service)

The formula for ROI equals the return minus the investment. Then divide this figure
by the investment. The ROI is usually expressed as a percentage so multiple the
result by 100.
Marketers need to know the ROI from all of their campaigns. It is the best measure of
the success or failure available.
Example

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If a hardware store was considering marketing a heavy duty circular saw,


as a new product to carpenters in the local area, it could use a
spreadsheet to calculate the predicted ROI.

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This is a simplified version. If this organisation decided they needed to run a more
extended campaign at an increased cost the ROI would be different.
Different organisations need to consider other factors. Consideration must be given to
the minimum purchase numbers in order to achieve the ideal buying price. There
may also only be a fraction of units sold at full retail price before being discounted to
clear stock. Spreadsheets will need to show sales at a range of prices.
Other factors which might need to be shown by some organisations include:

Increased staff

Staff training

Overheads associated directly with the marketing campaign

Capital equipment

Regulatory and legal costs

Environmental levies

Organisations also need to analyse the effects of direct competition. If another


hardware store sold the same heavy duty circular saw at increasingly discounted
prices, assessment would be required to analyse the reduction in sales that could be
expected.
An accurately calculated ROI is one of the most important indicators of the potential
viability of a marketing campaign. If the ROI is not acceptable the campaign should
either be revised or abandoned, because it will adversely affect the profitability of the
organisation.

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Measuring your returns is critical. How else do you know how this is performing and
what else needs to be done or changed to maximise the potential for success.
Benefits
Improved profitability is usually the main benefit of any marketing opportunity. If an
opportunity does not offer the prospect of improved profitability, it may not be worth
pursuing. If the opportunity threatens to significantly reduce profitability it should not
be pursued.
There are circumstances where other benefits might outweigh the lack of profit.
Recognition in the marketplace may be more important than profitability. This could
be increased recognition of the product, organisation or brand. Some experts caution
against placing too much emphasis on the brand.
Branding occurs as a side effect of consistent marketing. But sales rarely happen
as a side effect of brand advertising.
Vee, Millerand Bauer 2008, p.100.

They contend that recognition comes from effectively marketing quality products or
services in a way that attracts customers. They suggest that brand advertising is
suited only to very large organisations that have enormous advertising budgets and
can afford to wait up to 10 years for advertising to have a significant effect.
Cash flow can also benefit from a marketing opportunity. Organisations need to do
cash flow predictions whenever they are assessing a new opportunity and then to
monitor cash flows as the campaign unfolds.
Risks
The major risk of any new market opportunity is that of an illusion rather than a real
opportunity. Thorough research, careful planning and test marketing should expose
this risk, so that whenever an organisation does target a new market it know that it
is able to supply a real market with something it needs. There is also the risk that the
market is already saturated, but proper research should reveal this too.
Entry into new markets imposes a risk to resources because there is a lag between
commencing activity and getting a financial return. Organisations must assess the
risks to their finances, customer service, infrastructure and personnel to ensure they
have the resources to operate during the period when there is no return.
Cash flow is always affected by entry into a new market, and must be predicted
before a campaign starts and then monitored carefully throughout the campaign to
ensure that the organisation has the financial resources to absorb the inevitable
period of negative cash flow.
These factors are assessed to determine the viability of a marketing opportunity.
Decisions on whether or not to take the opportunity are based on the data collected
and the predictions based on them. If the opportunity is taken then these factors are
monitored closely to ensure that the predictions were accurate, and to alter the
campaign or even abandon the opportunity if necessary.

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2.4.1 The risk versus benefit


Marketing opportunity viability
Organisations find marketing opportunities by offering:

New products to new or existing markets

Developing new markets for existing products

Promoting existing products to existing markets in new ways

Normally several opportunities would be compared to determine the best. Each offer
would be individually assessed to determine its viability and potential contribution to
the organisation and any which were not viable or did not offer a satisfactory
contribution would be discarded. The remaining opportunities would then be
compared. The detailed criteria on which they would be compared would depend on
the organisation, its products or services and its markets.
Assess viability on financial criteria and the impact on operations and customers of
the organisation. For example, if the extra workload for each staff member causes
deteriorating standards of customer service, we would judge the opportunity unviable
unless this could be resolved.
Criteria can include profitability, return on investment and knock out factors.
Contribution to the organisation would be assessed on any criteria important to the
organisation in terms of its policies, procedures and legal requirements. An
organisation would not add a new product to its range if it felt that the quality was so
poor that there would be an unacceptably high rate of warranty claims.
Criteria used could include:

Customer base-the potential for the new market to add valuable customers to
the customer base

Profit-calculation of the net profit expected from the new market over time

Sales revenue-the increase, or decrease , in expected sales revenue, and the


contribution this will make to the organisation

Market share-the increase in market share expected if the opportunity is to


expand an existing market, or a new market

Brand awareness-how the new market would contribute to awareness of the


organisation's brand

Staff and infrastructure required to manage the expanding or new market

New market opportunities-other opportunities opened up by the new market

Each organisation needs to compile a comprehensive list of criteria which fits its own
circumstances at the time of the assessment. We could expect variations every time
new marketing opportunities are assessed.
Example

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A sports store has a choice to make. They have an opportunity to add a


prestigious brand of tennis racquets and golf shoes to its product
inventory, or expand into the schools market with its current range of
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products. It should analyse the options - a grid will allow them to compare
the alternatives.
Criteria
Viability
Profitability

Return on
investment
Knock out
factors

Tennis racquets

Golf shoes

Schools market

100% mark up if
sold by end of
tennis season. 30%
on stock remaining
at end of season.

80% mark up.


Not seasonal so
can maintain
retail price
throughout the
year.
130% in six
months.
None

Average 60% mark up on


stock.

600 families with estimated


take up of 10% = 60 new
customers with each making
two purchases per year.

121% in 3
months.
None

200% ongoing.
Some parents who are now
existing customers might use
school discount scheme. Not
significant.

Contributions
Customer base

510 new customers


per year maximum
with each making
one purchase every
three to five years.

Profit

$440 in first year

23 new
customers per
year maximum
with each making
one purchase
every three to
five years.
$320 in first year

Sales revenue

$2,200 per year

$630 per year

$1,000 per year

Market share

12% increase

Brand
awareness
Staff and
infrastructure
New market
opportunities

No effect

Negligible
increase
No effect

No change

No change

None

None

Rank

New market. Expect 20% in


first year.
Extends beyond primary
market to all parents.
Allocate time for rep to visit
schools one day per month.
Primary market is the
schools. Opportunities to
market to all parents.
1

$400 in the first year

On these comparisons the schools market would appear to be the most viable and
have potential to contribute most to the business with the tennis racquets next and
the golf shoes last. Other factors, not considered here, could change this. For
example, if advertising opportunities were included it is likely that the store would be
able to promote itself through tennis and golf clubs, while most schools do not allow
commercial organisations to advertise to their communities.
If the sports store did not go through this process they may make a costly mistake.

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Media differences
Different media have different advantages and disadvantages. Consider them all when
selecting which media to use as part of your promotion strategy. Remember that each of
these advantages and disadvantages are general, individual deals can be struck and it is
up to you to calculate the costs and the return on your investment.
Advantages

Disadvantages

Television

Multi-sensory, potentially high


impact, reach and acceptance

High absolute cost, short exposure,


transient

Print

Flexible, targetable, broad


acceptance and reach

Potentially short exposure, waste


circulation

Press release

High acceptance, targetable,


increased credibility

Often not managed well, risk of not


being taken up by media outlets

Trade show

High acceptance, multi-sensory,


targetable

Potentially high cost, short


exposure

Social
marketing

High selectivity and credibility,


immediacy, low relative cost

Demographically skewed, audience


controlled

Direct
marketing

Targetable, flexibility, low


relative cost, high reach

Often not managed well, privacy


and legislation restrictions

Different markets prefer to be communicated with in different ways. In order to ensure


the success of your marketing campaign, you must choose the right media for your
market. These years are approximate only but certainly need to be considered in your
approach to your target audience. Dont stereotype though, individuals within a
particular age group will behave as diversely as different groups. For example a 70 year
old may be as familiar with technology as a 50 something, another 70 year old may be
completely disinterested:
Markets
Baby Boomers
(usually born 19461964)

Products

Gen X (usually born


1960- to early 1980s),
Baby Boomers

Business to Consumer (newspaper and


magazines)

Press releases

Gen X, Baby Boomers

Business to Business

Trade show

Gen X, Baby Boomers

Television

Print

Business to Consumer (mass appeal


products)

Business to Business (trade journals)

Business to Consumer (big ticket items)


Business to Business (demonstrable products)

Social
marketing
Direct
marketing

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Gen Y (usually born


1980-2000)

Business to Consumer

Gen X, time poor

Business to Consumer
Business to Business

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2.5 Describe and rank marketing opportunities on


their viability, and likely contribution to the
business
Effective marketing is based on clearly defined marketing goals. Opportunities must
be analysed in terms of their impact on these goals and the organisation's capabilities.
The organisation should define its goals first so that it knows what it is aiming at.
'Some plausible marketing goals for the immediate future are increased revenue or
unit sales , improved market share, greater profits, entry into new markets,
abandoning a current market, and adopting a new technology or product line.' (Bangs
1989, p. 18)
These goals (stated here) are too vague. Each goal needs to be made more specific:

Increased revenue - quantify it with a dollar figure or a percentage

Increased unit sales - state how many

Improved market share - state the percentage increase required

Greater profits - quantify with a dollar figure or a percentage

Entry into new markets - define the markets and analyse their requirements

Abandoning current markets - nominate markets concerned and the reasons for
abandoning them

Adopt new technology - describe the technology and analyse its benefits

Adopt new product lines - identify products, their market and risks associated

New opportunities must also be analysed in terms of their impact on the


organisation's capabilities.
Example

If a sports store identified a new market opportunity to provide a tennis


racquet re-stringing service it would need a re-stringing machine and
people trained to do the work. Lack of capability does not automatically
mean the organisation cant take the opportunity if they are prepared to
buy a machine and train staff to operate it, but it does present an impact
which must be assessed and analysed.
An air conditioning supplier could analyse the opportunity to market a low
cost, entry level unit, using the following:

Goal
Increase sales by 10 units per
month
Increase profitability by 10%
within 12 months
Install all new units within 5
working days of customer paying
their deposit

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Impact on goals
Expected sales of the new model 30 units per month.
Lower margins on this model means that 30 sales per
month would reduce profitability by about 0.5%
Installers are currently working 45 hours per week
each so we would have to employ more installers.
This would reduce our profit margin even further.

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Attend to all breakdowns of


existing customer units within 2
hours of their call

New units are not as well made as premium units and


are likely to require more breakdown service, which
might cause longer waiting times

Based on the impact the new model would have on its goals, the organisation
might decide not to try to enter the market for it. If, however, they could
source another entry level unit with a profit margin which would allow them
to achieve their goal of a 10% increase in profitability, they might decide to
enter the market and hire new installers.
Assessing viability
Organisations are continually faced with three kinds of marketing opportunities. They
are the opportunity to:

Increase market share or establish market leadership within their current markets

Enter new markets either with new products or with their current products

Introduce new products, either to their current markets or to new markets

Some external factors apply generally to all organisations, and others apply only to
groups of similar organisations. An organisation's marketing is influenced by these
factors.
In his section on the market environment, Rix (2011, pp 46-70) subdivides the
external marketing environment into two parts, macro and micro. Marketing
organisations have little or no control over macro factors which include demography,
economic conditions, social and cultural forces, political and legal forces and
technology. Organisations have some small influence over micro factors which include
customer suppliers, marketing middlemen, specific competitors and other public
entities (e.g. the media and citizen action groups).
Some specific external factors should be assessed, because of their potential to
influence opportunities.

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Evaluate required changes to current


operations

3.1 Identify and document changes needed to


current operations to take advantage of viable
marketing opportunities
Whenever an organisation takes advantage of new market opportunities some
changes to its operation will be required. These changes can be categorised under six
main headings:
Staff
New sales staff and new support staff may be needed to accommodate the increase
in sales and provide after sales service. All staff will need to be trained to carry out
their roles in the new market.
Work practices
Policies and procedures need to be reviewed to ensure that they accommodate the
new market and any new systems to be adopted
New packaging methods could be required. A restaurant entering the takeaway
market/home delivery business for the first time would need new packaging for food
and consideration of their transport requirements.
Premises
The organisations premises could need to be relocated, refurbished or refitted. The
restaurant would need an area for takeaway customers to wait and collect their
orders as well as a safe and effective loading and delivery system.
Equipment
New specialised equipment could be required. Our restaurant would need to (at a
minimum) consider new delivery trucks, thermometers and holding equipment to
meet safe food handling regulations. General equipment which any organisation could
need includes:

Telephone systems

Computer hardware and/or software

Motor vehicles, such as a delivery vehicle for the restaurant

Cash registers

Forklifts and pallet trucks

Packaging equipment

Legal
New markets can make an organisation subject to legislation which had not
previously applied to its activities. An organisation which decided to sell its products
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to the consumer market, after having sold exclusively to the business market would
find itself subject to consumer protection laws. It would need to document its
responsibilities in detail and ensure all relevant personnel understood the new
responsibilities. It could also need to redesign its invoices, warranties and general
stationery to comply with the new regulations.
New markets could be subject to new regulations or licence requirements. A furniture
shop entering the electrical goods market would be subject to regulations covering
these products, while it might need a second hand dealers licence if it changed from
selling only new goods to also selling second hand goods.
Financial
The expected financial impact of the new market opportunity is critical in the planning
process. Relevant information would include cash flow forecasts, profit estimates,
cost analyses and predictions of return on investments. Most organisations require
professional advice on these predictions.
If finances need to be raised to enter the new market, business plans, feasibility
studies and cash flow predictions will be required for financial institutions and general
planning.
Businesses could also need to change the way they manage their finances if different
financial arrangements are needed in the new market. A stationery store which had
previously only sold in the consumer market would need to develop a system of
monthly accounts if it was to enter a business market.

3.2 Ensure organisational changes to service an


increased or different customer base including
provision for continued quality of service to
existing customers
Whenever an organisation takes advantage of a new marketing opportunity it must
consider the impact it will have on current markets.
Customer service is one area where the impact can be significant and so needs
careful planning and management. The organisation must firstly define acceptable
levels of customer service and how these can be measured. It must document all
factors which could affect service to existing customers and make detailed plans to
manage these factors.
Acceptable levels of customer service will be found in organisation's policy and
procedure documents, which provide guidelines for identifying and managing this.
Staff performance is one of the most important factors determining the quality of
customer service. Many factors can affect the ability of staff to do their job properly
in a changing environment. Consider the following:

New markets can increase the work load for existing staff. Significant
increases of work could cause a deterioration of service to existing customers.

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The organisation must determine the needs of their staff to service the new
market while maintaining the level and quality of service to existing markets

Staff members may require additional training to provide the required


standard of customer service in new and existing markets

Customer service depends on staff having the equipment they need. As


discussed, new markets can require new types of equipment and changes or
increases to existing equipment

The physical layout of a workplace can affect customer service and a new
market can require changes to the layout
A hairdresser who enters the beauty therapy market may need to
expand or rearrange the salon to accommodate the new procedures. At
the same time existing clients need to be looked after as well as usual.

New markets can require the adoption of new operational procedures, or


adaptation of existing procedures
A chiropractor, who had previously treated only private patients, could
enter the workers' compensation market. They would retain most of
their current procedures for the treatment of patients, but would need
to adopt new reporting and billing procedures to comply with the
requirements of the workers' compensation authorities.

Financial issues, especially cash flow can impact on customer service.


Organisations entering new markets need to ensure that a lack of cash will
force them to reduce their service to their current customers
If an equipment hire organisation servicing the consumer market,
entered the business market, they would need to carefully monitor and
manage cash flow. Lease payments on new equipment and business
customers paying on monthly accounts means those payments may not
be made on accounts for several weeks. The organisation still has to
make lease payments. This imbalance of cash out (lease payments) and
cash in (income from account payments) could reduce cash flow to the
point where there were delays on essential repairs and maintenance on
equipment, meaning less equipment being available for customers to
hire. Cash flow must be monitored very carefully to ensure maintaining
current levels of service to existing customers

Some new markets are opened by making an agreement with a supplier. If


this agreement requires that this market should have priority over others, it
could affect the service the organisation can deliver to its current customers
If a freelance repairer of all brands and types of whitegoods signed an
agreement to become the sole repairer for LG, this could reduce or even
take away its ability to give good service to owners of other brands. The
organisation would need to plan how to deal with this

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3.3 Estimate resource requirements for changed


operations
When an organisation enters a new market it requires additional resources and/or a
reallocation of existing resources to open the market and service it. During the
planning stage these resources will be identified and new resources will be located.
This could include negotiating offers of supply because costs need to be budgeted and
reliable supply, at the required levels, needs to be confirmed. Do you have access to
the resources needed to pursue the opportunity? Consider the costs of starting your
new venture as well as the cost of the time it takes before the new opportunity
returns a profit.
Resource requirements should be estimated based on:

Knock off effects - the effects on other aspects of the organisation's business

Time - the time taken to adjust to new resource requirements

Logistics - how the changes can be implemented

Cost

Distribution costs
New markets can include new products, new geographical areas or new methods of
distribution, all of which will add to the organisations distribution costs.
If a new product is significantly larger, more perishable, fragile, valuable etc than the
organisation's current stock then distribution considerations will be different. Your
new product may require different packaging or transport, for example. There are of
course other considerations to make with any change to your product range.
Example If a jeweller decided to add grandfather clocks to its current range of small
clocks, watches and jewellery, it would need to consider storage, new
display options, any new packaging requirements and extra handling and
transport costs if it delivered to customers' homes.
Delivering goods into new geographic areas will also incur extra distribution costs,
especially if the new area is further from the distribution point than the current
markets. Entering the online market could require new methods of distribution and
other resources, such as packing material.
Equipment
Many new markets require new equipment. A hairdresser entering the beauty therapy
market will need equipment to allow the beauty therapist to work, while a grocer
entering the home delivery market could require a new vehicle.
Production
Manufacturers and fabricators of products could need new supplies of raw materials
and operators who had been trained to produce the new products. Restaurants and
food outlets have this issue too as they source new ingredients, or larger supplies of
current ingredients.
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Promotion
Promotion into new markets can include advertising in various media, product
giveaways, seminars, expos, static displays, direct mail campaigns, leaflet drops,
spruikers and competitions. Organisations must plan their promotional campaigns to
suit their own needs, culture and budget to ensure they have the resources they
need.
Research and development
Marketing opportunities need to be thoroughly researched to establish their potential.
Organisations need to know what research resources they need and whether they can
conduct their own market research or have to use market research organisations.
After a new market has been identified it needs to be developed, especially for a new
product.
Example An example of developing a new market is Apple's marketing of its iPad.
Before the product was developed there was no market specifically for it.
Apple developed its market from the existing market for personal
computers.
If the new market requires the development of a new product then alternative
specifications also need to be researched. A kitchen manufacturer entering the do it
yourself, flat pack market would have several alternative plans to consider. Each
would need to be researched and assessed for its potential contribution to the
organisation, before a final choice was made. When a basic plan had been adopted,
the product would need to be developed from a prototype to a commercial product.
This could take from a few weeks to several months.
Example A pharmaceutical organisation introducing a new cancer drug would need a
much longer time for research and development. Unlike the kitchen
manufacturer, this research often begins with no tangible starting point. It
can begin with someone's hunch or an accidental discovery which was
made while researching something else.
The kitchen manufacturers research would consist of a finite number of
predictable steps; the pharmaceutical company's research would often
proceed by trial and error in a laboratory and on a computer. Often these
steps lead nowhere and have to be abandoned. While there is an overall
goal, the actual end point of the research is often unknown until it is
reached. Sometimes it comes as a surprise to the researchers when they
do reach the end point.
Developing a drug from research findings takes much longer and involves
many more processes than developing a flat pack kitchen from a set of
plans. The pharmaceutical organisation must manufacture a prototype of
the drug and test it, usually on laboratory animals. Several prototypes
might be needed before the final specifications are determined. After
animal testing is complete, human trials must be done and once they are
completed satisfactorily the organisation must complete a series of steps to
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have the drug approved by the authorities in the countries where they wish
to market it.
Each market and product have their own unique research and development
requirements and a significant amount of research and development must be put
towards identifying resource needs of the new markets and developing these
resources.
Re-tooling
Manufacturers who develop new products need to re-tool their factories and need to
budget for this when the organisation develops the new market. This can be a simple
adjustment of current resources as in the case of a kitchen manufacturer who may
only need to re-set the guides on their machines, or it can require a major refit as
would be the case if the Australian Submarine Corporation began manufacturing
destroyers instead of submarines.
Entering a new market will alter an organisations requirement for resources and
these changes need to be estimated and budgeted for whenever a new opportunity is
being assessed. On the whole it is good practice to be conservative in your planning.
Cash flow is not the same as profit, it is important to have a good grasp of the
financial aspects of the new plans as well as the existing business and how it is
operating and continues to operate.

3.4 Determine and communicate viability of


making changes to current operations to key
stakeholders
Once the viability of changing operations has been determined, the nature and
viability of the changes need to be communicated to key stakeholders within the
organisation. Remember viability will be assessed in terms of:

Financial: the change must be able to produce a profit within an acceptable


time frame without dangerously reducing the organisation's cash flow prior to
that time

Physical: the physical resources such as suitable premises, adequate


equipment and suitable infrastructure must be available or obtainable

Effects on other markets: the proposed changes should enhance or at least


cause no damage to the organisations existing viable markets

Effects on the overall operations of the organisation

There is some risk in entering a new market and the opportunity can only be viable if
the benefits outweigh the risks. One serious risk to implementing any change can be
resistance by the people who are affected by it.
Perhaps the main reason that change fails in many organisations is that the majority
of employees first find out about it at the try-out phase ... When the majority of
employees have not experienced and understood the pressures for change and
grasped the need to change, and have not participated in developing the change ...
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it's hardly surprising they don't welcome it and implement it enthusiastically. (Cote
2010, p. 713)
A landscape supplier who had decided to add garden furniture to its product range
would need to explain the proposal, its benefits and its risks. This could be done in a
meeting, an email or both.
Many stakeholders do not want to know all the details of the proposal and its
viability. They simply want to be sure that the appropriate personnel have assessed it
thoroughly. The offer of a full analysis is reassurance to these people that the
evidence is available, and enables the message to be kept short and simple,
increasing the chances of its being understood. Those who want all the details also
have the option of seeing them.
A key stakeholder is anyone who plays a part in implementing the change or anyone
whose function is affected by the change, and while it is different for every
organisation in terms of size and complexity, stakeholders can include:
Board of
Directors
Finance staff

Human
resources
staff

Managers

Marketing
personnel

The owners
Production
staff

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The board is ultimately responsible for the organisations performance and


must approve any changes to operations. They must also be kept
informed as the changes are introduced.
Finance staff can be involved in planning the changes and preparing
budgets for their introduction and ongoing implementation. They also
need to be fully informed as changes are implemented so that they can
monitor the financial aspects and ensure that the budget is adhered to.
Responsible to ensure there are adequate personnel who are properly trained
to implement the change. HR staff has three main functions when developing
a new market: recruit staff required to implement the changes, identify
current staff that needs to be trained or retrained for new or extended roles,
and arrange and oversee all necessary training and retraining.
If a department is affected in any way by proposed changes its manager
needs to be informed. The sales department would be critical when
introducing a new product or opening a new market; the sales manager
needs to be fully briefed. If the organisation were entering a new market
for an existing product then this might not cause any changes to
operations of the stores department, but the store manager would need to
be advised to plan for increased turnover of that product.
Marketing personnel are responsible for identifying and developing new
marketing opportunities and when an opportunity is taken they must
develop a campaign to allow the organisation to successfully enter the
new market. Marketing personnel are involved in almost all marketing
activities and need to be kept informed of them.
Like the board of directors, are concerned with the viability of the organisation
as a whole and should be advised of all major changes to operations.
Some changes involve producing new products while others require
increased production of established products. Organisations which
manufacture their own products must advise and train production staff to
ensure new products and extra volumes of existing products can be made
in the quantities required and that quality is maintained.

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Supervisors

Are directly responsible for the quantity and quality of work produced by their
sections and so must be fully briefed on any changes which are planned.

Changes to current operations can include:

Staff, including recruiting and training new staff and retraining current staff

Work practices, including altering existing practices and introducing new ones

Premises, including expansion , refitting or finding new premises

Equipment , including adapting and duplicating existing equipment and


purchasing new equipment

Legal issues and compliance with regulations

Financial practices, including refinancing, and

Adopting new billing and/or accounting methods

The viability of proposed changes to operations must be determined and then


communicated to all key stakeholders because the success of the changes depends
on their support. The key stakeholders will not give the level of support needed
unless they clearly understand the benefits of the changes and have confidence that
the proposal has been properly assessed.

3.5 Document newly identified marketing


opportunities and required changes
Changes which need to be made in response to new marketing opportunities must be
documented:

To ensure all changes, including knock off effects, are identified and
appropriate plans are made to manage them

As a means of informing all personnel who need to know about them

New markets can require an organisation to develop additional capacity to some of its
current operations or to introduce new practices and procedures, depending on the
relationship of the new market to its current markets.
A wholesaler of dried and canned foods would need to increase the capacity of its
operations if it became the sole distributor for a major breakfast cereal manufacturer
but would not need to make major changes to its current practices and procedures.
The new market could promote the market for bakery products from the same
manufacturer and it could also knock out another brand of breakfast cereal. If the
same wholesaler became a distributor of fresh meat it would have to introduce new
procedures, equipment and work practices and would become subject to a new set of
regulations and laws.
The changes will be determined by the nature of the organisation, its current markets
and operations, and the new marketing opportunity. Some organisations and some
markets would require changes in other areas, while some organisations would not
need to consider some of these factors. Each organisation must determine and
document its own changes for each new market it enters.
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Appendix - Useful templates and guides


Review previous marketing activities
Previous marketing activity

Successful Y/N

Why / Why Not?

Policies / Procedures that impact marketing


Policy / Procedure

How it impacts marketing activity

Legislation / Regulations that impact marketing


Legislation / Regulation

How it impacts marketing activity

Organisational goals that impact marketing


Goals

How it impacts marketing activity

Product definition
Core
Actual
Augmented
Market definition
Market

Characteristics

Potential market
Available market
Qualified market
Target market
Penetrated market
Market Segmentation
Segment
Characteristics
Region (location)
Size of population
Geographic
Population density
Climate
Age
Demographic
Gender
Family size
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Family structure
Generation
Income
Occupation
Education
Ethnicity
Nationality
Religion
Social Class
Segment

Characteristics
Activities
Interests

Psychographic

Opinions
Attitudes
Values
Benefits sought
Usage rate / frequency
Brand loyalty

Behaviouristic

User status (potential,


first-time, regular)
Readiness to buy
Occasion (holiday, event)

Target market identification


Target
Market
Characteristics
Name

Product(s)

Geographic
1.

Demographic
Psychographic
Behaviouristic
Geographic
Demographic

2.

Psychographic
Behaviouristic
Demographic

Marketing activity that best suits markets


Market

Activity

Target market
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Penetrated market
Marketing activity plan
Purpose
Expected Outcome 1
Expected Outcome 2
Expected Outcome 3
Marketing activity definition
Activity
What is it?
Why did you choose it?
Implementation strategy
When will it be conducted?

Skills analysis of team


Team
member

Knowledge /
experience

Skills

Benefit to the team

Resources required
Resource

Source

People
Physical / Material
Budget
Skills

Role allocation
Skills required

Team member

Reason

Tasks and milestones


Tasks

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Deadline

Reason

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Conclusion
Now that you have completed this unit you should be able to answer.
How do you identify and marketing opportunities?
How do you evaluate them?
How can you tell if they meet organisational objectives?
And
How have you documented the changes that need to be made in order to take
advantage of the new opportunities?

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Appendix - Types of marketing strategies


Cause marketing: Find a cause both your customers and your company care about.
Relationship marketing: Focus on building relationships with your customers
Offline marketing: Find new ways of integrating offline marketing with new
technologies.
Digital marketing: Use various digital devices like smartphones, computers, tablets
or digital billboards to inform customers and business partners about your products.
Scarcity marketing: Accessible to only a few.
Word of mouth: Passing of information from one person to another person by oral
communication.
Call-to-action marketing: Prompts a customer to make a decision; creates a sense
of urgency.
Diversity marketing: Taking into account different diversities and cultures in terms
of beliefs, expectations, and needs.
Undercover marketing: Hide some of your products and services best features.
When discovered they can create a buzz (example is a movie trailer)

Transactional marketing: Encourage consumers to buy using coupons, discounts,


liquidations and sales events.
Mass marketing: Ignores the market segment differences and approaches the whole
market with one offer or one strategy. Strategy to reach the largest number of people
possible.
Seasonal marketing: Offer seasonal events.
PR marketing: Work the media to bring awareness to your products
Viral marketing: Get your customers attention and enthusiasm, so that they cant
resist sharing the information.
Online marketing: Leverage the web.
Email marketing: Email meaningful messages of value, respecting the inbox.
Evangelism marketing: Surprise, delight and over-serve your customers so they
become voluntary advocate.
Event marketing: Create events to drive sales.
Outbound marketing: Let your potential customers know you exist. Make a list of
prospects and reach out to those target groups.
Inbound marketing: Sell existing customers additional products and services upon
point of contact.
Freebie marketing: Selling items at a low rate or give them away to boost the sales
of another item or service (can be called loss leaders).

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Augmented marketing: Providing additional services through innovative offerings


and benefits to increase customers level of satisfaction.
Newsletter marketing: Write a newsletter that highlights some of the newsworthy
things about your business.
Content marketing: Create and publish content on various platforms to give
information about your products and services.
Tradeshow marketing: Trade shows are industry gatherings where customers are
invited to come sample all that the industry has to offer.
Article marketing: If expertise is highly valued in your industry, articles can offer a
powerful tool to showcase your knowledge and expertise.
Search marketing: Make Google your business partner. Master the search engine
optimisation.
Direct mail marketing: direct communication to the customer via text message,
email, interactive consumer websites, online display ads, fliers, catalogues,
promotional letters or outdoor signs.
Niche marketing: Finding a niche and filling it.
Social media marketing: Engage your customers through sites like Facebook and
Twitter.
Cross-media marketing: Multiple channels like emails, letters, and web pages are
used to give information about products and services to customers in the form of
cross promotions.
Close range marketing: Also known as Proximity Marketing, this strategy uses
Bluetooth technology or Wi-Fi to promote products and services to customers at close
proximity.
Business-to-business marketing: B2B marketing allows businesses to sell products
and services to other companies and organisations that resell the same products and
services, us them to augment their own products or services, or use them to support
their internal operations.
Promotional marketing: Designed to stimulate the customer to take action towards
a buying decision, promotional marketing is a technique that includes various
incentives to buy, including contests, coupons, and sampling.
Cloud marketing: An internet-based marketing approach where all marketing
resources and assets are transferred online so that the respective parties can develop,
modify, utilise and share them.
Alliance marketing: Two or more business entities come together to pool their
resources to promote and sell a product or service, which will not only benefit their
stakeholders, but also have a greater impact on the market.

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Reverse marketing: Getting your customers to seek out your business rather than
you seeking them. Focuses on the customer approaching the potential seller who may
be able to offer the desired product.
Telemarketing: A method of direct marketing where a salesperson solicits
prospective customers to buy products/services via the phone or face to face.
Database marketing: Using database of customers or potential customers to
generate personalised communications in order to promote a product or service.
Permission marketing: Delivering personal and relevant messages to people who
have given you permission to do so.
Loyalty marketing: Growing and retaining existing customers through incentives. It
includes tracking purchase history and getting to know the customers preferences.

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The marketing mix


It refers to the various elements making up the practice of marketing in its totality.
Often referred to as the Four Ps which are closely linked to the consumers Four Cs:

Product

Customer needs and wants

Price

Cost to the customer

Place

Convenience

Promotion

Communication

The extended marketing mix


In recent years, the marketing mix has been extended to include people, process and
physical evidence. This is largely as a result of the marketing of services.
People

Important particularly in the marketing of services.

Process

Customers migrate to other service providers when the


process is not providing customer value.

Physical evidence

Examining every aspect that customers use in their


perceptual field to assess such a service.
Process
Product

Place

Physical
evidence

People

Price

Target
market
intended
position

Promotion

Product
A product is anything that can be offered to a market for attention, acquisition, use
or consumption that might satisfy a want or need. There are many types of products
- goods, services, events, ideas/causes, people, political candidates and parties,
locations and so on.
Goods: many products are physical goods e.g. cars, toasters, shoes, books, and
televisions. Goods may be used over an extended period of time (durable products
e.g. refrigerators) or may be consumed in a single usage or short period (nondurable goods e.g. grocery items).
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Services: service organisations offer their customers something essentially


intangible - the interaction does not result in the ownership of anything that endures.
Services usually involve high involvement by the consumer and are more personal in
nature than consuming physical goods e.g. a visit to the dentist or doctor,
hairdresser, a meal at a restaurant. Services usually involve synchronous delivery
and consumption e.g. a driving lesson, a lecture. They are perishable once the
experience is over (e.g. a concert, a flight etc.) there is no taking it back.
Events: combine elements of physical products with those of services, particularly
the experiential aspects of sporting, entertainment and other staged events delivered
over a period of time. For example, the Olympic Games combines physical goods
(food, drinks, merchandise) with experiences, such as attending one of the events or
the Opening and Closing ceremonies. Events often attract sponsor companies that
wish to reinforce positive buyer attitudes by being associated with the particular
event.
Ideas/causes: ideas or social causes can be marketed like other products, in the
hope that the consumer will adopt the behaviour associated with the idea, and
promote it to others.
If you drink then drive, youre a bloody idiot.
Kissing a smoker is like kissing an ashtray.
People: live performances by people/recording artists are products. Because of
global television, sporting stars are products in their own right. They are used to lift
the people-drawing power of the sports they represent and also used as brands to
sell and endorse products.
Political candidates and parties: politicians market themselves as well as their
political ideologies and their political parties. We do not buy them, but we give them
our attention, vote for them and support their policies. Political parties adopt many of
the same marketing research techniques used in the commercial world. Where do
politicians campaign these days? On television? In person? On Facebook? On
YouTube?
Locations: visits and experiences to locations are also marketed and sold as
products. While consumers do not necessarily assume ownership of them, they buy
the experience of visiting and experiencing that place, and will often consume a
range of products associated with that location.
If someone buys a ticket to the Great Barrier Reef for a holiday, what experience
might they be buying? What types of products might they consume while on holiday
there?
Product attributes
Developing a product or service involves defining the benefits that will be offered to
the marketplace. These benefits are communicated and delivered by product
attributes such as quality, features and design.

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Product quality is the ability of a product to perform its functions. It includes the
products overall durability, reliability, precision, ease of operation and repair, and
other valued attributes.
How should a products level of quality be determined?
Marketers should match quality levels with expectations of the target market or
quality levels of competing products. Quality also relates to the consistency of
delivery of quality. Do you think consumers these days expect quality from every
brand? I.e. is quality now a necessity?
Product features are used by marketers as a competitive tool to differentiate your
product from those of a competitor. Often companies begin by offering products
without any extra features - a stripped down model and progressively create higherlevel models by adding more features.

What sort of questions might companies ask their customers to determine


what new features they should add to their products?

Which specific features do you like most?

What features could we add to improve the product?

Good design is not just about making a product look good (style), it is also about
creating products that are easy, safe, inexpensive to use and service, and simple and
economical to produce and distribute. For example, Black and Deckers cordless
power tools feature outstanding design, which contributes to their great success.
Good design can attract attention, improve product performance, cut production
costs and give a product a strong competitive advantage.
Products are further categorised by the level of attributes they contain.
Augmented
Delivery and credit
Installation
Warranty
After sales service

Actual / secondary
Brand name
Features
Styling
Quality
Packaging

Core
Core benefit or
service

Core product: The problem-solving services or core benefits that consumers are
really buying when they obtain a product. This addresses the question:

What is the buyer really buying?

When designing products, it is critical to identify the core benefits offered by the
product to its consumers.
In the factory, we make cosmetics; in the store, we sell hope. Charles Revlon of
Revlon Cosmetics.
Actual product: A products parts, styling, features, brand name, packaging and
other attributes that combine to deliver core product benefits.

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Example: A Qantas air ticket from Brisbane to London is an actual product. So are
the Qantas name (brand name), air terminal layout and services, plane
seating configurations, crew uniform styling, booking system (a
component of packaging), features such as in-flight movies, food and
beverage service/quality are carefully combined to deliver the core benefit
or service.
Augmented product: Additional consumer services and benefits built around core
and actual products. For example, some consumers might require greater service
levels than others - Business or First Class, or vegetarian meals. Some expect extra
services before the flight, and so might join the Qantas Club. Some expect extra
augmentation through packaged tours, a Frequent Flyer points scheme. These all
become important parts of the total product.
The product life cycle
The product life cycle is the course of a products sales and profits during its lifetime.
It involves five distinct stages:

Product development

Introduction

Growth

Maturity

Decline

The exact shape and length of each stage varies from product to product, and market
to market.
Product development

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A product concept (idea) is developed into a physical product (prototype) to ensure


that the idea can be turned into a workable product. Prototypes are tested to ensure
the product performs safely and effectively.
Introduction
New product is first distributed and made available for purchase. Consumers of the
new product need to be informed and to try it. Deal with negative/low profits due to
low sales and high distribution and promotion costs. Because the market is not
generally ready for product refinements at this stage, companies produce basic
versions of the product.
Growth
If successful, sales will start climbing quickly. New competitors enter the market,
introducing new product features. The market expands, as does the number of
distribution outlets. Profits increase, as promotion costs are spread over a larger
volume. Unit manufacturing costs fall. Product quality and features are improved,
new market segments entered, new distribution channels established, and prices
lowered at the right time to attract more buyers.
Maturity
Sales growth slows or levels off. Normally lasts longer than the previous stages, and
poses challenges for the marketer. There are many producers with many products to
sell. Competitors mark down prices, thus reducing profits. Marketers should consider
one of the following strategies:
Market modification - look for new users and segments for current product.
Baileys Irish Cream liqueur targeted the 19-25 singles segment with its positioning
as a sexy drink.
Product modification - change a products characteristics to attract new users and
more sales e.g. Renault adds new styles and features to its line of compact cars.
Marketing-mix modification - e.g. cut prices, launch a new advertising campaign,
and offer new or improved services to buyers.
Decline- in sales. The company must identify declining products, are they to be:

Maintained - in the hope that competitors will leave the industry

Harvested - reducing costs in the hope sales hold up

Dropped - could sell to another firm or liquidate it at salvage value

Reasons for the decline can be many e.g. technological advances, shifts in consumer
tastes, increased competition, and changes to regulations.
The life cycle can be a useful framework for describing how products and markets
work. It can help in developing good marketing strategies for different stages of the
cycle. However, managers may have trouble using it e.g. identifying what stage their
product is at, when it will move to the next stage, and what factors affect its
movement through the stages.

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Price
Price refers to the value of the exchange charged for a product or service. You pay
rent for accommodation, tuition for education, a toll on the motorway, interest for the
money you borrow from the bank, and so on.
Price is the only element in the marketing mix that generates revenue; all of the
others (product, promotion and distribution) are costs. Common mistakes made by
companies in setting prices include:

Pricing is cost-oriented

Prices are not revised to reflect market changes

Pricing does not take the rest of the marketing mix into account

Prices are not varied enough for different product items and market segments.

Pricing decisions are affected by a number of factors, Internal (company) and


external (environmental).
Internal factors
Marketing objectives
Price is often largely determined by the target market and positioning for the
product. The clearer a firm is about its objectives, the easier it is to set price.
Objectives affecting price

Survival: if a company is facing financial troubles due to over-capacity, heavy


competition or changing consumer wants, they may reduce prices to stay in
business.

Current profit maximisation: a company estimates demand and costs at


different price levels and chooses the most profitable price.

Market-share leadership: by setting prices as low as possible, a company


hopes to out-sell the competition.

Product-quality leadership: the objective of highest quality means setting


higher prices.

Example: Virgin Mobiles has positioned itself as a company for budget-minded


callers, and keeps prices low.
Marketing-mix strategy
Pricing decisions must be coordinated with product design, distribution and promotion
decisions to form a consistent and effective marketing program. Decisions made for
other marketing-mix variables may affect pricing decisions, and vice versa. Price is
often largely determined by the target market and positioning for the product.
Example:

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Fashion houses like Gucci and Armani hold a high-quality position in the
market. They must set their prices high enough to cover high quality
materials, resellers high margins and good service.

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Yamaha, discovered a market for affordable stereos, and so designed


their product with a lower price in mind.
Costs
The company must cover all costs for producing, distributing and selling the product,
and also deliver a fair rate of return for its effort and risk. Costs are therefore an
important element in pricing strategy. A company has two types of costs i.e. fixed
costs and variable costs.
Fixed costs (or overheads) do not vary with production or sales level e.g. rent, heat
and executive salaries.
Variable costs vary directly with the level of production e.g. the costs of wires,
plastic, packaging and other materials that go into producing a calculator. Total costs
are the sum of the fixed and variable costs for any given level of production.
Companies must watch costs carefully, if it costs them more than competitors to
produce and sell their products, they will have to charge a higher price or make less
profit. To price wisely, managers must understand how its costs vary with different
levels of production.
Management wants to charge a price that will at least cover the total cost of
production at any given level of production.
Organisational considerations
There could be other issues internally that will affect pricing decisions, every case is
different and needs to be examined thoroughly to make the correct pricing decision.
External factors
Market and demand
Costs set the lower limit of pricing, the market and demand set the upper limit.
Buyers balance the price of a product / service against the benefits of owning it.
Before setting prices, marketers must understand the relationship between price and
demand for its product.
Economists recognise four different types of markets, each presenting a different
pricing challenge:
Pure
competition
Monopolistic
competition
Oligopoly
Pure monopoly

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Many buyers and sellers trade in a single commodity. No single buyer or


seller therefore has much effect on the going market price.
Many buyers and sellers trade over a range of prices rather than a single
market price. Sellers can differentiate their offers and buyers pay
different prices for different products.
There are only a few sellers who are highly sensitive to each others
pricing and marketing strategies. Example if Optus slashes call costs,
Telstra will likely have to do the same.
There is a single seller- it may be a government monopoly, a private,
regulated monopoly or a private, non-regulated monopoly. They may set
prices quite low to make the product accessible, or quite high to slow
down consumption

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When setting prices, the company must consider consumer perceptions of price and
how these perceptions affect buying decisions and demand. Pricing, like other
marketing-mix decisions, must be buyer-oriented. Effective pricing involves
understanding how much value consumers place on the benefits they receive from
the product and then setting a price that fits this perceived value. A demand curve
shows the number of units the market will buy in a given time period, at different
price levels that might be set.
In most cases, the higher the price charged for a product, the lower the demand.
However, in the case of luxury goods, sometimes higher prices lead to higher
demand amongst the target market, as they perceive a higher quality product. Most
companies try to measure their demand curves, estimating demand at different price
levels.
Marketers also need to understand price elasticity i.e. how responsive demand will be
to a change in price. If demand hardly changes with a change in price, demand is
inelastic. If demand changes greatly, we say the demand is elastic.
What determines the price elasticity of demand?
Buyers are less price-sensitive when the product they are buying is

Unique or when it is high in quality, prestige or exclusiveness

When substitute products are hard to find

When the cost of a product is low relative to their income

If demand is elastic rather than inelastic, sellers will consider lowering prices.
Competitors prices and offers
Companies can use competitors prices as a starting point for its own pricing strategy.
The companys pricing strategy may also affect the nature of the competition that it
faces.
Example: A purchaser considering buying an Omega watch will evaluate Omegas
price and value against the prices/values of comparable products made by
Seiko, Tag Heuer etc. If Omega follows a high-price, high margin strategy,
it may attract competition. If it follows a low-price, low-margin strategy,
however, it may stop competitors or drive them out of the market.
Basically, Omega will use price to position its offer relative to competitors.
Other external factors
Economic conditions: inflation, booms, recessions and interest rates all affect both
the costs of producing a product and consumer perceptions of the products price and
value, and their ability to purchase.
Other parties: the company should give resellers a fair profit.
Government regulations: the Trade Practices Act prohibits unfair pricing practices
e.g. predatory pricing. Predatory pricing is where prices are set unreasonably low to
force competitors out of the market.

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Pricing approaches
Companies set prices by selecting a general pricing approach that includes one or
more of the following four sets of factors:

Cost-based pricing

Value-based pricing

Competition-based pricing

Relationship pricing.

Cost-based pricing
This is the simplest pricing approach; it involves adding a standard mark-up to the
cost of producing the product.
Disadvantages -It ignores current market demand and the competition. Mark-up
pricing only works if that price actually brings in the expected level of sales.
Advantages- Sellers can be more certain about costs than about demand.
Sellers earn a fair return on their investment but do not take advantage of buyers
when buyers demand becomes great.
Example: Suppose a radio manufacturer had these costs and expected sales:
Variable cost per unit

= $10

Fixed costs

= $300 000

Expected unit sales

= 50 000

The manufacturers cost per radio =


Cost per unit

= unit variable cost + (fixed cost/unit sales)

= $10 + ($300 000/$50 000) = $16.


There also needs to be a mark-up, in this example use a 20% mark-up
=
=

unit cost/ (1 desired return on sales)


$16 / (1 0.2) = $20.

Break even pricing (target profit pricing)


This involves setting the price to break even on the costs of making and marketing a
product, or to make the desired profit. Manufacturers should consider different prices
and estimate breakeven volumes, probable demand and profits for each. Much
depends on price elasticity and competitors prices.
Breakeven volume = fixed cost divided by (unit sell price unit variable cost)
=

$300 000 divided by ($20 minus $10)

30 000 units

Value-based pricing
This approach sets price based on buyers perceptions of value rather than on the
sellers costs. The company uses the non-price variables in the marketing mix to build
up perceived value in buyers minds. Price is then set to match the perceived value.
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Example:

Consumers may purchase nachos for $5.50 at the supermarket, $7 at


the food hall, $9.50 at the local restaurant, $15 at a hotel restaurant
and $20 at an upmarket restaurant. Each venue can adjust their price
according to the value of the total experience (the atmosphere, quality
of service).

Cost-based pricing is product driven: The company designs what it considers to


be a good product, totals the anticipated costs of producing it, sets a price that
covers costs plus a target profit, and then uses marketing to attract buyers to the
product.
Value-based pricing is customer driven: The company sets its target price based
on customer needs and perceptions of product value. The targeted value and price
drive decisions about product design and what costs can be incurred.
Competition based pricing
When a company sets its price based largely on following competitors prices rather
than on company costs or demand, it is called going-rate pricing. When demand
elasticity is hard to measure, companies use this approach as they feel it represents
industry wisdom on the going rate. This approach is also often used when companies
bid for jobs. Using sealed-bid pricing, a company bases its price on how it thinks
competitors will price rather than on its own costs or demand.
The company may price above the market, pricing its products higher than similar
products charged by competitors. IBM price this way because its products are
perceived to be durable, of high quality, state-of-the-art and high serviceability.
The company may price below the market by adding a lower profit per unit or
keeping costs per unit lower than competitors. In this situation, the distinguishing
attribute of the product is its low price e.g. generic supermarket items.
The company might price at the market, establishing prices that reflect the
prevailing market price for a particular type of product.
Relationship pricing
This approach to pricing requires a special approach to pricing that incorporates
shared risk and reward between companies and suppliers. Example: a company may
meet with its suppliers to explore ways of enhancing value to both businesses, or to
reduce production costs.
BHP Billiton has a number of alliance partner customers who they share the cost,
risks and benefits of oil exploration and processing with.
Price adjustment strategies
In addition to the previous approaches to setting prices, companies also apply a
variety of price adjustment strategies to account for differences in consumer
segments and situations:

Discount pricing

Segmented pricing

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Psychological pricing

Promotional pricing

Geographic pricing

Discount pricing: a company lowers the regular price of its products:

Cash discounts

Quantity discounts: selling products at a lower cost per unit if the buyer
purchases a given quantity e.g. 6 bottles of wine

Functional discounts: decreasing the price for a reseller who performs certain
marketing activities for other members of the distribution chain

Seasonal discounts and allowances: a special discount offered in the off-season


e.g. Air tickets

Segmented pricing: the company sets different prices for different customers,
product forms, places or times. Nokia will price different mobile phones at different
price points depending on their different functionality.
Psychological pricing: the company adjusts the price to communicate more
effectively a products intended position. Expensive (highly priced) suits and other
apparel are then perceived to be of a higher quality. Similar to value-based pricing.
Promotional pricing: the company decides on loss leader pricing (charging less,
when launching a product, in the hope it will lead to a greater quantity of sales and
repeat purchase), special-event pricing and psychological discounting.
Geographic pricing: the company decides how to price to distant customers,
choosing from alternatives like uniform delivered pricing, and zone pricing.
Supermarkets and petrol stations often use this pricing model.

Place
Marketing logistics networks (place) is the system of efficiently and effectively
making and getting products and services to end-users.
It consists of Marketing Channels. Members of the marketing channel move goods
from producers and suppliers to consumers. Members may include retailers,
manufacturers, warehouses, transport companies, docks and wharves.
Distribution and logistics can add up to 30-40% to a products cost. A well planned
marketing logistics program can be a very important tool in competitive marketing.
Through marketing logistics network management practices, companies attempt to
source the right inputs (raw materials, components, capital equipment), convert
them efficiently into finished products and dispatch them to their final destinations.
Companies can attract additional customers through offering better service, faster
delivery times or lower prices through logistics improvements.
Marketing logistics network decisions typically involve:
Cycle-time reductions e.g. changing the manufacturing process to make it faster
from time of order to time of receiving the product
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Conversion operations locations e.g. placing a manufacturing plant close to the


source of raw materials to reduce costs and time
Purchasing decisions e.g. to make or buy or vertically integrate or network with
suppliers
Manufacturing and operations process decisions e.g. product scheduling to
produce larger amounts of a product at one time and thereby reduce costs
Order processing and costs e.g. outsourcing a call centre overseas where labour is
flexible and costs are lower
Warehouse numbers and costs e.g. improving customer service by placing
warehouses in each capital city to speed up delivery times
Inventory levels and costs e.g. reducing inventory levels and costs by reducing
the amount of storage in warehouses
Transport types and costs e.g. using rail transport instead of road transport to
reduce freight costs
Restructuring the marketing channels used to place products within easy reach of
buyers and end-users.
A marketing channel is a set of interdependent organisations involved in the process
of making a product or service available for use or consumption by the consumer or
industrial user.
Kotler et al (2007).

Members of the marketing channel move goods from producers and suppliers to
consumers.
Marketing channel members perform many key functions, including:
Information: gathering and distributing marketing research and intelligence
information about people and forces in the marketing environment, this aids
marketing planning
Promotion: developing and spreading persuasive communications about an offer
Contact- finding and communicating with prospective buyers
Matching: shaping and fitting the offer to the buyers needs, including grading,
assembling and packaging
Negotiation: reaching an agreement on price and other terms of the offer so that
ownership or possession can be transferred
Physical distribution: transporting and storing goods
Financing: acquiring and using funds to cover the costs of the channel work
Risk taking: assuming the risks of carrying out the channel work.
Channel structures

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Each layer of intermediaries that performs some work in bringing the product and its
ownership closer to the final buyer is a channel level. The number of intermediary or
channel levels used indicates the length of a channel. A direct marketing channel has
no intermediary levels. It consists of a manufacturer selling directly to consumers.

For the producer, greater numbers of levels generally means less control, greater
complexity and more costs. Channels may contain one middleman level. In consumer
markets, this is typically a retailer e.g. Kmart sells televisions, cameras, tyres,
furniture, appliances that they buy directly from manufacturers.
Channels may contain two intermediary levels- typically a wholesaler and a retailer
e.g. this is often used by small manufacturers of food, pharmaceuticals, hardware
and other products.
Other channels contain three middleman levels. For example, in the giftware
industry, a jobber buys from wholesalers and sells to smaller retailers who are not
generally served by larger wholesalers.
Are marketing channels also used in marketing services?
Yes! Producers of services and experiences also must decide how they will make their
output available to their target markets. For example, when governments sell
services like health systems, they must determine agencies and locations for reaching
widely spread populations.
Vertical Marketing Networks (VMN)
This is a distribution channel structure in which producers, wholesalers and retailers
act as a unified network. One channel member owns the others, has contracts with
them or wields so much power that they all cooperate. The VMN can be dominated by
the producers, wholesaler or retailer.

Manufacturer
Wholesaler
Consumer
Woolworths in Australia is a good example of a Vertical Marketing Network. They
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own, dominate or control, manufacturers, producers, logistics, warehousing and


retailers for their marketing channel.
Horizontal marketing networks
A horizontal marketing network is a channel arrangement in which two or more
companies at one level join together to follow a new marketing opportunity.
Companies are able to combine capital, production capabilities or marketing
resources to accomplish more than they could, working alone.
In Victorias Goulburn Valley, fruit canners joined forces to market their product
overseas under a single brand name to achieve wider distribution.
Hybrid marketing channel networks
These are multichannel distribution systems in which a single firm sets up two or
more marketing channels to reach one or more marketing segments.
For example, Ingham chicken sells chicken products and portions using its own brand
through large retailers like Coles and Woolworths, and store branded chicken
products to food retailers like McDonalds and KFC and to other independent fast food
operators.
Today, Ingham encompasses a fully integrated farming, primary and further
processing poultry business (operating 10 feed mills, 10 primary plants and six
further processing plants), and a diversified stockfeed business, ingredients for pet
food and stockfeed, a piggery operation and extensive bloodstock breeding and
racing division.
Retailing
Retailing refers to all the activities involved in selling goods or services directly to
final consumers for their personal, non-business use.
Types of retail stores
Retail stores come in all shapes and sizes, and new retail types keep emerging. They
can be classified according to one or more of several characteristics:

Amount of service

Product line sold

Relative prices

Control of outlets

Type of store cluster

Different types of retailers use different levels of service:

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Self-service retailers
Provide few or no
services to shoppers
Shoppers perform their
own locate-compareselect process to save
money
This retail structure is
used by sellers of
convenience goods, such
as supermarkets, Kmart,
Big W, Aldi, etc.

Limited-service retailers

Full-service retailers

Provide only a limited


number of services to
shoppers
Hardware chains like
Bunnings provide limited,
but technically
competent, sales
assistance for their
products
These types of retailers
may also offer additional
services such as credit
and merchandise return

Retailers that provide a


full range of services to
shoppers
These include speciality
stores and first-class
department stores, where
salespeople assist
customers in every phase
of the shopping process
They usually carry more
specialty items, and
provide more liberal
returns policies, credit
plans, free delivery,
home servicing etc.

Retailers can be classified by length and breadth of product assortment:


Specialty stores: carry a narrow product line with a deep assortment within that
line e.g. stores selling sporting goods or furniture or books or electronics.
Department stores: carry a wide variety of product lines, such as clothing, home
furnishings and household goods e.g. David Jones, Myer.
Convenience stores: small stores, located near residential areas, open long hours,
7 days a week, and carrying a limited line of high-turnover convenience goods such
as milk and bread e.g. 7- Eleven.
Mass merchants: carry a large assortment of merchandise such as hardware
(Bunnings Warehouse) or electrical goods and furniture (Harvey Norman) or personal
and healthcare (Priceline).
Superstores: almost twice the size of a regular supermarket carrying a large
assortment of routinely purchased food and non-food items, and extra services as dry
cleaning, photo developing, cheque cashing, bill paying, car care etc.
Hypermarkets: combine supermarket, discount and warehouse retailing- carrying
food, furniture, appliances, clothing etc. More popular in US than Australia.
Retailers can also be classified according to their prices:
Discount stores: sell standard merchandise at lower prices by accepting lower
margins and selling at higher volume.
Off-price retailers: buy at less than regular wholesale prices and sell at less than
retail, usually carrying a changing and unstable collection of higher-quality
merchandise, often leftover goods e.g. factory outlets.
Catalogue showrooms: sell a wide selection of high mark-up, fast moving, brandname goods at discount prices. These include jewellery, power tools, cameras,
luggage, sporting goods, toys etc. They make money by cutting costs and margins to
provide lower prices that will attract a higher volume of sales.

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Retailers can also be classified according to ownership structure:


Chain stores: two or more outlets that are commonly owned and controlled employ
central buying and merchandising, and sell similar lines of merchandise e.g. Coles
Myer controls 20c of every retail dollar in Australia. The dominance of retailing
turnover by a limited number of firms has implications for marketers, who have to
gain distribution with key retailers if they are to gain market coverage.
Retailer cooperatives: a group of independent retailers that band together to set
up a jointly owned central wholesale operation and conduct joint merchandising and
promotion efforts e.g. Mitre 10 hardware.
Franchise: a contractual association between a manufacturer, wholesaler or service
organisation (a franchisor) and independent businesspeople (franchisees) who buy
the right to own and operate one or more units in the franchise system e.g. Real
estate agencies, McDonalds.
According to type of store cluster:
Central business districts (CBDs): are the areas of business at the heart of a city
or town, usually containing department stores, specialty stores, banks, movie
theatres etc.
Shopping centres: a group of retail businesses planned, developed, owned and
managed as a unit e.g. Indooroopilly Shopping Centre.
Wholesaling
Wholesaling includes all activities involved in selling goods and services to those
buying for resale or business use. Wholesalers are firms engaged primarily in
wholesaling activity. Wholesalers buy mostly from producers and sell mostly to
retailers, industrial consumers and other wholesalers.
Why would a producer use wholesalers rather than selling directly to
retailers or consumers?
Because wholesalers are better at performing one or more of the channel functions.
Wholesalers offer a range of benefits:
Selling and promoting - wholesalers sales teams help manufacturers reach many
small customers at a low cost. The wholesaler has more contacts and buyers often
trust the wholesaler more than they trust the distant manufacturer.
Buying and assortment building - wholesalers can select items and build
assortments of different products needed by their customers, thereby saving the
consumers much work.
Bulk breaking - wholesalers save their customers money by buying in carload lots
and breaking large lots of products into small quantities.
Warehousing- wholesalers hold inventories, thereby reducing the inventory costs
and risks of suppliers and customers.

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Transportation - wholesalers can provide quicker delivery to buyers because they


are closer than the producers.
Financing - wholesalers finance their customers by giving credit, and they finance
their suppliers by ordering early and paying bills on time.
Risk bearing - wholesalers absorb risk by taking title (ownership of the products)
and bearing the cost of theft, damage, spoilage etc.
Market information - they give information to suppliers and customers about
competitors, new products and price developments.
Management services and advice - wholesalers often help retailers to train their
salespeople, improve store layouts and displays, and set up accounting and inventory
control systems.

Promotion
This is the most commonly recognised aspect of the marketing function. It is the
process of integrating and coordinating available communication channels to deliver a
clear, consistent and compelling message about the organisation and its products or
services. The objectives of the communication may vary: inform, persuade, remind,
or reinforce attitudes or perceptions.
In order to develop a compelling message, the sensible marketer:

Identifies the target audience

Determines the response they seek

Selects a message

Selects the appropriate media

Collects meaningful feedback.

Identifying the target audience


The target audience affects all decisions when developing your promotion strategy.
The audience might be current users, potential buyers, decision makers, decision
influencers, groups, individuals, special interest groups, general public etc.

What will be said?

How will it be said?

When will it be said?

Where will it be said?

Who will say it?

Determining the response sought


The marketer uses communications to influence consumer state of mind:
Awareness

Product name recognition, or brand awareness. The message may


simply be repetition of the product name.

Knowledge

The goal is to provide the target market with information about the
product or organisation

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Liking/admiring

Create favourable emotional responses and connections to the


product or organisation.

Preference

Build consumer preference by promoting the products quality,


value, performance and other features

Conviction

Convince the target market that buying the product is the right
thing to do, that it fills a need (previously identified need or not).

Purchase

Lead consumers to take the final step, often called the Call to
Action. This may include a sales promotion such as offering the
product at a reduced price, letting the consumer try before they
buy, or a limited time offer.

Obviously, the eventual goal is for the consumer to purchase the product; however,
there are other stages the come before the ultimate purchase in the decision making
process that the marketer will attempt to influence.
Selecting a message
The marketer must determine:

What to say message content

How to say it logically message structure

How to say it symbolically message format

For example, in a print ad, the marketer must consider:

Headline

Colour

Illustrations

Placement

Copy

Selecting media
There are 5 common communication channels used in modern consumer marketing:

Advertising

Public Relations

Personal Selling

Sales Promotions

Direct Marketing.

Reviewing media performance


Once the message has been sent, the marketer must obtain meaningful feedback to
determine the success of the communication. Research may include:

Whether the consumers remember the message

How many times they saw it

What points they recall

How they felt about/responded to it

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Their past and present attitudes about the product or company

Whether it resulted in a behaviour change.

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References

Real Marketing, The people the choices. Michael Solomon et al 2012: Pearson
Education

2013. She Runs The Night strategy, execution, results of Nike's groundbreaking campaign. Marketing Magazine, [Online]. Available at:
www.marketingmag.com.au/case-studies [Accessed 06 May 2013].

Amazon

Attorney General's Department, The Australian Guidelines for Electronic


Commerce

Australian Direct Marketing Association, Code of Practice

Bangs, DH 1989,Practical Marketing, Kogan Page, London

Business.gov.au, Codes of Practice, viewed 19 January 2012, link Carsguide

BNet (now CBS Money Watch http://www.moneywatch.com)

Cole, K, 2012. Management: Theory and Practice. 5th ed. Frenchs Forest:
Pearson Australia.

Free TV Australia 2010, Commercial Television Industry Code of Practice

Kotler, P, Brown, L, Adam, S, Burton, S, and Armstrong, G (2007). Marketing


7th Edition, Pearson Education Australia, Frenchs Forest.

Nielsen Australia

Oztam

Rix, P 2011, Marketing a Practical Approach, McGraw-Hill Australia, Sydney.


Roy Morgan Research

The People's Supermarket, Mission Statement

Vee, J, Miller, T and Bauer, J 2008, Gravitational Marketing, John Wiley and
Sons, Hoboken, New Jersey. Wikipedia, Smirnoff History

When Art Meets Science: The Challenge of ROI Marketing (Dec 2003)
www.strategy-business.com, retrieved 09 Dec 2009

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