You are on page 1of 59

Marketing

What is a market?

A market can be defined as a meeting place for buyers (consumers) and sellers.
Markets can be set up in a shop, restaurant, over the telephone/ internet, at a car
boot sale, etc.

A market consists of the individuals or organisations who are actual or potential
buyers of a product or service. Markets may be classified as consumer markets or
industrial markets.

Consumer markets are made up of individuals who purchase goods or services for
personal or domestic use. They make most of their purchases from retailers and
buy a combination of consumable goods, such as food and durable goods such as
cars, televisions, and clothes. Consumable goods are bought more frequently than
durable goods.

Industrial markets are made up of organisations that purchase goods or services
to use in the production of other goods and services. They buy a combination of
consumable goods, such as raw materials and longer-lasting durable goods, such as
machinery and equipment.

Market share

The percentage of total sales of a product or service achieved by one organisation
is known as market share . It is often considered by businesses to be an indicator
of their success – the larger the market share, the larger the profits. The
advantages of having a large market share are:

• High market share companies have the power to buy their raw materials in bulk,
which will reduce costs. This may be passed on to the consumer in the form of
cheaper prices, thus edging smaller competitors out of the market. Otherwise,
the firm will make higher profits.

• High market share companies may be able to make special components or
ingredients for themselves, rather than buying them from other firms. This
again will prove to be a saving in costs.

• If larger profits are made, more can be reinvested in the organisation.
Additional research and development may give the company a competitive edge.

• Costs, such as marketing and transport, are spread over a larger output –
making expenditure on advertising, etc. much more worthwhile.

Market growth

An organisation may be selling in a high- or low-growth market. Markets that are
growing offer more potential for products to develop than declining or static
markets do. High-growth markets are attractive to organisations that wish to
increase their market share. It becomes very difficult to gain market share from
established market leaders when market growth has slowed down.

What is marketing?

Marketing Manager Required
Here is your chance to influence the spending habits of a discerning
sector of the population and manage a world-famous cosmetics
company. Reporting to Senior Management, you will develop and
implement a marketing strategy for a range of brands. You will have
responsibility for market research, promotion and advertising,
direct mail activity and preparation of publicity material.
Additional responsibility will be for new product development and
branding in order to expand our market base.

The marketing activities contained in the above job advertisement are italicised in
the text.
The Chartered Institute of Marketing defines marketing as ‘the process involved
in identifying, anticipating and satisfying consumer requirements profitably’.

The role and importance of marketing in organisations

• Identify
• Anticipate
• Satisfy

1 To identify consumers’ requirements

Businesses must identify what exactly a consumer wants from a product or
service. There is little point in providing something that does not meet consumers’
requirements – they simply will not buy it. Marketing departments aim to ensure
that consumers buy products or services and that they continue to do so (that is,
make repeat purchases).

Firms today face a lot of competition and consumers’ expectations are increasing
and becoming more sophisticated. Requirements change frequently and the
marketing department must make sure the product or service is developed or
altered to meet these requirements. The role of marketing is, therefore, an
increasingly important one in today’s business world.

Price and quality have always been important factors in whether or not a consumer
will buy, but so too have prompt delivery, attractive packaging and after-sales
service. Advertising and promotion play a big part in influencing consumers to buy.

2 To anticipate consumers’ requirements

The role of the marketing department is to find out what consumers want today
and will want in the future. Consumer trends must be considered in order to
anticipate future needs. This is especially important in markets where trends and
fashions change rapidly (e.g. clothing, toys), or where technological changes occur
frequently (e.g. computers). It may be necessary to develop new products quickly
to stay ahead of competitors.

3 To satisfy consumers’ requirements

The consumer is the most important consideration for most businesses today –
businesses are often said to be ‘consumer (or customer) focused’. Without
consumers the business would fail. Good service and quality products that offer
value for money are essential.

Prompt delivery and good after-sales service are also important, as are well
presented and packaged goods. It is vital that the product is available at the
right price and at the right time.

These three aims, for the majority of businesses, must be achieved profitably.
There is little point in spending large amounts of money on marketing if costs are
greater than revenue. However, organisations do exist where profitability is not
an objective. Schools, hospitals and charities also use marketing techniques in
order to become more effective in satisfying consumers’ requirements.

The importance of marketing

The importance of marketing can be illustrated by considering the contrasting
responses of the American car industry and the Swiss watch industry to changes
in market conditions.

The decline of the American car industry

For decades, motor cars manufactured by American companies were built on the
principle that the American consumer preferred a long, roomy vehicle with large
engine capacity. During the 1960s large heavy vehicles with names like Chevrolet
and Buick, produced by American manufacturers, dominated the market. Roads
were seldom graced by the sight of a foreign motor car and the American
manufacturers tended to ignore trends taking place in the rest of the world where
small, economical vehicles with lower engine capacities were capturing an ever-
increasing share of the market.

American manufacturers believed that small cars would never sell in the US
market. Japanese car manufactures, on the other hand, disagreed and recognised
a major opportunity for market growth in the US. Marketing strategies were
developed, research and development programmes carried out, factories built, and
a workforce was trained in order that Japan could enter the American motor
vehicle market.

During the 1970s world oil prices quadrupled, making fuel much more expensive.
Increasing labour and raw material costs also combined to make large American
cars expensive to buy and to run. American consumers rapidly switched their
preference to smaller, economical cars, and sales of Japanese vehicles such as
Datsun and Toyota rocketed because American manufacturers offered no
alternative.

Even while this process was taking place, American car manufacturers decided
against changing to small car production believing that the trend was only
temporary and that their market share would recover when world oil prices fell.
This never happened, and by the time American manufacturers finally changed to
small car production, the Japanese manufacturers had a powerful grip on the
market. They also faced severe competition from West Germany, Italy, France
and Korea where technological advances in car production enabled competitors
such as Volkswagen, Fiat and Renault to secure a market share.

Several American car producers went out of business and thousands of
manufacturing jobs were lost. This led to the United States having a large
balance of payments deficit with Japan due to the high volume of imported
Japanese motor vehicles. The domestic American industry failed to anticipate the
changes in consumer needs and never recovered.

The Swatch story

In contrast, the outstanding success of a Swiss watch manufacturer during the
1980s was the result of a careful and well-executed marketing plan, brought on by
necessity.

For years the Swiss were world leaders in the watch industry. In 1974 their
worldwide market share was 30%. Then the Japanese actively began to produce
and market quartz watches, which the Swiss viewed as a passing fashion. Quartz
digital watches were, however, no fad and by 1983 the Swiss share of world
markets for watches had fallen dramatically to 9%.

The Swiss manufacturer SMH carried out extensive research in its watch markets
and carefully analysed patterns of consumer behaviour. Marketing experts advised
the company that a turnaround was possible if an inexpensive, good-quality quartz
analog watch could be developed, since the market was saturated with digitals.
Gradually, a marketing plan was devised and implemented resulting in the
introduction of the Swatch in 1984, which has since revolutionised the world
watch industry.

Based on their extensive analysis of consumer behaviour and lifestyle, SMH
adopted a strategy that completely changed the concept of a wrist watch.
Watches were to be a fashion accessory first and a watch second. They would
also be analog rather than digital. Product planning developed a distinctive quartz
analog watch in a wide range of fashionable colours and designs. New models were
introduced rapidly and older ones quickly dropped. Because Swatches were sold as
fashion accessories, consumers were encouraged to buy more than one (to match
different sets of clothes or lifestyles). The average Swatch customer in Britain
today owns three different models.

In Britain, Swatch watches were distributed mainly through department stores
and speciality shops. They were not sold in high-street jewellery stores, which
the company believed were an inferior point of sale for the product. The
marketing strategy was based on carefully controlling distribution to avoid
flooding the market, which would have resulted in consumers losing their desire to
own a Swatch.

Today, Swatch watches sell for a relatively low price which appeals to a large
number of consumers and encourages multiple purchases. The watches are highly
distinctive. Extensive product promotion, which includes advertising on TV and in
magazines, together with sponsorship of various concerts and sporting events,
generates further sales.

Successful marketing has greatly increased market share and enabled the company
to introduce new product lines, such as clothing and telephones, using the Swatch
name.

ACTIVITY
In your own words compare the success of the American Car Industry with that of
Swatch.

when combined. distribution. through competition. the strategic function of marketing was to attract and retain a loyal group of consumers through a unique combination of market research. Among the elite to get caught (and likely to face jail time) is Sotheby's chairman Alfred Taubman. Since many markets for goods and services have evolved to the point where the consumer has become of prime importance. and distributed in a convenient manner. businesses have responded by attempting to ensure that their products are produced to an appropriate standard. product design. Now they sound more like Bonnie and Clyde. . centre on four functional activities: • product • pricing • distribution or place • promotion (including advertising).The marketing function In the case of Swatch. are known as the marketing mix . at an acceptable price. or hefty profits. until this year. therefore. promotion and price factors. The two auction houses conspired to fix prices so that they would not lose clients. These decision areas. That's the same Taubman who chaired (until recently) the mall development company that bears his name and brought International Plaza to the Tampa Bay area. Marketing decisions. The names oozed high culture and big checkbooks. CORPORATE BLUNDERS Sotheby's and Christie's.

The current position must be looked at along with the future position – marketing departments must anticipate what will happen in the future in order to allow adjustments to goods and services to be made and new goods and services to be produced. Profit is important to most organisations. marketing still has a job to do: it must ensure consumer satisfaction through the provision of after sales service. Henry Ford in launching his Model T car said ‘customers can have any color they want as long as it is black’. Even after the sale. marketing has come to be recognised as the discipline which coordinates and manages the total business function. e. Product-oriented organisations These assume that the product or service being offered is the best on the market and will be very easy to sell. selling and promotion. This might be the case with a new invention or a highly technical unique product. It is concerned with what is to be sold. . distribution. marketing decisions are often strategic decisions since they frequently determine the overall direction of the organisation. its design. Marketing is far more than just selling the product. Amongst the most important functions of marketing is the assessment of the market to discover • where the consumers of the product are to be found • how many consumers there are • the attitudes and preferences of the consumer • the effectiveness of distribution methods • the strengths and weaknesses of competitors. In a consumer society. such as maintenance. from its inception until it finally reaches the hands of the consumer. or even when a very strong advertising campaign can convince a consumer to purchase the product. price. when it is to be sold and where it is to be sold. how it is to be sold. repairs. spare parts and quality guarantees. Today. Other business functions such as production and human resource management are often influenced by marketing considerations.g. but there may also be a need to improve brands in order to obtain or retain brand leadership or increased market share. It is felt that there is no need for product change or development as there is no real competition.Marketing as a strategic activity Marketing is concerned with every aspect of an organisation’s product or service. instruction booklets.

Pressure from the media was considerably less. Organisations operating like this may fail once competitors enter the market. Honda and Suzuki – they had failed to look at what these foreign competitors were producing and how they met the needs of the consumer more successfully. These organisations realise that their profits and/or success depend on meeting the needs of the customer. This section considers industrial goods and services. though. this approach may be seen as complacent. producing heavy. were superseded by Kawasaki. This has led to the customer being seen as the main focus of an organisation’s activities. Product orientation was predominant in the UK in the 1930s and 1940s when there was less competition.g. An example can be shown by the demise of the British Motorcycle industry. Consumer goods (i. e. the same goods can be both industrial goods and consumer goods. but are consumer goods when bought by private individuals for their own use. From a marketing point of . large capacity machines. Norton and Triumph. may be industrial goods when bought by companies for use by sales representatives.e.In today’s competitive business world. Consumers did not have such a large disposable income and their knowledge of products was more limited. and customers’ expectations were not so sophisticated. customers became increasingly aware of what is available on the market and the amount of competition has greatly increased. They will make an effort to find out what customers want and what influences their purchasing decisions. It is important to remember. industrial goods and services. Customer-oriented organisations These constantly modify their products or services in response to changes in the market. The main principles of marketing (covered later in this text) apply in all cases. The marketing of products and services Marketing applies to both products and services. slow-revving. BSA. They are purchased for use in a business. ones bought by end consumers for their own personal use) are commonly used to give examples to illustrate marketing. Cars. for example. that marketing also applies to industrial goods and to services. Marketing ensures that the needs of the customer are considered before production takes place. but the ways in which they are used may differ between consumer goods. In some cases. During the 1980s and 1990s. Industrial goods are distinguished from consumer goods according to the purpose for which they are bought. raw materials and machinery.

bank accounts) are distinguished from goods in the following ways: • They are intangible – as a result. They are right. the marketing of industrial goods is influenced by several factors: • Crucial considerations when buying industrial goods include product performance and quality in terms of wider company requirements – the technical specification of industrial goods may then be an important feature of marketing them. car repairs. • Their quality may be variable – products can be produced in constant conditions so that quality can be closely controlled. It is the inability to see 'down the road'. Marketing myopia Marketing myopia is a disease rampant among business people. They do not think about what will likely occur in their industry in the future. Many business people make their decisions based on current circumstances. before they are bought. hairdressing. but the production and consumption of services cannot usually be separated. of course. Although people can be trained to follow very detailed job procedures (such as those used by McDonald’s in their fast food restaurants). unlike products. cannot be stored. . • They are usually sold and consumed at the same time – products can be produced. mass advertising is not often used for industrial goods and marketing tools such as branding may be less common.view. that is no reason why we should not use the whole range of business prediction techniques available to us to estimate future circumstances as best we can. then stored and consumed at a later date. The reason that short sightedness is so common is that people feel that they can not accurately predict the future. But just because we cannot accurately predict the future. • The link between the seller and the buyer is usually much closer with industrial goods – for this reason. Services are often provided on the spot and quality may depend on the person providing the service.g. quality control of services is generally more difficult than it is for products. Services (e. they cannot be displayed like products nor can they be handled. • Personal selling tends to be more common for industrial goods than for consumer goods. The term was coined by Theodore Levitt in the 1960's. • They are perishable and. These factors mean that the marketing of services often concentrates on ensuring that the quality of the service is as consistent as possible so that consumers get the same experience wherever the service is provided. tested etc.

Ansoff's Matrix . Related diversification means that we remain in a market or industry with which we are familiar. Exporting the product. but it is marketed to a new audience. the food industry). There are four main categories for selection. However. Market Development Here we market our existing product range in a new market. This well known marketing tool was first published in the Harvard Business Review (1957) in an article called 'Strategies for Diversification'.Planning for Growth. There are two types of diversification. Ansoff's matrix is one of the most well know frameworks for deciding upon strategies for growth. promoting the product. or marketing it in a new region. This often happens with the auto markets where existing models are updated or replaced and then marketed to existing customers. namely related and unrelated diversification. Ansoff's Product/Market Matrix Market Penetration Here we market our existing products to our existing customers. It is used by marketers who have objectives for growth. Here we develop and innovate new product offerings to replace existing ones. For example. This means that the product remains the same. For example a soup manufacturer invests in the rail business. Such products are then marketed to our existing customers. for example. and so on. . the product is not altered and we do not seek any new customers. repositioning the brand. Ansoff's matrix offers strategic choices to achieve the objectives.e. This means increasing our revenue by. are examples of market development. Product Development This is a new product to be marketed to our existing customers. Diversification This is where we market completely new products to new customers. Unrelated diversification is where we have no previous industry nor market experience. a soup manufacturer diversifies into cake manufacture (i.

So Ricardo designed and built a number of bikes to overcome this problem.000 units in 1996. The marketing environment Organisations operate in an environment that is constantly changing. Use Ansoff's matrix to examine the options for Colorado Ricardo. As the mountain bike sport took off. He was very competitive and loved to take his bike off-road to test his strength and endurance. However sales have fallen annually since then and forecasted sales for 2000 are only 4. It went so well that soon he was able to give up his own job as a DJ to focus on the construction of the bikes. which he called the 'Colorado Ricardo'. He was a keen cyclist who spent his weekends with many friends cycling and having fun in the mountains of Colorado. It is vitally important that marketing decisions take account of the forces that shape that environment in order to compete more effectively. Many failed but eventually he came up with the ultimate in off-road bike.People liked Ricardo's bike and he was asked to build and sell them to other cyclists in the Colorado region.000 units. Ricardo's company needs strategies for growth before it is too late. The factors that determine and influence the marketing environment can be shown as follows: Consumer trends and behaviour Competition Government THE MARKET The economy Technology . Colorado Ricardo Mountain Bikes. Colorado Ricardo Mountain Bikes was founded by Ricardo Francisco in 1992. Ricardo's business grew to produce 10.Ansoff's Matrix Exercise. However he found that the bikes themselves kept on breaking-down under the strain.

Products are the means by which a business provides benefits for its customers. These factors can be split into the four Ps: PRODUCT PRICE PLACE PROMOTION Each of these factors has an influence on attracting the customer to the product. Each can be varied to suit the needs of the consumer. For example. A product is useless unless it provides a benefit for the user. why did we just witness an unprecedented bidding war.They are the same kinds of factors that influence all aspects of the behaviour and activity of an organisation. CORPORATE BLUNDERS Cheers to Bud "Lite" Selig. the method of manufacture and how it is packaged. the materials used in manufacture. but not a local café. travel agent. The quality of a product is capable of wide variation depending on how it is designed. commissioner of Major League Baseball. for whining all year about MLB's red ink and the need to get rid of at least two major league franchises. Existing products may have to be adapted to meet these needs. insurance company and architect all offer products – normally referred to as services . an organisation has to combine all the marketing activities to create a combination of benefits considered to be the most suitable to meet the needs of a selected market. a gardener buying insecticide wants to get rid of insects.g. place needs to be considered when setting the price of a product – expensive meals can be sold in up-market type restaurants. topping $700-million. The marketing mix For marketing to be successful. to acquire the Boston Red Sox? Does anybody smell a rat? . what the consumer wants when buying washing-up liquid is clean dishes. Product/service The product must meet the needs of consumers – actual and potential. If the business of MLB is in such trouble. e. Products are not necessarily tangible: the bank.

the ease at which you can go where you like. That's because the core product is the BENEFIT of the product that makes it valuable to you. the customer service support offered by the car's manufacture. When you buy a car. the ACTUAL product. It usually consists of lots of added value.e. part of the augmented product would be the warranty. and finally the AUGMENTED product. These are known as the 'Three Levels of a Product.the CORE product. is the product more complex than you first thought? In order to actively explore the nature of a product further. Describe the difference between the core and augmented product 2 3. Describe what you understand by a ‘Product’ 2 2.' So what is the difference between the three products. and any after-sales service.simple! Or maybe not. buy and then collect.PRODUCT For many a product is simply the tangible. You can get some use out of it. when you want to. be creative! As part of an upcoming group task you are going to design your very own product. From watching Steve Jobs introducing the i-Pod. Again with the car example. Another core benefit is speed since you can travel around relatively quickly. or more precisely 'levels?' The CORE product is NOT the tangible. physical product. The AUGMENTED product is the non-physical part of the product. STUDY QUESTIONS 1. Discuss the key features and benefits of an augmented product you 4 own 4. physical product. You buy a new car and that's the product . So when you buy a car. the benefit is convenience i. lets consider it as three different products . So with the car example. The ACTUAL product is the tangible. Make a list of other elements you feel are important in creating a 4 product 6. Brainstorm some ideas in your jotter . phsysical entity that they may be buying or selling. You can't touch it. for which you may or may not pay a premium. what were the main 4 features and benefits of the i-Pod? 5. it is the vehicle that you test drive. Finally.

Initial sales will be low until the consumer starts buying. At this point. The early development costs can be recovered. Durables like a car have a longer lifespan. Marketers may also put added value onto their product. Introduction To make the target market aware of the new product it is important to heavily promote it. have a short lifespan. Growth As sales and profitability increase. the actions of competitors or government and use the following strategies during each stage of the product life cycle. like fruit and vegetables. Applying the product life cycle to the marketing mix Marketing teams watch for changes in the business environment and react to them. by offering accessories or insurance. to reach more consumers. The success of the product can lead to brand loyalty and repeat sales. Maturity Competitors will usually have entered the market at this stage. the selling price may be reduced to make the product more attractive. It is no longer profitable to produce it. Different products last for different lengths of time but their life-cycles have elements in common and follow this curve: Introduction The product is tested and developed before it is launched. Maturity The product reaches its peak of sale and is at its most profitable point for the company. Sales fall. as does revenue. Competitors have now entered the market that may reach saturation point. A special introductory price may help push the product. If their products are as good but cheaper the company may lose some of its market share. Perishable goods. The marketing team may consider expanding its distribution. They respond to consumer needs. Growth As sales increase production becomes more profitable. for example.The Product Life-Cycle When we buy a product we need to know how long it will last. Continued advertising around the brand name will help to sustain sales. a product may become obsolete. The pricing strategy must be reviewed. or fashions change. production costs are much higher than the revenue from sales. Decline As new models and designs come out. .

Price – the price may be lowered to reach a new market Place – changes in where the product is sold can expand the lifecycle. For example Brother typewriters are now sold in the Developing world. but targeting a different and smaller segment can prolong its life. Extending the Product Life A product need not die. Promotion – BOGOF and other deals may encourage more sales. CORPORATE BLUNDERS After Sept. Citing the terrorist attacks as a "force majeure. Through manipulation of the marketing mix the product cant survive longer. severance and early-retirement incentives.000 employees. three major airlines (American. or changes in packaging. Delta and Northwest) said they would lay off an estimated 100. It may have better features." the airlines argued they could make the cuts without customary notice. They later backed down.Decline Marketing cannot save a product at this stage. . Product – a new version or generation of the product may be introduced. 11. but are considered old hat in the West.

invented by a couple of Sony execs.Product Life Cycle Questions 1 Draw and label the product life-cycle diagram 8 2 Describe what happens in each of the 4 stages. . Sony Pictures used "quotes" from an imaginary film critic in Connecticut named David Manning. Oops. A couple of moviegoers sued and several state lawmakers began investigations. 4 3 What stage of the product life cycle do you think these products 4 are at? I-Pod Walkman PS3 Cars DVD CDs Video PSP 4 Give 4 ways in which a product’s life may be extended 4 5 Describe what happens in the development stage 2 CORPORATE BLUNDERS In a boffo move. in ads promoting such Sony-backed movies as A Knight's Tale and The Animal.

PRODUCT FAILURES THE PRODUCT – Name and the Developer THE TARGET MARKET – Who it was aimed at FEATURES AND KEY BENEFITS TO CUSTOMERS REASONS FOR FAILURE .

and 6 Japanese brands. with the help of advertising. such as youthfulness. to a customer base that was only familiar with local goods. with their products. image. The packaged goods manufacturers needed to convince the public that their product was just as trustworthy. It quickly became apparent that their soap was a hard sell next to the familiar. 30 European. Domestos is just another detergent. Brands were born with the 19th century advent of packaged goods. These factories needed to sell their products nationwide. This is illustrated by many brands of that era. and Chiquita is a banana just like another. Brands (United States): Apple Boeing Coca-Cola Columbia Records Ford Motor Company Hershey's McDonald's Microsoft The Gap BP Cadbury Honda Nestlé Nokia Orangina Canon Sony Toyota Nintendo Brio Ferrari Ikea Lego Mercedes-Benz A good brand name should be: • legally protectable • easy to pronounce. such as Uncle Ben's rice and Kellogg's breakfast cereal. which distinguishes a product or service. Without the brand. such as soap. from local communities to centralized factories. Industrialization moved the production of many household items.BRANDING Originally branding meant anything that was hot or burning. local product. Brands are the personality attributed to products and/or services. Today a brand is an identifying mark. A brand name that has been given legal protection is referred to as a trademark. From there. manufacturers quickly learned to associate other kinds of brand values. by the European Middle Ages it was commonly used to identify the process of burning a mark into a stock animal so as to identify ownership. Coca-Cola is little more than sugared water.:Easy off) or suggest usage . remember and recognise • attract attention • suggest product benefits (eg. name or concept. Examples of prominent brand names The 2001 ranking of the 100 most valuable brands worldwide by Business Week magazine contained 62 American. This kick-started the practice we now know as branding. The manufacturers wanted their products to appear and feel as familiar as the local farmers' produce. fun or luxury.

This calculation is at best an approximation. Explain your answer. 8. Even purchasers of Charmin will refer to the product as Kleenex. Questions 1. If corporate branding is done well. Explain the difference between positive and negative brand equity. hence there is not adequate focus on the products' unique characteristics. So do IBM. It can be positive or negative. 2. Disney. Positive brand equity can allow family branding. In your own words. for example. Pepsi. • suggest the company or product image • distinguish the product's positioning relative to the competition Brand Equity is the value built-up in a brand. The value of a company's brand equity can be calculated by comparing the expected future revenue from the branded product with the expected future revenue from an equivalent non-branded product.: Kleenex. The main disadvantage with corporate branding is the products are not treated as individuals. includes the word 'Disney' in the name of many of its products. A corporate branding strategy should only be used if the company is already well known by the target market and also has a very positive image in their minds. One advertising campaign can be used for several products. which makes new product introductions less risky and less expensive. Corporate Branding refers to the practice of using your company's name as a product brand name. The company topped its naming blunder when it funded a report in the Czech Republic on the economic virtues of a heavy smoking population. 7. the study said.g. Negative brand equity is usually the result of bad management. You see. Choose an example of a brand with either positive or negative brand equity. the corporate name can become synonymous with a product category (e. . and Coca-Cola. describe how brands were born. How is brand equity calculated? CORPORATE BLUNDERS Tobacco giant Philip Morris left no doubt it should be somewhere on this list for its decision to swap its corporate name for the nonsense word Altria. thus saving the country the extra costs of providing them with a pension in their old age. Define what a brand is. people who smoke cigarettes tend to die young. What is brand equity? 6. Explain the origin of the word branding. Tampax). Positive brand equity is created by a history of effective promotion and consistently meeting or exceeding customer expectations. It also helps new products being introduced because customers are already familiar with the name. 4. Which brand do you remember most? Why? 5. 3.

The responsibility for marketing the product is passed to the retailer.g. Broadhead. A marketing department must make sure that consumers believe the product to be better than all of its competitors. Tesco. e. A branded product may also command a higher price. is quite used to remarkable paychecks. Own brands This is the term for products branded with the name of the store stocking the product. Many organisations maintain a product portfolio with different products at different stages of development. CORPORATE BLUNDERS James Broadhead. . But Broadhead and other FPL honchos still walked away with $62-million in deal-related bonuses. Retailers can have products made to their own specification and it may be offered as a cheaper alternative to the consumer. but despite this brand loyal customers are reluctant to change. Sainsbury’s or Boots. Last year. FPL's proposed $15.8- billion buyout of New Orleans' Entergy was never consummated.Brand loyalty Some consumers are faithful to one particular product. CEO of FPL Group (parent of Miami's Florida Power & Light). who is retiring at the end of this month. Manufacturers are able to launch new products much more easily if they use an existing brand name. obviously knows a good (personal) deal when he sees one. Consumers believe that the new product will meet the same standards as the products they already know and like to buy. It is difficult to persuade brand loyal customers to switch products. The product may well be manufactured by someone else. he received more than $39-million.

What is a USP? The USP very clearly answers the question. the blindfolded waitress was escorted to the parking lot to claim her "toy Yoda. However many USPs are based on advertising imagery like Tango (wacky) or Levi jeans (cool). What other examples of USP can you think of? 4. Second.).The Unique Selling Proposition In developing your marketing message. Notice Dominos didn't even promise the pizza tasted good." a doll of the Star Wars character. or USP. What are the two main benefits of having a USP? 3. airbags or ABS) or computer firms (DVD-Rs. a Hooters restaurant boss told waitress Jodee Berry that a new Toyota awaited the employee who sold the most beer in a month. it clearly differentiates your business in the eyes of your current and potential customers or clients. Do you think the team at Dominos made a considerable effort to develop systems to assure the USP was met? CORPORATE BLUNDERS In Panama City. it's very helpful to develop a Unique Selling Proposition. USPs should focus on a real product characteristic. There are two major benefits in developing the USP. . Questions 1. What is a USP? 2. helping to improve your internal performance. Internet access etc. hot pizza delivered in 30 minutes or less. Who do you think of when you hear the phrase. "Fresh. After she won. She sued. it focuses your team on delivering the promise of the USP. How do you think a Dominos delivery person would behave compared to a delivery person who works for a competitor without this USP? 5. "Why should I do business with you instead of your competitors?" The USP may be used repetitively in your marketing literature to build the customer's or client's identification of your company with your product or service. Stronger still are USPs based on patented technical advantages like many car manufacturers (GPS. guaranteed"? Dominos virtually took over the delivered pizza market with that USP. for example Irn Bru’s taste or quality of Armani. First.

STAGES IN NEW PRODUCT DEVELOPMENT Brainstorming Filter ideas Ask customers Formulate strategy Estimate sales. costs and profits Prototype created Trial launch in a few areas Putting into production .

Then… You are required to create a 5 minute Presentation for your Product and to prepare a 2 page brochure outlining the Target Market.Memorandum To: Business Management Students From: Mr McGowan Date: Today’s Subject: Product Design Firstly… We will view Steve Job’s brilliant iPod launch to see how the very best in the world present a product to market. Go through the processes of idea generation. . the Competition. Then… In your Apprentice Groups you are to come up with a new ICT Product. Finally… A specially invited Judge will decide on the winning group. screening and concept development. The losing teams will have to fire the members they believe was least productive/cooperative. Features and Key Benefits of your Product.

The funds generated by your Cash Cows is used to turn problem children into Stars. Problem Children and Stars need to be kept in a kind of equilibrium. These are products with a low share of a high growth market. It has two controlling aspect namely relative market share (meaning relative to your competition) and market growth.The Boston Consulting Group's Product Portfolio Matrix Like Ansoff's matrix. Keep and build your stars. Dogs. • There is an assumption that higher rates of profit are directly related to high rates of market share. This is simplistic in many ways and the matrix has some understandable limitations that will be considered later. They consume resources and generate little in return. You would look at each individual product in your range (or portfolio) and place it onto the matrix. These are products with a low share of a low growth market. Look for some kind of balance within your portfolio. These are the canine version of 'real turkeys!'. They do not generate cash for the company. These are products with a high share of a slow growth market. They absorb most money as you attempt to increase market share. Cash Cows generate more more than is invested in them. Some of the Problem Children will become Dogs. You would do this for every product in the range. Stars. When Boeing launch a new jet. Try not to have any Dogs. So keep them in your portfolio of products for the time being. Problem Children. This may not always be the case. the Boston Matrix is a well known tool for the marketing manager. It was developed by the large US consulting group and is an approach to product portfolio planning.The Boston Matrix . Cash Cows. These are products that are in high growth markets with a relatively high share of that market. and this means that you will need a larger contribution from the successful products to compensate for the failures. You can then plot the products of your rivals to give relative market share. Stars tend to generate high amounts of income. Problems with The Boston Matrix. which may eventually become Cash Cows. it may gain a high market share quickly but it still has to cover very high development costs . Each cell has its own name as follows. they tend to absorb it. Cash Cows. Get rid of these products.

For example. • Oliver is the market leader in handsaws with 40% of the market. Their first products were fish hooks which were made from the flexible wire that they were able to produce. However is is still quite profitable. Boston Matrix Exercise Manor Way Tools Manor Way Tools began life as a small steel company at the end of the 19th Century. drill bits. It was one of the first companies to put carbon into regular iron to create steel. • Manor Way has a high share in the new market for sandpaper replacement products. • There is another assumption that SBUs will cooperate. Core products include handsaws. • The main problem is that it oversimplifies a complex set of decision. They are the market leader in many similar areas of the market. • Both Oliver and Manor Way have invested heavily in gardening tools and expect sales to increase in the future since people have more leisure time and a larger disposable income. Their Wayplate is a steel sandpaper replacement for which they have sole rights. bowsaws etc. Today they focus their operations on the manufacture of tools for the professional. There is little house building and nowadays many amateurs use power tools. screwdriver. This is an SBU not a single product. • It is normally applied to Strategic Business Units (SBUs). Manor Way has only 25%. The tool trade is very complex and competitive. Manor Way's main competitor is Oliver Tools. It was strong and flexible. Ford own Landrover in the UK. and Oliver has 15%. These are areas of the business rather than products. Maner Way has 10% of the new market. • What about the javelins? . Be careful. • Manor way still make a range of barbed fish hooks which are now banned in some markets. This is not always the case. Analyze your product portfolio using the Boston Matrix. Use the Matrix as a planning tool and always rely on your gut feeling. production. They have 5% of this growing market. and the enthusiastic amateur. Over the years the product portfolio grew to include anything that their operation could turn its hand to such as javelins and railings.

is expected to sell about 8. STUDY QUESTION Discuss the implications for Toyota of recalling and not recalling the product. Toyota said it was investigating possible corrosion of parts within the engines of certain models manufactured between 1998 and 2005. The Japanese firm recalled a record 1. . Toyota. Indonesia.000 vehicles in Japan over concerns about engine parts. Toyota will consider whether it should withdraw more than a million similar models exported to Thailand.41 million vehicles last month to repair a separate electrical defect. India and Australia as well as Europe. not long after it had to take a million cars off the road. The latest scare involves Crown sedan and Hiace van models in Japan.5 million vehicles this year. No accidents have been reported. The company did not comment on the likely cost of the recall. the world's second largest carmaker. Corrosion worry The latest recall came after drivers complained about unusual noise and vibration and vehicles stopping unexpectedly. Affected models include the Crown Chaser Cresta and the Hilux and Dyna truck marques.Mass vehicle recall hurts Toyota Toyota is already recalling more than a million vehicles Toyota is recalling nearly 250.

1 The Demand curve shows us the relationship between price and the quantity demanded. Price is important for two main reasons: 1. Cost-plus pricing – this is similar to mark-up but adds overheads onto direct costs before the profit percentage is added. Market Price – when a business sets prices in line with competitors. where image is all important. premium goods and services. For example. This avoids a price war. When goods or services respond strongly to changes in price. then the Quantity demanded falls from Q1 to Q2. Consumers use price as a measure of quality How do small firms set their price? Small firms usually use cost-based pricing methods called mark-ip and cost-plus pricing. Demand Curve Fig.PRICE The price a firm sets for its products/services will affect demand. . High Price – adopted by firms offering high quality. As we can see when the price increases from P1 to P2. Long Term Pricing Strategies Low Price – businesses may charge a lower price than those of competitors if the good is price sensitive. they can be deemed price sensitive. so if the dress is to have a 100% mark-up. and lower may result in higher sales. the £40 dress will be sold at £80. which is unbeneficial to all companies. A small clothes shop buys a dress for £40. Consumers will only pay what they can afford 2. Mark-up – adds a profit percentage onto direct cost of goods. This is when consumers respond positively to changes in price.

At the beginning when competition is low. Once the competitor is forced out. When DVD players first came out in the late 1990s they cost in excess of £1. Questions 1. This is also called price discrimination.000. Destroyer pricing is when a firm sets a price low enough to drive competitors out of the market. What is market skimming? What types of firms would use this strategy? 5. consumers pay for the novelty value. Explain the difference between mark-up pricing and cost-plus pricing? 3. sometimes at a loss. Demand-orientated pricing refers to varying the price for different groups of consumers. but reduced prices occasionally at local level to put local firms out of business. It is deemed anti- competitive by the Government. 7. Supermarkets may lower the price of their best selling products in order to attract customers who will buy other goods while in the store. 4. . Compare and contrast penetration pricing and destroyer pricing. Penetration Pricing – used when entering an established market. Prices are set low. 6. This occurs in technological markets. Give an example of a good which you have bought recently which would be priced in this way. What does the demand curve show? 2. For example telephone calls are less expensive off peak as there are less calls made during that period. As more competition enters the price is lowered each time to ‘skim the cream’ off the market.Short Term Pricing Strategies Skimming – when a new product is introduced the price is set high. Give an example of a good or service which could use demand-orientated pricing. Describe the three long term pricing strategies. Rentokill advertised competitive prices nationwide. Stagecoach introduced low fares when entering the Glasgow market in 1997 to take passengers from First Bus. This is also called a loss leader . prices can return to normal.a product that has a price set so low that it acts as a promotional device and draws customers into the store. Promotional pricing is used in the short term to boost sales or create interest in a new product. Today cheap DVDs can be bought for around £80. Describe demand-orientated pricing. As the product becomes established it can then increase the price. Explain what promotional pricing is. it allows sales and market share to increase quickly. It is a way of generating more business.

g. They will have superior knowledge of the world markets. Car manufacturer’s use agents to sell to local markets because they should have better knowledge of the market. E.g. and can create sales through their own promotional campaigns. yours might not be given the attention needed. Agent’s income comes from commission they make on each sale. Retailer – the shop which sells goods to the general public. Freeman’s o Door-to-door – companies like Avon take orders from people’s doorstep. clothing and electrical goods. Successful due to the credit facilities offerd. Agent – an independent person or company appointed to handle sales and distribution within a specified area.g. McDonald’s. Debenhams o Franchises – offer a new business a chance to trade using a successful formula. Tesco. Agents carry out promotional activities to attract customers and sell them the product. House of Fraser. E. Sometimes act as retailers too. Wholesaler – they buy large quantities of product from suppliers and sell them on in smaller volumes to retailers or business users. Retailers offer a variety of goods and services from a variety of producers. E. saving the producer time and money in delivering direct to the retailer. E. and how is it distributed. . Goods are stored on their premises and are prepared for sale and display them for sale. This refers to where the product is sold. o Mail Order – rather than having expensive shops to run they issue catalogues to consumers who can select products in the comfort of their own home. e.DISTRIBUTION The next P in the marketing mix is Place. Types of retailer o Independent retailers – most common type and can be best illustrated as your local corner shop. Channel of distribution – the route taken by product as it passes from producer to consumer. o Multiple chain stores – a number of outlets across the country with a well-known name.g. Normally specialise in premium brands. One drawback is that if an agent sells many different products. Sainsbury’s o Department Stores – offer a range of goods within different departments.g. Marks and Spencers o Supermarkets – offer a wide range of groceries. Importer/Exporter – they play a similar role to the agent but on an international scale. The wholesaler provides a link between the producer and the retailer.

and both Calvin Klein and Levi’s have prevented Tesco selling them in their stores. pubs and off-licenses. direct selling is more apt. People now expect these type of stores to be located in such places. Give one advantage and disadvantage of using an agent. Each one contains supermarkets. especially with highly technical machinery. then to save in distribution costs. fruit and vegetables sometimes go through specialist wholesalers who buy from small producers in order to make up the bulk needed fro retailers. Garden centres etc. Once common among large organisations. Explain what an agent does. furniture stores. Explain why the choice of distribution channel is important in terms of: a) the product b) the market 7) Give two advantages of selling online .Direct Selling – This is when the manufacturer sells straight to the consumer. The Product – Perishable products which have a limited shelf-life should select a direct channel. The business – some firms have their own distribution process with their own wholesalers and retailers. Choice of distribution channel – how the product gets to the consumer depends on a number of factors. Compare and contrast wholesalers and retailers. then using wholesalers and retailers are more efficient. Premium brands are selective where they are sold. 4. It also occurs in the industrial market. The emergence of out-of town retail parks have seen identikit sites open up nationwide. carpet stores. local businesses like a baker. most of these functions have been outsourced. 6. However. QUESTIONS 1. What is a channel of distribution? 3. Buying habits – consumers influence where products are distributed. More common in small. Legal requirements – some goods can only be sold through licensed premises such as chemists. If the market is small and local. Why is distribution important to the marketing mix? 2. DIY stores. some perishables like fish. The Market – if the market is nationwide. 5.

A Distribution Channel Manufacturer Wholesaler Retailer Consumer CORPORATE BLUNDERS Viisage Technology of Massachusetts was happy to supply its face-recognition software at this year's Super Bowl in Tampa so law enforcement could scan and compare the face of every fan at Raymond James Stadium with a criminal database. 11 terrorist attacks changed the public's view on aggressive security tactics. The company and law enforcement escaped rising criticism after the Sept. . Too bad nobody told the fans.

Many of those whose power usage was underestimated got a nasty shock later when the meter was finally read and a revised bill arrived. forcing Central Florida's dominant electric utility to "estimate" an unusually large number of its residential customers' monthly bills. . Petersburg's Florida Power Corp.Manufacturers A B C D E Company Wholesalers warehouse Company Retailers Retailers E-tailers outlets C o n s u m e r s CORPORATE BLUNDERS St. grossly underestimated the need for meter readers.

PROMOTION Who’s Advertising Slogans are these? 1. • Below the line – This type of promotion is directly controlled by the business. Whassup? 2.You know. Dangerously entertaining.Put a tiger in your tank 23. Hello boys 10. Australian’s wouldn’t give a _____________ for anything else 3. There are two main types of promotion: • Above the line – Use is made of independent media such as television and newspapers.Because I’m worth it 17.Finger lickin' good 16.“Where do you want to go today?” 15. It allows .got your number 25. 5. direct mail.The world’s favourite airline 22. enabling businesses to reach large audiences easily.And all because the lady loves _____________ 18.You can be sure of _______________ 19. sales promotions. the promotion can be said to be wasted.g.The drive of your life 12. e. Make yourself at home. • informing – to tell consumers about the product. • reminding – to remind consumers that an established product still exists. 6.Making life taste better 11. Obviously there will be those who are not really interested in the product at all so. Thank you very much 7.the world’s local bank Methods of Promotion The three main aims of promotion are: • persuading – to persuade consumers to purchase the product.Be the Best 20. trade fairs and personal selling.Your flexible friend 21. 4.Original and best 13. Bon voyage.Vorsprung durch technik 14. when you’ve been ____________ 24. Bonne destination. You either love it or hate it 9. to a certain extent. A ________ a day helps you work rest and play 8.

national. create awareness. Let us look at the individual components of the promotions mix in more detail. Generic Advertising – When rivals come together and sell not their individual products. They use powerful images and language to try and get us emotionally involved.businesses to target the consumer they hope will be interested in their product more directly. free. terrestrial. bus sides). Persuasive Advertising – a hard sell by manufacturers to get us to buy their products. where the whole company is promoted not just individual products. Advertising is a 'paid for' communication. movement and colour can the product. It is used to develop attitudes. national. outdoors advertising (such as posters. television (local. but their market or industry as a whole. and transmit information in order to gain a response from the target market. E. Informative Advertising – used to pass on information about new or improved products. in the lager industry Carlsberg state: “Probably the best lager in the world. A recent example would be during the BSE crisis. vision. satellite) cinema.g. HEBS regularly run ads to change Scottish unhealthy lifestyles and eating habits. or to give information about a technical product. E. MEDIUM ADVANTAGES DISADVANTAGES Television Exposure on a national scale Expensive The advert reaches all socio-economic There may not be a groups nationwide interest in Sound.” Corporate Advertising – like corporate branding. Often used in competitive markets where there are few USPs between products. There are many advertising 'media' such as newspapers (local. British Beef advertised in unison to try and allay consumer’s fears. The effectiveness of advertising will often depend on selecting the most appropriate media to reach the target segment of the market. Remember all of the elements are 'integrated' to form a specific communications campaign. The government uses informative advertising in the media.g. magazines and journals. so TV all be used advertising would not be appropriate Daily Exposure on a national scale Only read by particular newspapers groups People tend to believe what is in the Can be expensive papers They have high attention value Market segments closely identified with readership . trade).

image and Limited market coverage colour Effective for targeting local markets Expensive to produce and segments ‘quality’ adverts Outdoor media High visual impact May go unnoticed – i. Controls on advertising Advertising Standards Authority (ASA) . part of the scenery The choice of advertising method will be affected by: • cost • the audience reached • the advertising used by competitors • the impact • the law (restrictions on tobacco advertising) • the marketing mix (may be used along with other promotions).e.Sunday Greater attention value since people have Expensive newspapers more time to read them Large circulation Difficult to define Advertising in colour supplements is market segment of attractive readership Local Readers tend to scrutinise local papers Local papers do not have newspapers more closely than they do the nationals the authority of national papers Greater density of readership on a local Newsprint is sometimes basis of poor quality Direct mail Good for targeting market used with Poor strike rate if target mailing lists if audience is not carefully selected Good for exclusive products and Many consumers view it particular interest groups as an ‘invasion of privacy’ Independent Less expensive than press and television Relies on messages being radio communicated by voice – high ‘noise’ factor ‘Captive’ audience Difficult to target specific segments Listeners tend to ‘switch off’ when the adverts come on Cinema Messages can combine voice.

The pre-planned PR machine clicks in very quickly with a very effective rehearsed plan. All airlines exploit PR. bonus packs and money-off coupons. etc.. Each sales promotion should be carefully costed and compared with the next best alternative. and so on. They tend to be well trained in the approaches and techniques of personal selling. Advertisements must be legal. but certainly not cheap. introductory offers (such as buy digital TV and get free installation). promotional videos. However sales people are very expensive and should only be used where there is a genuine return on investment. and sale or return arrangements under which the supplier agrees to take back unsold stock. There are two main types of sales promotion: Into the pipeline This is a promotion designed to enhance sales of a product to trade outlets and to help them sell the product to their customers. It is relatively cheap. Sales promotion tends to be thought of as being all promotions apart from advertising. Out of the pipeline This is a promotion that helps trade outlets to persuade their customers to make a purchase. It is responsible for making sure advertisers conform to the British code of advertising and sales promotion practice. Personal Selling is an effective way to manage personal customer relationships. Examples include free trial packs. just watch what happens when there is a disaster. such as displays. For example salesmen are often used to sell cars or home improvements where the margin is high. and public relations. planned and sustained effort to establish and maintain mutual understanding between an organization and its publics' (Institute of Public Relations). posters.This is a voluntary body set up to monitor advertising in the UK. . truthful and not cause offence. The sales person acts on behalf of the organization. Successful strategies tend to be long-term and plan for all eventualities. honest. or Buy One Get One Free. Others include couponing. Public Relations is defined as 'the deliberate. personal selling. Examples include point of sale (POS) material. free accessories (such as free blades with a new razor). Independent Television Commission (ITC) This is a body which controls advertising on television and radio. money-off promotions. For example the BOGOF promotion. competitions.

in the hope of making a sale. Expo has recently finish in Germany with the next one planned for Japan in 2005. the most expensive for producers to get is at eye-level. Trade Fairs and Exhibitions Such approaches are very good for making new contacts and renewing old ones. think of advantages and disadvantages of each. Draw a T-chart if necessary. Creative agencies work with marketers to design a highly focussed communication in the form of a mailing. Companies will seldom sell much at such events. Similar products are stacked together for customer ease. despite a recent decline in interest in such events. Prices for shelf space vary. Companies will sponsor sports events such as the Olympics or Formula One. it gives new meaning to "flame broiled. you would use a database of doctors' surgeries as the basis of your mail shot. They offer the opportunity for companies to meet with both the trade and the consumer. As with all marketing.Merchandising is an attempt to create an atmosphere or mood to attract customers into stores via elaborate displays. At the home of the Whopper. if you were marketing medical textbooks. Layout of stores are designed for customers to follow routes whereby to get to the popular selling products they have to pass less popular ones. The purpose is to increase awareness and to encourage trial. The elements of the promotional mix are then integrated to form a unique. but coherent campaign Activity For each of the various methods of promotion." . CORPORATE BLUNDERS In Miami. the potential consumer is 'defined' based upon a series of attributes and similarities. posters etc. Direct mail is very highly focused upon targeting consumers based upon a database. For example. a dozen Burger King executives suffered serious burns to their feet after walking across a bed of hot coals during a management training exercise. The attributes of the event are then associated with the sponsoring organization. The mail is sent out to the potential consumers and responses are carefully monitored. Products at eye-level out perform other. Sponsorship is where an organization pays to be associated with a particular event. cause or image. similar products.

’ The adverts will be judged by an expert! The winning poster and flyer will be used for real! . ‘cut through the noise. Our clients will be one of the following: a) Healthy Eating in Octagon b) Mr McGowan’s Podcasting Club c) HGS e-zine d) Dangers of using Bebo/Facebook/My Space e) Kazakhstan Tourist Board I will select which one in class before we begin. You need to make sure you are communicating the message of the product as well as making it eye-catching enough so it will stand out from the crowd.Memorandum To: Business Management Students From: Mr McGowan Date: Today’s Subject: Design an Advert Your task is to design a promotional advert and flyer. or to use advertising speak.

High Products should Ad campaigns production be sold in relevant must use costs may shops/locations appropriate mean a high media selling price PRICE High price is . Promotions need product is goods are to be aware of sold affects available in the ‘noise’ in image and exclusive certain places quality stores such as the internet (pop-up killers etc) PROMOTION Campaigns High priced Competitive High - must target goods are Streets or right advertised Shopping Malls consumers selectively may have to have and regular exclusively promotions to attract customers . In different Low priced perceived as locales prices may goods are often high quality differ (think heavily shopping malls or promoted via internet) BOGOF (sales promotion) PLACE Where a High priced .Marketing Mix: The 4Ps and how they relate to each other PRODUCT PRICE PLACE PROMOTION PRODUCT .

Target.Market Segmentation: Introduction There are three main approaches to marketing strategy: 1. concentrated or niche marketing Undifferentiated marketing Firm Market Marketing mix Differentiated marketing Marketing mix1 Segment 1 Marketing mix 2 Firm Segment 2 Segment 3 Marketing mix 3 Concentrated marketing Segment 1 Firm Segment 2 Marketing mix Segment 3 . Differentiated or product-varied marketing 3. Undifferentiated or mass marketing 2.

There are five commonly used categories: • Gender • Culture • Age • Income • Lifestyle . High Quality Low High Price Price Low Quality The above circles are products. Then products are matched to consumer categories.Perceptual Mapping Perceptual maps are grids to help us understand consumers’ views and perceptions about products and brands. Segmenting the market makes it easier to identify groups of people with the same consumer needs and wants. Market segmentation Market segmentation is when a market is analyzed to identify all the different types of consumer. Types of segments Just as you can divide an orange up into segments you can divide the population as a whole into many different groups of people or segments that have something in common. Marketers therefore look for categories they can use to divide up the population.

a pensioner will have similar needs to those of other pensioners but different needs from those of a teenager. 17-25) or by the stage of life reached (eg. For instance. Age The population can be divided by age in years (eg. Culture People's needs and wants as consumers will vary according to their religion. 0-16. cosmetics have been traditionally targeted at women while DIY has been targeted at men. teenager). language. social customs.Gender Products may be targeted at a specific gender group. . dietary habits and ethnic background. In the UK businesses provide for a wide range of different cultures. There are magazines and newspapers in many different languages and Halal butchers in areas with large Muslim populations. For example. schoolchild.

.

Armani. Supervisory. C2. Place the following brands in the map: Levi’s. C1. What is market segmentation? 3.Income The population can be segmented according to annual salary (e. Lee’s.000. Outline the differences between the three marketing approaches. Gola. Versace .g. young professionals may drive a sports car because of the image they want to project. administrative or professional C1. casual and lowest paid Lifestyle People are grouped according to the way they lead their lives and the attitudes they share. £15. Create a perceptual map for running shoes based on quality and price. clerical. State pensioners. Married parents might want the same things. Pepe. Place the following brand sin your map: Reebok. D and E describe how much the head of the household earns.). which is a large extra cost. 4. widows. clerical. Puma. A. again based on quality and price. addidas. Wrangler. 2. Intermediate. 5. Semiskilled and unskilled E. but have to provide for their children. administrative or professional B. Skilled manual D. The socio-economic groups A. £30. or type of job and social class. This is called a socio- economic segment. Market Segmentation Tasks 1. Higher managerial. Describe the ways you can segment a market. B. For example. Establishing a group's disposable income is important so that products can be targeted to the relevant income group. junior administrative or professional C2. Create a perceptual map for jeans. Nike. They will need a family car to suit their lifestyle.000 etc.

Detail Age Sex Socio-economic group Dyson vacuum cleaner Shoot magazine Audi TT PlayStation 3 Filofax personal organizer B&Q Power Drill CK Obsession IKEA coffee table Westlife CD Baby Annabelle doll Robosapien Rod Stewart CD Gap Jeans 3G phone 4 week holiday in Portugal in January Gold Rolex watch 7. You decide how you are going to segment the market and justify why. (You may have to access the internet). . Look at the top 10 films in the UK at present AND the top 10 albums. Copy and complete the table to show the most likely target market for each product. Now place each film/album into a segment you create.6.

resorts.000 UK visitors took holidays in Scotland specifically for the purpose of playing golf. However. a third of visitors booked all their golf after arriving in Scotland. the requirements of each of these different types of visitors and match these with what you can offer. here are a few key findings about Scotland’s golfing visitors from a survey carried out as part of the National Golf Tourism Monitor in 2001 • Visitors found it easy to obtain information on golf holidays in Scotland and also found it easy to book their accommodation and golf. Around another 1 million visits where golf was part of the trip and this generated an additional £240 million in tourism spend. a further £5 is spent elsewhere in the Scottish economy. bringing an additional £100 million into the Scottish economy. In 2002. (With more and more online information and booking activity. But first. This generated around £105 million in tourism spend.Introduction Scotland boasts five of the nine Open Championship venues as well as hosting many other major events that attract wide media coverage. with more and more countries. For every £1 spent on a green fee in Scotland. with only about 30% making their decision and bookings within three months of their visit. Since the launch of the Scottish Golf Tourism Strategy in 2000 there have been concerted efforts to further develop and promote what is clearly a core product for the Scottish tourism industry. Despite Scotland’s obvious strengths. around 300. and most booked directly with accommodation establishments and/or golf courses. thus driving up prices.Niche Marketing Golf in Scotland Golf Tourism . • Scotland has drawbacks to accompany its strengths – the weather deters some visitors. there is little winter business and demand often outstrips the supply of available tee-times at some of the courses visitors most want to play. • 40% of visitors made their holiday decision and 25% made their bookings.000 golfing visitors from overseas. more than six months before their visit. it is probably now even easier. and with many types of business and all parts of Scotland benefiting from this spend. In addition.) • Most visitors booked all their accommodation and (to a lesser extent) their golf before leaving home. golf courses and hotels competing for their attention and business. Scotland attracts approximately 100. there are big challenges in the golf tourism market. Who are Scotland’s golf tourist customers and what are they looking for? The key to success is to identify the different segments in the golf tourism market. . namely: • Golfing visitors are now spoilt for choice.

• Visitors were typically experienced and competent golfers – 20 years’ experience. day-trip visitors can be a key part of the market mix for many golf courses. You will then be able to decide which of these segments you can realistically target. while most North American golfing visitors tend to focus on Scotland’s famous courses. • About 20% of visitors had considered visiting a country other than Scotland for their holiday – with Ireland the strongest competitor destination. but are obviously of no direct interest to accommodation operators. different types of golf facilities and different parts of Scotland attract different types of golfing visitors. • 80% of ‘golfing holidaymakers’ take at least one golf holiday a year with 50% taking several such holidays every year. • Scotland’s strongest features are the number and quality of its golf courses. • Overseas visitors are Scotland’s most critical customers – as well as being our most valuable ones in terms of length of stay and spend per head. What is meant by the term niche marketing? 2. What golf segment would you target and why? 8. Of course. Conduct a brief SWOT analysis for golf in Scotland. Accommodation quality and value for money are less highly rated than golf course quality and value. Golf is one of four key niche markets in Scotland. 5. mostly golf club members. What advantages does Scotland have in term of golf courses? 3. Questions 1. and with an average handicap of 15. The first step is therefore to recognise these different segments in the golf tourism market and what each type of visitor is looking for. What evidence can you find that shows golf package deals have room for improvement? 7. Why is golf tourism important to the Scottish economy? 4. Can you work out the other three? . and the ease of access to them. and ‘holiday golfers’ who play some golf as just one part of a more general holiday. A key distinction is between ‘golfing holidaymakers’ for whom golf is the main purpose of their holiday. What are the two major disadvantages of golfing in Scotland? How would you solve this problem? 6. For instance.

because ‘Nova’ means doesn’t go in Spanish. General Motors’ Chevy Nova People laughed at this car when released in Latin America. KFC in Hong Kong KFC’s ‘Finger Lickin’ Good’ slogan was translated as ‘eat your fingers off’. using the same packaging for Western markets. Coors in Spain Coors ‘Turn it loose’ slogan translated as ‘You will suffer from diarrhoea’! .Marketing Research Faux Pas Pepsi in Taiwan The advertising slogan “Come alive with the Pepsi generation” was translated as “Pepsi will bring your ancestors back from the dead”. Toyota’s Fiera In Puerto Rico ‘fiera’ translates to ‘ugly old woman’. Schweppes Tonic Water In Italy the name was translated at Schweppes Toilet Water. Gerber in Africa Baby food manufacturer Gerber began to sell products in Africa. Low sales revealed that the other firms used pictures to show what’s inside as many customers cannot read English.

demand is always changing and therefore it is essential to know how things are changing. Market research sets out to answer the following questions: • who makes up the target audience? • what do they want? • when do they need it? • where does it sell best? • how can it be taken to them? • why do they want/need it? • what are our competitors doing? • how is our market changing? • Market research helps firms to plan ahead rather than to guess ahead. Market research requires a special form of skill and therefore market research companies are often employed because they have the necessary experience and also because market research takes up a lot of time. . In business. recording and making sense of all the available information which will help a business unit to understand its market.Market Research Market research involves collecting.

It involves taking a census of a small sector of the population which represents all of a particular group. which are accessible on the Internet. whether published or unpublished. and reaching people who are otherwise inaccessible. Data is divided into primary and secondary categories. Postal questionnaires: These are easy to administer but unfortunately they yield a poor response. female students studying the social sciences.g. which happens to be handy . questionnaires are easy to 'cheat' on and a market research agency will ensure that 'control questions' has been built in to check that the questionnaire has been filed in in a suitable fashion. Telephone interviews: These are ideal when specific information is required quickly. marketing. usually before any further steps are taken.e. which then enables them to register for access to a website. It relies on desk research and field research. They are rarely used on their own: more often they are used to support a programme of telephone or personal interviews. A good place to begin is with a company's records of items such as production. A useful way of delivering a questionnaire is on-line. and is always studied first when doing desk research. Field research involves the search for primary information. e. middle-class business people. Other sources of secondary data are government publications on the Internet such as the government's Expenditure and Food Survey showing what typical households spend their money on. Desk research. Benefits include relatively low cost. telephone or in person. and Social Trends outlining changes in social patterns in this country. Commercial research organisations such as Mintel also provide market research reports. many of. However. However. and can provide surprisingly detailed information. Convenience sampling is taking information from any group. Primary data are collected in the field. Quota sampling deals with specific types of respondents .Methods used in marketing research Data gathering involves collecting as much information as possible about the market. They simplify the analysis of results. finance and other data. sales. married working women in Bristol aged 30-45 are taken to represent all urban.say. Questionnaires are easy to administer and easy for respondents to deal with. Judgment sampling is slightly more refined: the interviewer would select high street respondents on the basis of whether or not they appear to belong to a particular segment or the population . Sampling/sample surveys: Is the most common way to gather field data. Questionnaires: This is the most popular method of extracting information from people. One way of doing this is to ask the public to fill in a questionnaire. This method involves the search for secondary data. They are usually conducted by post. married working women in the United Kingdom. in the modern age many consumers are reluctant to 'waste' their time on .walking down a high street for example. no interviewer bias.g. Secondary data are gathered from all the material that is at present available on the subject.

ticking boxes). . the interviewer has to follow a set pattern of questions and responses (e. usually individually. Investigate Sampling in more detail and highlight advantages and disadvantages of each type of Sampling. Unstructured interviews are what they sound like . Qualitative market research . and the interviewee is allowed to reply in his or her own words. As the questioner has little evidence of whom they are speaking to it is easy to get false information. 3. Compare any 2 methods of market research. It is the process of recognizing and recording relevant objects and happenings. Quantitative market research .g. Personal interviews: In a structured interview. but which often used fairly closed responses.answering questions on the telephone.relates to methods such as questionnaires.certain topics are covered in a relaxed fashion. Investigate Hall Testing and Consumer Panels in more detail using either the internet or other available resources and prepare a memo outlining the advantages and disadvantages of each. Hall test: During this procedure. a number of respondents are invited to attend a fixed location (traditionally a hall from which the term originates) and then are asked to respond to stimuli.relates to more intensive methods involving small samples such as a focus group who come together to discuss their feelings about a particular product. In semi-structured interviews the order and wording of the questions are laid out in an interview guide but the response is open ended. Observation: Observation is the collection of data through non-verbal means which can stand alone as research on its own or compliment other relevant research. 2. which can be used to gather a lot of information. Study Questions 1.

anything at all. This can also be done by post. and anyone counting the answers would also find it an easy task. underage drinking. Market research organisations are paid to use questionnaires on behalf of companies that offer many different products and services. cosmetics. holidays and cars to politics and how you rate your daily newspaper – in fact. public transport. Sometimes interviewers stop people in the street and ask them to fill in questionnaires. Questionnaires. These companies need to know customers’ views so that they can improve what they sell. For example. are carefully constructed for use in surveys. Questionnaires could be useful as part of a Business project.Surveys Surveys are used to find out what people think about a wide range of things from food. Types of questions There are basically two types of questions: • closed – where you provide a range of answers and the person answering has to choose one or more • open – where the person answering has to make up their own answer. vandalism. such as: • yes/no • multiple choice • rating scales. There are several ways to construct closed questions. Yes/no questions These are the simplest type of question as there are only two one-word answers. . by telephone and on the Internet. for example: Do you like chocolate? Yes/no Most of the population would be able to answer this question quite easily. you could use them to: • find out what potential customers think about something you are planning to sell • find out what people think about a range of issues such as smoking. which are basically collections of questions.

textures and sizes the public could suggest. For example: Can you describe your ideal chocolate bar? You could get a very wide range of answers here. it is a good idea to have a rating scale. For example. this type of question is fairly easy to answer and the results are easy to add up.Multiple-choice questions Usually a question is asked and three or more options are given as possible answers. The person answering chooses one or more of the answers. . Rating scale If you want to find out how strongly people feel about something. Once more. Open-ended questions With this type of question you are inviting the person answering to give his or her own feelings and opinions. For example: What kind of chocolate do you like? • Milk • Plain • White • Filled Again. you can ask: How much do you like chocolate? Like it a Like it quite Like it very Don’t like it I’m addicted little a lot much 1 2 3 4 5 The person answering would circle the number that is closest to how they feel about chocolate. Chocolate manufacturers could get some very valuable information from a question like this. There is virtually no limit to the range of flavours. but it would be a hard task to make some kind of statistical sense out of the answers. this type of question is easy to answer and the results are easy to add up.

Fractions for example: One third (1/3) of people answering started smoking before the age of 16.you are more likely to get honest answers if you don’t ask for names • make sure all the questions are clear and easy to understand.Stick to the rules If you are compiling your own questionnaire. When you have written your questionnaire. part of a school or college project • say ‘please’ and ‘thank you’ – either on the form or in person • start with the easy questions requiring the least thought – yes/no questions are good • keep it brief – no more than 10 questions so that people answering don’t become bored • keep it anonymous .e. There are several ways to express your figures. there are some basic rules to follow to make things easier for you and the people answering your questions. Don’t: • ask irrelevant questions – for example. try it out on one or two people first before you make a lot of copies. . you will have to add up the answers and present them in a way that contributes something to your project. Do: • introduce yourself and let people know what the questionnaire is for – i. don’t ask for age and date of birth if you only want to find out if they will buy your homemade cakes. Results When you have collected all of your completed questionnaires. Percentages for example: 90 per cent (90%) of cats thought that our tuna and egg sandwich filling was delicious.

collate the results and show them to your teacher. use of hospitals. CDs. . Culture in your neighbourhood Views on use of museums and galleries. sites used. Medical services Use of doctors’ surgeries and clinics. attendance at concerts. choose one of the following subjects and as a group make up a questionnaire of no more than 10 questions: Internet shopping Types of purchases – books. amounts spent per month. Try the questionnaire on three or four people. views on quality of service and waiting times.Surveys Create your own questionnaire If you would like some practice in writing questionnaires. clothes. plays. food.

usually led by a chairperson (facilitator) who puts forward points to encourage open discussion Advantages Disadvantages  Qualitative information  Can be difficult to analyse provided in the form of qualitative information opinions. incentives sometimes needed Focus group Specially selected groups of people.Market Research Methods Summary Face-to-face interview A personal interview held in the street or home Advantages Disadvantages  2-way communication  Personal interviews can be  researcher can encourage expensive respondent to answer  Researchers have to be  mistakes and selected & trained misunderstandings can be  Home interviews unpopular cleared up right away with consumers Postal Survey Market researcher sends questionnaire through the post Advantages Disadvantages  Inexpensive  Questions must be simple and  No interviewer training easy to answer needed  Response rate very low. feelings and  expensive attitudes  Topics can be explored in some depth .

lower or about the same as at Aldi?’ Names should be reversed for half the sample. Do you find it paradoxical that X Unfamiliar word: a study has shown that less than a lasts longer and yet is cheaper quarter of the population understand such words as than Y? paradoxical. Test understanding before use. Which is more powerful and kind Two questions in one. . Ask the two questions separately. Showing the respondent a list and asking ‘from this list…’ would avoid the problem. Do you think that prices are Leading question favouring Asda: a better question cheaper at Asda than at Aldi? would be ‘Do you think that prices at Asda are higher. depending on their interpretation.Questionnaire Design: Poorly Worded questions Question Problem and Solution What type of wine do you ‘Type’ is ambiguous: respondents could say ‘French’ prefer? or ‘Red’. Ariel may be more powerful to your hands: Ariel or Bold? but Bold may be kinder to the hands. chronological or facility.

Your questions should look at their current eating behaviour in school and what potentially could be their new behaviour (what is it they would like to see?) Remember the questionnaire design tips from the previous page and also concentrate on healthy eating. Good luck! .Memorandum To: Business Management Students From: Mr McGowan Date: Today’s Subject: Pupil Questionnaire Your task is to design a basic questionnaire to investigate the eating habits of S1 and S2.

(10 marks) 6 Select 2 of the following methods of market research and describe each. PlayStation 2). Your answer should refer to the reliability of the information you have gathered. (5 marks) 3 How can the use of information and communications technology (ICT) support market research? (10 marks) 4 Discuss how the Scottish Tourist Board could make use of the Internet to ‘market’ Scotland? (9 marks) 5 Describe and justify the research method you would employ to find out if visitors to Edinburgh Castle were satisfied with there experience. (8 marks) . (8 marks) 2 Discuss the factors which would contribute towards a good product mix for an organisation.PAST PAPER QUESTIONS 1 At Christmas time. (8 marks) 7 Distinguish between penetration and skimming pricing. toy manufactures often face the problem of not being able to obtain stocks of the most popular toys ( eg. Toy manufacturers produce updated versions in order to extend their product life cycle. discussing their advantages and limitations: (i) Face-to-face interviews (ii) Postal survey (iii) Focus group. Identify and describe 4 other means of extending the life of a new product.