Unit 4 1 The Role of Marketing Marketing

+ Unit 4. 1 The Role of Marketing

+ Marketing n Marketing is essential to the success of any business. However, marketing is not just about selling or advertising, as many people think. n Marketing exists to address people’s needs and wants. n It is about making customers want to buy the products of a particular business.

+ n“Marketing is the management process involved in identifying, anticipating and satisfying consumer needs profitably. ” – The Chartered Institute of Markerting n“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. ” – American Marketing Association n “Marketing is meeting the needs of your customer at a profit. ” – Kotler (1994)

+ Marketing is not simply: n Selling n Advertising n Public relations n Promotion n Smooth-talking salespeople n Glossy, ‘jazzy’ media coverage n The spending of vast amounts of money n. However

Marketing is: + A strategy or a plan for successful business An overall focus on the customer A total approach to running an organization and building up business The involvement and combination of sometimes simple, occasionally complex decisions into effective action Looking outside the organization for the primary direction Dynamic

+ 4 main objectives of marketing n Ensure that the right products are supplied to fulfill the needs and wants of customers. n Set the correct price so that customers can afford to buy the product (and to ensure that they do not buy from a rival business). n Distribute the products to a place that is convenient for the customer to buy the products. n Ensure that there is adequate and effective promotion to convince customers to buy from the business.

+ 4 P’s of MARKETING

+ 7 Ps of marketing (4 + 3) Ø These are marketing of services: n People n Process n Physical Evidence

+ PEOPLE: n. Effectiveness can be measured in a number of ways: n Appearance and body language (use of uniform and formal clothing) n Aptitudes and attitudes (capability and behavior) n Feedback from various stakeholder groups provide useful information regarding the effectiveness in delivering good customer service n Efficiency to gain better reputation and corporate image

+ PROCESSES: n Refers to the way in which a service is provided or delivered; it includes: n Payment methods (cash, check, etc. ) n Waiting time (queuing time) n Customer service refers to degree of attentiveness, care and politeness of staff toward their customers. n After-sales care services offered following the sale of the product (installation, maintenance, tech support, warranties)

+ PHYSICAL EVIDENCE (ENVIRONMENT) n. Refers to tangible aspects of a service n. Many businesses use peripheral products (additional products) to enhance the overall experience for customers

+ Relationship of Marketing with other Business Functions n Finance and Marketing n Both departments must work together in setting the appropriate budgets. n The marketing dept. may want to spend more than is in its budget to meet the requirements of a demanding marketing plan, but the finance dept. may advise that it sticks to its given budgetary allocations. n This will cause a department conflict.

+ Relationship of Marketing with other Business Functions n Human Resource Management (HRM) and Marketing n Marketing information can enable more effective workforce planning in the HRM department. n This can influence the demand supply of labor in an organization. n Ensuring that the right quality of salespeople are hired – those with innovative minds and a competitive spirit – will also aid in meeting the marketing department’s objectives.

+ Relationship of Marketing with other Business Functions n Operations Management and Marketing n Production and marketing depts. will need to work together to ensure that the products developed meet the specifications of the customers. n Market research will help the marketers in determining the needs and wants of the consumers. n Both departments need to balance the time needed to test, develop, and launch products, to avoid any loss in sales or reputation and any arousal of potential stakeholder conflict.

+ Marketing Goods and Services GOODS SERVICES n Are tangible (can be touched) n Are intangible (cannot be touched) n Can be returned if you did not like what you bought n Cannot be taken back (ex. a bad haircut) n Can be stored and consumed later n Cannot be stored and will need to be consumed immediately (ex. your consultant’s time) n There is ownership of the product n There is no ownership of the product n Services are more difficult to compare because of different experiences a customer may get from a given service (ex. A hotel may treat a customer differently each time he/she visits) n Goods are easier to compare because of the similar nature of some products (ex. One TV can easily be compared to another)

+ Marketing must consider these characteristics between goods and services n Intangibility n Inseparability n Heterogeneity n Perishability n Product strategy n Price strategy n Promotional strategy n Place strategy

Theory of Knowledge Is it more difficult to market a good or a service?

There are two distinct approaches that businesses can use to market their products. + Product-Oriented Approach Or Market-Oriented Approach

+ Product Orientation vs. Market (Consumer) Orientation Market Orientation Product Orientation n Adopted by businesses that are inward looking. n They focus on selling products that they make, rather than making products that they can sell. They focus on making the product first and then trying to sell it. n They supply the products and tempt the customers to buy them. n n Adopted by businesses that are outward looking. n They focus on making products that they can sell, rather than selling products that they can make. They focus on carrying out market research first and then making products that can sell. n They supply products that meet consumer needs and wants. n Ex. Ford, Sony, Samsung Ex. Microsoft, Ferrari, Apple

+ Advantages Market Orientation Product Orientation n Quality can be assured – they supply products that they have expertise in n Customers are willing to pay higher price for exclusivity and luxury products n Flexibility – firms can respond quicker to changes in the market as they have access to relevant data and information n Less risk – firms can be more confident that their products will sell and be more successful

+ Disadvantages Product Orientation n Inward looking because they assume that they know what the consumers want n Very risky – needs of the market are ignored such as changes in fashion and tastes n High failure rate n Money spent on R&D without taking the customer in consideration is fruitless Market Orientation n Market research tends to be very expensive n Given the dynamic nature of the business environment and the uncertainty of the future, there is no guarantee that this approach will work

Question 4. 1. 1 Sony Page 331

Types of marketing strategies + Commercial Marketing And Social Marketing

+ Commercial Marketing n This involves creating, developing, and exchanging goods or services that customers need and want. n Market research is carried out to establish customer demand businesses will supply what is demanded. n It is considered value-free and does not involve making moral judgments on the buying habits of customers. n Strategies may include a traditional focus (using billboards, television advertisements or local print media) or an online marketing campaign (using Google Ad or emails). Or mass marketing campaign.

+ Social Marketing n Involves use of marketing approaches that help bring about changes in behavior that ultimately benefit society. n “The use of commercial marketing concepts and tools in programmes designed to influence individuals’ behavior to improve their well-being and that of society” – The Social Marketing Institute (SMI) n Ensures that businesses make good marketing decisions based not only on consumers’ wants and the firm’s requirements but also on consumers’ and society’s longterm interests and welfare. n Examples: Public health campaigns (anti smoking campaigns)

+ Advantages of Social Marketing n It gives firms a competitive advantage as consumers may perceive such firms to be socially responsible and therefore buy products from them. n Firms can charge premium prices for providing goods that society is deriving benefits from. However, getting people to change their habitual behavior poses a major challenge to social marketers. As a result, a number of non-profit organizations (NPOs) have set up in an effort to help people change their behavior, for example Alcoholic Anonymous (AA).

+ COMMERCIAL MKTG n Selling physical goods and intangible services for a profit n Exists to satisfy individual needs and wants, and thus reaps profit for the business n Is used mainly by private sector business SOCIAL MKTG n Aims to influence or persuade a desired change in social behavior or attitudes n If successful, satisfies the needs and desires of the general public, and thus reaps benefits for communities n Is used mainly by the government and nongovernmental organizations (NGOs)

Question 4. 1. 2 Singapore’s Littering Policy Page 333

MARKET +

+ THE MARKET n A market is a place or process whereby customers and suppliers trade. n It exists where there is demand for a particular product and where there is willingness from businesses to supply these products. n Markets that cater for private individuals (i. e. general public) are known as consumer markets. n Markets that cater for organizations (businesses and government) are known as industrial markets or commercial markets.

+ 4 Market Structures

+ Market Characteristics n Market Size n Customer Base n Barriers to Entry n Competition n Geographic n Demographic n Market Growth Rate n Season and Cyclical

+ Market Size n Markets differ in their size as measured by sales revenue. n International and globalization have meant that the size of a market is not confined to the domestic market. n Market size is a measurement of the total volume of a given market. For now, think of market size in terms of a pie chart (think of a circle). The entirety of the circle represents the market size.

+ Customer Base n Alternative measure of market size, this refers to the total potential number of customers in a particular market. n Multinational companies have been expanding into China and India partly because they account for the third of the world’s population. n The internet has also broadened the customer base for many businesses.

+ Barriers to Entry n These are obstacles that determine the number of suppliers in the market. n In markets such as oil and aircraft manufacturing, the entry barriers are extremely high as there are huge set-up costs and existing firms already dominate with their market power and huge economies of scale. n In other markets where entry barriers are relatively low, there a lot more businesses that operate on a much smaller scale.

+ Competition n This refers to the degree of rivalry within a particular market. n The market for soft drinks, sports apparel or aircraft manufacturing is dominated by only a small number of producers. As firms have significant market power, the intensity of competition can be very high in such markets.

+ Geographic n Some markets focus on a particular area, country or region. n Ex. Adidas is a market leader in the supply of equipment for Taekwondo with around 4/5 of the world’s black belt holders residing in Korea. n Ex. One billion vegetarians who reside in India. n Ex. Other markets target a global audience.

+ Demographic n Characteristics of consumers include differences in gender, age, ethnicity and religion. n Marketers can then target their promotional strategies toward these demographic groups. n Ex. Market for Porsche cars comprises mainly of mails aged 35 and above who earn higher than average incomes.

+ Market Growth Rate n Refers to an increase in the size of a market period of time, usually a year. n It can be measured by an increase in value or volume of sales in the market. n Usually expressed in percentage change to indicate the extent of market growth. n Ex. Market rises from $100 to $110 = 10% growth. n Market growth is likely to lead to more suppliers enter the market as they are attracted to the potential profit.

+ Seasonal and Cyclical n Seasonal is any change or pattern that recurs or repeats over a one-year period. n Cyclical effects can span time periods shorter or longer than one calendar year. n Some markets are constrained by seasonal factors (ie. weather).

+ MARKET SHARE n Refers to an organization’s share of the total value of sales within a specific market. n Mkt. Share = Firm’s sales revenue x 100 Industry’s sales revenue n An increase in market share shows that the marketing strategy is successful against that of competitors. n The firm with the highest market share is called the ‘BRAND LEADER’.

+ Increase in market share might be done in a number of ways: n The promotion of their brands n Product development, improvements and innovation n Motivation and training of the workforce to deliver better customer service n Establishing property rights through the use of copyright and patents n Use of more efficient channels of distribution

+ Market Concentration & Concentration Ratio n Market concentration measures the degree of competition that exists within a market by calculating the market share of the largest firms in the industry. n The sum of these market shares is known as the concentration ratio. n For example, an industry with a 3 -firm concentration ratio of 98% means that the top 3 firms account 98% of the industry’s output. Hence, this would not be a very competitive industry as all other firms would account for just 2% of the total sales of the market.

Question 4. 1. 3 Samsung Page 335

Marketing Objectives + - are the specific goals of an organization.

+ Marketing Objectives of For-Profit Organizations n. Increased sales revenue: n. By increasing the customer base and/or persuading existing customers to buy more, the business can generate greater sales revenue.

+ Marketing Objectives of For-Profit Organizations n. Higher Market Share: n. It suggests that the business is more competitive than its rivals, who might also have generated higher sales revenue but at a slower rate of growth.

+ Marketing Objectives of For-Profit Organizations n. Increased Market Leadership: n. While market share might be higher, market leadership means the business enjoys the benefits of having the largest market share in the industry.

+ Marketing Objectives of For-Profit Organizations n. Improved Product and Brand Awareness: n. Marketing can help a business to promote its products and brands in order to gain brand awareness and customer loyalty.

+ Marketing Objectives of For-Profit Organizations n. Developing New Products: n. Innovation and new products can give businesses a competitive edge over their rivals.

+ Marketing Objectives of For-Profit Organizations n. Enhanced Brand Perception (Product Positioning): n. Existing and potential customers have a positive perception (opinion or judgment) about the business.

Objectives of Social Marketing +

+ Objectives of Social Marketing n To build membership (support) and to connect with new donors n To generate awareness of the NPO’s cause n To improve brand recognition of the NPO n To create positive attention to the NPO’s operations n To demonstrate the value of the NPO to the local community or society in general

Question 4. 1. 4 FC Barcelona Page 337

Marketing Strategies and Changes in Customer Preferences +

+ Reasons why marketing strategies evolve: n Changing - - customer tastes As consumer tastes are constantly subject to change, marketers must constantly evolve their marketing strategies to remain competitive. Example: The traditional Bollywood movie had 3 key components - (1) it had to be long (Indians want value for their money) - (2) there had to be songs and dancing - (3) had to be a happy ending However, due to globalization, Bollywood movie producers have changed this formula to cater for their international customer base.

+ Reasons why marketing strategies evolve: n Shorter product life cycle • Marketers use different strategies at different stages of a product’s life cycle. • If successful, sales are strong during the introduction and growth stages. • Extension strategies may be used (Unit 4. 5) to prevent sales from declining when the market becomes saturated. • Too much competition means that the product cycle has shortened.

+ Reasons why marketing strategies evolve: n Internet and Mobile Technologies • The e-commerce revolution has also meant that consumers have far more choice than ever before. • Businesses that have an online presence are better positioned to meet the needs of their customers.

+ Reasons why marketing strategies evolve: n Competitive Rivalry • The intensity of competition in many markets across the world has forced marketers to adapt and evolve their strategies. • Competitors may initiate marketing strategies that threaten the profitability or survival of their rivals. • Ex. Apple and Samsung’s innovative products and aggressive marketing strategies led to the eventual collapse of Motorola, Nokia and Sony. Ericsson in the mobile phone industry. • Evolving marketing strategies can be seen as a defensive strategy against competitors that pose a threat to the organization’s market share and market position.

+ Reasons why marketing strategies evolve: n Globalization • Globalization has made businesses and countries more interdependent with consumer tastes more integrated. • This forced marketers to act globally. • Ex. China has become the world’s largest consumer market for many products, including televisions, cars, refrigerators and air conditioners. This has meant that marketers evolve their strategies to match the local needs and wants of Chinese consumers.

+ The role of marketing and the CUEGIS concepts Pages 339 - 342

Question 4. 1. 5 Banning Pester Power Page 340

Question 4. 1. 6 Nestle offensive advertising: a strategy: Page 341

REVIEW TERMS

Commercial Marketing • Is the use of marketing strategies to meet the needs and wants of customers in a profitable way.

Ethical code of practice • Refers to guidelines that help businesses to act in a moral way by considering what is ethically right or wrong (from society’s point of view).

Market • A place or process whereby customers and suppliers trade. A market exists where there is demand for a particular product and where there is a willingness from businesses to supply these products.

Market Concentration • Measures the degree of competition that exists within a market by calculating the market share of the largest few firms in the industry.

Market Leadership • Refers to firms with the largest market share in a particular market.

Market Orientation • Is a marketing approach adopted by businesses that are outward looking by focusing on making products that they can sell, rather than selling products that they can make.

Market Share • Measures the value of a firm’s sales revenues as a percentage of the total sales revenue in the industry.

Market Size • Refers to the magnitude of an industry, usually measured in terms of the value of sales revenue from all the businesses in a particular market, per time period.

Marketing • Is the management process of predicting, identifying and meeting the needs and wants of customers in a profitable manner.

Marketing Objectives • Are the specific marketing goals of an organization. The marketing objectives of for-profit (profitseeking) organizations include increased sales revenue, market leadership and greater market share.

Marketing Strategies • Are the medium to long term plan to achieve a firm’s marketing objectives.

Needs • Are the essential necessities that humans must have to survive. • Example: food, shelter, warmth and water

Product Orientation • Is a marketing approach used by businesses that are inward looking as they focus on selling products that they can make, rather than making products that they can sell.

Social Marketing • Refers to any activity that seeks to influence social behavior to benefit the target audience and society as a whole.

Wants • Are human desires. Irrespective of a person’s income or wealth, all people have infinite wants.