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Functions of marketing Importance of marketing research to

the creation or improvement of products or services

Selling prices of products and services Classification of channels of

distribution Classification of the main types of

promotion2

The process of planning & executing the› Conception› Pricing› Promotion and › Distribution

of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

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What happens during the marketing process? Businesses are involved in:

› Product Origin- Research & Development› Product Pricing› Product Promotion, and› Distribution of products and services

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Products and services are made available in order to meet the goals of individuals and businesses.

Essential Question:Why do businesses spend so much time, money, and effort to market their goods and services?

Answer: to meet customer needs and to make a profit

Product/service management

Distribution

Selling

Marketing-information management

Financing

Pricing

Promotion6

Marketing Activities happen during the seven functions of marketing

Defined: designing,

developing, maintaining, improving, and obtaining products and services

in order to meet the needs of customers.

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Defined: Using the best ways

for customers to: locate, obtain, and use the products

and services of a business.

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Defined: Communicating directly with potential customers in order to determine and satisfy their needs and wants.

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Defined: Obtaining Managing and using information

about:› Products & services› Customers› & Competitors

to improve business decision-making and the performance of marketing activities.

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Defined: Budgeting for

marketing activities Securing necessary

funds for operations, and

Providing financial assistance to customers.

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Defined: Determining and

communicating the value of products and services.

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Defined: Communicating information such as:

features and prices about products and

services to potential customers.

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http://www.rolex.com/en#/home/

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Why do companies spend money on marketing research?

http://www.deere.com/servlet/PIPInquiry?PIN=&Submit=Search http://www.ford.com/innovation/automotive-technology

What is marketing research?› utilizes customers to find solutions to

marketing problems through carefully designed studies.

Steps in marketing research:Define the marketing problem. Study the situation. Develop a data collection procedure.Gather and analyze information.Propose a solution.

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Surveys› ASKING OPINIONS

OF LARGE GROUPS› Student survey

Focus groups› SMALL GROUP

DISCUSSION› Group previews tv

ads

Observations› RECORDING ACTIONS

OF CONSUMERS› ex: what people buy,

return, use Experiment

› PRESENTING TWO ALTERNATIVES TO DETERMINE WHICH HAS BETTER RESULTS

› ex: cloroxed socks

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Parts of a product› Basic product› Product features› Options› Brand name› Packaging› Warranty

http://www.benjerry.com/

Simplest form of a product or service Not unique Usually available from several companies

Example: basic tv› Limited # of

channels › No pay per view› No HD› No DVR › No playback

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Example: basic health insurance› High deductible› Limited coverage› Limited service

providers› High co-pays

Additions and improvements to the product or service

Example: cell phone offers: built-in digital camera, voice dialing, web browser

What are some features of vehicles?

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http://www.chevrolet.com/?seo=goo_|_2008_Chevy_Retention_|_IMG_Chevy_Make_|_Exact_Match_Chevy_Chevrolet_|_chevrolet

Options include choices of the product or service.

Car Choices include:› Models› Engine size› Colors› Manual/automatic› 2-dr, 4-dr,

hatchback

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http://www.chevrolet.com/pages/mds/vehicles/helpMeChooseResult.do?bodyStyle=CARS

What options are available on this vehicle?

a company’s unique identification for a product or service

Breyer’s ice cream Ford Mustang Maxwell House

Coffee Nike shoes Thomasville

furniture

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the protection and security of a product or service before it is used.

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A company’s offer to: Repair Replace, or Provide a refund for a

product or service in order to build consumer confidence in the business

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Products vs. Services Both:

› Meet the needs or satisfaction of a target market

› Include a mix of the marketing elements (product, price, promotion, and place -distribution)

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Products› Tangible› Perishable or non-

perishable› Separable› Easier to market› More control over

quality

Services› Intangible› Perishable› Inseparable› More difficult to

market› Less control over

quality

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Tangible - items one can see and touch Intangible - no physical form, more difficult to examine Inseparable - services are consumed at the same time they are

produced. The person or technology producing the service must be available when and where the consumer needs it. Marketers must determine when and where consumers want a service and must be able to provide it at that location and time.

Perishable -cannot be stored for later consumption, services must be available at the same specific time as the demand› If a taxi driver does not have a fare, the service goes unused› If all concert seats are full, no more people can hear

performance Heterogeneous – there will be differences in the type and

quality provided. Skill , training, and motivation of the service provider affect quality service.

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Definition: Money a customer

must pay for a product or service

Price changes as it moves through channels of distribution from producer to consumer. Value is added at each step.

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What are the components of price?

The Pricing formulaSelling price=product costs+ operating

expenses+ profit

Product costs-› Costs to

manufacturer of producing the product

Operating expenses-› Costs of doing

business:› Salaries, storage,

equipment, facilities, utilities, taxes, etc

Profit-› Amount left after all

costs and expenses have been paid

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Example A Product cost=$67 Operating expenses =

$38 Required profit= $100 Using price formula,

what is the price?

P=67+38+100P= $215

Example B Product cost = ? Op exp = $ 24 Profit = $45 Selling Price = $

169

Using price formula, what is the product cost?

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Prices will be higher due to these factors:

Supply and demand- limited supply Uniqueness – few close competitors Age – new product introduction Seasonal– used only for a specific period of

time Complexity – very technical or complex Convenience – people pay for convenience

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1. Must cover the cost of the product2. Must cover the operating expenses

(cost of running the business)3. Must allow profit for the business If PRICE cannot cover 1-2-3, then

business cannot survive…but must also BE COMPETITIVE in the market or will

products will not sell!

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Selling Price-Product Cost=

Gross margin**Important factor in pricing

Gross margin represents amount of money on hand to pay for operating expenses of the business

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Markup Amount added to the

selling price to cover the operating expenses and profit

Usually stated as a percentage of selling price› Selling price =

product cost + markup

Example: $35+$14=$49› $35*40%=$14

MarkdownA reduction from the

original selling price.

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Selling price = $49 Markup = $14 Product cost = $35

What is Markup % $35 x MU%=$14MU %=14/35MU%= 40%

Selling price = $100 Markup = $25 Product Cost = $75

What is mark up %?

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Example: Original price $35 20% advertised

markdown What is new price?

$35 x .20 = $ markdown $ markdown= $7

New price is $28

Practice: Price = $140 Markdown =15% What is new price?

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What is channel of distribution?How products and services reach final

customers or businesses Can be classified as

› Direct- producer to consumer only› Indirect- one or more businesses in chain

between producer and consumer

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Direct Examples Tonya makes and sells

drapes to local customers.

Joe sells fresh peaches from his orchard at a roadside stand.

Harvey uses landscaping equipment to move soil for the foundation of a house being built by Mr. Thomas, his customer.

Indirect Examples RCA sells televisions to

Circuit City who resells to customers.

UPS delivers merchandise packages to Ann Taylor retail outlet at the mall to be sold to consumers.

Gant, an ore extractor, sells bauxite to Reynolds for processing into aluminum.

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Intermediary Involved NO Intermediary Involved

How do the needs of producers and consumers differ?

They differ by:› Quantity – a definite amount of

anything› Assortment-collection of various

kinds of things› Location- a place of activity› Timing – selecting the best time

or speed for doing something

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› Producer Needs versus Consumer Needs › Quantity – a definite amount of anything

Businesses produce or sell massive quantities of products and services, where as each consumer needs fewer numbers.

› Assortment-collection of various kinds of things Businesses usually specialize in producing a specific

type of products and services, where as consumers usually purchase a variety of products and services.

› Location- a place of activity Businesses may distribute products and services to

customers in other countries as well in local communities. Consumers mostly buy local.

› Timing – selecting the best time or speed for doing something There could be a gap in time when businesses

produce products and services as to when consumers need them.

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Defined: how products/services reach final customers and the businesses involved

Channel members – businesses that take part in a channel of distribution

Allow businesses to adjust :- quantity and assortments - accessible in convenient locations- storage of products for customer’s convenience.

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The marketing mix element that uses locations and methods to make the product/service available to the target market.

Determining the best methods and procedures to use so customers can find, obtain and use a product or service.

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CHANNELS OF DISTRIBUTIONHow does CORN get to your table?

1.FARMER/FARMWORKERS GROW2.FARMWORKERS HARVEST FOR TEMPORARY STORAGE3.CORN TRANSPORTED TO SILO STORAGE4.CORN TRANSFERRED TO TRAIN/TRUCK FOR TRANSFER5.TRAIN TRANSFERS CORN TO MILL/PROCESSING PLANT6.MILL/PROCESSOR CHANGES PRODUCT7.PROCESSOR PACKAGES INTO CANS/FROZEN BAGS ETC8.CANS FROM MILL TO STORAGE9.STORAGE TO TRAIN/TRUCK TO WHOLESALER10.WHOLESALER (GROCERS ASSOCIATION) STORAGE11.WHOLESALER TO RETAILER (FOOD LION) BY TRUCK12.RETAILER TO CONSUMERS13.CONSUMERS EAT CORN FOR DINNER!

Without looking back to previous slide- List as many as you can…groups who

had contact with the corn that you eat.

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Influential messages daily bombard you from:› Businesses› Organizations› Government

agencies› Political candidates

Is the promotion always effective?

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http://www.youtube.com/watch?v=R55e-uHQna0&safety_mode=true&persist_safety_mode=1

Any form of communication used to inform, persuade, or remind

Used to influence knowledge, beliefs, and actions about products, services and ideas

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Pizza $9.99

Business card

OPENClay’s Pizza

Effective communication consists of

an understanding of information between the sender and the receiver.

Sender selects a channel of communication and

Receiver indicates understanding by providing some form of feedback.

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What is the relationship between effective communication and promotion?› Businesses use

promotion to communicate with potential customers about their products and services.

Information about products and services is encoded in a promotional message.

Promotional messages may be delivered through advertisements and sales representatives.

Potential customers decode messages and provide feedback by way of purchasing or inquiring about products or services.48

Main types of promotion:› Personalized - customized for individual

customer› Mass - communicated with many people with

a common message Some types of mass promotion:

› Advertisement› Publicity› Public relations› Sales promotion

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Direct, individual communication with a potential specific customer

Most expensive type of selling

Face to face contact Used for complex or

expensive products Can be by phone

Examples: Car salesmen Jewelry sales Cosmetic counters

at department stores

Insurance sales Investment brokers Realtors

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A non-personal paid form of communication

Designed to inform, persuade, or remind customers about

a good or a service

Most common media› Television› Newspapers› Outdoor display

boards› Magazines› Radio› Internet

› Mass Mailings› Email

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http://www.godiva.com/welcome.aspx

Non paid communication in the news media or by word of mouth

Cannot be controlled

Can be good or bad for the business

Examples Walmart violations

of EEOC regulations Food poisoning

linked to local restaurant

Action 9 contacting business that did not stand behind contract with consumer

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Activities used to build and maintain a positive image about a company and its products

Examples: Executive at bank is

active in Rotary Club

Speedway Plumbing sponsors golf hole at the CTE golf tournament

Chic-Fil-A gives discount coupons

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Communication activities used to stimulate sales, create awareness of a new product, or create goodwill for the business

Radio listener contest with $100,000 prize

Buy one get one free programs- BOGO

Free gifts- ink pens/caps/tshirts given with company info

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