MARKETING Marketing BM Unit 2 - LO22 Success Criteria: To introduce marketing and its significance...

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MarketingMarketing

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BM Unit 2 - LO2 2

To introduce marketing and its significance in modern business practices.

You should be able to:

•Describe what marketing means to you

•Describe consumer and industrial markets

•Describe and understand identifying, anticipating and satisfying consumer requirements

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BM Unit 2 - LO2 3

Marketing – What it means to me?Marketing – What it means to me?

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What is a market?What is a market?

Any place where buyers and sellers meet.

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Consumer marketsConsumer markets

Consumer markets - are made up of individuals who purchase goods/services for personal or domestic use.

Consumable goods, eg food, cosmetics, magazines

Durable goods, eg cars, televisions, clothes

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BM Unit 2 - LO2 6

Identifying Consumers’ Identifying Consumers’ RequirementsRequirements

What do they want? Consumers must buy products and continue to do so

Fierce competition and consumers’ expectations mean that products must be constantly updated and altered to suit

Other factors - price, quality, prompt delivery, attractive packaging and after-sales service

Advertising and promotion play a big part

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Industrial marketsIndustrial markets

Industrial markets - organisations that purchase goods and services to use in the production of other goods and services.

Consumable goods, eg raw materials

Durable goods, eg machinery and equipment

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What is marketing?What is marketing?

‘Marketing is the management process responsible for identifying, anticipating and satisfying consumer requirements profitably.’

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BM Unit 2 - LO2 9

Anticipating Consumers’ Anticipating Consumers’ RequirementsRequirements

What do they want today?

What do they want in the future?

Trends must be considered to anticipate future needs

Volatile markets - fashion, toys, technology (mobile phones, computers, etc)

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Satisfying Consumers’ Satisfying Consumers’ RequirementsRequirements

“The customer is king!” Businesses must be customer-focused

No customers no business

Must offer - good service, quality products, value for money, prompt delivery, good after-sales service (eg returns), well presented and packaged goods, at the right price and available at the right place

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Marketing objectivesMarketing objectivesTo target a new market or market

segment.

To achieve or maintain market share.

To develop a new range of products.

To improve the image of the product.

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Marketing activitiesMarketing activitiesMarket researchNew product developmentSellingPricingPromotion and advertisingPreparing publicity information

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BM Unit 2 - LO2 13

Assessment (looking) of the Assessment (looking) of the MarketMarket

Where are the consumers of the product?

How many consumers are there?What are their attitudes and

preferences?How effective are the distribution

methods?What are the strengths and

weaknesses of competitors?

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Factors leading to the importance of Factors leading to the importance of marketingmarketing

Economic growth and booms – with more disposable income, marketing is needed to gain market share.

Fashion – marketing attempts to anticipate trends and/or changes in tastes, lifestyle.

Technology – new product innovation is essential for firms to keep up with competitors.

Competition – rivals may come from overseas. Firms have to be aware of the market environment both at home and abroad.

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BM Unit 2 - LO2 15

To introduce marketing casualties and success stories.


•Identify and describe marketing casualties in both the UK and World-wide markets

•Identify and describe marketing success stories in both the UK and World-wide markets

•To describe product and market orientation

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The casualties of not The casualties of not adapting to the marketadapting to the market

The American car industry

The British motor cycle industry

In pairs have a discussion to see if you can think of any others.

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Product/Marketing failuresProduct/Marketing failuresFord EdselNew CokeSony Betamax VCRMcDonald’s Arch DeluxeSinclair C5DeLorean motor carhttp://www.bbc.co.uk/news/magazine-

11517129

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BM Unit 2 - LO2 18

Marketing SuccessesMarketing Successes

SwatchStarbucksEasyjet and RyanairIn pairs have a discussion

to see if you can think of any others.

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Product orientationProduct orientation

Production capabilities

Manufactureproduct

Aggressive sales effort

Customers

Production orientation is when a business focuses on the production process and seeks to make goods that are viewed as superior.

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BM Unit 2 - LO2 20

Product-led - Product-led - Product Orientated and Product Orientated and Production OrientatedProduction Orientated

Putting a product on the market without prior market research

Assumption of best available and no real competition

Often new inventions like Dyson vacuum cleaners or Playstation 2

A risky approach which can fail - British motor bikes

Making as many products as possible at the lowest price

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Market orientationMarket orientation

Customer needs

Potential market opportunities

Marketing product and services

Customers

Market orientation starts with the consumer and looks at consumer needs. It is customer orientated.

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Market-led - Market-led - Customer Orientated and Customer Orientated and Sales OrientatedSales Orientated

Considering what the customers want before putting a product on to the market

Competition has led to companies focusing on the needs of the customer

Also looks at the influences on purchasing decisions

Pressure to sell to the public

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Advantages of market-orientated Advantages of market-orientated approachapproach

Can respond more quickly to changes in market due to market research.

Increased chance of new product success.

Stronger position to combat new competitors/entrants.

Can anticipate market changes.

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Review of learningWhat are the 2 types of orientation a

product uses in the market.What are the features of each type.Give examples.

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BM Unit 2 - LO2 25

To introduce marketing environment and how it links to PESTEC


•Describe how the market adapts to PESTEC (external factors – that we have previously covered)

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The marketing environmentThe marketing environment

The market

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The marketing environmentThe marketing environment

The market

Social - Consumer trends and behaviour

Technology

PoliticalCompetition

The economy

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BM Unit 2 - LO2 28

To introduce market share


•Identify and describe market share giving examples of UK supermarkets and business organisations

•Describe the benefits of a high market share

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Market share and market growthMarket share and market growth

Market share is the percentage of customers who buy/use a company’s goods/services.

Market growth is the volume of new sales or customers within a market.

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Having a Having a High Market ShareHigh Market Share

Power to buy raw materials in bulk

Special components – can make them themselves

Research and development – profits reinvested

Economies of scale

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Supermarket market shareSupermarket market share

Learning and Teaching Scotland

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Soft drink market shareSoft drink market share


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Coca cola world wide shareCoca cola world wide share


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Online book retailersOnline book retailers


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BM Unit 2 - LO2 35

Success Criteria:Success Criteria:

To introduce MARKET RESEARCH and MARKET SEGMENTATION.

Learning Intentions:

To enable pupils to:

1. To introduce pupils to market research and techniques, linking to marketing mix from previous lessons.

2. To introduce ICT and how it links to Market research

3. How linking MKT RES and Market segmentation creates a common goal – to aim product or service at particular group.

4. To be able to summarise marketing topic.

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Target marketsTarget markets

Undifferentiated or mass marketingWhen a product is sold to the entire market.

Differentiated marketingWhen a product is offered to a group or

groups within the total market.This is done by market segmentation.

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Market SegmentationMarket Segmentation

Advantages Seller can meet buyers’ requirements Advertising can be focused - less wasteful Expertise developed for a specific market Higher sales Increased profits

“Breaking down of markets into sub-groups that can be targeted with a specific marketing mix.”

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Methods of SegmentationMethods of Segmentation

Age Gender Socio-economic grouping Education level Income Religion Residential area Lifestyle preferences - hobbies,

politics

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Involves aiming products and services at the population as a whole without producing different products for different market segments

eg Heinz Beans

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Undifferentiated marketingUndifferentiated marketing

Firm Market

Marketing mix

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Involves providing different products and services for particular segments

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Differentiated marketingDifferentiated marketing

Firm

Segment 1

Segment 2

Segment 3

Marketing mix 1

Marketing mix 2

Marketing mix 3

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Concentrated marketingConcentrated marketing

Firm

Segment 1

Segment 2

Segment 3Marketing mix

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Socio-economic groupSocio-economic group

A Higher managerial, administrative or professional

B Intermediate, clerical, administrative or professional

C1 Supervisory, clerical, junior administrative or professional

C2 Skilled manualD Semiskilled and unskilledE State pensioners, widows, casual

and lowest paid

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Psychographic segmentationPsychographic segmentation

Segments people according to lifestyle. Lifestyle is a person’s individual pattern of behaviour, including attitudes, beliefs, interests, hobbies, habits, religion.

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Answer a questionAnswer a question

Describe six methods that an organisation could use to segment their market.(6 marks) 2009

12 minutes

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SolutionSolutionAge – segments the market by different age

groupings, such as young or old, under 12, 13–19, 20–35, over 35.

Occupation – segments the market by different types of occupation.

Education – segments the market by the level of education attained.

Socio-economic – segments the market by grouping customers into different economic classifications.

Geographical – segments the market by the area they live in.

Cultural/religious background – segments the market by religion or ethnicity.

Family lifestyle – segments the market by customers being either married or single.

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BM Unit 2 - LO2 49



•Identify and describe marketing share giving examples of UK supermarkets and business organisations


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Niche marketingNiche marketing

A niche market is when a firm concentrates on selling to a specific market segment.

Niche markets are normally very small, but can be highly profitable.

Niche markets normally know their customers’ needs very well.

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Niche marketingNiche marketing

AdvantagesNiche market may

be overlookedGain competitive

advantage

DisadvantagesIf successful, larger

competitors may enter market

Niche markets are smaller and may suffer more frequent swings in consumer spending

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BM Unit 2 - LO2 52





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Market researchMarket research

What is market research?‘The collection, collation, and

analysis of data relating to the marketing and consumption of goods and services.’

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Market research is used to find Market research is used to find information about:information about:

the market itself (size and make-up – age, gender, income, tastes)

promotional methodscustomer feedback (opinions, usage

and attitudes)sales data (best sellers, best stores,

best sales staff)influence and impact of competitorseffect of price on market.

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Primary (field) researchPrimary (field) research

1. Questionnaires2. Personal

interviews3. Telephone

interviews4. Postal surveys

5. Observations6. Technology, eg

loyalty cards7. Focus groups8. Customer

panels

Used to collect primary data

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SamplingSamplingSampling is a way to find out the views of the population without asking everyone!

Random sampling – A randomly generated list of individuals. Free of bias, but not targeted at any market segment.

Quota sampling – A group selected to reflect a proportion of the whole population. Cheaper than random sampling but can be less representative than the random method.

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Primary researchPrimary research

PositivesOnly firm that

collects data has access

Can be controlled/verified

NegativesExpensive to

collectLengthy time

involved, information could be out of date

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Secondary (desk) researchSecondary (desk) research

Used to collect secondary data.Examples:sales figuresannual reports and datainternet data (eg other businesses’ websites)

government publications, eg Social Trends

commercial publications, eg Keynote, Mintel.

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Secondary (desk) researchSecondary (desk) research

PositivesSaves timeRelatively

inexpensive

NegativesNot specifically

related to project undertaken

Cannot be verified

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Problems with market researchProblems with market research

• Human behaviour is unpredictable.

• Sampling and bias.

• Other forms of bias, eg leading questions.

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Describe four methods of field research.(8 marks), 2009

15 minutes

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SolutionSolution Personal interview: this is a face-to-face interview,

conducted in the street or at a person’s home, where an interviewer asks a respondent questions.

Focus group: a small group of selected individuals are involved in discussions about an organisation’s product or service, led by a facilitator to provide qualitative information.

Telephone survey: individuals are telephoned at their home and asked specific questions by an interviewer.

Postal survey: questionnaires are sent through the post to selected individuals, but the response rate is very poor.

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SolutionSolution Consumer audit: continuous market research is

carried out with a selected group of consumers who record their purchases in a diary. This is then analysed for trends by marketers.

Hall test: individuals are invited to try out a product and then give their opinion on it. These are collated and analysed.

Observation: customers’ actions and purchasing patterns are observed by trained staff, who look for consumer behavioural trends.

Test marketing: product is launched on a small area to gauge the consumers response. If successful the product can be mass produced.

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The Marketing MixThe Marketing Mix

Product

Price

Promotion

Place

People Process

Physical environment

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BM Unit 2 - LO2 65

The Marketing MixThe Marketing Mix

Product People

Price Physical Environment

Promotion Process

Place

Now the 7 p’s not the 4 p’s

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BM Unit 2 - LO2 66

To introduce product as one of the 7p’s


•Describe core, actual and augmented products - giving examples

•Describe the boston box principle of categorises success against market share of products

•Describe and identify the product life cycle

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Product/serviceProduct/service

Product – the good or item to be made for sale to customers.

From the product everything else follows in the marketing mix (product, price, place, promotion).

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Levels of a productLevels of a productCore – the basic product.

Actual – the product on sale to the public.

Augmented – a product with additional features to boost its USP.

Let’s try the worksheet

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Boston boxBoston box

Market share

Market growth

High

High

Low

Low

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Boston box Boston box –– strategies strategiesStars

Build sales/market share

Invest to turn into cash cow

Problem children

Build selectively

Harvest or divest rest

Cash cows

Hold sales/market share

Use excess cash to invest in stars, problem children

Dogs

Harvest or divest

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BM Unit 2 - LO2 71

The Product MixThe Product Mix

Very few companies have only one product

Some companies have a range of related products eg Proctor & Gamble

Some companies have totally unrelated products in their product portfolios eg Imperial Group

It is important that you have new products being launched to replace products going into decline in your “Product Mix”

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Product lifecycleProduct lifecycle

The product lifecycle is a theory that has some assumptions:

•Products have a lifespan.

•All products pass through the stages described.

•All products decline.

Click for Clip

http://news.bbc.co.uk/1/hi/uk/7814502.stm

http://www.bbc.co.uk/news/uk-wales-20413234

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Stages in cycleStages in cycleDevelopment – In this costly stage, money is spent on research to create a viable prototype. Introduction – The product is launched onto the market but normally sales are low due to competition and lack of awareness from the public.

Growth – Sales rise sharply as awareness increases. This is the first stage where the company starts making a profit.

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Stages in cycleStages in cycle

Maturity – The product is now a market leader and ways to expand sales become more difficult. When there is an overkill of supply, this is the saturation point.

Decline – Sales begin to fall, and the product begins a slow death as trends, technology or imitators overtake it.

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Sales

TimeIntroduction Growth Maturity DeclineDevelopmen

tSaturation

• Similar products enter the market

•Price lowered

•Some businessesmy be forcedout of the market

• Sales falling• Profits continue to fall

•Sales reach its highest point

•Rate of growth Slows

•Competitors enterthe market

• Sales increasingrapidly

• Profits will reach their highest at the end of this stage

• Sales are low

• Profits will be negative

• Product may be unknown

• Product is being designed

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Sales

TimeIntroduction Growth Maturity DeclineDevelopmen

tSaturation

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Product lifecycleProduct lifecycle

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BM Unit 2 - LO2 78

The Product Life CycleThe Product Life Cycle

Time

£000Costs/Sales Idea

NewProduc

tLaunch Youth Growth Declin

e

Maturity(Saturation) Death

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Extension strategiesExtension strategies

Change the product – have additional features or upgrade the product. Change the price – lower prices to make it more appealing to non-users/buyers. Change the place/channel of distribution – look to more outlets or go online to widen market opportunities.

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Extension strategiesExtension strategiesChange the promotion method –

introduce sales promotional campaigns, such as BOGOF.

Change the packaging – to make it more eye-catching to customers.

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Effects of extension strategiesEffects of extension strategies

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Extension of life cycle - LUCOZADEExtension of life cycle - LUCOZADE

From this

To this:

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The Product MixThe Product MixVery few companies have only one product

Some companies have a range of related products eg Proctor & Gamble

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Product mix/portfolioProduct mix/portfoliohttp://www.pg.com/en_UK/brands.shtml

Some companies have totally unrelated products in their product portfolios eg Imperial Group

It is important that you have new products being launched to replace products going into decline in your “Product Mix”

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Answer a questionAnswer a questionChanging the packaging of products

can make them more appealing and eye-catching to consumers.

Explain five other methods of extending the product lifecycle.(5 marks) 2008

10 minutes

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SolutionSolution Improve the product by adding new or additional features

customers will want, eg cameras on mobiles. Alter price, either lower or increase price to attract

customers. Change the method of advertising, move the message, eg

from TV to radio. Change the use of the product, eg Lucozade once was

used to reenergise ill people, now used as a sports drink. Introduce line extensions to the product, create new

flavours, different sizes or even alter the format like the PSP.

Change the name of the product, eg Opal Fruits to Starburst, Marathon to Snickers.

Alter the place the product is sold, offer products online to reach a wider customer base.

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Product Innovation –step by Product Innovation –step by step processstep process

Generating an idea

Analysing/market research of the idea

Producing a prototype

Test market

Adapt product to solve problems

Launch the product

Next: Product innovation by diagram

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Identify and describe Identify and describe 3 3 stages of the stages of the product life cycle. 6 marksproduct life cycle. 6 marks

Development − product is planned, developed and tested before being introduced onto the market.

Introduction − product is launched onto the market.

Growth − sales of the product are rising as consumers become more aware of it.

Maturity − product is well known in the market and growth is slowing down. Competition increases and the price of the product falls.

Saturation − competition is very fierce and prices fall significantly.

Decline − sales and profits fall as new and more advanced products enter the market.

Death − product withdrawn from the market.

1 mark per stage − max 3 1 mark per description − max 3

(6)

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Summary of learningSummary of learningWhat have you learned today?

http://www.businessstudiesonline.co.uk/live/index.php?option=com_content&view=article&id=35&Itemid=23

http://www.businessstudiesonline.co.uk/GcseBusiness/Activities/Module3/Product/ProductLifeCycleProfitvSales/frame.htm

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What is a new product?What is a new product?New to the worldNew product linesAdditions to existing product linesImprovements and revisions to

existing productsRepositioned products

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Product InnovationProduct Innovation

Generating an idea

Analysing the idea

Producing a prototype

Test market

Adapt product to solve problems

Launch the product

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New product development stagesNew product development stages

Generate ideas – Brainstorming session to come up with ideas. Quantity rather than quality is needed before refining the idea to something realistic.

Analysis and further research – Time and money spent on discovering what is possible and what is not. Can existing technologies be used? Or will something totally new be created?

Are the products marketable? – Will customers buy the product? Potential customers may be surveyed at this stage.

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New product development stages New product development stages (contd.)(contd.)

Prototype – A working model is developed.Test marketing – Potential customers may

test several versions (or generations) of the product, and feedback will be used to modify the prototype.

Full launch – If satisfactory, the product will be put into full production and a marketing campaign will be put in place to raise awareness of the product, emphasising the benefits it brings to customers.

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Successful NPDSuccessful NPDDoes the product have a USP?Is there a specific market segment to

target?Is the market large enough and will

there be a return on investment?Are R&D and marketing

communicating?Was NPD process handled well?

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BM Unit 2 - LO2 97





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BM Unit 2 - LO2 98


To introduce pupils to branding and own branding



1. Describe the benefits of branding to an organisation

2. Describe the benefits of own branding to an organisation

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BrandingBrandingA brand is a registered trademark of a company, including the name or logo that can only be used by that company.

Branding helps create USPs (unique selling points), and via advertising and creating a positive, desirable image, build brand loyalty.

Brands promote an image of high quality, which means a premium price can be charged.

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Unique Selling Point (USP)

Try to identify the USP of each of the products listed opposite

Think of how they are presented to you in the advertising you see daily on TV, in newspapers and magazines

Coca Cola Nike Kit Kat Sunny D Skoda Cars Mercedes

Cars Baxter’s

Soups Fairy Liquid Finish

(dishwasher tablets)

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Branding

Branding distinguishes a product from its competitors

Instantly recognisable by consumers

Often linked to quality and reliability – or “snob” value

Can command a premium price

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Advantages of brandingAdvantages of branding

• Easily identifiable.

• Brand loyalty – repeat purchases.

• Premium pricing can occur.

• High quality is associated with brands.

• Can create a family of branded products.

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Disadvantages of brandingDisadvantages of branding• Brands take time to establish

reputation and quality.

• Advertising and promotion costs will be expensive.

• Negative press can tarnish entire family of products.

• Cheap imitations may flood the market.

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Own Brands Products

branded with the name of the store selling them

Most of the big supermarkets (Tesco) and chain stores (Boots) have their own brands

Often cheaper alternatives to branded goods

Make a list of as many “own brands” you can think of. Indicate which branded product they are designed to rival

Eg “Wheat Bisks” by Safeway to rival “Weetabix”

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Discuss the effects on an organisation of branding their products.(6 marks) 2009

12 minutes

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SolutionSolutionProducts in the brand range are instantly

recognisable and are uniquely different from other products.

Brand loyalty can be built up, which can lead to repeat purchases.

Brand is perceived to be of high quality, which can mean premium prices can be charged.

Makes it easier to launch new products onto the market as there is already a brand family of products.

Brand names can be expensive to build up as it takes time to achieve their reputation.

Bad publicity can affect the whole brand, which can ruin the brand’s reputation overnight.

Imitator and fake products are common, which can damage sales in the long run.

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Own brandsOwn brands

Own brands are goods made by a producer who sells them to a well-known retailer such as Tesco or Sainsbury’s, who repackage them and sell them at a low price under their own brand label.

What are the own brands for the major supermarkets?

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Advantages of own brandsAdvantages of own brands

• Own brands will attract more customers and more sales within the store.

• Producer will have guaranteed sales.

• Products are cheaper.

Disadvantages of own brandsSome customers believe own brands are of lower quality than established brand names (although this is not necessarily true).

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Answer a questionAnswer a questionDiscuss the advantages and

disadvantages of selling own brands.(4 marks) 2008

8 minutes

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SolutionSolution Own labels require very little advertising as customers will

be normally be regular shoppers. The retailer does not need to produce the own-brand

products as they can buy them from manufacturers and re-label them.

A range of products with own labels can be sold because a brand family is established.

Some own brands can be seen as value for money and a quality product when customers look for good deals.

Own labels are cheaper to customers as the price is always lower than that of regular brands.

Whole brands can be tarnished over one product’s failure or problem. This can ruin reputation overnight.

Run the risk of imitator brands, which can damage sales.

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BM Unit 2 - LO2 113


To introduce PRICE. Price being one of the factors linking into the MARKETING MIX.



•describe pricing objectives

• identify how businesses use pricing strategies to price products and services

•describe short-term pricing tactics and give current examples

•be able to describe pricing methods and elasticity of demand

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BBC Price ClipBBC Price Clip

http://www.tutor2u.net/blog/index.php/business-studies/comments/pricing-in-uk-supermarkets/

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PricePrice

Price has to be set appropriately or else customers will not purchase the product. High quality and high price normally go together and vice versa.

In determining price firms have to consider:

•production costs of materials

•profit mark-up

•the market price (what competitors charge).

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Long-term pricing strategiesLong-term pricing strategies

Low price – Price lower than competitors. Only appropriate where there is a little brand loyalty and competition in the market is high.

Market price – Setting price at a similar price to competitors. Homogeneous product means that price competition is not of benefit. They compete in other areas, eg service.

High price – High-quality products, premium goods and services where image is important, such as perfumes.

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Short-term pricing strategiesShort-term pricing strategies

Market skimming – In a new market a high price is set and then once the first customers have bought, the price is lowered to continue to skim the cream of the market layer by layer. Penetration pricing – A low price used to enter a new highly competitive market.

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Short-term pricing strategiesShort-term pricing strategies

Destroyer pricing – An illegal pricing tactic used to eliminate competition where a ridiculously low price is charged (sometimes at a loss) to smash competitors. Once market share is achieved, prices soar. Promotional pricing – A short-term strategy to gain media attention and renew consumer interest, eg BOGOF or loss-leader tactics. Demand-oriented pricing – When different prices are charged at different times for the same good/service based on high demand or lack of demand.

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Describe three pricing tactics that could be used when an organisation attempts to break into a new market.(6 marks) 2009

12 mimutes

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SolutionSolutionHigh price – price is set higher than competitors to

give the image of quality and exclusiveness.

Low price – price is set lower than competitors to attract customers to their product/service.

Skimming – price is set high initially, when no competition exists. When competitors enter the market, price is lowered to market price.

Market/competitive pricing – price is set at the same level as competitors, normally used for products that are identical.

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Solution (cont’d)Solution (cont’d) Penetration pricing – price is set slightly lower than competitors to

attract customers; once a customer base is established, the price is slowly increased to same as competitors

Promotional pricing – a low price is set for a short period of time to boost sales in the short term, possibly even making a loss on the product. This is often used by supermarkets to attract customers.

Destroyer pricing – price is set very low compared to competitors and once there is no competition in the market the price is then put back up to the previous level or higher. This is mainly used by larger organisations to destroy competition, as you must have large reserves to sustain this tactic over any length of time.

Cost-plus pricing – is the cost of buying in the materials with a mark-up added on.

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Place - Distribution ChannelsPlace - Distribution Channels

Producer 1 Producer 2 Producer 3

Consumer Retailer Wholesaler

RetailerConsumer

Consumer

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PlacePlace

Producers

Wholesalers

Retailers

Consumers

Direct selling

Producer to wholesaler

Two or more intermediaries

Producer to retailer

Click for clip

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Choice of distribution channelChoice of distribution channel

Projected level of demand

Geographical spread

Optimum methods of stock control

Seasonal trendsCosts of

distribution

Speed of distribution

Legal restrictionsChanges in buying

habits and life styleExisting buying

habits

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Wholesaler

Retailer

Consumer

A distribution channel

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Direct channelDirect channel

This is from manufacturer to consumer.

Fastest way (perishable goods?).

Cheapest for consumer (no costs added on by each part of the chain).

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Manufacturers

A B C D E

Company

warehouse

Wholesalers

Company

outlets

Retailers Retailers E-tailers

C o n s u m e r s

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The Wholesaler FunctionThe Wholesaler Function

Buys in bulk from producers (low transport costs) and sells to retailers in smaller quantities

Bears stock-holding risk

Offers a wide variety of goods in small quantities

Packages and labels goods

Offers advice to both producers and retailers as to which goods are selling well

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Advantages of using wholesalersAdvantages of using wholesalers

Buy in bulk, saving manufacturers the delivery costs of many small runs.

They bear the risk of holding stock.Break down the bulk supplies and sort

into quantities retailers will buy.Give advice to manufacturers,

knowing what goods will sell well.

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The Retailer FunctionThe Retailer Function

Breaks down bulk to quantities consumers wish to buy and store at home

Provides information to consumers through advertising, displays and trained staff

Stores a variety of goods, displays them and marks on prices

Offers range of related services - credit, HP, after-sales service and delivery

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Types of RetailerTypes of Retailer

Independent - convenience stores, corner shops

Multiple Chains - M&S, Dixons, Boots

Supermarkets - Tesco, Asda, Safeway, etc

Co-operatives

Department Stores - Jenners, Harrods, Selfridges

Franchises - Benetton, Body Shop, McDonald’s

Others - mail-order, internet, direct-response advertising, telephone and TV shopping channel

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Key termsKey terms

Manufacturer – firm that makes goods.

Wholesaler – company that stores goods in bulk before selling them on in smaller batches.

Retailer – firm that sells goods to end-users.

Consumer – person who uses final good/service.

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Discuss the advantages and disadvantages to a manufacturer of using a wholesaler.(5 marks) 2008

10 mimutes

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SolutionSolutionAdvantages Saves on a number of smaller deliveries as retailers will buy in

bulk. Less money tied up in stock as the wholesaler stores the

materials. Wholesalers may label the product for the retailer, saving costs. Wholesalers break product down into smaller more saleable

sizes that can be packaged and sold by the retailer. Wholesalers can give market research direct to manufacturer,

which may affect future buying decisions.

Disadvantages Loss of control of how the product is presented because it is

normally packaged already. Lower profits as wholesaler, as intermediaries, take their cut.

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To introduce PROMOTION. Promotion being one of the factors linking into the MARKETING MIX.



•describe types of promotional activities

• identify how businesses use promotional techniques to sell products and services

•describe types of advertising and give current examples

•describe the role of Public Relations (PR) within promotional activity.

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Types of promotionTypes of promotion

Promotion

Advertising Sales promotion

Direct mail

Personal selling

Public relations

Exhibitions and trade fairs

Merchandising

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What is promotion?What is promotion?

Promotion is the way firms inform customers of their products and try to generate sales.

Click for clip

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Methods of promotionMethods of promotion

• Advertising• Sales promotion• Public relations• Merchandising• Packaging• Exhibitions and trade fairs• Direct mail• Personal selling

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Advertising DecisionsAdvertising Decisions

The effect on Sales?

The target market?

Why do the consumers NOT buy the product?

Which is the best medium to use?

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Types of advertisingTypes of advertisingInformative: Health Education Board for Scotland – smoking, drugs, alcohol etcPersuasive: used in very competitive markets, uses powerful images and language – ‘Probably the world’s favourite lager’.Corporate: promoting the whole company not a single product – BP adverts focus on their ‘green image’ not on the product (petrol)Generic: the whole industry comes together to promote the whole industry – Scottish beef, Scottish tourism

Click for clipSome classic adverts

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Types of advertising mediaTypes of advertising mediaPrint: newspapers and magazines

Broadcast: TV, radio, internet

Outdoor: billboards, buses, round football grounds etc

Which one is chosen depends on:

•cost: TV expensive but memorable

•target audience: choice of programme, newspaper

•competitors’ advertising: match to competitors

•impact required: new product wide variety of methods

•the law: tobacco and alcohol

Click for clip

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Sales promotion – out of the Sales promotion – out of the pipeline and into the pipelinepipeline and into the pipeline

Into the pipeline targets retailers to purchase from suppliers. It also includes materials to help them sell to customers, eg merchandising displays and posters. Out of the pipeline targets customers and end users, eg trial packs and BOGOF.

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Main Types of Main Types of Sales PromotionSales Promotion

Into the pipeline

Enhancing sales to trade outlets

Helping retailers to sell to their customers eg displays, posters, videos, etc

Out of the pipeline

Helping to persuade customers to buy from retailers

Providing free samples, a percentage extra free, 2 for 1 offers, money-off coupons, etc

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Public relations (PR)Public relations (PR)

This is when an organisation tries to communicate with customers, shareholders, employees and the government – all of whom form the organisation’s ‘public’.

The aim of public relations is to improve the image of an organisation’s products and the image of the organisation itself.

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The role of PRThe role of PR

Provides public with information about the organisation.

Builds confidence/reputation of the organisation and awareness of its products.

Develops goodwill in the community.Presents the organisation in a positive way.Supports and enhances other areas of the

promotional mix, such as advertising and selling.

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PR activities PR activities

Opening a new storeCharitable donationsEvent sponsorshipCelebrity product endorsementPress conferences and press releases

It is important to remember that PR is always conducted with ‘spin’ involved. In other words it always tries to have the firm viewed in the best possible light.

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MerchandisingMerchandising

• Merchandising involves making sure a firm’s products are laid out in the most enticing or attractive way possible to customers.

• Special displays, stands or posters may be given to retailers to help point-of-sale advertising.

• ‘Eye level is buy level’, for example when a new DVD comes into the local supermarket expect giant posters and cardboard cut-outs of the characters to be emblazoned around the store!

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Packaging Packaging

The ‘cover’ or packaging of the product can also generate sales.

Design – the colour scheme should help make the product stand out from rivals.

Protection – is the packaging appropriate to ensure it doesn’t get damaged during distribution or when being taken home by the customer?

Information – most products sold in supermarkets have to carry labels with information on their content or to indicate if they pass the BSI quality standard.

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Describe and justify four different methods of direct selling that could be used by an organisation.(8 marks) 2010

15 minutes

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SolutionSolution Personal selling – Products are sold by experienced

sales personnel. Direct contact can be made with the retailer or consumer. Can be tailor-made to customer requirements. Demonstrations of the product or service can be shown.

Mail order – Goods sold via catalogues. Offers credit facilities. No need for high-street stores. Internet selling – making use of websites to sell products. Consumers can order online from offices or homes. Is available worldwide. Can be accessed 24/7.

Specialist magazines – Used to describe and sell specialised products or services. Customers who are sent or purchase the magazine are directly interested. Consumers can phone in orders or speak to specialists.

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ICT and Market ResearchICT and Market Research

Databases compiled by research agencies

Electronic point of sale information (EPOS)

Supermarket loyalty cards

Stock control software gives sales breakdown

Web sites - customers can e-mail comments back to the company

MARKETING Marketing BM Unit 2 - LO22 Success Criteria: To introduce marketing and its significance...

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Transcript of MARKETING Marketing BM Unit 2 - LO22 Success Criteria: To introduce marketing and its significance...