LM3187: PRINCIPLES OF MARKETING

MARKETING
- Form of communication between you and your customers with the goal of selling your product or service to
them.
- Communicating the value of your product or service is a key aspect of marketing.
- Marketing seeks to satisfy the needs of people (customers or the market) (creating a sense of usefulness or
utility) through the exchange process.
- Marketing refers to channelling the gap between service and product providers to service and product seeker,
also known as a way of satisfying needs.

5 CONCEPTS OF MARKETING

1) Production Concept – consumers prefer products that are widely available and inexpensive. The production
concept is more operations oriented than any other concept.
2) Product Concept – consumers favour products that offer the most quality, performance, or innovative features.
3) Selling Concept – consumers will buy products only if the company aggressively promotes or sells these
products. Of course, in this area of marketing, we know that selling is not the only tactic to sell your product.
You have to focus on marketing as well.
4) Marketing Concept – focuses on needs/wants of target market and delivering value better than competitors. The
marketing concept believes in the pull strategy and says that you need to make your brand so strong that
customers themselves prefer your brand over every other competitor.
5) Societal Marketing Concept – focuses on the needs/wants of target market and delivering value better than
competitors that preserves the consumer’s and society’s well-being.

MARKETING PRINCIPLES

1) Strategy before tactics – create a marketing strategy first, and then build your marketing activities around this
core strategy.
2) Narrow market focus – focus your marketing strategy and tactics on a small, niche market and become the
dominant player.
3) Differentiate – find and communicate a hook that allows your prospects to easily see how your firm is different
from everyone else in the country.
4) Marketing materials should educate – create information products, websites, and other forms of communication
that allow your prospects to fully appreciate your expertise.
5) Orchestrate the lead generation trio – a large portion of your leads can originate as referrals, but by adding
advertising and public relations to your system, you amplify your efforts in each.
6) Create a total online presence – today’s business easily found online, easily engaged, and easy to communicate
with. This requires a major focus on search engine optimization and social media participation.
7) Live by a business calendar – the best way to move your marketing strategy forward is to create a calendar and
schedule a marketing activities every single day, week, and month.

5 P’S OF MARKETING

1) Product
2) Price
3) Place
4) Promotion
5) People
PRODUCT
- A product is anything that can be offered to a market that might satisfy a want or a need.
- In retailing, products are called merchandise.
- To help you accurately define and develop the products and services that you will take to the market, you can
create a product description statement.
- When writing a product description statement, ensure that you connect the features of your product to the way
that they can benefit customers.
- In manufacturing, products are bought as raw materials and sold as finished goods.
- By having a clearer understanding of what your product is, you’ll be in a better position to fully exploit its
potential when advertising or selling it.
- A clear definition of your product can also help their customers (to be continued..)
- To further improve the attractiveness of your offering you may like to consider adding additional value using
incentives such as guarantee or warranties.
- A warranty is a legally implied obligation which guarantees the repair or replacement of a product in the event
that it fails within a certain period after it has been purchased.
- A guarantee is an agreement by the business to assure the quality or length of use of a product offered for sale
by the business and in the event that the product is faulty. A refund is given.
PRICE
- It is important to have a pricing strategy that is tailored to your target market.
- Mark-up is the difference between the costs of producing and selling a product (fixed cost plus variable cost) and
the market selling price of the product.
- Desired profit margin is the amount of profit you would like your business to make above your production costs.
It can be expressed as a percentage of the total costs.
- Value-based pricing sells the product at the price based in the customer’s perceived value of the product.
- It is important to note that this method of pricing is based on a sound understanding of how customers judge
value and may only be possible after a product has a strong reputation.
- A business first determines what level of demand there is for the product and then identifies the desired profit
the business would like to make from the product.
- The price is calculated by dividing the total desired profit by the expected level of sales. Therefore, by meeting
the level of expected sales, a certain amount of profit will be received.
- In the situation where the business is in a competitive market, the business charges the average price of what its
competitors are charging for a similar or the same.
- A good example where such a pricing system is used is on luxury items where the actual value is quite different
from the perceived value. For example, a luxury item may not actually cost nearly as much to make as what
people are prepared to pay for it.
PLACE
- In regards to distribution, location and methods of getting the product to the customer.
- This includes the location of your business, shop front, distributors, logistics and the potential use of the interet
to sell products directly to consumers.
- It’s critical then, to evaluate what the ideal locations are to convert potential clients into actual clients.
- Today, even in situations where the actual transaction doesn’t happen on the web, the initial place potential
clients are engaged and converted is online. It is called digital marketing.
- Your business sells its products directly to customers through channel such as retail stores, markets, the
internet, direct mail orders, door to door sales and catalogues.
- Your business sells its product through some form of middleman who sells the product on behalf of the
business. This may be through retailers (such as department stores), wholesalers, agents (such as real-estate
agents) or a distributor.
- Each distribution has positive and negative aspects (to be continued…)
- Generally wherever possible it is good to be able to sell directly to customers. This is because when you
introduce a third party to the process, you are taking away some of your control over the customer experience.
- If your agent does a poor job of distributing, you product can a negative impact on your business.
PRICING STRATEGIES

1. Price Skimming –saleability after the introduction (high price to low price)
2. Penetration Pricing – developing market share (low price to high price)
3. Cost Plus Strategy – build up cost to estimate profit
Cost
Variable cost 75
Ingredients
Packaging
Fixed cost 25
Total Cost 20_
Profit 120
4. Loss Leadership
5. Promotional Pricing Strategy – buy 1 take 1 (discounts  close to spoilage)
6. Special Event Pricing – Valentines, Christmas promos
7. Early Bird Pricing – first 100 customers gets the item

5P’s  TARGET MARKET

Product Price Place Promotion People

Value Strategies Retail Special offers Employees
Design Skimming Wholesale Advertising Management
Technology Penetration Mail order Endorsement Customer service
Usefulness Cost plus Internet User-trials
Convenience Loss leadership Direct sales Direct mail
Quality Multi-channel Letters/posters
Packaging Compe
Branding Public relations

The 6th and 7th P’s

PROCESS (Production)
- Refers to the process involved in delivering your products and service to the customer. It is also about being
easy to do business with.
- Having good process in place ensures that you:
1. Repeatedly delivers the () standard of service to your customer
2. Save time and money by increasing efficiency

PHYSICAL APPEARANCE (Packaging)

- Refers to everything your customers see when interacting with your business. This includes:
1. Physical environment where you provide the product or service
2. The layout or interior design
3. Your packaging
4. Your branding
- Can also refer to your staff and how they dress and act.
- Consider how your store layout, fixtures, and signage can build your brand and increase your sales.

Marketing campaign is align with the business objectives

Vision – describes the desired future of the company

Mission – defines that company’s business, its objectives and its approach to reach these objectives
Vision + Mission  Business Goals (PROFIT)  Marketing Strategies
10 MARKETING PLOYS MOST CUSTOMERS FALL PREY TO

1. CUNNING LAYOUT OF PRODUCTS

In any supermarket, the top shelves are reserved for the less well-known brands; the middle shelves (aka the
“Golden shelves“) for the popular, hyper-advertised trademarks; while the bottom shelves house the produce
of virtually unknown companies and children-oriented products. To rent the “Golden shelves" costs companies
a lot of money, which naturally affects the price we pay for their goods. If you wish to avoid getting caught
on this hook, always follow a simple rule: before you pick up the goods from the middle shelf, compare their
price and quality to that of the goods located on the upper and lower shelves.

2. ANTHROPOMORPHISM
Anthropomorphism means our tendency to invest in things and creatures with human qualities. This includes
arguing with computers when they don’t work properly, giving affectionate names to cars, and talking
to animals as if they were people. Animated movies like Cars and Minions and Pixar’s famous table lamp
character are good examples of anthropomorphism. When companies use animal mascots as part of their
brand’s promotion and packaging design, consumers tend to empathize with the characters, thus becoming
sympathetic toward the product as well. Anthropomorphism strengthens consumers’ trust in the company and
its products, which, in turn, leads to an increase in sales.

3. LARGE SHOPPING CARTS

When customers use shopping carts instead of baskets, they’re likely to spend up to 40% more, though not
in the case when they’re making purchases to meet the needs of a large family or to stock up on food for
a week. The supermarket personnel intentionally position food essentials (products like bread and milk) at the
far end of the hall, or even at its opposite end. This is the best way to make sure that customers pick up a few
additional (and, ultimately, redundant) items along the way. In many supermarkets, the aisles lead in a counter-
clockwise direction — this also provokes people into making unplanned purchases.

4. THE GRUEN EFFECT

The world’s first fully enclosed shopping mall was designed by the architect Victor Gruen. Before Gruen,
shopping malls consisted of detached single-storey buildings, linked together by walkways. The architect
managed to unite a multitude of shops under a single roof, creating a mazelike supermarket. The Gruen concept
entails a perfectly safe world that is always warm, well lit, and comfortable. A place without windows or clocks.
Nowadays, nearly all shopping malls are built in this fashion. Such an environment causes people to fall into
a state of disorientation and light trance, making them forget about the real purpose of their visit. Walking
around a large shopping center, we seem to lose our ability to make sound decisions. As a result, we’re likely
to make impulse purchases and spend more than we originally planned.

5. SIZE/QUANTITY REDUCTION
A favorite with big brand producers and supermarkets, this ploy allows them to maintain a stable profit rate
without raising prices.
 6. FALSE PRICE REDUCTION
In stores, we often see price tags with the old price crossed out and the new price written in large digits. But
few people realize that, more often than not, such price reductions are completely phony. In reality, shop
assistants simply “inflate” the old price by 20%, hoping that no one will remember the original price for that
product. Another example of false discounts is when we are offered, say, a coffee and cake for a “special offer"
of $10. It doesn’t matter that each of the products individually costs $5 — subconsciously we still perceive this
as a nice bargain.

7. DECOY PRICING
Expensiveness is a relative notion. A decoy-priced product works by making other products look reasonably
priced in comparison. This effectively forces the customer to make the "right" decision.

8. OVERPRICING
This clever ploy proves effective with nearly every customer. It works like this: the most expensive goods are
displayed first, while the less expensive ones bring up the rear. However, although these items cost less
in comparison, they are still significantly overpriced. This tactic is successfully used in restaurants. A bottle of the
same brand of mineral water costs a different amount in a supermarket, in a railway station cafe, and
in a restaurant. People tend to see restaurants as more reliable in terms of quality, so restaurant prices are likely
to be 2-3 times higher. This in no way deters customers and even serves as a status symbol.

In this example, sellers offer the same amount of monthly payments for cars of different value. A catch that
makes a customer think: If there is no difference, then why buy a cheaper car?

9. ANTI-ADVERTISING
"We’re sorry, but we can’t sell you this." That’s roughly the underlying message of some of Volkswagen’s
slogans. Has this approach actually stopped someone from buying their cars? On the contrary: more attention
means higher sales!

10. MISLEADING VISUAL APPEARANCES

To emphasize the freshness of products and make items like hamburgers look more appetizing and appealing,
food photographers sprinkle water on their surface. This technique is also successfully used by sellers
of vegetables and greens. The mouth-watering results promptly tempt us into making unplanned purchases.

MARKETING SEGMENTATION AND TARGETING

WHAT ARE MARKETS?

- Market are people or institutions with sufficient purchasing power, authority and willingness to buy

REQUIREMENTS OF A MARKET
- Need
- Ability
- Willingness
- Authority

EFFICIENCY VS EFFECTIVENESS
- Efficiency is making the most out of your limited resources
- Effectiveness means the standards and expectations are met
ROLE OF MARKET SEGMENTATION
 Market Segmentation – division of the total market into smaller, relatively homogenous groups
 Levels – Mass, Segment, and Niche

WHY SEGMENT?
MOST EFFICIENT ------------------------------ MOST EFFECTIVE
Many groups of one
ONE MASS
MARKET

THE IMPORTANCE OF MARKET SEGMENTATION

- Markets have a variety of product needs and preferences
- Marketers can be better define customer needs
- Decision makers can define objectives and allocate resources more accurately

SEGMENTATION PROCESS
 Marketers follow two methods to determine the bases on which identify markets:
- Segments are predefined by managers based on their observation of the behavioural and demographic
characteristics or likely users
- Segments are defined by asking customers which attributes are important and then clustering the reponses

BASES FOR SEGMENTATION

1. Geography – dividing an overall market into homogeneous groups on the basis of their locations (MSA)
2. Demographic – dividing consumer groups according to characteristics such as gender, age, income, occupation,
education, ethnicity, household size and stage in the family life cycle
Family Life Cycle = Age, Children, Marital Status
3. Psychographic – dividing a population into groups that have similar psychological characteristics and lifestyles.
IAO variables (Interest, Attitude, and Opinion)
Lifestyle – people’s decision about how to live their daily lives, including family, job, social, and consumer
activities
Geodemographic – segmenting potential customers into neighbourhood lifestyles categories. Combines
geographic, and psychographic segmentation
4. Benefits Sought – the process of grouping customers into market segments according to the benefits they seek
from the product
5. Usage Rate – diving a market by the amount of product bought or consumed

STEPS IN SEGMENTING MARKET

1. Select a market for study

2. Choose bases for segmentation
3. Select descriptors
4. Profile and analyse segments
5. Select target market
6. Design, implement, and maintain marketing mix
WHAT IS TARGETING?
- Targeting is choosing one or more segments for which to design your marketing operations

IDENTIFY THE APPROPRIATE TARGETING STRATEGY

- Undifferentiated
- Differentiated
- Concentrated

Undifferentiated
Organization  Single Marketing Mix  Target Market (Everyone)

Differentiated
Organization  Marketing Mix 1  Target Market (Female)
 Marketing Mix 2  Target Market (Male)

CANNIBALIZATION
- Situation that occurs when sales of a new product can cut into sales of a firm’s existing products

Strategies for Reaching Target Markets

 No single, best choice strategy suits all firms
 Determinants of a market-specific strategy:
- Company resources
- Product homogeneity
- Competitor’s strategy

Economy of Sale – sale must be greater costs and expenses

ONE-TO-ONE MARKETING
- An individualized marketing method that utilizes customer information to build long-term, personalized, and
profitable relationships with each customer
- “share of customer”

ATL, BTL, AND ITL MARKETING

ATL – ABOVE THE LINE, eg. TV, Newspaper, Radio, Billboards (widespread brand-building advertising)
BTL – BELOW THE LINE, eg. Flyers/Leaflets, Booths, Samplers, Telemarketing (highly targeted direct marketing focused
on conversions)
TTL – THROUGH THE LINE, eg. Social Media Events (integrated ATL and BTL marketing campaigns)

WORD OF MOUTH AND PRODUCT POSITIONING

Word of Mouth Marketing (WOM)

- Word-of-mouth marketing (WOM Marketing) is when a consumer's interest for a company's product or service
is reflected in their daily dialogs.
- It can be encouraged through different publicity activities set up by companies, or by having opportunities to
encourage consumer-to-consumer and consumer-to-marketer communications. It includes buzz, viral, blog,
emotional and social media marketing.

PRODUCT POSITIONING
- Positioning starts with a product. A Piece of merchandise, a service, a company, an institution, or even a
person... But positioning is not what you do to a product. Positioning is what you do to the mind of the
prospect. That is, you position the product in the mind of the prospect. - Al Ries and Jack Trout (1981)
PERCEPTUAL MAPPING
- A means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of
products in customers’ minds.

Product Positioning using Perceptual Maps

REPOSITIONING
- Changing consumers’ perceptions of a brand in relation to competing brands.
Positioning and Product Differentiation