1. Marketing

Question 1

What is the strategic role of marketing goods and services?

Answer 1

• The overarching goal of business is profit maximisation.
• The strategic role of marketing, therefore, is to translate this goal into reality.

Question 2

Why should a business develop a marketing plan?

Answer 2

If businesses want to achieve their financial goal of making a profit, their product needs to generate sales. This requires them to develop a marketing plan detailing the strategies they will need to put into place to sell their products.

Question 3

To achieve the goal of profit maximisation, the marketing plan should be the focus of both short-term and long-term planning for three reasons… What are they?

Answer 3

1. The marketing plan outlines the strategies to be used to bring the buyer and seller together.
2. The core of marketing is satisfying existing customer wants, which should lead to repeat sales.
3. Marketing is the revenue-generating activity of any business. Nothing is achieved until a sale is made.

Question 4

What is meant by the interdependence between key business functions?

Answer 4

Interdependence refers to the mutual dependence that the key business functions have on one another.

Question 5

Outline the interdependence of marketing with other key business functions.

Answer 5

Interdependence with operations

• Operations require marketing to research and design products that are in high demand within current consumer markets; while marketing will require operations to - through the transformation process - generate this product in physical form.

Interdependence with finance

• Finance requires marketing to generates sales, increasing the business’ value and assisting with the financial goal of managing cash flow; while marketing requires finance to determine its budget and fund the advertisement of products with.

Interdependence with human resources

• Marketing requires human resources to acquire the correct skillset in order to uncover the current unmet needs and wants of consumers within the market. In turn, human resources require marketing to advertise job vacancies and positions available for qualified and experienced individuals.

Question 6

What is the production approach and when was it used?

Answer 6

• The production approach was implemented from the 1820s to 1920s.
• Emphasis on quantity and reducing costs.

Question 7

What is the selling approach and when was it used?

Answer 7

• The selling approach was implemented from the 1920s to 1960s.
• To stimulate demand for their goods and services, businesses focused on increased their spending on advertising.

Question 8

What is the marketing approach (stage 1) and when was it used?

Answer 8

Stage 1 of the marketing approach was implemented from the 1960s to 1980s. Stage 1 focuses on finding out what customers want, through market research and then satisfying that need.

Question 9

What is the marketing approach (stage 2), what does it comprise of and when was it used?

Answer 9

Stage 2 of the marketing approach was implemented from the 1980s to the present day.

Corporate social responsibility

• With growing public concern over environmental pollution and resource depletion came a shift in the emphasis of marketing plans. Marketing managers now realise that businesses have a corporate social responsibility (CSR).

Customer orientation

• Refers to the process of collecting information from customers and basing marketing decisions and practices on customers’ wants and interests.

Relationship marketing

• Relationship marketing is the development of long-term and cost-effective relationships with individual customers.

Question 10

What is the difference between the marketing approach stage 1 and stage 2?

Answer 10

Stage 2 of the marketing approach used today, focuses on additional tasks - such as customer orientation, relationship marketing and corporate social responsibility - that is not applied in Stage 1 approach.

Question 11

What are the types of markets?

Answer 11

Resource

• The resource market consists of those individuals or groups that are engaged in all forms of primary production, including mining, agriculture, forestry and fishing. Farmers, for example, purchase machinery, seeds 9and fertiliser.

Industrial

• An industrial market includes industries and businesses that purchase products to use in the production of other products or in their daily operations. Tip Top Bakery, for example, buys flour to make bread, and Sony buys plastics and metals to produce televisions.

Intermediate

• The intermediate market consists of wholesalers and retailers who purchase finished products and sell them again to make a profit. The vast majority of goods sold to consumer markets are first sold to an intermediate market. Resellers are an intermediate market.

Consumer

• Consumer markets consist of individuals — that is, members of a household who plan to use or consume the products they buy.

Mass

• In mass markets, the seller mass-produces, mass-distributes and mass-promotes one product to all buyers. The business does not target its products to a specific group of buyers. The assumption is that all customers in the market have similar needs and wants.

Niche

• A niche market, also known as a concentrated or micro-market, is a narrowly selected target market segment

Question 12

What are the psychological factors that influence consumer choice?

Answer 12

Consuming behaviours are influenced by five main physiological factors:

Perception

• Perception is viewed through everyone differently, it is simply the opinion that customers have. Perceptions can differ due to – information gathered, age, culture & religion. To give customers a positive perception, businesses need to develop marketing campaigns to promote a positive image of the product.

Motives

• This is the reason which individuals act upon. There are 10 main motives, Comfort, health, safety, ambition, taste, pleasure, fear, amusement, cleanliness and the approval of others. Advertising attempts to motivate the customer by trying to make the product seem a necessity.

Attitudes

• Attitudes of customers heavily influence the success or failure of a businesses marketing strategy. Include our ethnic, religious, political persuasions & attitudes toward social issues.

Personality & Self Image

• Personality is the collection of all the behaviours & characteristics that make up a person. Type of brand reflects a person’s personality. E.g. Style of Clothes, Car, Jewellery. The way we see ourselves influences the types of goods & services we purchase.

Learning

• Information/Experiences change individuals behaviour. Successful marketing strategies will assist in encouraging brand loyalty. Eg. Learning occurred the first time a customer tasted a Coca Cola.

Question 13

What are the sociocultural factors that influence consumer choice?

Answer 13

Sociocultural influences are forces exerted by individuals and groups that affect customer behaviour. There are four main factors:

Social class

• Social class influences the type, quality and quantity of products a customer buys. People from a high socioeconomic status background, are usually willing to buy products that are perceived to be prestigious.

Culture and subculture

• Culture is all the learned values, beliefs, behaviours and traditions shared by a society. Culture influences buying behaviour because it infiltrates all that we do in our everyday life.

Family and roles

• All of us occupy different roles within the family and groups within the wider community. These roles influence buying behaviour. For example, although women’s roles are changing, market research shows that most women still make buying decisions related to healthcare products, food and laundry supplies.

Peer groups

• A reference or peer group is a group of people with whom a person closely identifies, adopting their attitudes, values and beliefs. A customer’s buying behaviour may change to match the rest of the group’s beliefs and attitudes. For example, if a close friend tells you of a bad experience at a particular shop, you will probably change your buying behaviour based on this information.

Question 14

What are the economic factors that influence consumer choice?

Answer 14

Economic forces influence a business’s capacity to compete and a customer’s willingness and ability to spend.

Upturn

• When the economy is experiencing a boom, there will be an increase in income levels and decreased unemployment. As individuals now have more disposable income, the economy will see an increase in consumer spending.

Downturn

• When the economy is experiencing a downturn, there will be a decrease in income levels accompanied by a decrease in unemployment. As individuals have less disposable income, the economy will see a decrease in consumer spending.

Question 15

What are the government based factors that influence consumer choice?

Answer 15

Depending on the prevailing economic conditions, the government will put in place policies that expand or contract the level of economic activity. These policies directly or indirectly influence business activity and customers’ spending habits and therefore will influence the marketing plan.

For example, if the government wish to directly influence consumer spending they may do so through the implementation of various forms of fiscal policy.

Question 16

Who is ASIC?

Answer 16

The Australian Securities and Investments Commission is the government body with responsibility for corporate regulation, consumer protection and the oversight of financial service products. ASIC’s role is critical to lifting the standards of corporate behaviour and maintaining confidence in financial markets. Some examples of specific offences regulated by ASIC include insider trading.

Question 17

What are the two most common ways in which businesses engage in deceptive and misleading advertising?

Answer 17

Bait and Switch Advertising

• This involves advertising products at reduced prices to entice customers in and not have enough stock to meet demand and offer a full price similar product instead.

Dishonest Advertising

• This occurs where businesses use words that are dishonest/ deceptive about the product (could be on the nature of the product or the quality of the product).

Question 18

What is price discrimination?

Answer 18

Price discrimination occurs when a firm sells the same type of good or service in different markets at different prices. Generally, a firm will attempt to charge higher prices to consumers that it believes have a higher willingness and ability to pay, but lower prices to consumers that it thinks are less willing and able to pay.

It is allowed if you can justify:

• Geographical reasons have led to the price difference
• Product differentiation within the market – consumer vs business

Question 19

What are implied conditions?

Answer 19

Implied conditions are the unspoken and unwritten terms of a contract. Overall, all products must fit the purpose for which it is being sold - that is they all have to be of “acceptable quality”.

Question 20

What are warranties and refunds?

Answer 20

Warranties offer consumer protection if the good is/becomes faulty within a specific period of time the business will repair/replace it. Breaches of warranties by businesses are managed by the ACCC to ensure consumer protection.

A business is required to offer a refund if:

• The product is faulty
• Do not match sample/ description (online sales)
• Fail to do the job it was intended for.

Question 21

What is The Australian Consumer Law?

Answer 21

The Australian Consumer Law (ACL) commenced on 1 January 2011 and is a single, national consumer law. The ACL includes:

• An unfair contract terms law covering standard form consumer contracts
• A law guaranteeing consumer rights when buying goods and services
• Product safety law and enforcement system
• Law for unsolicited consumer agreements covering door-to-door sales and telephone sales
• National rules for lay-by agreements
• New penalties, enforcement powers and consumer redress

Question 22

Who is the ACL enforced and administered by?

Answer 22

The Australian Competition and Consumer Commission (ACCC), each State and Territory’s consumer agency, and, in respect of financial services, and The Australian Securities and Investments Commission (ASIC).

Question 23

What is truth and accuracy in advertising?

Answer 23

Ethical businesses should ensure their advertising is truthful as they can be held morally responsible for misleading the public by using false information an advertisement.

Question 24

What is good taste in advertising?

Answer 24

What is considered to be in ‘good taste’ is highly subjective. Some consumers may regard an advertisement as offensive, while others might view it as inoffensive. There is usually common agreement as to what society considers acceptable and marketers must be aware of community sensitivities.

Question 25

What is meant by products that may damage health?

Answer 25

The marketing of junk food, which is often portrayed as an essential part of a balanced diet, is an area presently being criticised by nutritionists, especially as childhood obesity rates approach epidemic proportions. Companies marketing such products tend to play their advertisements at times of the day where it will be viewed by the majority of their targeted audience at one time.

Question 26

What is engaging in fair competition?

Answer 26

Competition in the marketplace is a fact of life. Businesses compete against each other to attract the greatest number of customers. Those businesses that compete successfully will usually increase their sales revenue and profit.

Question 27

What is sugging?

Answer 27

Sugging, Selling Under the Guise of a Survey, is a sales technique disguised as a form of market research. For example, when you are approached by someone in a shopping centre or have been asked over the phone to “complete our survey” about a particular product.

Question 28

What are the steps involved in developing a marketing plan?

Answer 28

1. Situational analysis
2. Market research
3. Establishing market objectives
4. Identifying target markets
5. Developing marketing strategies
6. Implementation, monitoring and controlling

Question 29

What is SWOT analysis?

Answer 29

A SWOT analysis involves the identification and analysis of the internal Strengths and Weaknesses of the business, and the Opportunities in, and Threats from, the external environment. It provides the information needed to complete the situational analysis and gives a clear indication of the business’s position compared with its competitors. The marketing plan should be modified to reflect this information.

Question 30

What are the stages of the product life cycle?

Answer 30

The stages of the product life cycle:

Introduction

• Until customers get to know the product sales will grow slowly
• Heavy promotion, possible negative profits as a result
• Higher prices can be charged until competitors enter the market.

Growth

• Sales grow rapidly
• Very profitable because of high prices
• Profits attract competitors

Maturity

• Sales level off
• Minimal advertising to promote a product

Decline

• Sales are falling and there is little purpose in fighting the trend.
• Getting rid of stock requires heavy discounting.

Question 31

Lable the product life cycle below.

Answer 31

1. Launch
2. Growth
3. Maturity
4. Decline

Question 32

What are various extension strategies in the product life cycle?

Answer 32

Extension strategies should maintain or increase sales.

They include:

• Modifying the product
• Reducing the price
• Adding a feature
• Promoting to a different market sector

Question 33

What are the three steps of the market research process?

Answer 33

1. Determining information needs
2. Collecting data from primary and secondary sources
3. Analysing and interpreting data

Question 34

What are three common marketing objectives?

Answer 34

• Increasing market share
• Expanding the product mix
• maximising customer service

Question 35

What is meant by identifying target markets?

Answer 35

A target market is a group of present and potential customers to which a business intends to sell its product. The customers within the target market share similar characteristics such as age, income, lifestyle, location and spending patterns.

Question 36

How are marketing strategies undertaken?

Answer 36

Marketing strategies are actions undertaken to achieve the business’s marketing objectives through the marketing mix.

Product

• The business needs to determine such features as the product’s quality, packaging/labelling, design, brand name and guarantee. The product is a combination of all these variables.

Price

• The major pricing decision is whether to set a price above, below or even with the competitors’ price. A business must consider other factors too, such as the costs of production and level of consumer demand.

Place

• This element of the marketing mix deals with the channels of distribution: the ways of getting the product to the customer. This process usually involves a number of intermediaries or ‘go-betweens’, such as the wholesaler or retailer. The number of intermediaries chosen will determine how widely the product will be distributed.

Promotion

• A promotion strategy details the methods to be used by a business to inform, persuade and remind customers about its products. The main forms of promotion include advertising, personal selling and relationship marketing, sales promotion, publicity and public relations.

Question 37

What is ‘implementation’ in developing marketing strategies?

Answer 37

Implementation is the process of putting the marketing strategies into operation. Implementation involves the daily, weekly and monthly decisions that have to be made to make sure the plan is effective. Once the marketing plan has been implemented, it must be carefully monitored and controlled.

Question 38

What is ‘monitoring’ in developing marketing strategies?

Answer 38

Monitoring means checking and observing the actual progress of the marketing plan. This requires the marketing department personnel, as well as other employees, to gather information and report on any important changes, problems or opportunities that arise during the life of the marketing plan. The information collected during the monitoring stage is now used to control the plan.

Question 39

What is ‘controlling’ in developing marketing strategies?

Answer 39

Controlling involves the comparison of planned performance against actual performance and taking corrective action to make sure the objectives are attained. To achieve this, the marketing manager needs to constantly ask two questions regarding the marketing plan:

1. What does the business want the marketing plan to achieve; that is, what are the objectives?
2. Are these objectives being achieved?

Question 40

What are the sub-steps involved in the implementation, monitoring and controlling of marketing strategies?

Answer 40

1. Developing a financial forecast
2. Comparing actual and planned results
3. Revising the marketing strategy

Question 41

What is involved in developing a financial forecast?

Answer 41

When evaluating alternative marketing strategies, a business must develop a financial forecast that details the costs and revenues for each strategy. By measuring the sales potential and revenue forecasts (benefits) for each strategy, and comparing these with the anticipated expenditures (costs), a business is in the best position to decide how to allocate its marketing resources.

Developing a financial forecast requires two steps:

1. Cost estimate. How much is the marketing plan expected to cost? Costs of the marketing plan can be divided into four major components: market research; product development; promotion, including advertising and packaging; and distribution.
2. Revenue estimate. How much revenue (sales) is the marketing plan expected to generate? Forecasting revenues will be based on two major components: how much consumers are expected to buy and for what price, and what sales staff predict they will sell.

Question 42

What is involved in comparing actual and planned results?

Answer 42

Three key performance indicators used to measure the success of the marketing plan are:

Sales analysis

• Sales analysis is the comparing of actual sales with forecast sales to determine the effectiveness of the marketing strategy.

Market share analysis

• By undertaking a market share analysis, a business is able to evaluate its marketing strategies as compared with those of its competitors.

Marketing profitability analysis

• This can be done only by analysing the costs involved in each marketing strategy. Using a marketing profitability analysis, the business breaks down the total marketing costs into specific marketing activities.

Question 43

What is involved in revising the marketing strategy?

Answer 43

Once the results of the sales, market share and profitability analysis have been calculated, the business is now in a position to assess which objectives are being met and which are not. Based on this information, the marketing plan can be revised (modified).

Question 44

What is market segmentation?

Answer 44

market segmentation involves dividing the total market into segments. Once the market has been segmented, the marketing manager selects one of these segments to become the target market.

Question 45

What are the four variables consumer markets may be segmented into?

Answer 45

Demographic segmentation

• Demographic segmentation is the process of dividing the total market according to particular features of a population, including the size, age, sex, income, cultural background and family size.

Geographic segmentation

• Geographic segmentation is the process of dividing the total market according to geographic locations. Businesses may divide the consumer market into regions because consumers in different geographical locations have different needs, tastes and preferences.

Psychographic segmentation

• Psychographic segmentation is the process of dividing the total market according to personality characteristics, motives, opinions, socioeconomic group and lifestyles.

Behavioural segmentation

• Behavioural segmentation is the process of dividing the total market according to the customers’ relationship to the product. This includes customers’ knowledge of, attitude towards, use of, or benefits sought from the product.

Question 46

What is product/service differentiation?

Answer 46

The difference could be as simple as changes to the packaging or labelling; or more complex, such as offering top-quality service, greater convenience, more features and better value for money, or products or services that are environmentally friendly. Four important points of differentiation are customer service, environmental concerns, convenience, and social and ethical issues.

Question 47

What is product/service positioning?

Answer 47

This refers to the technique in which marketers try to create an image or identity for a product/service compared with the image of competing products or services. Product/service positioning is something that is done in the minds of the target market: it is how potential buyers perceive the product.

Question 48

What is the total product concept?

Answer 48

Most products are combinations of tangible and intangible components. Consequently, when customers purchase products, they buy both the tangible and intangible benefits - a total product concept.

Question 49

What is a cost-based pricing method?

Answer 49

The business determines the total cost of producing (or purchasing) one unit of the product. The business then adds an amount to cover additional costs and to also provide an adequate profit margin.

Question 51

What is a market-based pricing method?

Answer 51

Market-based pricing is a method of setting prices according to the interaction between the levels of supply and demand. When demand for a product is greater than its supply, there will be a shortage in the market. This will force up the price of the good.

Question 52

What is a competition based pricing method?

Answer 52

Competition-based pricing is where the price covers costs and is comparable to the competitor’s price. Competition-based pricing is often used when there is a high degree of competition from businesses producing similar products. Once a business has established a base price, it can then decide to choose a price either:

• Below that of competitors.
• Equal to that of competitors.
• Above that of competitors.

Question 53

What is a pricing strategies method?

Answer 53

Skimming

• Price skimming occurs when a business charges the highest possible price for the product during the introduction stage of its life cycle.

Price penetration

• Price penetration occurs when a business charges the lowest price possible for a product.

Loss leaders

• A loss leader is a product sold at or below cost price.

Price points

• Price points (or price lining) is selling products only at certain predetermined prices.

Question 54

What is price and quality interaction?

Answer 54

Customers often associate the quality of a product with its price high price = superior quality, low price = low quality. Prestige or premium pricing strategy where a high price is charged to give an aura of quality and status.

Question 55

What is the importance of branding a product?

Answer 55

Branding helps consumers:

• Identify the specific products that they like.
• Evaluate the quality of products, especially when a consumer lacks the expertise to judge a product’s features.
• Gain a psychological reward that comes from purchasing a brand that symbolises status and prestige.

Question 56

What is the importance of packaging a product?

Answer 56

Packaging involves the development of a container and the graphic design for a product. Well-designed packaging will give a positive impression of the product and encourage first-time customers.

Question 57

What is the importance of promotion?

Answer 57

To sell more of its products, a business has to change customers’ behaviour through information or persuasion. This is achieved through promotion. Promotion describes the methods used by a business to inform, persuade and remind a target market about its products.

Question 58

What are the elements of the promotion mix?

Answer 58

Advertising

• Advertising is an essential tool for successful marketing because of the great number of products available.

Personal selling

• Personal selling is where businesses use people to sell the product after meeting face-to-face with the customer.

Relationship marketing

• Aims to individualised customer treatment. The ultimate goal is to create customer loyalty by meeting the needs of customers on an individual basis.

Sales promotions

• Occurs when a business offers a direct inducement to customers in an attempt to sell more of its product.

Publicity and public relations

• Publicity is any free news story about a business’s products. It differs from advertising in that it is free and its timing is not controlled by the business.

Question 59

What is the communication process in promotion?

Answer 59

Opinion leaders

• An opinion leader is a person who influences others. Their opinions are respected and they are often sought out for advice.

Word of mouth

• Word-of-mouth advertising occurs when customers tell other people about their experience with products.

Question 60

What is meant by place/distribution?

Answer 60

The fourth ‘P’ of the marketing mix is ‘place’ or distribution. Once a business manufactures a product, it must see that the product gets into the customers’ hands. For this to happen successfully, an efficient distribution system is required.

Question 61

What are the various distribution channels?

Answer 61

Traditional distribution channels

1. Producer to customer.
2. Producer to retailer to customer.
3. Producer to wholesaler to retailer to customer.
4. Producer to agent to wholesaler to retailer to customer.

Question 63

What are the various channels choices?

Answer 63

1. Intensive distribution
2. Selective distribution
3. Exclusive distribution

Question 64

What are the various physical distribution issues?

Answer 64

1. Transport
2. Warehousing
3. Inventory

Question 65

What are the three additional Ps as part of the marketing strategies?

Answer 65

People

• The people element refers to the quality of interaction between the customer and those within the business who will deliver the service.

Processes

• Processes refer to the flow of activities that a business will follow in its delivery of a service.

Physical evidence

• Physical evidence refers to the environment in which the service will be delivered. It also includes the location of where the service is being provided.

Question 66

What is E-marketing?

Answer 66

E-marketing (electronic marketing) is the practice of using the internet to perform marketing activities. The main technologies presently available for e-marketing include web pages, podcasts, blogs etc.

Question 67

What are the various types of global marketing

Answer 67

Global branding

• Global branding is the worldwide use of a name, term, symbol or logo to identify the seller’s products.

Standardisation

• A standardised approach is a global marketing strategy that assumes the way the product is used and the needs it satisfies are the same worldwide. Therefore, the marketing mix will be the same in all markets.

Customisation

• A customised approach (also called a local approach) is a global marketing strategy that assumes the way the product is used and the needs it satisfies are different between countries.

Global pricing

• Refers to how businesses coordinate their pricing policy across different countries. Is comprised of customised pricing, market customised pricing and standard world price.

Competitive positioning

• Competitive positioning relates to how a business will differentiate its products.

Question 68

What is the marketing concept?

Answer 68

• Philosophy that states all sections of the business are involved in satisfying a customer’s needs and wants while achieving the business’s goals.
• To be effective, marketing concept must be embraced by all employees of the business.