Marketing Flashcards
One desired outcome of marketing is an exchange, in which people give up something in order to receive something else they would rather have.
There are 4 marketing philosophies you should know.
1. Production orientation (294)
- Sales orientation (295)
- Market orientation (296)
-
Societal marketing orientation (297)
Production orientation focuses on the internal capabilities of the firm rather than the desires and needs of the market. Say, you know how to produce lemon juice so well. You’re good at that. But nobody wants to drink lemon juice. But you produce it anyway because this is what you’re good at. Seems ridiculous huh?
Sales orientation focuses on increasing sales using aggressive sales techniques. That’s good. But the problem is that there is a lack of understanding of the needs and wants of the market. Even if your products suck to the customers, you still convince them to buy using different tricks and techniques.
Market orientation focuses on the needs and wants of the market. If you care about the needs and wants of the customers, you are market-oriented (298).
Societal market orientation focuses on the needs and wants of the society as a whole. Not only should the product is desired by the customers, but it also has to be good for the society. Like following the practice of using reusable or recyclable materials. People are now paying attention to the materials of the products they are using. Even if they need and want it but products are not environmentally friendly, they will refuse to buy.
4 marketing philosophies
- Production orientation focuses on production capabilities
- Sales orientation - focuses on making more sales
- Market orientation - focuses on customers
- Societal market orientation focuses on the society
One of the most important concepts in marketing is the marketing mix (302), which include the well-known 4Ps
- Product
- Place
- Price
- Promotion
The marketing mix starts with the product. The product includes not only physical unit but also its package, warranty, after-sale service, brand name, company image, perceived value and many other factors. In the case of Apple, Product is iPhone, its warranty service, brand name, etc. Is that clear?
After determining the product it has, Apple will think about where to distribute it (sell it). Will it sell the iPhone in Apple stores or will it associate with telecommunication companies or both? Will it sell the iPhone in the supermarket or high-end stores (303).
After place comes promotion. Promotion includes advertising, PR, sales promotion and personal selling. Promotion is about informing, educating, persuading and reminding customers the benefits of your products.
After promotion comes pricing. How much should you price your product? Let’s discuss each of these 4Ps in more details.
PRODUCT - What are we selling?
We all know what a product is. So lucky me, I don’t have to explain too much. There are 4 categories of products
1. Convenience products (304).
- Shopping products (305)
- Specialty products (306)
- Unsought products (307)
Convenience products are inexpensive items that don’t require you to pay too much attention on the purchase decision. Like, candies, bottled water, aspirin, paper, etc. They are everywhere. You don’t even care who makes these products.
Shopping products are more expensive than the convenience ones. It requires more shopping efforts. You consider and compare prices and styles before buying. Clothing is a prime example. Computer or smartphone is another one. Printers. These are all shopping products.
Specialty products are expensive and rare. Something that are very special and particular or unique. They are hard to find. Roll-royce cars, Bose speaker, etc.
Unsought products are unknown to buyers. We are just not aware of them. These are new products that are not advertised enough so we don’t know them just yet or don’t know we NEED them yet.
4 types of products
- Convenience products - paper, comb, water
- Shopping products - printers, USB, clothing
- Specialty products - Rollroyce, Bose speakers
- Unsought products - not yet known by us
Sometimes, marketers exercise planned obsolescence (308). iPhone 4 was one of the best models in the world. With planned obsolescence, it’s now one of the most obsolete phones. Why do they exercise planned obsolescence? To make iPhone 6 7 more attractive and better sold. Behind the scene, they will be like “Hmm, this iPhone is great, but let plan to make it obsolete after 2 years”
Branding (309) is the main tool marketers use to distinguish their products from those of the competition. A brand is a name, term, symbol, design, or a combination thereof (310) that identifies a seller. Trump is just an old fat guy. But he has a brand. His brand has so much value that benefits him a lot. Brand has value. Why? A phone with the same functions and design as iPhone without a brand costs MUCH MUCH less than a phone WITH the Apple’s brand. Most of the time, we don’t value a product just by it’s intrinsic value. We also value it based on the brand attached to it. Brand value is called Brand equity that can be measurable. Apple’s brand equity is the most valuable in the world. it can be sold for money. Branding - makes product more expensive than it should be
A trademark (311) is the exclusive right to use a brand. You might see (R) or TM symbols beside a company symbol like M in McDonald or Y! beside Yahoo! These are (registered) trademarks. You CANNOT attach their trademarks to your company’s symbol. They will sue you.
A product can be a service, which are intangible (312).‘Intangible’ is the opposite of ‘tangible’ meaning it cannot be touched, seen, heard, tasted, or felt. Your spirit is intangible, but your legs are tangible.
PLACE - Where do we sell (distribute) it?
Let’s talk about marketing channel. There are 4 channels for you to choose to distribute your products to the consumers.
1. Direct channel (313)
2. Retailer channel (314)
3. Wholesaler channel (315)
4. Agent/broker channel (316).
With direct channel, it’s like you distribute your products using your OWN channel. The chain of Apple stores is a prime example of direct channel. Or just simply think of street vendor’s selling Pho. These are direct channel.
If you want to reach more customers. It’s better to sell (distribute) your products through a RETAILER channel. Any convenience or grocery store or supermarket is a retailer that distribute products of the producer.
Similarly, you can distribute your products through a wholesaler, then a retailer, then to customer.
Agent/broker channel - this distribution channel involves more than one intermediary (317) before the products gets into the hands of the consumer. The intermediary, known as the agent, assists with the negotiation between manufacturer and the seller. Agents come into play when the producers need to get their product into the market as quickly as possible.
4 ways to distribute products
- Direct channel
- Retailer channel
- Wholesaler channel
- Agent/broker channel
intermediary: a link/medium between two things
There are different levels of distribution, too, determining how intense it is.
1. Intensive distribution (318)
- Selective distribution (319)
- Exclusive distribution (320)
Intensive distribution aims at maximum market coverage (321), meaning it wants the products to reach the hands of as many consumers as possible. MAX. Coca-cola, iPhone, paper, water, laundry detergents. You see a lot of companies using intensive distribution on TV commercials.
Selective distribution ONLY aims at selective amount of customers rather than everyone. Say, you only select people from 5-10 in your local area to sell your toys.
The most restrictive one is Exclusive distribution. Remember Rolls-Royce - a specialty good. This type of product is ONLY aimed at certain exclusive customers. You will not see any TV commercials on it.
3 levels of distribution
- Intensive distribution
- Selective distribution
- Exclusive distribution
PROMOTION - How to let people know?
This is getting exciting. Few goods or services, no matter how well-developed, priced, or distributed, can survive in the market place without effective promotion. There is a lot of confusion about promotion. You’re my readers, I want to simplify things for you.
What is promotion?
Promotion is communication that INFORMS, PERSUADES and REMINDS potential buyers of a product.
Three most important words are:
- Inform
- persuade
- remind
Promotion = Inform + Persuade + Remind
Let me explain. Let’s say you are an IELTS teacher and want to attract students so you decide to carryout a promotion strategy. Basically what you do is to first, INFORM your customers about your course. Like what are you going to teach, what’s in it? Then you PERSUADE them on WHY they should follow you by using logic. Like, if you attend my course, you will get at least 6.0 because here is my method. Here is my experience. Here is my IELTS score, etc. Then finally, you keep REMINDING your customers about how great you are and how much benefit your potential customers can get. So it’s a process of informing, persuading and reminding.
You can either engage in interpersonal communication (322) or mass communication (323). Interpersonal communication means that you meet with your customers face-to-face to discuss or to promote your course. It’s more personal. Mass communication is the communication of a message to large audiences by using, for example, TV commercials or social media.
2 kinds of communication
Interpersonal communication face-to-face, direct
Mass communication - to large audiences.
Remember the Marketing mix-4Ps? Product, place, promotion, price? We also got what it’s called the Promotion mix. The promotion mix comprises. (APSPS)
1. Advertising
- PR
- Sales promotion (324)
- Personal selling (325)
- Social media
Let’s go through them very quickly
Advertising is what you see on TV or on the street or on the newspaper or, of course, on your laptop screen. It can reach a large amount of audience. Prices are generally high.
PR is used to maintain a positive image of a company or a product through various events or publications executed. People can appear on the news or TV by using the broadcasting media for their PR purposes.
Promotion mix =
Advertising + PR + Sales promotion + Personal selling + social media
Sales promotion is used to stimulate consumer purchasing. It’s generally a short-run tool to boost immediate increase in demand. Some examples of sales promotion are free samples, premiums, coupons, and giveaways. We use sales promotion to make other promotion components like advertising, PR, personal selling more effective. In other words, sales promotion complements them.
Personal selling happens when, let’s say, you schedule a face-to-face meeting with your customers or have a presentation in front of them, talking about the benefits of your products and so on. A car salesperson may try to persuade a car buyer that his model is superior to a competing model. These days, people place more emphasis on building long-term relationships rather than just making a quick sales in personal selling.
Social media are what we are very familiar with. It’s a great tool to facilitate conversations among people online. Initially, these tools were used primarily by individuals for self-expression. For example, a lawyer might develop a blog to talk about politics because that is her hobby. Or a college freshman might develop a profile on Facebook to stay in touch with his high school friends. But soon, businesses saw that these tools could be used to engage with consumers as well.
But wait. Advertising is very fascinating, why don’t we talk about it a little bit more?
There are two major types of advertising: Institutional advertising (326) and Product advertising (327).
Institutional advertising focuses on the company’s image. One form of institutional advertising is advocacy advertising (328), which is used to enhance consumer attitudes and company’s credibility. Advocacy means support.
Product advertising, on the other hand, focuses on a particular product.
2 major types of advertising
- Institutional advertising for the whole company
- Product advertising - for a particular product.
PRICING - How much should we price it?
An interesting concept. when you already have product, place, and promotion in place, the last step is to price it to maximize demands. If the prices too low or too high, we could jeopardize profit. Our job is to find the best price to maximize demand and even profit.
There are three objectives of pricing that you can pursue anyone of each that fits your needs.
1. Profit-orientation pricing (329) - you price to maximize profit (earning OR income). Your goal is too maximize the amount of money you can take home.
2. Sales-orientation pricing (330) - you price to maximize revenue (demand). You goal is to maximize the number of people buying. (normally you want your products to be as cheap as possible)
3. Status quo pricing (331) - you price to match the existing market price or your competitors’. The market price has increased? You want to increase your price, too.
3 objectives of pricing
- Profit-orientation
- Sales-orientation
- Status-quo orientation
So what determines the price?
One of the strongest determinants of price is supply and demand, which we discussed in the Economics world.
Costs can be a determination. Let’s say it costs you $3 to produce a cup of tea. Then you want to price it at least somewhere higher than $3 or you will breakeven. Breakeven means that you have no profit. You spend $3, and you take home $3. As discussed, there are two types of cost I want to remind you, which are fixed costs and variable costs. Fixed costs are like rent or property taxes, you pay the same amount every month regardless of how much you produce. Variable costs vary with the amount of products you produce. The more you produce, the higher the variable costs get. Examples are raw materials or labor costs.
Another determination is competition. If your price is too high compared to that of the competition. Your customers will flock to your competition.
That’s basically 4Ps-the heart of marketing.
The next important concept of marketing is market segmentation (332). Market segmentation is the practice of dividing a big market into different targets (segments). For example, there are market segments for different ages, genders, income, ethnic background and lifestyles or even countries.
The main market segment of Maple Syrup is Canada and US because people consume a lot of it. But not Vietnam, people don’t know what to do with Maple Syrup. So marketers focus on the Canada and US segment rather than the Vietnam segment.
The iPhone has different market segments, too. The pink version is mostly for women while others are likely for both. Why do we need to divide the market into different segments? Because we want to modify products to fit with each segment.
