marketing strategies Flashcards
Importance of market segmentation
One strategy for the whole market won’t effectively meet specific consumers needs and wants
Market segmentation is when the total market is divided into subgroups of people who share one or more common characteristics
Importance of market segmentation: process
- The business divided the entire market into different segments
- They analyse which segment is the most attractive
- They choose their target market and tailor their marketing strategies to them
Importance of market segmentation: aims
Segmentation leads to a competitive advantage
Aim
The aim is to boost market share, sales and profits by better understanding the needs of the target market
- Promotion will be more effective
- Products will better meet customer needs
- Price points will be more suitable
Segmentation variables
Segmentation variables are used by marketing managers to split up the total market
They are:
- Demographic
- Geographic
- Psychographic
- Behavioural
Segmentation variables: demographic
The market is divided by personal features
Personal features can be easily identified and measured and deeply impact customer spending
Example variables: age, gender and income
Segmentation variables: geographic
The market is divided based on geographical location
Businesses usually segment this way because people in different locations have different needs and preferences
Example variables: regions, climate and rural vs urban living
Segmentation variables: psychographic
The market is divided by psychological factors
Market research is important for businesses to find out things like a customer’s values, like and dislikes and even hobbies
Example variables: lifestyle, motives and personality
Segmentation variables: behavioural
The market is divided by a customer’s relationship with the product
It’s all about finding out exactly what customers want from the product
This helps marketers design products that satisfy these preferences
Example variables: purchase occasion, price sensitivity, product knowledge, product attitudes, benefit expectations and loyalty
Differentiation
Differentiation is the creation of products or product features that distinguish a business’s goods and services from competitors
It’s about making a product different so it will stand out in the marketplace
Businesses can implement marketing strategies such as increased prices because they’re offering something unique
Differentiation: point of differentiation
How businesses set themselves apart
These include:
- Eye-catching packaging
- Better features
- Value for money
These methods can mean that customers view the business’s product as superior to competitors, so they’ll be more likely to buy them
Differentiation: points of differentiation (customer service)
Customers want caring and personalised customer service
If salespeople assist customers at every step of the way and exceed their expectations, they’ll keep coming back for more
Personalised service
Customers want products that are tailored to their specific needs and wants
Caring service
Customers want to be treated honestly and with efficiency
Poor services equals lost sales and reputational damage
Differentiation: points of differentiation (environmental, social and ethical concerns)
Businesses can take into account customer concerns of important issues in society
Businesses can attract more customers when they show concern for important issues in society
Environmental
People are becoming increasing concerned about the health of the environment
Social and ethical
Known as ethical consumerism, consumers want to buy products that are not harmful to people, the planet or animals
Differentiation: points of differentiation (convenience)
Customers look for convenience in using and acquiring a product
Attainment convenience
If the product is the exact same, for the exact same price, customers will turn to the more convenient option
Product convenience
Customers want products that are easy to use
Positioning
Positioning is about creating an image or identify for a product or brand that distinguishes it from competitors
Example factors: price, quality, luxury, safety
How to position a product
- Decide what position that business wants to create
- Develop a marketing mix that will build this image
Repositioning a product
- Benefits: regain market share and improve profits
- How: new packaging, features or promotion
Tangible vs intangible
Product: a good or services that’s offered to the market for exchange, with the aim of satisfying a need or want
Tangible: Physical objects that can be owned. Goods fall into this category.
Intangible: Cannot be touched or owned. Services are intangible products as they don’t involve ownership, instead, they are experienced
Tangible vs intangible: total product concept
Most products are made up of both tangible and intangible benefits
Eg. when staying in a hotel, tangibles benefit may be food in a buffet whereas intangible benefit may be room service
Branding
Brand: a collection of features that identifies a product and differentiates it from competitors’ products
Brand symbol: An image that identifies a business or its products
Branding: importance
A strong brand is a very powerful asset that benefits both businesses and customers
Importance for customers
- Identification
- Evaluates quality
- Intangible benefits
Importance for businesses
- Differentiation
- Familiarity
- Brand loyalty
Developing the brand
Businesses put a lot of time, money and effort into developing their brand
Protecting the brand
Brands protect themselves through copyright and trademarks
Branding: strategies
There are three main types of branding strategies and they’re categorised by who owns them
Manufacturer’s brand
Owned by the manufacturer and is widely recognised and available
Private or house brand
Owned by retailers or wholesalers and typically sold at a lower price because their products are cheaper to produce
Generic brand
Products don’t have a brand name, only the product name, and are usually sold in plain packaging
Packaging
Packaging is a really important element with lots of different functions
Protection
It protects the product
Attention
It attracts consumer attention by using elements like bright colours
Convenience
It creates extra convenience for transporting, storing and using products
Packaging: labelling
Labelling is part of the product or its package that provides important information
Functions of labelling
Information: lets customers identify element such as use-by date and country of origin
Promotion: might be helpful in promoting the business’s other products
Protection: it can protect consumers
Most of the information displayed on labelling is required by law in Australia
Labelling aims to ensure customers use products safely and can easily compare similar products
Why is price important?
Price is the amount of money the business charges for a product and has to be consistent with how much money a customer is willing to spend on it
Importance for customer
Price is an indicator of value
Importance for businesses
It allows businesses to generate revenue and make a profit
Too high: this can turn off customers and reduce sales
Too low: The business might not cover costs and they might be seen as ‘cheap’
Pricing methods
- Cost-based pricing
- Marketing-based pricing
- Competition-based pricing
Pricing methods: cost-based pricing
The business determines their cost of production or purchasing and then adds a mark-up
The business starts at the cost it takes to produce one unit. Then, they add an extra amount, which is the profit.
Direct costs are stuff like materials and indirect costs are stuff like insurance.
Price = cost + mark-up
Pricing methods: cost-based pricing (pros and cons)
Advantages
It’s a great starting point as if a business wants to make a profit, it has to cover its costs first
It’s also very simple to use
Businesses can use market research to determine the mark-up
Disadvantages
It can be difficult to determine the mark-up percentage: if it is too high, the product might be overpriced and unsold and if it is too low, the business could lose profit it could have made
It doesn’t consider other elements of the marketing mix such as promotion methods and location of sale
Pricing methods: market-based pricing
Prices are set following the levels of supply and demand in the market
To use this method, we need to understand the relationship between supply and demand
Supply: the quantity of products that businesses will sell at a particular price
More supply than demand → prices fall
Demand: the quantity of product that customers will buy at a particular price
More demand than supply → prices rise
Pricing methods: market-based pricing (pros and cons)
Advantages
can be very effective as it takes advantage of what’s happening in the market to maximise profits
Disadvantages
prices will constantly fluctuate, so it can be difficult to apply
Pricing methods: competition-based pricing
Prices are set to cover production and operating costs, and are comparable with competitors
When customers see similar products, they usually pick the one at the lowest price (so when there’s a lot of competition in the market, this method is used)
Pricing methods: competition-based pricing (options)
Below competitors
Helps businesses to break into a new market
Equal to competitors
Avoids the risk of price competition, and instead competes on features like quality
Above competitors
Businesses can create a superior images for their product to appeal to status-conscious buyers
Price skimming
The business charges a very high price for a product in its introduction stage and then eventually lowers the price
Usually there’s no substitute as the product is unique or prestigious, so demand is high
So customers are willing to pay any price to be the first to own it
Price skimming: advantages
- Testing and feedback
- Recovers costs early
- Improves brand image
- Slow rise in market share
Price penetration
Businesses charge the lowest price possible when a product hits the market
This encourages customers to try before they buy, because they can purchase the product at a lower price than normal
Price penetration: advantages and disadvantages
Advantages
It can build a large market share early in a competitive market
It can discourage competitors from entering the market
Businesses can increase their price when the product is more established
Disadvantages
If the price is too low, it’s harder to cover costs and make a profit
It can be difficult to increase prices as customers are so used to them
Loss leader
This is when businesses sell their product at, or below their cost so they don’t profit from these products
Why do this?
The loss leaders attracts customers to the store in the hope they’ll also buy other products
So the business makes up for the loss from the loss leader by selling its other higher-priced items
Loss leader: advantages
It can be used when a product is overstocked or difficult to sell
A business can position itself as a high value option
Loss leader: advantages
It can be used when a product is overstocked or difficult to sell
A business can position itself as a high value option
Price point
Prices are sold at predetermined levels
The business chooses a few key price points for each product line
Price points are based on the idea that customers form psychological associations with products at different price points
Price points: advantages
Advantages
Customers can be encouraged to trade up to the next price point
Factors influencing pricing
The choice of strategy can depend on a number of different factors
Marketers need to ask themselves
- What is our marketing objective?
- What stage of the product life cycle is the product in?
- Is our product unique or innovative?
- What does the economy look like?
- Who is our target market?
Factors influencing pricing: price and quality interaction
Products that are higher in quality are normally sold for higher prices and vice versa as higher quality products usually require higher costs
Together, price and quality form part of the product’s image
Low price → ‘cheap’ → some customers can be so price sensitive that small increases in the price of these items means they turn to competitors
High price → ‘prestigious, high quality’ → this is what appeals to status-conscious buyers because they believe they’re getting a better product
However, there are always exceptions to the rule!
Reasons for promotion
Promotion involves the activities that inform, persuade and remind current and potential customers about a business’s products
It’s about making sure people are aware of and interested in the product
Businesses invest lots of time and money into developing promotional campaigns
Reasons for promotion: inform customers about products
Promotion helps consumers make informed decisions by providing them with information about the product
It informs customers of:
- What is does
- Features
- How it stands out from competitors
Importance for:
- New products: helps build a customer base
- New customers: it attracts and encourages them by creating awareness of both new and existing products
- Existing customers: reminds them about a product and encourages them to make repeat purchases
Reasons for promotion: develop a product’s image
Reinforcing a product’s image also reinforces the business’s image, which encourages brand loyalty
The product image depends on the target market and their likes and dislikes
Reasons for promotion: persuade customers
The aim of promotion is to create customer interest in the product to the point that they would choose it over competitors’ products
This means using tactics such as:
- customer testimonials
- special offers
Reasons for promotion: increase sales
If more people are aware of and persuaded to buy the product, sales will increase
This will lead to:
- higher profits
- greater market share
Importance of the promotion mix
The promotion mix is the combination of methods that businesses use to promote their products
Businesses can use any of these to attract customers but if they want to maximise their success, it’s important to use a mix of strategies
Includes 4 elements: advertising, personal selling and relationship marketing, sales promotions, publicity and public relations
Each element of the promotion mix has different strengths and appeals to different people. So a combination of strategies ensures the business can reach as many customers as possible.
Advertising
Advertising is a paid, non-personal message that’s communicated to a mass audience through a mass medium
Advertising: advertising media
There are a range of media that a business can use to advertise its products
A business could combine these to create a very saturated coverage of the market
Mass marketing: the most popular form of advertising (eg. TV, radio and newspaper ads)
Direct marketing: organisations directly communicate product information to customers (eg. mailing out catalogues, email, texts)
Telemarketing, e-marketing and social media advertising: these mediums use telephones and the internet to advertise products (eg. instagram)
Billboards: usually placed in strategic locations to make sure they’re seen (eg. airports)
Advertising: advertising media (factors influencing advertising media)
It’s really important to choose the right media so your ads reach your target market
Type of product and its positioning: a chanel perfume aimed at women might be advertised in Vogue while a men’s Rolex might appear in GQ Men
Size and features of the target market: a small target market could be reach with flyers and telemarketing. A large target market might require television and radio ads.
Budget: a business with a large budget can probably afford TV ads. A small start-up might opt for e-marketing to save costs.
Product life cycle: when the product is new, promotion is very intense. Promotion is reduced later on once customers are aware of the product
Advertising: advertising media (pros and cons)
Advantages
Flexibility: an ad could focus on a small target market or be tailored to reach a large or even global audience.
Businesses who run successful advertising campaigns can greatly increase their sales and profits
Disadvantages
Expensive: businesses should investigate how they can advertise cost-effectively and within their budget constraints
Personal selling
Involves the activities of a sales consultant directed towards customers
Best used for:
- Expensive and complex products
- Personalised products
These items requires sales staff to familiarise customers with the product and explain its features, benefits and how to use it
Personal selling: advantages and disadvantages
Advantages
Sales staff can tailor their message to suit the customer’s circumstances
Customers really value this service
It can lead to a long-term relationship, resulting in repeat sales
Disadvantages
It can be expensive as it requires more employees
Employees need the skills to interact and connect with customers
Face-to-face interaction is difficult with customers further away
Relationship marketing
This involves building strong relationships with individual customers that are long-term and cost-effective
It’s about rewarding customers who make frequent purchases so they keep coming back
Relationship marketing: advantages
By knowing your customers you can meet their individual needs and wants, so you’re offering something uniquely suited to them
The business gains a competitive advantage so the end result is brand loyalty
Sales promotion
The activities or materials designed to encourage customers to purchase a product
Examples
- Coupons or 2-for-1 deals (offers customers extra value for their money)
- Premiums (also known as free gift with purchase)
- Point of sale displays (located at the end of a store aisle or at front of a shop to catch the customer’s eye)
- Free samples (encourages customers to try, and then hopefully buy new products)
- Competition (such as giveaways on social media)
Sales promotion: advantages and disadvantages
Advantages
- Attracts new customers
- Persuades new and existing customers to trial new products
- While used to boost sales in the short-term, if customer ends up liking the product, it leads to repeat purchases
- Can increase the effectiveness of other strategies like advertising
Disadvantages
- If overused, customers will get used to the promotion price and be hesitant to buy at full price
- It won’t work for every product
Publicity
Any free news coverage about a business or its products
Media attention is a great way for businesses to boost their profile without spending money
Publicity: advantages and disadvantages
Advantages
- Raises awareness of new or existing products
- It can improve a product’s image, leading to more sales
- It’s great for damage control when a business needs to improve its negative reputation by highlighting its positive qualities
- As it’s basically free, it’s a great option for businesses with smaller budgets
Disadvantages
- Publicity can backfire
- Sometimes a business can’t control the timing and content of the message
- It risks miscommunication or sensitive information being released that reflects negatively on the company
- Publicity reaches a mass audience so it isn’t tailored to the target market
Public relations
Communications aimed at creating and maintaining positive relationships between a business and its customers
Usually done through the media
Public relations: advantages and disadvantages
Advantages
- Promotes a positive business image by highlighting positive qualities customers love
- When a firm has failed PR could turn an untrustworthy or unethical reputation into a responsible and positive one
- It communicates information about a business and its products to a wider audience
- It can provide insight into public trends that could affect the business’s sales
Disadvantages
- Businesses have little control over the message once it’s released
The communication process
Promotion is all about communication!
Marketers need to find ways to communicate with their customers clearly and efficiently.
No matter how great or important the message, without effective communication promotion essentially has zero value.
This can lead to lost sales, lost profits and reputational damage.
The communication process: effective communication
Communication is integral to business success! So, it’s important that promotional messages are delivered through trusted and respected channels, like television advertisements or salespeople who interact directly with customers.
But sometimes communication through these channels can become distorted, and communication turns into miscommunication. This is because of ‘noise’. Noise includes misinterpretations, grammatical errors or inappropriate images.
To avoid these miscommunications, businesses can use reliable and respected channels like opinion leaders and word of mouth to spread their messages.
The communication process: Opinion leaders
An opinion leader is a person with the ability to influence others.
They’re usually held in high esteem by others, so their opinions are valued and their advice or recommendations are followed. An opinion leader could be a footballer like Cristiano Ronaldo, an actress like Julia Roberts, or simply someone from your peer group.
Many companies use celebrity endorsement as part of their marketing strategy, whether it’s to endorse an existing product or spread publicity for a new release.
The communication process: word of mouth
Word of mouth is when people influence each other through their conversations.
People are more trusting of people they know than they are of businesses. After all, a business’s main focus is usually profit maximisation.
Word of mouth can also be really valuable when customers are faced with several similar alternatives. If you’re choosing a new pair of sneakers from five options, the recommendations that your friends or family make will probably be a deciding factor.
In today’s world, many companies are even using social media platforms like Instagram to start word of mouth communications.
What is place?
All of the activities that make products available to customers at the time and location they want to purchase them
It’s about forming a chain from the producer to the consumer
Distribution channels
The routes that products travel along from the producer to the consumer
This journey usually involves a few intermediaries (such as producers, wholesalers, retailers, customers)
This means everyone can focus on what they do best, so it’s all about efficiency
Distribution channels: producers to consumer
Producer → consumer
The product travels straight from the producer to the consumer with no intermediaries involved
The producer could use retail outlets to sell directly to customers
Customers could shop online or place mail orders
It can be done through telesales, which is when goods or services are sold via the telephone
This channel is mostly used for services or businesses with a low sales volume and less customers
Distribution channels: producer to consumer (pros and cons)
Advantages:
- The business doesn’t have to pay intermediaries to sell for them, meaning lower costs for businesses and lower prices for customers
- This can lead to a competitive advantage
Disadvantages
- More time and expenses spent on personalised sales and delivery
- It’s best used by businesses with fewer customers otherwise it’s too difficult to create cost savings
Distribution channels: selling via retailers
Producer → retailer → consumer
Retailers purchase goods from the producer and on-sell them to consumers at a higher price
Retailers are probably the intermediaries we see most and sell many products including bulky and perishable items
Distribution channels: selling via retailers (pros and cons)
Advantages
- Producers can focus on manufacturing
- Customers receive better customer service, so they’ll be more satisfied
- Retailers can help in providing knowledge and promoting products
- Products can be sold in more places, so there are more potential customers
Disadvantages
- Small businesses might find it hard to convince retailers to sell their products
Distribution channels: selling via wholesalers
Producer → wholesaler → retailer → consumer
The wholesalers buys products in bulk from the producer and resells them in smaller quantities to retailers or consumers
It’s usually used by producers who mass-produce
Distribution channels: selling via wholesalers (pros and cons)
Advantages
- Save costs in logistics
- Products are sold in more places to more customers
Disadvantages
- When wholesalers sell directly to customers, customers might get lower level of customer service
Distribution channels: selling via agents
Producer → agent → wholesaler → retailer → consumer
Agents are people who are paid commission by producers to distribute goods to wholesalers
They are usually used for goods that are inexpensive or frequently used
They’re also used to sell services
Distribution channels: selling via agents (advantages)
Advantages
- The producer doesn’t have to deal with selling its products
- Agents can negotiate better deals and help the producer sell their products at the highest possible price
Contemporary distribution methods
These are all non-store retailing methods, meaning products aren’t sold through stores
Door to door
Usually used by companies who provide utilities like electricity and water and have unique customer cases
Vending machines
Placed in locations like train stations and airports so customers can buy products at any time of the day
Telemarketing
Salespeople call via telephone in an attempt to make a sale
Choosing a channel
Marketers go about choosing their distribution channel based on the following factors
Customer preferences
Where are our customers likely to shop?
Market reach
How many customers do we need, or want, to reach?
Speed
How quickly do we need to get the product to customers?
Customer service
How much customer service should we provide?
