STRATEGIES
q Strategies: Areas covered in this chapter
MARKETING STRATEGIES
m The 7 Ps
r Products
r Price
r Promotion r Place - distribution
Including a contemporary issue
Marketing plan of a product Including a case study
r Services - 3 additional Ps
m Special focus
r Global marketing r E-marketing
Including case studies
Marketing plan of a business Including a case study
Terms
relating to the ‘strategies’ translated into simple English!
UNIT 2 MARKETING
Business Term
536
Simple Explanation
Positioning
How marketers want customers to see their product.
Market segmentation Dividing up the market into groups of customers.
Packaging
The way in which a product is presented.
Branding
The name and/or logo connected with a product.
Pricing method
The overall approach to pricing products: cost-based, market-based, or
competition-based.
Pricing method market-based
The price is set based on market forces of demand and supply.
Pricing method - costbased
The price is based on the costs of making the good and a mark-up on these
costs.
Pricing method competition-based
The price is set with reference to the prices set by competitors. Pricing may
mean charging the same price as competitors, or higher or lower prices.
Pricing strategies
Different pricing techniques to achieve business objectives: skimming,
penetration, loss leaders, and price points.
Price skimming
Charging high prices.
Penetration pricing
Charging relatively low prices in order to drive up sales.
Loss leaders
Goods that are sold below cost price to attract customers in the hope that
they will then be persuaded to buy other full-priced products.
Price points
Price points are specific prices at which customers are more likely to buy a
product for emotional reasons.
Relationship marketing
Developing long-term relationships with customers so that the business can
sell additional goods to them in the future.
Sales promotions
Promotional activities designed to generate interest in a product.
Publicity and
public relations
Creating a positive image for the company/product without paying for
advertisements.
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These are people whose opinions & buying habits influence others.
Word of mouth
Customers talking to each other about a product.
Distribution channels
The path that a product takes to get from the business to the final customer.
Physical evidence
Marketing strategy for a service that involves giving customers exposure to
some physical aspects of the product.
E-marketing
E-marketing is the strategy of marketing goods and services over the internet.
Standardisation
Using the same marketing mix to sell a product in different markets around
the world.
STRATEGIES
Opinion leaders
b The explanations of these Business Studies terms have been constructed to give you a basic understanding of
these expressions. The explanations are simplistic and should not be used as formal definitions.
q Marketing strategies:
3 KEY SYLLABUS/EXAM DOT POINTS - Marketing strategies:
Marketing strategies:
Starting the marketing mix process
i. Market segmentation - differentiation and positioning
Marketing of the 7 Ps
i. Products
ii. Price
iii. Promotion
iv. Place/distribution
v. People, processes and physical evidence
Special focus of marketing
i. E-marketing
ii. Global marketing
Prompt for remembering:
Aim of the story The story Strong =
Men
=
Eat
=
Global =
Peas
=
To help you remember the areas of strategies in
marketing that are identified in the syllabus.
Strong men eat global peas
The story - Marketing strategies
Market segmentation
E-marketing
Global marketing
Ps -
Products
Price
Promotion
Place / distribution
People
Processes
Physical evidence
Creative Classroom
©
9
7 PEAS
Key for unlocking the
cartoon:
Strong = Strategies
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UNIT 2 MARKETING
537
STRATEGIES
Starting the marketing mix process - segmenting the market:
Y
The first crucial marketing strategy involves
determining how the business’ product fits into
the competitive market landscape.
This involves working out which customers to
target, and how the business wants customers
to view the product in relation to its competitors’
products.
Strategies for marketing
Syllabus point:
Segmentation
‘Strong men eat global peas‘
7 PEAS
Products - goods and/or services: Definition of ‘Products - goods and/or services’
All businesses are involved in making products, which can be classed as goods
and/or services. The type of product affects the marketing strategy.
m Goods are tangible or physical objects, which can often be stored and produced
in mass quantities. Services involve the performance of an activity or task.
m
Additional point for the exams:
The marketing mix for goods usually focuses on price, product, promotion, and
place. Three additional factors - people, process, and physical evidence - are
particularly important for marketing services.
UNIT 2 MARKETING
m
538
Positioning the product/service:
Definition of ‘Positioning the product/service’
Positioning involves shaping the way that customers perceive and recognise the
company or product relative to others in the market based on key attributes such
as price and quality.
m
Positioning is a strategic decision made by marketers about how they want
customers to see their product relative to the other products in the market.
This decision affects every aspect of the marketing mix, such as the design
specifications of the product and advertising decisions.
Within every market, products can be compared on the basis of a number
of different attributes, or categories of attributes. Each product can often be
described (and separated) in terms of two important attributes.
g Information overload: Additional details to enhance your extended response answers:
r Think about the different airlines with which you could fly overseas. Different airlines can
get you to the same destination, so how do you tell the difference between each one?
Each airline offers different levels of convenience and flexibility for departure times, leg
room and seat size, baggage allowances, meals, in-flight entertainment, and so on - these
can all be grouped as ‘comfort’ or ‘luxury’ factors.
And of course, airlines differ based on price. At one end of the market there are highcost, high-comfort/luxury airlines; at the other end are low-cost ‘budget’ airlines that offer
few ‘comfort’ features. Most airlines sit somewhere in between.
r
r
g
Information
overload!
Ignore this section
if you are still
coming to grips
with the basics
Positioning means deciding how your product fits into this sort of representation of the
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STRATEGIES
market. Marketers need to decide where their good will be positioned. For example, an
airline might see that no other airline offers cheap flights with a medium-level of comfort.
On the other hand, the business could choose to imitate the position of the rival and look
to compete on the basis of other factors, like advertising and branding.
This decision is based on market research and situational analysis. A gap in the market,
for example, may not necessarily be a lucrative opportunity - it might be a gap precisely
because there is no demand for a product that fits that description.
r
Every part of the marketing mix must be consistent with the positioning strategy. If a
product is positioned at the luxury end of the market, for instance, reducing the price could
undermine this as people associate quality with price.
r
Positioning options:
b These terms are not identified in the syllabus, but Creative suggests that using the concepts
‘positioning by use’, ‘positioning by benefit’, ‘positioning by direct comparison’, and ‘positioning by
price’ will make your explanation more logical and give your answer added depth and sophistication.
Marketers need to decide where their good will be positioned.
For example, it could position the product by -
g
Not syllabus
terms.
Useful for essays
Positioning by use: This is a positioning strategy that aims to associate the product with its
application for certain purposes or in certain situations. Identifying uses can
help differentiate the product and open new markets for it.
This is a positioning strategy that focuses on the special attributes of the
product that give consumers particular benefits. This can make the product
stand out against competitors which may not have these attributes.
Positioning by direct comparison:
This is a positioning strategy that directly references rival products to
establish the superiority of the company’s version. The product could, for
example, be positioned as cheaper than a competitor, or of a higher quality
than the market leader.
Positioning by price:
This is a positioning strategy that focuses on the price of the good.
3 Useful expressions that may be used in extended response questions:
Positioning strategies:
Story: Benny possum uses pricey diamonds
i. By benefits (symbol - Benny)
ii.
By use (symbol - user)
iii.
By price (symbol - $)
iv. Direct comparison
(symbol - diamond)
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Direct
comparison
Price
Benefits
Use
Possum
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UNIT 2 MARKETING
Positioning by benefits:
539
145
STRATEGIES
Market segmentation: Definition of ‘Market segmentation’
m Market segmentation is the division of the total market into groups, or ‘segments’,
of the population with certain common characteristics, such as demographic or
psychological attributes, geological location, or the way in which they would use
the product.
In the section on ‘marketing processes’, you saw the importance of identifying
target markets. Marketers have to make strategic decisions about how to
divide up the mass market into groups of customers. This is called market
segmentation. Other elements of the marketing mix are affected by these
decisions.
Market segments are groups of customers that share some important
characteristics. Markets are segmented on the basis of many different
attributes.
Segmentation options:
i. ii. iii.
g
Geographic
Demographic
Psychographic
Not syllabus
terms.
Useful for essays
UNIT 2 MARKETING
Segmentation options:
146
Common factors relate to customer demographics (such as age and gender),
geographic location, socioeconomic status (such as income level, occupation,
and employment status), lifestyle and cultural background, and the way in which
customers use a product.
Based on the segmentation of the total market, marketers choose ‘target
markets’. The marketing mix is tailored to the needs and attributes of
these target markets. The strategic decisions about market segmentation
depend on the product. When it comes to anti-ageing skincare products,
the business might segment the market on the basis of age and gender,
targeting middle-aged women. On the other hand, segmentation based
on income and lifestyle might be more appropriate for adventure holidays,
targeting wealthy, outgoing people.
s
Market segmentation affects all aspects of the marketing mix. Products
are designed to suit the target market, promotional activities are targeted
to their attributes, and pricing strategies and distributional decisions are set
based on their needs and behaviours.
s
This ability to precisely target marketing strategies is the biggest benefit of
market segmentation, leading to a more efficient use of marketing resources.
Market segmentation, though, is also associated with greater costs as the
business looks to provide a wider variety of products and use a variety of
promotional strategies.
s
Excessive segmentation could therefore be counter-productive.
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Definition of ‘Product differentiation’
Product differentiation involves creating characteristics unique to the product to
persuade consumers to purchase it rather than a rival product.
m Common factors for differentiation include price, quality, ethical positions, and
rewards for loyal customers.
m
STRATEGIES
Product/service differentiation:
Customers are faced with a great deal of choice when buying a product there are often several businesses that make every type of product.
Businesses can compete for these buyers by making its product stand out
from its competitors based on certain attributes.
This is called differentiating the product or service - giving it features or
qualities that competitors don’t have which give customers a reason to buy
it rather than a rival’s.
It is the marketer’s role to decide how to differentiate products and services.
Marketers make strategic decisions based on situational analysis and market
research.
Marketers must take into consideration the designs of rival products,
customer wants and needs, and the capabilities of the business. There is no
point, for example, in a book publisher deciding to differentiate its novels by
printing in red rather than black ink if there is no data to suggest that this
would attract more customers.
Products can be differentiated on the basis of many different factors, such
as their high quality, speedy delivery, prestigious brand name, and special
features that competitors don’t offer.
Products are also often differentiated on the basis of price. In the operations
chapter this was referred to as a ‘cost leadership’ strategy, as compared to
a ‘differentiation’ strategy.
The marketer’s differentiation strategy must be realistically achievable by
operations, showing how these two business functions are interrelated.
Marketers might want to differentiate by offering lower prices than others in
the market, but it might simply not be possible for the business to produce
the good efficiently enough for this to be profitable.
The differentiation strategy also needs to be supported by the marketing
mix. For example, advertising should emphasise the selected special features.
It may be necessary to review and revise the differentiation strategy, selecting
a new strategy for standing out.
s
For example, the book publisher using red ink might find that it has in fact
lost customers since making that strategic decision.
It could decide to revert back to black ink, and perhaps instead look to
differentiate its books by offering a larger font size for the vision-impaired.
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UNIT 2 MARKETING
s
147
STRATEGIES
P1 Product - Marketing mix element 1:
Every business produces something. When you buy
Y
Strategies of marketing
a pair of shoes, you have bought a product that a
business has made. This is an easy concept to grasp
Syllabus point:
Product
- you can see and feel the physical good you are
‘Strong
men
eat global peas‘
buying. When you pay for a haircut, you have also
bought a product that a business has produced.
This is a service - unlike a good, it is not tangible and
you don’t acquire ownership of something that you
can feel and keep. You do, however, benefit from
the tangible results of effects of a service - such as
a new hairstyle. Some businesses produce goods,
and others produce services. In reality, the distinction between goods and
services isn’t so clear. Many products have both a service and good element.
When you buy a spring water delivery package, for example, you pay for a
product - the bottle of water - and a service - having it delivered to your door.
7 PEAS
UNIT 2 MARKETING
Services - the 7 Ps:
The distinction between goods and services is important for marketing
because they are marketed in different ways. Services can’t, for example,
be displayed on shelves in stores in the same way that goods can be, and
can’t be stored or delivered as easily, affecting distribution decisions. When
it comes to goods, people usually talk about the ‘Four Ps’ of marketing product, price, promotion, and place. Services, on the other hand, involve
‘Seven Ps’, with the addition of people, processes, and physical evidence.
3 EXAM DOT POINTS - Elements of the product:
Terms to describe the product:
i. Core product
ii.
Actual product (including packaging)
iii. Augmented products
148
g
Not syllabus
terms.
Vital for essays
Prompt for remembering:
Aim of the story The story Apple
=
Or
=
Core =
To help you remember the
characteristics of products
Apple or the core Actual product
Augmented products
Core product
Products are arguably the most important part of the marketing mix - no
matter how impressively a product is promoted, how cheap it is, or how
conveniently it is distributed to customers, if the product itself doesn’t meet
customer needs and expectations it is unlikely to be successful. A good
product doesn’t guarantee success, but it is usually necessary for the longterm survival of the business.
The product element of the marketing mix is an area in which the operations
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Marketing has considerable input over product design, but operations
determine what is physically possible and how these designs are physically
realised.
g
Not syllabus
terms.
Vital for essays
Their goals may also conflict - marketing is concerned with designing products
that meet customer needs and stand out from the competition, whereas
operations is focused on reducing costs and meeting certain quality standards.
STRATEGIES
and marketing functions are closely related.
Marketing is concerned with three crucial aspects of a product - the ‘core’
product itself, branding, and packaging. Products are often broken down into
three parts (although the HSC syllabus does not use these terms): the core
product, the actual product, and the augmented product.
The core product refers to the basic product that customers look to buy, such
as an mp3 player.
The actual product consists of the core product and the additional physical
aspects customers pay for, such as packaging, brand name, and style.
The augmented product includes additional aspects beyond these physical
factors that add value for customers, such as warranties and customer
service. Marketers are especially involved in the design of the core and actual
product, although also influence decisions about the augmented product.
Actual product:
r Packaging is an important part of the actual product that is often overlooked.
r Products must be designed to meet (and perhaps exceed) customer expectations and
allow the business to compete against competitors (such as being differentiated on the
basis of selected attributes). The marketer’s ideas for the product must also be realistic for
operations to produce in a cost-effective manner.
r It is often necessary for marketers to revamp old product designs or design new products
to offer customers innovations and a reason to buy from the business instead of from a
competitor. One example of this is extension strategies for the product life cycle.
r As a product reaches the ‘decline’ stage of its life cycle, marketers may make some
modifications to the design of the product to try to extend its profitability. For example, a
‘deluxe’ version of a CD might be released months after the original release featuring bonus
tracks and music videos, or an mp3 player might be offered in new colours to try to attract
some more customers and even convince some original customers to buy another version
of the product.
r Marketers have a big role to play in designing the core product. Remember that marketing
has a customer focus, so product design must be tailored to fit customer needs, rather than
just focusing on what businesses can make well.
r Based on market research and the market objectives, marketers determine what factors
will appeal to customers and help design a product that meets these requirements. For
example, if the business has decided to position the product as high quality, marketers
must determine how customers perceive quality and design a product to match these
specifications.
Augmented product:
‘Augmented’ aspects of the product, such as warranties and customer service, are
increasingly used to make a product standout and satisfy customer expectations (these
are covered in greater detail in the operations topic).
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UNIT 2 MARKETING
g Information overload: Additional details to enhance your extended response answers:
149
STRATEGIES
Packaging - Product strategy 1:
Definition of ‘Packaging’
Packaging refers to the way in which a product is presented.
It is an important marketing strategy because it can serve as a form of advertising
at the point of sale that differentiates the products from other similar products, or
after the sale to encourage repeat purchases.
m
m
Packaging is an important part of the actual product that is often overlooked.
It has both practical and promotional functions that marketers must pay
attention to. Packaging is necessary for storing and protecting goods as
they go through the distribution process from producer to customer. They
must offer an appropriate level of protection and convenience for customers.
Expensive, high quality goods need to be matched by sophisticated packaging
to assure customers that they will receive the product in good condition.
Overly bulky packaging, though, might annoy customers and make transport
more difficult and expensive.
UNIT 2 MARKETING
Packaging also offers a promotional opportunity. Even if people don’t
consciously set out to judge the proverbial ‘book by its cover’, many people
inevitably do, particularly when there is little else differentiating the products.
In the supermarket you might end up selecting one brand of tea because it
was in a more eye-catching box than the brand sitting next to it on the shelf.
150
Many different visual designs can be used, it can present a lot of information
about the product, and can highlight certain differentiating attributes of the
business, helping to reinforce the positioning of the product. Packaging
made from recycled materials, for example, highlights the business’ green
credentials and appeals to customers who value environmental outcomes.
Simple, plain packaging might be used to help a product appear low cost
and good value, whereas packaging made from expensive materials and
featuring an intricate visual design could reinforce the ‘luxury’ status of the
product.
Redesigning packaging is a strategy that can be used to extend a product’s
lifecycle. A new design might simply reassert the product’s position on the
supermarket shelf, relying on novelty to capture customer attention. New
packaging could even be used to target new markets. For example, a shift to
more environmentally-friendly packaging, such as recycled or biodegradable
materials, might attract new, ‘green-conscious’ customers.
Additional Contemporary issues/Case studies
Strategies
- Product - Packaging
Focus:
Calvin Klein uses several levels of packaging for its ‘Calvin Klein Man’ fragrance.
The actual liquid fragrance comes in a glass bottle.
However, a cardboard box that holds the fragrance acts as a secondary package
that aims to protect the fragile primary packaging from breaking.
Both levels of packaging clearly aim to promote the product given that both the
bottle and bottle feature the word ‘MAN’ in large writing and both are a dark
colour to appeal to the male target market of the product.
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STRATEGIES
Branding - Product strategy 2: Definition of ‘Branding’
m
‘Brand’ refers to the name, logo, and look associated with a company or product.
Branding refers to the name and/or logo associated with a product. The
brand acts as a summary or trigger for a range of attributes that customers
associate with a product.
For example, many associate the Mercedes Benz car brand with luxury and
safety; the McDonald’s fast food brand is associated with value, convenience,
and even tastiness.
The brand is part of the actual product. A strong brand name adds value to
the product and can build customer loyalty. When people buy a Mercedes
Benz, they don’t just pay for the car itself, but for the prestige, reliability, and
all the other attributes associated with the name ‘Mercedes Benz’. People may
also loyally buy Mercedes cars throughout their life because they make these
positive associations with the brand.
A strong brand name gives customers a sense of security or confidence about
the product they are buying.
This is related to the positioning of the product. It is achieved through
promotional strategies and by making products that are consistent with
the desired brand image. Mercedes, for example, is unlikely to develop a
cheap vehicle for the budget end of the auto market because that would be
inconsistent with the brand image it has worked so hard to create.
Marketers have to decide how to create or assign brands to products. There
are several different strategies.
3 EXAM DOT POINTS - Key branding strategies:
Key points to memorise Branding strategies:
i. ii.
iii. iv.
v.
vi.
vii.
g
Family branding
Company branding
Individual branding
Private branding
Manufacturer branding
Generic branding
Co-branding
Not syllabus
terms.
Vital for essays
b These terms are not identified in the syllabus, but Creative suggests that using the concepts will
make your explanation more logical and give your answer added depth and sophistication.
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UNIT 2 MARKETING
Marketers aim to develop brands and spread brand awareness, which means
trying to get the brand name and logo widely recognised, and encouraging
a certain set of positive associations with that name and image.
151
STRATEGIES
g Information overload: Additional details to enhance your extended response answers:
Family branding:
Family branding involves using one ‘umbrella’ brand name or brand image for a family of
related products. The ‘Nivea’ brand, for example, is used for a range of different personal
care and beauty products, such as soaps, creams, and deodorants.
The advantage of family branding is that businesses can continue to profit from a strong
brand, reducing the risk of launching new products.
r
If Beiersdorf, the company that owns the Nivea brand, were to launch a new range of
toothbrushes, for example, under the Nivea umbrella brand, customers are likely to try out
the product because of their positive associations with other Nivea products.
r
g
Information
overload!
Ignore this section
if you are still
coming to grips
with the basics
The danger of family branding, though, is that if one of products in the family doesn’t
perform, the whole brand suffers. If the new Nivea toothbrushes turn out to be very poor,
customer trust in the Nivea brand as a whole may suffer, hurting sales across the whole
range.
r
Company branding:
Company branding is similar to family branding, but the brand is more widely used for the
whole range of the company’s products even if they are unrelated.
The most prominent example of this is the Virgin Group, which owns many different
companies. The ‘Virgin’ brand is used for many different products that aren’t really related,
such as music, mobile phone services, airlines, hotels, radio stations, and Formula One
racing teams.
r
Like family branding, company branding seeks to take wide advantage of a strong brand
name. If people have a good experience with Virgin Airlines, for example, associating it with
good value and service, they might be more likely to try out Virgin hotels, expecting a similar
experience.
UNIT 2 MARKETING
r
152
The danger is that the brand could be spread too wide, particularly when so many
subsidiary companies, independent in many ways, carry the brand, which makes it difficult
to maintain a consistent brand image.
r
Individual/product branding:
Individual or product branding is the strategy of using a new brand for each new product.
This means that the company can’t benefit from other brands it has developed, but also
means that the failure of one product won’t harm the performance of others. It also allows
a business to launch several similar products aimed at different target markets.
Private or distributor branding:
The retailer or distributor may sell a line of products branded with its own name. Many
supermarkets and department stores, for example, have their own ‘home’ brands. The
retailer usually pays a manufacturer to make the product under this label. These brands
seek to benefit from a customer’s positive associations with the store name.
Manufacturer branding:
Manufacturer brands are brands that use the name of the manufacturer on a range
of products, not necessarily directly related to the manufacturer’s main products. The
manufacturer allows other companies to use its name (for a fee) or pays other companies
to make a range of products for it.
For example, the Ferrari brand is used for a range of clothing and fashion accessories as
well as for its cars. Like retailer or distributor brands, manufacturer brands aim to capitalise
on a customer’s positive associations with the manufacturer. They often require quite a lot
of support from the promotion element of the marketing mix.
r
Co-branding branding:
A strategy whereby marketers link two brands (or more) in a promotional campaign.
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Coles is a company that uses a diverse range of branding strategies.
Coles also has its own manufacturer brand known simply as ‘Coles Brand’
(generic branding) under which it sells a wide-variety of products from jams to
chocolate biscuits. The benefit of this strategy is that there is greater brand
awareness associated with Coles and this should result in greater sales.
STRATEGIES
Additional
Contemporary
issues/Case studies
Focus: The marketing process - Product - Branding
Co-branding is a commonly found on credit cards, such as the ‘Qantas ANZ Visa
Card.’ The advantage of using two or more well known brands combine to create
broader a wider brand appeal.
3
Preparing for your Trial and HSC examinations:
1. Short answer and multiple choice questions:
1a. Memorise the definitions that are found in the text boxes.
1b. Answer the following questions.
•
Discuss the importance of branding when marketing products.
•
Describe two features of packaging in the marketing process. b The ‘Question Possibility Index’ (QPI) - See page 105 for details.
8 lines / QPI = 5
6 lines / QPI = 6
2. Key points to remember in the examinations:
m A product is usually only marketed towards certain segments, rather than the total market.
The marketing strategy can be tailored to target identified segments. The same product
can be marketed to different segments in different ways.
m
The sub-topic of ‘product’ will probably not be the main focus of an extended response
question, but you will need to be able to use these terms in questions relating to the
marketing plan and the marketing mix.
m
A firm may seek to position the product in a gap in the market, or it might imitate the
position of successful firms.
m
m
The marketing mix must be tailored to achieve the desired position in the market.
Packaging is also important in relation to distribution. The packaging must be appropriate
to protect the product through the distribution channel and make tasks like storage easier.
m
Branding may broadly be defined to include customer experiences and perceptions about
a product.
m
Firms must make decisions about how brands will be developed for their goods. Common
approaches include family branding (one brand for a ‘family’ of goods) and individual branding
(a separate brand for each product).
m
Firms seek to develop a strong, recognisable brand as they encourage customer loyalty and
make it easier to launch new products.
m
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UNIT 2 MARKETING
EXAMINATION FOCUS - Market segmentation and product:
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STRATEGIES
P2 Price - Marketing mix element 2:
Y
One of the most important marketing tasks
is determining the price of the product. It is
strategically vital to fulfilling the business’
aims. Prices have a big influence on people’s
purchasing decisions, and they help determine
the business’s revenues.
Strategies on marketing
Syllabus point:
Price
‘Strong men eat global peas‘
In deciding on pricing techniques, marketers
must keep several things in mind.
7 PEAS
The price must allow the business to recover its
costs and to make a profit. It also needs to be
consistent with the marketing objectives - different strategies are appropriate,
for example, for boosting market share compared with boosting profits. The
price must allow the business to compete against rivals. It must be affordable
for the target market, and it must satisfy the customers’ needs by giving them
value (or at least the appearance of value).
Pricing methods:
Definition of ‘Pricing Methods’
Pricing methods refer to the overall approach to pricing products that marketers
can use.
m The three types of pricing methods are cost-based, market-based, and
competition-based.
UNIT 2 MARKETING
m
154
The first step in determining a price is to choose a pricing method. The
pricing method can be thought of as the basic formula or framework that
marketers use as a guide for setting the price. Within each pricing method,
a number of different specific pricing strategies can be used. The different
pricing methods are cost-based, market-based, and competition-based.
Choosing the right method is difficult because businesses have to balance
a range of aims. The most appropriate method depends on a variety of
factors, such as the nature of the product and the market, and the internal
and external situation of the business.
b Don’t get mixed up between pricing strategies and methods
3 KEY SYLLABUS/EXAM DOT POINTS - Pricing methods:
Pricing methods:
i. ii.
iii.
Cost-based
Competition-based
Market-based
COSTLY
COMPETITION
PRIZE TO
MARS
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www.creativeclassroom.com.au
STRATEGIES
Prompt for remembering:
Aim of the story
To help you remember the three methods of pricing that are identified in the syllabus.
The story - Me won a costly competition prize to Mars
Me =
The story - Examples of pricing methods
=
Nothing
Costly
=
Competition = Prize =
Cost-based
Competition-based
The story - price
to
=
Nothing
Mars
=
Market-based
Cost-based - Pricing method 1:
the products
y
Definition of ‘ Cost-based:’
A cost-based pricing method determines the price of the product based on the
costs of production and a fixed profit margin (the mark-up).
A cost-based pricing method focuses on the costs to the business of making
the good, with an additional ‘mark-up’ to provide a profit. The simplest costbased strategy is a ‘cost-plus’ strategy, whereby the business determines the
average total cost of making each unit of the product, and adds a percentage
mark-up. For example, a clothing manufacturer might determine that each
pair of jeans costs $30 to make when all the costs - including materials,
labour, rent, electricity, and so on - are considered. It might settle on a 40%
profit margin, so sell the jeans for $42.
g Information overload: Additional details to enhance your extended response answers:
r Other more complicated cost-based strategies might focus only on marginal or variable
costs to set a price based on the ‘contribution’ of each product towards covering total costs.
m
The main benefit of cost-based pricing methods is that they focus on recovering the costs
of production. This is the first step to making a profit - if a business can’t even cover its
costs, it can’t survive! However, it ignores market demand and competitor behaviour, which
can be dangerous.
r
Structure for:
Pricing
methods
Issue:
Cost-based
‘Me won a costly
competition prize
to Mars’
g
Information
overload!
Ignore this section
if you are still
coming to grips
with the basics
Costs can only be recovered if the business achieves certain sales levels, and this may not
be possible if wider market conditions are not taken into consideration.
r
Also, the cost-based method may be quite popular because it is relatively simple calculate costs and then add a percentage. It can sometimes be tricky, though, to work out
how to attach fixed costs (like electricity, machinery) to each product - if a manufacturer
produces clothing of various shapes and sizes, what is the best way to allocate energy costs
to each unit? This is difficult to answer!
r
Competition-based:- Pricing method 2: the products Definition of ‘Competition-based’
A competition-based pricing method determines the price based on the prices set
by competitors.
m The price may be set to be the same as competitors’, or higher or lower.
m
Under a competition-based pricing system, the price is set with reference
to the prices set by competitors. The dominant business in the market may
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UNIT 2 MARKETING
won a
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STRATEGIES
be the ‘price leader’, and other businesses follow it. Competition-based
pricing may mean charging the same price as competitors, or higher or
lower prices.
Competition-based pricing is most common in transparent markets for
undifferentiated products - so that price is the only differentiating factor.
g Information overload: Additional details to enhance your extended response answers:
r Businesses are not allowed to collude (make agreements) on price as this is anticompetitive behaviour, but an equilibrium level often develops in such markets because it is
logical for businesses to adopt a ‘going rate’ strategy of essentially setting the same price
as everyone else.
y
Structure for:
Pricing
methods
Issue:
Competitionbased
‘Me won a costly
competition prize
to Mars’
Because price is the only differentiating factor, it would be unprofitable to set a price
higher than the others, while businesses are wary of lowering prices because it could set off
a price war.
r
If one business lowers prices, other businesses will have to lower their prices to compete,
so prices will spiral downwards towards a new equilibrium, which will just mean lower profits
for all businesses in the market.
r
A controversial form of competition-based pricing is predatory pricing. This is when a
business sets prices below the market average in an effort to force competitors out of the
market. This can best be done by large businesses against small businesses as the large
businesses can afford to make a loss on the product for a while.
r
Predatory pricing is illegal in Australia because it reduces competition. In the short term
customers may benefit from lower prices, but in the long term prices will be higher because
there will be fewer businesses competing in the market. It is, though, difficult to prove cases
of predatory pricing.
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156
Market-based - Pricing method 3: the products
y
Definition of ‘Market-based competition’
A market-based pricing method sets the price based on demand and supply,
regardless of the costs of production.
m
Market-based pricing methods set the price with relation to market forces
of demand and supply. If there is strong demand for a product, for example,
the business can charge higher prices. On the other hand, if few customers
are interested in buying the product, prices can be lowered to try to stimulate
demand.
Structure for:
Pricing
methods
Issue:
Market-based
‘Me won a costly
competition prize
to Mars’
Market-based pricing can be very effective because it is versatile. It is
customer-oriented, and aims to be sensitive to how and why customers
make purchasing decisions.
Different prices can be set for different target markets, which allow business
to better satisfy various groups of customers, and provides good opportunities
for making a profit. It also allows the business to tailor prices to changing
conditions and the product’s stage in the product life cycle.
Some of the most popular pricing strategies (which are discussed in the next
section), such as penetration, skimming, and loss leaders are market-based,
aiming to profit from different sorts of customers and market conditions.
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STRATEGIES
This can be difficult to successfully implement, though, as it requires
accurate, up-to-date information about the market. The level of demand
can be hard to measure and fluctuates, but business can’t afford to change
the price too often because it will confuse and annoy customers. Also, if
businesses focus solely on market conditions they may lose sight of their
costs of production and struggle to turn a profit.
One of the most controversial market-based pricing strategies is price
discrimination, which is when the same product is sold to different customers
at different prices. This means that the business can take advantage of the
fact that different target markets are prepared to pay different prices for the
same product.
g Information overload: Additional details to enhance your extended response answers:
r Price discrimination is banned by law because it is uncompetitive - consumers suffer if, for
example, businesses can take advantage of geographic distances to charge higher prices.
However, there are some acceptable forms of price discrimination, such as selling ‘adult’
and ‘child’ tickets to arts and attractions.
r
Also, businesses often get around price discrimination laws by instead using ‘differential’
pricing, which is when several versions of the same product are made with slight variations
(such as different branding or a few different features) to justify the price difference.
r
Definition of ‘Pricing Strategies’
Pricing strategies are the different pricing techniques that marketers can use to
achieve business objectives such as higher profits and market share.
m Popular pricing strategies include skimming, penetration, loss leaders, and price
points.
m
e
Take care.
Examiners exploit
these subtle
differences
Pricing strategies are the specific pricing techniques used to achieve business
objectives. Don’t get mixed up between pricing strategies and methods
- methods are the frameworks or blueprints, whereas strategies have the
details filled in.
b These terms are stressed in the syllabus. Don’t get mixed up between pricing strategies and
methods
The appropriate pricing strategy depends on a variety of factors such as the
positioning of the product, the product life cycle, and market conditions.
3 KEY SYLLABUS / EXAM DOT POINTS - Pricing strategies:
Pricing strategies:
i. Skimming
ii. Loss leaders
iii. Price points
iv. Penetration
v. Discounts b Of these terms, ‘discounts’ is not identified in the syllabus.
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‘Discounts’ is not
a syllabus term.
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UNIT 2 MARKETING
Pricing strategies:
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157
STRATEGIES
Prompt for remembering:
Aim of the story : The story
Strong =
Skinny
=
Leaders
=
Point
=
Pens
=
at the =
Disco
=
To help you remember the 4 pricing strategies that are identified in the syllabus.
Strong skinny leaders point pens at the disco.
The story - Pricing strategies
Skimming
Loss leaders
Price points
Penetration
strong
nothing
Discounts
Skimming - Pricing strategy 1: he products
pen
Definition of ‘Skimming’
Price skimming is a pricing method that involves charging high prices to maximise
profits
UNIT 2 MARKETING
m
552
Skimming is a pricing strategy that involves charging relatively high
prices in order to get the maximum amount of profits based on the market
situation. There are two main situations in which skimming is used. Firstly,
skimming is a popular pricing strategy for products in the ‘introductory’
stage of a product life cycle. High prices early on give the business a good
chance to recover a significant portion of its costs, and it takes advantage
of a group of customers called ‘early adopters’. For many types of products,
there are consumers - ‘early adopters’ - that are eager to be among the first
to own it and are willing to pay a premium for this. They may be enthusiasts,
for example, or like to be seen as up-to-date. Fashionable clothing and
electronics products, for example, are usually relatively expensive early in
their life cycle. The sellers can take advantage of people who are willing to
pay more to have the trendiest pair of jeans or newest laptop.
g Information overload: Additional details to enhance your extended response answers:
Once the early adopters have bought the product (and hopefully spread good word of
mouth about it), the price is often dropped to attract a wider group of buyers. As production
increases due to rising demand, the business can also achieve economies of scale that
allow it to drop its prices.
r If the business does not use price skimming, it might miss out on some profits. If it sold
the product at the lower price from the beginning, it means that there would be people
buying it - early adopters - who would have been willing to pay even more.
r
leader
y
Structure for:
Pricing
strategy
Issue:
Price
skimming
‘Strong skinny
leaders point
pens at the
disco’
g
Information
overload!
Ignore this
section if you
are still coming
to grips with the
basics
Of course, there are risks with price skimming as well. If the cost is too high, even early
adopters might be unwilling to buy it, particularly if the brand doesn’t have an established
reputation and there are other established and cheaper brands in the market.
r Price skimming is also often used in markets in which demand is relatively price inelastic,
which means that consumer demand for the product doesn’t change very much when the
price does. The business can raise prices well above its costs to take advantage of this.
r Demand may be relatively price inelastic because there are few close substitutes for the
product or because people depend on it. Petrol is a good example - even if petrol prices rise,
people need to drive, so there isn’t much of a fall in demand.
r
Even when their costs of production fall (such as because of a fall in global oil prices),
petrol stations can keep their prices higher to ‘skim’ off these profits.
r
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STRATEGIES
Additional Contemporary issues / Case studies
Focus:
Pricing strategies - Price Skimming
Price skimming is a strategy that has often been used by Apple given that it
differentiates itself by creating products that are typically more innovative and
advanced than its competitor’s products. When Apple released its tablet computer
in 2010, the iPad, it set a price range from US $499 to $829 depending on the
options chosen.
The strategy was a success for Apple who sold over seven million iPad devices
between April and November 2010, while ‘skimming’ the maximum revenue from
the segments willing to pay its high prices.
http://knowledge.asb.unsw.edu.au/article.cfm?articleid=1079 y
Definition of ‘Loss Leaders’
Loss leaders are goods that are sold below cost price to attract customers to the
business in the hope that they will then be enticed to buy other full-priced products.
m For example: a clothing store may place a rack of heavily-discounted clothes
outside the store to tempt customers inside, in the hope that once there they will
purchase other full-priced clothes.
m
Structure for:
Pricing
strategy
Issue:
Loss leader
‘Strong skinny
leaders point
pens at the disco’
Using loss leaders is a pricing strategy whereby the seller offers some goods
for very low, often below-cost, prices in order to attract customers in the
hope that they will buy other more expensive products. This strategy tries to
target customer motivations and behavioural trends. For example, a clothing
store might put a rack of heavily discounted clothes out the front of the shop,
hoping that this will entice passing customers. Once they stop at the store,
these customers will hopefully browse around and become interested in the
full-priced clothes, too. Many companies use promotional sales in this way.
Loss leaders can be very effective, but there are risks associated. The shop
can’t afford to sell products below cost for too long. It might not generate
enough profit from sales of the store’s other products, and it could tarnish
the image of the discounted product (as customers often associate ideas of
quality and fashionability with price).
Additional Contemporary issues/Case studies
Focus: Pricing strategies - Loss leader
A classic example of loss leader pricing is the price set for McDonald’s Soft Serve
ice creams. A Soft Serve at McDonalds typically costs 50 cents, resulting in a loss
for McDonalds.
However, McDonalds assumes that customers who come into McDonalds to buy
a Soft Serve will buy additional products, such as a burger. These other products
have higher profit margins.
McDonalds chief financial officer Matthew Paull acknowledged that their profits
are driven by their burgers once saying that “there is no question that we make
more money from selling hamburgers and cheeseburgers”.
http://www.tomspencer.com.au/2008/09/20/four-p-marketing-promotion-analysis-framework/
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UNIT 2 MARKETING
Loss leaders - Pricing strategy 2: he products
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STRATEGIES
Price points - Pricing strategy 3: the products
y
Definition of ‘Price Points’
Price points are certain prices at which people are more likely to buy a product for
psychological reasons.
m
Additional point for the exams:
m For example, people are more likely to buy something that is $99.95 rather than
$100.
Structure for:
Pricing
strategy
Issue:
Pricing points
‘Strong skinny
leaders point
pens at the disco’
Price points are certain price levels set for products at which demand is
relatively consistent. For example, a clothing label might sell shirts at the
price points $59.95, $79.95, and $99.95. All new shirts are set at one of
these price points, even though the actual costs of production may vary.
Customers form psychological associations with these price points. The
shirts for $99.95 may be considered high-quality formal wear, whereas the
$59.95 shirts are seen as everyday business shirts.
g Information overload: Additional details to enhance your extended response answers:
This kind of use of certain price points is a pricing strategy that, through consistency,
makes customers more likely to accept certain prices. Demand for shirts at $79.95 is likely
to be strong compared to if that store introduced a new shirt at $74 or $83. Certain prices
become associated with various ideas of quality and value.
r Price points also usually involve setting prices just below a whole number. You are probably
very used to seeing prices such as $14.95, $49.95, and $99.95, rather than $15, $50, and
$100. Even though $99.95 and $100 are almost exactly the same, demand is stronger at
$99.95 because customers psychologically see it as better value.
UNIT 2 MARKETING
r
554
Additional Contemporary issues/Case studies
Focus: Pricing points - Loss leader
Retailers who sell CDs and DVDs often use this method. For instance, JB Hi-Fi
typically sells all older CDs for $9.99 each whereas they sell new CDs for $19.99.
This price step reflects how customers are willing to pay more for newer CDs.
http://www.jbhifi.com.au/cd-dvd-music/
Penetration pricing - Pricing strategy 4: y
Definition of ‘Penetration Pricing’
Penetration pricing is a pricing method that involves charging a lower price than
competitors in an effort to enter a market and gain market share, with the intention
of raising prices later.
m
Penetration pricing is the opposite of price skimming - it involves charging
relatively low prices in order to drive up demand for the product (with the
intention of raising prices later). This is not the same as simply positioning
the product as a low-cost product in the market, whereby the business has
lower costs of production than most others.
Structure for:
Pricing
strategy
Issue:
Penetration
pricing
‘Strong skinny
leaders point
pens at the disco’
Penetration pricing involves a temporarily low price - the business sells near
or even below its cost price. A penetration pricing strategy could be used
when a product is launched.
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r In the same way, penetration pricing might be used to try to raise the market share of an
existing product. The overall aim is to get as many people to buy it as possible.
r Penetration pricing is a very risky strategy, though, because the business can’t afford to
g
Information
overload!
Ignore this section
if you are still
coming to grips
with the basics
STRATEGIES
g Information overload: Additional details to enhance your extended response answers:
r By charging a lower price than its competitors, the business hopes that customers will be
enticed to try the product. If they are impressed by the product, they might themselves be
willing to buy more units, and will hopefully spread good word of mouth about it.
charge the relatively low price forever. It will need to raise prices in order to recover its costs
and to make a profit. The hope is that, having tried the product, customers will have decided
that it is worth this higher price, and will have recommended the product to others.
r However, there is no guarantee that the business will be able to retain enough customers
to be profitable. When the price rises, many customers may abandon the product.
Pricing Issue - Relationship between price and quality:
It is common, on the whole, to assume that demand for a product will rise
if its price falls. This is indeed often the case - you only need to look at the
rampaging crowds at holiday sales for evidence!
However, this isn’t always the case, because the price of a product conveys
information to customers about it. In general, people equate higher prices
with higher quality. It does, after all, cost a business more to use better
quality inputs and more highly-skilled labour in production, and for many
products there are few other ways for customers to judge quality before
actually trying it.
If customers can afford it, they will often buy a more expensive brand - they
might not necessarily go for the most expensive one, but they will probably
avoid the cheapest one. In the supermarket, for example, people may avoid
the ‘no name’ jar of jam because it is the cheapest.
They don’t know that it is lower quality than more expensive branded jams,
but they assume that it is (perhaps subconsciously) because the price is
lower. Similarly, when booking a hotel room, people might choose the second
or third cheapest one, assuming that the one with the lowest price is ‘cheap
and nasty’.
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UNIT 2 MARKETING
Additional Contemporary issues/Case studies
Focus: Price - Price penetration
In light of Apple’s extraordinary success with the iPad, competitors rushed to
produce their own tablet computers to take advantage of the growing market. By
the end of 2010 Dell, RIM, Toshiba, Samsung, HP and Google announced that
they would join the tablet market.
The strategy chosen by most of these companies to differentiate their products
from the iPad was lower prices.
For instance, Dell priced its Streak tablet at only $299.99 while Amazon revised
the price of its improved Kindle down to just US $139 in order to gain as much
market share as possible. http://knowledge.asb.unsw.edu.au/article.cfm?articleid=1273
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g Information overload: Additional details to enhance your extended response answers:
This association between price and quality is most likely when customers haven’t used the
product before and don’t have other criteria by which to make a judgement about quality.
People often choose products like restaurants, wine, and other food products by price. On the
other hand, when buying a computer, for example, customers can look at the list of components
to see whether they think the product is good quality.
r The increasing availability of reviews, particularly on the internet - both professional and user
reviews - may reduce customer reliance on price for information about the product’s quality.
r This link between price and quality affects pricing and promotions. The price must reflect
how the marketers want to position the good. If the business wants to emphasise its quality
credentials, a very low price might actually undermine this. Similarly, excessive discounts can
tarnish the image of a product, as can advertisements that focus on the cheap price of the
product.
r In a related way, price is linked with prestige - essentially, some people buy more expensive
products simply to look good or show off their wealth. This is sometimes referred to as
‘conspicuous’ consumption. Many luxury goods are targeted at these kinds of customers.
Cars are a very good example of this.
r Mercedes Benz cars are more expensive than most Toyotas. To some extent, people pay
this extra price because they think it suggests a higher level of quality. Another motivation,
though, is that Mercedes Benz cars seem more exclusive and representative of wealth,
precisely because of their price tag. If the price were to drop to Toyota levels, Mercedes
Benz may actually lose customers as it becomes seen as ‘just another car’, and its target
market would instead buy BMWs or Porsches.
r In a similar way, people might avoid buying the cheapest option because they don’t want
to ‘look cheap’ to their friends or society at large.
r The overall lesson for marketers is that the price doesn’t just determine how affordable
the product is. It contributes to the image of the product - it almost becomes part of the
branding. The pricing strategy needs to conform to how marketers want customers to
perceive the product.
r
3 EXAMINATION FOCUS - Price
g
Information
overload!
Ignore this section
if you are still
coming to grips
with the basics
Preparing for your Trial and HSC examinations:
1. Short answer and multiple choice questions:
1a. Memorise the definitions that are found in the text boxes.
1b. Answer the following questions.
• Explain pricing methods.
8 lines / QPI = 6
• Compare & contrast the cost pricing method with a competition-based pricing method.
8 lines /
QPI = 4
•
•
•
Explain two pricing strategies. Describe two features of penetration pricing.
Describe two features of price skimming.
6 lines / QPI = 7
4 lines / QPI = 4
6 lines / QPI = 6
b The ‘Question Possibility Index’ (QPI) - See page 105 for details.
2. Key points to remember in the examinations:
This sub-topic, ‘pricing strategies’, will probably not be the main focus of an extended response
question, but you will need to be able to use these terms in questions relating to the marketing
plan and the marketing mix.
Pricing methods:
m The pricing method refers to the main consideration or factor used to set the price.
m Pricing strategies are developed from pricing methods. The pricing method sets a blueprint or
framework for pricing strategies.
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STRATEGIES
m A cost-based pricing method
has the benefit of focusing on recovering the costs of production
and it is relatively simple to determine, but it may be out of touch with the realities of market
demand and competitor behaviour.
m A competition-based pricing method is common in markets for homogenous products,
whereby price is the only differentiating factor.
m A market-based pricing method allows different prices for different market segments, and
tailoring prices to the market situation can lead to more goods being sold, but if pricing becomes
completely disconnected from production costs the business may be selling goods at a loss.
Recounting a question to clarify a Business Studies issue!
Question to: Bob Maccomas, Chairman of the Trade Practices Commission (ACCC)
Question: ‘What is the real difference between pricing methods and pricing strategies?’
Asked by:
Adrian Yap - 10th in the State in 3 Unit Economics, 1998
vs
COSTLY
COMPETITION
PRIZE TO
MARS
strong
pen
leader
Pricing strategies:
Pricing methods:
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UNIT 2 MARKETING
Pricing strategies:
m Different pricing strategies may be used at different stages of the product life cycle and to
target different market segments.
m The pricing strategy that is used depends on factors such as business objectives, the product,
and market conditions.
m Pricing strategies are based on pricing methods, which set a blueprint or framework for the
strategy.
m Price skimming is often used early in a product’s lifecycle. It is the most popular method
used for entering new markets as firms have a good chance to quickly recover the costs of
production, while economies of scale can make it economically-viable to lower prices later to
expand market share.
m Price skimming may also be used when the product has no substitute.
m Penetration pricing is a risky method because it may be difficult to fully recover production
costs and to later raise prices without losing customers.
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STRATEGIES
P3 Promotion - Marketing mix element 3:
Promotion is the element of the marketing
mix with which you and most other people are
probably most familiar. It is concerned with
communicating with potential customers.
This involves strategies to get the product
known in the target market and to persuade
people to buy it.
Y
Strategies on marketing
Syllabus point:
Promotion
‘Strong men eat global peas‘
Promotion is all about communicating
messages to the target market about the
product. This can be for various purposes.
It might be, for example, to generate interest
about a product and make it widely recognised, or it might be to give
people specific reasons to buy the product. Promotion is also used for noncommercial reasons, such as charities asking for donations and government
public service messages (such as anti-smoking ads).
7 PEAS
Elements of the promotional mix - Promotion focus 1:
Definition of ‘Promotional mix’
The elements of the promotional mix refer to the different techniques that
marketers can use to promote a product.
m The elements are: advertising, personal selling, relationship marketing, sales
promotions, publicity, and public relations.
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558
The promotion mix consists of the different strategies that are used to
communicate messages to customers and to generate interest. The
elements of the promotion mix are: advertising, personal selling, relationship
marketing, sales promotions, publicity and public relations.
Each element has different strengths and weaknesses, and marketers must
decide on which elements will be used for a particular product, and in what
proportion. The makeup of the promotion mix depends on a number of
factors. There are practical issues, such as cost and time. The promotion
mix also depends on the product, the market, and the product life cycle.
Different promotional strategies, for example, are used when a product
is launched compared to when it is in the maturity stages, and marketers
promote products differently to consumer markets and business customers.
3 KEY SYLLABUS/EXAM DOT POINTS - Promotional elements:
Key points to memorise
-
Elements of the promotional mix:
i. ii.
iii.
iv. Personal selling and relationship marketing
Advertising
Publicity and public relations
Sales promotions
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STRATEGIES
for remembering:
Prompt
Aim of the story: The story - Personally = Advertises = Pubs
=
for
=
Sale
=
To help you remember the three methods of pricing that are identified in the syllabus.
Promoter L personally advertises pubs for sale
Personal selling and relationship marketing
Advertising
Publicity and public relations
nothing
Sales promotion
Part 2 of this story To help you remember the two methods of communication (see the next section)
The story - Leading communist words
PROMOTER L
COMMUNIST
LEADER
Product placement:
A promotional strategy that has become increasingly popular in recent years
is product placement. This involves the business paying a fee to have its
product visibly used in entertainment media, such as in films and television
shows.
For example, a business might pay for an action hero in a movie to drive
a particular model of sports car, or a contestant on a cooking show to
use a particular brand of pasta sauce. This helps spread awareness of the
product and make it ‘cool’ or fashionable. Especially when used in ‘reality’
contexts, such as cooking programs, it also helps communicate the specific
advantages of the product.
g Information overload: Additional details to enhance your extended response answers:
Product placement can be especially effective because it catches people off guard. When
watching normal advertisements, people expect businesses to try to manipulate them and
persuade them, so are often quite cynical and sceptical about what they see - they have
their guard against advertising up.
r
They aren’t on the lookout for this, though, when watching a film or TV show, so might
be easier to influence.
r
g
‘Product
placement’ is not
a syllabus term.
Useful for essays
g
Information
overload!
Ignore this section
if you are still
coming to grips
with the basics
This is particularly true when they develop some sort of trust or relationship with the
characters. If a homely housewife on a cooking show that viewers have come to like over
many weeks recommends a particular pasta sauce, people are likely to be particularly
receptive to this message, compared to a regular 30 second ad spot.
r
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ADVERTISING
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Personal Selling - Promotional element 1:
Definition of ‘Personal Selling’
Personal selling is an element of the promotion mix that involves direct, two-way
communication between the seller and the potential buyer to try to persuade the
customer to buy the product.
m This is usually done face-to-face, such as by a salesperson in a shop, or over the
phone.
m
Personal selling involves salespeople communicating directly with potential
customers about the product. This is a major part of the promotion mix for
many products.
Structure for:
Promotional
elements
Issue:
Personal selling
‘Promoter L
personally
advertises pubs
for sale’
Example: If you enter a clothing store, a shop assistant often comes over to
help you, trying to guide you to buy certain products. Similarly, a car dealer
will explain the benefits of a particular model of car to try to persuade a
customer to purchase it.
Personal selling has become quite an intricate art, and salespeople have a
wide variety of techniques that they use to interest customers and to finally
make the sale. Successful selling requires specific skills.
UNIT 2 MARKETING
Example: A salesperson that pushes the product too aggressively at the
outset may drive away potential customers, whereas too much timidity will
fail to attract the interest of enough people.
The big benefit of personal selling is that salespeople can tailor their
messages to the specific customer, and because they receive continuous
feedback from the customer, salespeople can change their approach if a
particular method doesn’t seem to be working.
Salespeople can target the unique personalities of each customer and
answer their specific questions and concerns to make them feel that the
business values them and is satisfying their wants.
For example, if a customer seems worried about road accidents, a car dealer
will play up the safety features of a car, such as the brake system and
airbags. If the customer has a confident, outgoing personality, the dealer
may instead focus on the car’s performance attributes, such as speed and
engine power.
Personal selling is, however, expensive and time consuming. Salespeople
can only attend to one, or at most a few, customers at a time, and it can
potentially take a long time to close the sale - even hours or days across
several meetings for some big purchases like cars and houses.
Moreover, salespeople need training and experience. Successful personal
selling requires well-honed skills, which take time and money to develop.
Recounting a question to clarify a Business Studies issue!
Q A
&
Question to: Jana Wendt, Nine Network
Question: ‘Do you believe that in the next 10 years the traditional promotional mix
incorporating TV and print advertising will be replaced by virtual marketing campaigns?’
Asked by:
Adrian Yap - Equal 10th in the State in 3 Unit Economics, 1998
560
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Definition of ‘Relationship Marketing’
Relationship marketing is an element of the promotion mix that involves focusing
on developing long-term relationships with customers so that they are loyal to the
business, rather than focusing on short-term sales.
m
STRATEGIES
Relationship marketing - Tatic for personal selling:
Relationship marketing is an element of the promotional mix that prioritises
creating relationships with customers to retain them in the long term, rather
than focusing on making the immediate sale.
This involves a variety of techniques that are targeted at different groups of
customers in the business’ existing database to encourage them to make
more purchases in future and to make them feel that their needs are being
satisfied.
The essence of relationship marketing is targeting techniques at particular
groups of existing customers to make them feel that the business can
address their needs and is responsive to their concerns.
Example: The business may set up an opt-in newsletter in which existing
customers are given exclusive deals and information and the opportunity to
send feedback and suggestions.
New customers may be sent introductory offers to encourage them to make
more purchases, customers whose subscription to the product (such as
a mobile phone plan) is soon running out could be sent special offers to
encourage them to resubscribe, and customers who cancel a subscription
could be sent feedback forms so that the business can determine why the
person stopped buying the product, and try to address those concerns.
Likewise, the business could send information and offers that are specific to
customers’ geographical location, age group, or interests (as determined by
a prior survey or through purchasing habits).
Relationship marketing is difficult to implement successfully. It requires a
significant amount of time and resources and a very dedicated marketing
effort. For example, the business may need to keep a detailed database
profiling its existing customers.
In the long term, though, relationship marketing has many benefits, as it
is better for a business to retain previous customers than to replace old
customers with new customers (of course, the business will be looking
to attract new customers at the same time as it looks to retain existing
customers).
It is more difficult and expensive to attract new customers than to keep
existing ones, and if customers become loyal to a business, they can spread
positive word of mouth.
A loyal customer base can also provide the business with valuable feedback
about improvements that it can make to better satisfy customers.
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UNIT 2 MARKETING
This makes them feel valued by the business, and gives the business crucial
information.
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y
Advertising - Promotional element 2: the products Definition of ‘Advertising’
Advertising is an element of the promotion mix that involves paid messages in a
variety of media.
m Advertisements contain text, images, and/or audio, and popular media include
television, radio, film, newspapers, magazines, and billboards.
m
Advertising refers to the paid messages that businesses use in a range of
media, such as television, radio, newspapers, magazines, and billboards.
Advertisements contain a combination of images, text, and audio.
Advertisements in different media can be used for different purposes.
Structure for:
Promotional
elements
Issue:
Advertising
‘Promoter L
personally
advertises pubs
for sale’
Television ads, for example, can combine a variety of techniques, such as
interesting visuals and a catchy jingle, to effectively raise awareness of a
product.
Ads in print materials, on the other hand, can generally pack in a lot more
information, allowing businesses to inform customers about more details of
the product. Different media are also used to target different target markets.
UNIT 2 MARKETING
Advertising is a very popular form of promotion. It can be very effective.
It can reach very wide audiences, use a variety of creative techniques to
communicate the message, and can be placed in different media, locations,
and time slots to target a range of potential customers.
562
People can be exposed to ads for a product many times during a day,
reinforcing the message. However, advertisements are often expensive,
particularly television advertisements during prime time. Marketers must
carefully consider whether the expected benefits of the advertisements
justify this cost.
Expensive campaigns can be risky as there are many obstacles to the
business’s message getting through. People are exposed to so many
advertisements that it can be difficult for a business to stand out, and people
have the opportunity to quite easily avoid many ads - they can change the
channel during ad breaks, for example, or skip the newspaper page filled
with ads.
Publicity and public relations - Element
Definition of ‘Publicity and Public Relations’
Publicity and public relations seek to create a positive image for the company and
to increase exposure for the product without paying for advertisements.
m
Most forms of promotion cost the business money. Publicity and public
relations are concerned with strategies to generate positive attention and
exposure for the business and product effectively for free.
Publicists, for example, may release a press release about the launch of a
product, in the hope that news media, such as newspapers and television
news, will report on this story.
y
Promotional
elements
Issue:
Publicity
‘Promoter L
personally
advertises pubs
for sale’
This gives the product wide exposure at no cost. It can also be very effective
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STRATEGIES
because a news organisation is often seen as quite objective and trustworthy,
so if it reports on a new product, people are more likely to trust this coverage
than the business’s own ads. The publicists cost money but the exposure
they create is usually free.
Why would news organisations be willing to give companies free advertising
like this? Because it attracts a wider audience to them. People are interested,
for example, in the latest product released by Apple, so will read a news story
about it. This is good for the newspaper and good for Apple.
Public relations includes a wide range of activities to try to create this sort of
coverage and word of mouth. This may involve staging activities and events.
A tea company, for example, might hold a fete involving rides, carnival
games, and competitions revolving around the theme of ‘tea’. The aim is
to get news media to cover the event (and therefore the business and the
product) and to get people talking about the company.
g Information overload: Additional details to enhance your extended response answers:
r This idea of spreading word of mouth has become particularly important to marketers
with the rise of social media, such as Facebook and YouTube. Public relations now often
Information
attempts to create a ‘viral’ internet sensation, such as a YouTube video, which people tell
overload!
each other about on sites like Facebook, and might even make it into the news media,
Ignore this section
effectively generating free air time for the ad.
if you are still
r The benefit of public relations is that it can be very cheap. Of course, it costs money to
coming to grips
with the basics
stage an event or create a YouTube video, but the coverage or word of mouth is free (which
is what separates public relations from regular advertising).
r The cost is a fraction of a regular advertising campaign, and the exposure can be even
larger. Also, the type of coverage that the product receives can make the message seem
more genuine to customers.
r There are risks, however, to publicity and public relations, because it can be unpredictable
and uncontrollable.
r The business can’t control how the product will be reported or talked about by individuals.
Negative word of mouth and journalistic coverage can be very damaging for the same
reasons that positive coverage can be very effective.
r Encouraging this is risky, as journalists may not report a press release or individuals might
not view an event in the way that the business intended. It is also risky for a business to rely
too heavily on public relations strategies because of their unpredictability.
r News media, for example, may simply not report a press release at all, or a YouTube
campaign may fail to generate any sort of viral interest.
Sales promotions - Promotional element 4:
Definition of ‘Sales Promotions’
Sales promotions are a promotional method that involves short-term reductions in
price, such as discounts, cash-backs, and ‘two for one’ deals.
m
Sales promotions refer to a range of marketing techniques that are designed
to generate interest in a product and increase demand for it by offering
extra benefits or incentives to customers, usually for a limited period of
time. By offering something extra, sales promotions both attract customer
attention and give them more reasons to make the purchase.
y
Structure for:
Promotional
elements
Issue:
Sales promotion
‘Promoter L
personally
advertises pubs
for sale’
Examples of sales promotions include competitions, free gifts, free samples,
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UNIT 2 MARKETING
g
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STRATEGIES
coupons and rebates, rewards programs, and loyalty programs. For example,
a store might run a promotion in which the consumer can enter the draw to
win a prize by sending in barcodes from the products.
Loyalty programs often give consumers a free product after a certain amount
of purchases, usually within a limited time period. For example, they might
earn a free sandwich after buying ten sandwiches within a three month
period. Sales promotions can be effective when strategically used. They are
often used when new products are launched, attracting as much attention
as possible for the product and giving people extra reasons to try it.
Process of communication - Promotion focus 2: Definition of ‘Process of communication’
This refers to the series of steps that marketers can use to spread information
about a product to potential customers as part of the promotion part of the
marketing mix.
m Effective techniques include the targeting of opinion leaders and efforts to
generate positive word of mouth.
UNIT 2 MARKETING
m
564
y
Structure for:
Communication
processes
‘Leading
communist
words’
The focus of promotion is to communicate something about the product
to potential customers, such as its features, its benefits, or just the fact
of its existence. The communication process involves getting the business’
message to the target market. For this to be successful, it must be approached
systematically.
Marketers must have a good understanding of what kind of messages will
work on the target market, and how the target market will interpret the
message. This requires appropriate market research.
People react differently to various messages. If you tell a joke to two of your
friends, one of them might think it’s very funny, but the other might just find
it offensive or rude. In the same way, different groups of customers might
interpret one ad in different ways.
Marketers need to be aware of different perspectives, tastes, and sensitivities.
Based on preparatory research, marketers must decide what message
exactly they want to communicate to customers through advertisements.
You might think that all ads communicate the same message: “Buy this
product!”. Ultimately, of course, marketing is all about generating sales, but
marketers use a number of different messages to achieve this aim.
Some ads, for example, try to convince customers that the product has
many useful features, whereas others focus on how cheap or good value
it is. Some ads may seek to generate demand for a product by challenging
customers with a problem or lack they weren’t aware existed, while others
may seek to generate goodwill and customer loyalty by highlighting the
business’s positive social role (such as charity work).
Marketers then decide the form the message will take and which media
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STRATEGIES
channels will be used. Creating the message involves a great deal of creative
input, involving the combination of text, images, and audio to try to create
a memorable and effective message. The channel for communication (such
as television, newspaper, radio, billboards, etc) depends on the habits of the
target market and the business’ resources.
g Information overload: Additional details to enhance your extended response answers:
r The business hopes that its message gets through effectively and that it is interpreted by
customers in the way that the business intended. Things that frustrate the effective delivery
of messages, such as other advertisements and shocking world events, are called ‘noise’.
g
r Marketers try to design messages that can overcome noise, but it can be unpredictable.
Marketers should also implement systems for monitoring customer feedback to see how
effective its messages are.
r Some messages require direct feedback, such as customers sending in coupons - if they
don’t send in the coupons, obviously the message has failed. In other cases, businesses can
survey customers to gauge the effects of advertisements, and monitor sales levels to try to
estimate the impact of advertisements.
Information
overload!
Ignore this section
if you are still
coming to grips
with the basics
3 KEY SYLLABUS/EXAM
DOT POINTS - The communication process:
Aspects of the communication process:
Opinion leaders
Word of mouth
Prompt for remembering:
Aim of the story
To help you remember the two methods of communication
The
story Leading communist words
Leading
=
Communist = Words
=
Opinion leaders
The story - communication processes
Word of mouth
Opinion leaders - Communication issue 1:
Definition of ‘Opinion Leaders’
Opinion leaders are customers within the target market that have considerable
influence over their peers because of their particular position or reputation within a
group. They are usually early adopters of new products.
m
Certain consumers can be described as ‘opinion leaders’. These are people
whose opinions and buying habits influence those around them. Think about
your circle of friends.
There might be someone who is particularly enthusiastic about electronics
and can be trusted to give you advice about your next computer purchase,
or someone who is particularly fashionable and is trusted to give
recommendations about the latest trends.
y
Structure for:
Communication
processes
Issue:
Opinion leaders
‘Leading
communist
words’
These are opinion leaders. You trust their opinions and your purchasing
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i. ii.
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STRATEGIES
decisions are influenced by them.
Opinion leaders are usually ‘early adopters’ - they are likely to buy a product
when it is first launched. Marketers often try to target opinion leaders in the
communication process because they influence others. If your tech-savvy
friend is convinced that a particular mp3 player or mobile phone model is
very good, they are likely to tell you and encourage you to buy it too.
Targeting opinion leaders can be an effective communication strategy
especially because opinion leaders often prize their influential position, and
so will feel particularly valued and enthusiastic about a company that pays
special attention to them, helping to spread the message more widely.
On the other hand, opinion leaders can be dangerous for a business because
their opinions are difficult to control and negative opinions can be very
damaging.
Word of mouth - Communication issue 2: the products
Definition of ‘Word of mouth’
UNIT 2 MARKETING
y
Word of mouth refers to the impact that influential individuals have over sales by
affecting the perceptions of other potential customers about a product.
Structure for:
Communication
processes
Word of mouth refers to customers communicating to each other about
a product (rather than receiving messages from the business itself). After
you’ve watched a particularly good (or bad) movie, for example, you’ve
probably told your friends about it.
Issue:
Word of mouth
m
Word of mouth has a big influence on customer decisions because people
are likely to value the opinions and recommendations of their friends.
‘Leading
communist
words’
Businesses eagerly seek to generate positive word of mouth because it is so
influential, and can be cost-effective - the message is communicated widely,
but the business doesn’t have to pay to reach all of these customers.
For example, businesses may target influential people in the market - opinion
leaders - or create public relations events to try to get people spreading
positive messages about the company or product.
However, word of mouth is very difficult for businesses to control, and negative
word of mouth can be very damaging. This is part of the communication
process that is largely out of marketers’ control, even though they often try
very hard to influence word of mouth.
Recounting a question to clarify a Business Studies issue!
Q A
&
Question to: Bob Hawke, Prime Minister
Question: ‘Do you think that ‘opinion leaders’ put their names to
products because they really believe in the product or simply because
companies are prepared to pay them enough money to endorse them?’
Asked by: Stewart Loh – 10th in the State in 3 Unit Economics, 1998
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EXAMINATION FOCUS - Promotion:
Preparing for your Trial and HSC examinations:
1. Short answer and multiple choice questions:
1a. Memorise the definitions that are found in the text boxes.
1b. Answer the following questions.
•
Explain the marketing processes.
4 lines/QPI = 3
•
Explain the relationship between price and quality when marketing a product. 4 lines/QPI = 3
•
Discuss two elements of the promotional mix.
8 lines/QPI = 4
•
Compare and contrast the difference between publicity/public
relations and advertising.
8 lines/QPI = 5
2. Preparing for extended response questions:
Assess why a mix of promotional strategies is significant in the marketing of goods
and services. QPI = 3
3. Key points to remember in the examinations:
m Marketers can use one or any combination of advertising, personal selling and
relationship marketing, sales promotions, publicity, and public relations to market a
good.
m Which elements are used depends on several different factors, such as the cost, the
nature of the market, and the type of product.
m Advertising is usually used to raise awareness of the product and persuade people
to buy it.
m Advertising can reach a very large audience but is often expensive.
m Personal selling can be very effective because the salesperson can react directly
to the customer’s characteristics and concerns, but it is usually only possible when
the customer has already become interested (such as entering the store), and some
customers may resent the pressure.
m Relationship marketing involves using different techniques and providing different
kinds of information based on the characteristics of the customer and their current
relationship to the business.
m Relationship marketing can be difficult and take up time and resources, but there
are many benefits if customers are retained in the long term.
m If sales promotions last too long or are run too often, customers are less likely to
buy the product at full price, or the product’s image may be damaged (such as being
perceived as downmarket).
m Sales promotions can be very effective in quickly generating interest in a product
and boosting sales.
m Publicity and public relations example: media releases are made in the hope that
the media will mention the product or company (in a positive light).
m Word of mouth is hard to control and bad word of mouth can substantially impair
sales, regardless of the marketing mix.
m Marketers target opinion leaders, especially when introducing a new product,
because they can generate word-of-mouth, leading to increased sales throughout
the market.
m Firms try to generate positive word of mouth, especially by targeting opinion leaders,
as endorsement of a product by ‘ordinary people’ can lead to strong sales without
much advertising expense.
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UNIT 2 MARKETING
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e Case studies - Syllabus requirement The L’Oréal Group
Focus: Assessing why a mix of promotional strategies is important in the
marketing of goods and service.
The L’Oréal Group, the world’s most successful cosmetic company, has used
highly innovative marketing strategies. These strategies differentiate it from its
major competitors.
e
Exam tip!
Information in this
case study might
be relevant for
‘Section 4: Extended
response’ of the
HSC/Trial papers
L’Oréal uses traditional forms of print advertising such as magazines and
electronic advertising such as TV adds. Magazine ads are included in Dolly
and Women’s Weekly. L’Oréal’s TV ads feature during shows such as the
former Oprah show.
This is effective as all these TV shows and magazines are popular amongst
the female market that L’Oréal targets. Dolly magazines are popular amongst
younger females while Oprah was commonly viewed by older women. The
L’Oréal ads use opinion leaders, such as Scarlett Johansson and Penelope Cruz.
L’Oréal also embraced electronic forms of promotions. L’Oréal set up an online
loyalty program known as the L’Oréal Paris Beauty Confidential –
UNIT 2 MARKETING
http://www.lorealbeautyconfidential.com.au/.
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The L’Oréal Paris Beauty Confidentialis Club has a monthly-membership based
on an e-mail newsletter. This relationship marketing tool provides beauty tips and
exclusive offers. This is highly effective marketing approach as it gives L’Oréal
a platform to promote its products as well as obtaining vital primary market
research. It makes members feel as if they are part of the L’Oréal ‘family’. Building
customer loyalty is vital for L’Oréal’s success. Primary research has discovered
that members of this club are highly loyal to the brand.
Sales promotions:
Sales promotions are used regularly by L’Oréal.
L’Oréal offers free small samples of its most recent products. To overcome the
reluctance for customers to new, high-priced L’Oréal products the marketing
strategy is to attach samples of the new products to magazines. This creates
brand awareness of the new products.
Public relations:
L’Oréal supports many charities, such as The Ovarian Cancer Society.
L’Oréal has also received positive publicity for its work to support the careers
of women. This includes the establishment of the L’Oréal-UNESCO Awards for
Women in Science, which aims to improve the position of women in science by
recognizing outstanding women researchers. The awards carry a US $100 000
grant for each winner.
The communication process – opinion leaders:
L’Oréal has a history of employing sophisticated celebrities such as Scarlett
Johansson to endorse its products. The use of such opinion leaders is effective
as their support gives L’Oréal’s promotional messages credibility.
Consumers are more likely to trust personalities as they accept these stars as
‘objective third parties’. Most people forget that they are generally paid very well
for the endorsements.
Sometimes using a celebrity results in free media coverage. In many case this
media coverage is worth more than the original marketing campaign.
http://www.ibscdc.org/case-catalogues/Strategy_Case_Studies%28Catalogue_II%29.pdf
http://www.fundinguniverse.com/company-histories/LOreacute;al-Company-History.html
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Definition of ‘Distribution’
This is the element of the marketing mix that is concerned with how products are
transferred from the producer to the final customer.
m Distribution involves decisions about using intermediaries such as wholesalers,
retailers, and agents. This also involves decisions about the physical issues of
transport, warehousing, and inventory control.
m
Place, or distribution, is the element of the
marketing mix that is concerned with how
products are transferred from the business
to the final customer. This doesn’t focus on
physical transport issues, such as whether to
use trucks or trains to move goods, though
such physical issues are part of it. Distribution
involves strategic decisions about using
intermediaries (other businesses or people) to
help distribute products to customers. This has
important implications for how a product is
promoted and perceived by the market.
Y
Strategies on marketing
Syllabus point:
Place
‘Strong men eat global peas‘
7 PEAS
PL
AC
E
Ch
a
nn
el
I
Distribution/place issues
i. Distribution channels (These examples are not listed in the syllabus)
a. Direct channels
b. Indirect channels
ii. Channel choice
a. Intensive
b. Exclusive
c. Selective
Physical TWIst
iii. Physical distribution issues
a. Transport
b. Warehousing
c. Inventory
Prompt for remembering:
Aim of the story: To help you remember the issues involving distribution
The
story
Place
Channel I - INXS physically twists
Place =
Place/distributions channels & physical distribution
Channels
=
Channel choice
IN = Intensive
X = Exclusive
S =
Selective
Physically Physical distribution
T =
Transport
W =
Warehousing
I =
Inventory
st
=
nothing
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UNIT 2 MARKETING
3 KEY SYLLABUS / EXAM DOT POINTS - Distribution:
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STRATEGIES
P4 Place / Distribution - Marketing mix element 4:
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STRATEGIES
Distribution channel approaches - Distribution focus 1: Definition of ‘Distribution channel’
Distribution channels refer to the routes that producers can use to move products
to the final customer.
m
The distribution channel refers to the route that a product takes to get from
the original manufacturer to the final customer.
Direct channel - Distribution channel 1: the
Definition of ‘Direct Channel’
A direct channel is an approach to distribution whereby the producer sells
the product directly to the final customer, rather than using intermediaries like
wholesalers, agents, and retailers.
m
UNIT 2 MARKETING
Sometimes, customers buy directly from the producer. This is true for
many common services. When you get a haircut, you deal directly with the
hairdresser. This is an example of using a direct distribution channel - direct
selling. Most of the time, though, the manufacturer doesn’t sell directly to
customers. It’s unlikely, for example, that you bought your sports shoes
directly from Adidas or your milk straight from a dairy farmer. Instead,
you might have gone to a department store or a supermarket. These are
examples of intermediaries.
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Direct selling is obviously the cheapest choice for businesses because
intermediaries cost money. Particularly with the rise of the internet, direct
selling has become more common. Direct selling is also quite common in
industrial markets. However, it is often difficult for producers to reach all of
the customers that they want through direct selling.
Also, the techniques of direct selling are limited and many annoy customers
(such as ‘junk mail’). This is where intermediaries come into the picture.
Intermediaries can reach more customers, and are often more convenient
for customers because they offer a range of different products and because
of their location. To transfer products to final customers, businesses can use
three different types of intermediaries: retailers, wholesalers, and agents.
Additional Contemporary issues/Case studies
Focus: Place - Direct channel
An example of a company that uses a direct distribution channel is the computer
giant Dell. There is no intermediary between Dell and its customers. Consumers
purchase Dell products through Dell’s website.
The advantage of this approach is lower costs. Dell has the opportunity to
increase its profit margins and/or sell its products for lower prices compared to its
competitors. This give Dell a competitive edge.
However, Dell must still perform all the functions of the intermediary. Since
Dell doesn’t specialise in may of these functions, it might not be as efficient in
performing them. If this occurs, the cost benefits of direct distribution may not be
as great as expected.
http://mba.tuck.dartmouth.edu/pages/faculty/chris.trimble/osi/downloads/20014_
DellCase110102.pdf
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Definition of ‘Indirect channel’
An indirect channel is an approach to distribution that uses intermediaries to get
the product from the producer to the final customer.
m Any combination of wholesalers, retailers, and agents may be used to distribute
the product, rather than the producer selling directly to the final customer.
m
Structure for:
Distribution
Issue:
Distribution
channels:
STRATEGIES
y
Indirect channel - Distribution channel 2: the
‘Place Channel
I - INXS physically
Wholesalers:
Wholesalers are businesses that buy large quantities of the product from
the producer and then sell it on to retailers. For example, a meat wholesaler
buys meat in bulk from abattoirs or farms and then sells it to a wide range
of small butchers.
twist’
The advantage of wholesalers is that it gives producers access to smaller
retailers. It is difficult and time and resource-consuming for producers to
sell to dozens or hundreds of different small stores. Wholesalers are better
equipped to cultivate the necessary relationships with smaller retailers and
handle the transactions.
Retailers:
Retailers are businesses that buy the producer’s product and sell it to final
customers. Most consumer goods are bought from retailers, such as when
you buy shoes from a department store. The advantage of using retailers is
that they are often well-known and convenient for customers. Customers are
happy and confident shopping there, and can see and sample the product
before purchasing it.
Direct selling, by contrast, may involve the de-personalised experience
of a mail order catalogue or internet order which can make customers
uncomfortable as they can’t sample the product, and have to wait (and pay)
for it to be delivered. Retail outlets are also usually numerous and visible so
are useful for building brand awareness.
The main drawback to retail outlets is that they are expensive - they have
significant operating costs of their own and need to make a profit, so the
retail price of the product has to rise (making it less competitive).
Agents:
Agents are intermediaries that arrange transactions between the producer
and a customer. Unlike intermediaries and wholesalers, which buy the
products outright from the producer, agents do not acquire ownership of the
product - the producer continues to own it. Agents are useful because they
are better at knowing an individual customer’s needs and more informed
about local conditions. They are often used in the distribution of services
and when businesses are entering new markets (especially overseas). A
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UNIT 2 MARKETING
Like retailers, though, wholesalers have operating costs and need to make
a profit, so this is another extra cost. Large supermarkets and department
stores have reduced the role of wholesalers. These large businesses buy
from the manufacturer in bulk and sell directly to the final customers.
571
STRATEGIES
travel agent is, as the title suggests, an example of an agent.
The travel agent, responding on your needs and wants, arranges for you to
buy plane tickets from a certain airline and accommodation from a hotel.
Agents receive a commission for every sale that they arrange, so this is
another cost that has to be factored in.
g Information overload: Additional details to enhance your extended response answers:
r Longer channels involve more intermediaries, such as a wholesaler that then sells to
retailers, or using agents to connect with retailers or wholesalers.
r The combination of intermediaries that is used will depend on the nature of the good
and the target market. In general, longer channels are used for consumer goods and when
customers are widely dispersed, and shorter channels are used in industrial markets and
when customers are geographically concentrated.
r The main detriment of using intermediaries is that they create added costs. Also, businesses
lose some control over the image and quality of the product.
r For example, a retailer may decide to heavily discount a product, tarnishing its image by
making it look cheap and unpopular, or advertise products unsuccessfully.
r A wholesaler might accidentally damage goods while transporting them to retailers, which
will reflect badly upon the producer when the customer receives poor quality goods.
UNIT 2 MARKETING
r On the other hand, intermediaries assume some of the promotional burden. Retailers,
for example, have as much interest in selling the products as the original producers, so will
advertise them, persuade customers through personal selling, and so on. This reduces the
amount of money that producers have to spend on promotion.
572
r Businesses often use a multiple channel strategy to maximise exposure. For example,
airlines use agents to sell plane tickets, but also sell directly to consumers through its internet
site and at airport counters.
r Using multiple channels in this way helps achieve the core marketing goal of satisfying
customer needs - it gives customers as many opportunities as possible to reach the product
in the way that suits them best.
r Some consumers may still prefer the convenience of having a travel agent organise their
holidays, whereas others prefer to be able to book it themselves without leaving the house.
Additional Contemporary issues / Case studies
Focus: Place - Indirect channel
The Coca-Cola Corporation of Atlanta is a company that has successfully used
the indirect distribution approach.
As part of its international distribution strategy, the Coca-Cola Corporation (CCC)
acts only as a manufacturer. Coca-Cola Corporation of Atlanta simply produces
the syrup concentrate that is used to produce Coke.
This syrup concentrate is then sold on to bottlers. These bottlers such as CocaCola Amatil (CCA) in Australia, have a license to convert the syrup concentrate
into bottles and cans of Coke by adding carbonate.
These bottlers act as wholesalers and then sell the bottled Coke to retailers, such
as convenience stores and supermarkets.
These retailers then sell the Coke to the final consumers.
http://www.cscsarchive.org:8081/MediaArchive/audience.nsf/
b1bc9409c64d85a06525698d0025dc3c/dfd9ffd8fd5f4db7652572ca0024aa50/$FILE/A0320048.
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STRATEGIES
Channel choice - Distribution focus 2:
Definition of ‘Distribution channel’
Distribution channels refer to the routes that producers can use to move products
to the final customer.
m Determining the distribution channel requires deciding how many and which
intermediaries (wholesalers, retailers, and agents) will be involved.
m
Definition of ‘Channel choice’
Channel choice is a decision that producers make about how many locations will
be used to sell their goods. The options are intensive (many stockists), selective
(few stockists), and exclusive (one stockist).
m
3 KEY SYLLABUS/EXAM
DOT POINTS - Channel choice:
Examples of the channel choice:
i. Intensive
ii. Exclusive
iii.
Selective
Another decision that marketers have to make is how many locations will
be used to sell the product. That is, how many shops it will allow to stock its
product (such as how many and which retailers it will sell its products to).
This is referred to as ‘channel choice’.
Definition of ‘Channel Choice - Intensive’
y
An intensive channel choice is when a producer seeks to have its goods sold in as
many locations as possible.
m
An intensive channel choice is when the business decides to have its products
sold in as many locations as possible. It sells to as many retailers as will take
the product. The main reason to use an intensive strategy is that it gives the
product wide exposure, helping to drive sales. If a particular pasta sauce is
in every supermarket and convenience store, there is more chance you will
be in a position to buy it. The main drawback is that producers lose control
over the sale and the intermediary. If a product is sold in hundreds of stores
around the country, it is unlikely the producer will be able to offer advice or
service for every sale - it has to rely on the intermediary to take care of this.
It is similarly more difficult for the producer to control the intermediary in
respect of how the product is marketed or how the sale is conducted.
Structure for:
Channel choice
Issue:
Intensive:
‘Place Channel I
‘INXS ’
Additional Contemporary issues/Case studies
Focus: The marketing strategies - Place - Indirect channel
A company that uses intensive distribution is Coca-Cola Amatil (CCA). For instance,
CCA has saturated the market with its Mount Franklin water. Mount Franklin
can be purchased from a diverse range of retailers encompassing supermarkets,
convenience stores, restaurants, school canteens and cinema complexes, among
others. This is an appropriate form of distribution as water is a convenience good
and therefore it needs to be mass distributed so that it is convenient for consumers
to purchase.
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Intensive - Channel choice 1:oducts
573
STRATEGIES
Exclusive - Channel choice 2:ducts
Definition of ‘Channel Choice - Exclusive’
y
An exclusive channel choice is when a producer chooses to have its product sold
in only one location.
m
An exclusive channel choice is when the producer only allows one stockist of
its product. This is an extreme version of the selective choice, and has the
same benefits and detriments, to a greater extent. Producers have a great
deal of control over the intermediary and the sales process, and the product
is likely to have a sense of prestige or status. On the other hand, exposure
and customer access is very limited.
Structure for:
Channel choice
Issue:
Exclusive:
‘Place Channel I
‘IN X S ’
Additional Contemporary issues/Case studies
Focus:
The marketing strategies - Place - Exclusive channel
Exclusive distribution is a strategy employed by luxury retailer Louis Vuitton.
The distribution channel for Louis Vuitton products in Australia is limited solely to
David Jones and its own stores. This fosters the images of exclusivity associated
with Louis Vuitton. Louis Vuitton’s ditribution strategy is effective as it makes it
appear relatively more exclusive than competing luxury brands such as Calvin Klein
who distribute products through Myer and Harris Scarfe as well as David Jones.
UNIT 2 MARKETING
Selective - Channel choice 3:o products
574
y
Definition of ‘Channel Choice - Selective’
A selective channel choice is when a producer chooses to limit the number of
locations in which its goods are sold.
m
A selective channel choice is when the producer chooses to limit the number
of locations that stock its product. For example, it might only allow certain
retail chains to sell its product. The main advantage is that it gives producers
more control. It is easier, for example, for producers to offer after-sales service
and advice, rather than relying on the intermediary to perform this important
function. Intermediaries want to retain the right to sell the product, so the
producer has more control over them, controlling aspects of promotion and
perhaps extracting better financial agreements. A selective strategy can also
make the product seem more exclusive or prestigious, which can help build a
‘high status’ image for the product. The risk of using a selective strategy is, of
course, that it limits the exposure of the product. Customers have fewer ways
to access it, which could potentially affect sales.
Structure for:
Channel choice
Issue:
Selective:
‘Place Channel I
‘IN X S ’
Additional Contemporary issues/Case studies
Focus: The marketing strategies - Place - Selective channel
Selective distribution is a strategy used by sports retailer Nike. The distribution
channel for Nike products in Australia is limited to Nike stores as well as a number
of retailers such as Rebel Sports and Athletes Foot. This makes Nike products
reasonably accessible yet it does tarnish Nike’s image of being a high-quality
sports brand.
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y
Products need to also be physically transferred from the producer to the
final customers, which involves the physical distribution issues of transport,
warehousing, and inventory.
Structure for:
Physical
distribution
Marketers are involved in these decisions because they affect how well
customer needs are satisfied, such as how quickly and easily they can
get products. This is also an example of how operations and marketing
are interrelated, because some of these decisions overlap with operations
decisions (such as about inventory management and supply chain
management). Marketers must balance the aim of satisfying customers with
the need to reduce costs.
T W I s t ’
3 KEY SYLLABUS/EXAM DOT POINTS - Physical distribution:
Physical distribution issues
i. Transport ii. Warehousing
STRATEGIES
Physical distribution - Distribution focus 3: ‘Physically
iii. Inventory
Aim of the story: To help you remember the issues involving distribution
The story - Place Channel I - INXS physically twist Physically Physical distribution
T =
Transport
W =
Warehousing
I =
Inventory
st
=
nothing
Transport
y
- Physical distribution issue 3: the products Definition of ‘Transport’
m Transport is a physical issue related to distribution that concerns physically moving
goods through distribution channels.
Transport is concerned with moving products so that they can be delivered to
customers, such as consumers and retailers. The main forms of transport are
road, rail, air, and water. Air and road transport are generally faster and more
flexible than water and rail transport, but more expensive. Which transport
method is used depends on the nature of the product and customer needs.
Some products need to be delivered quickly, such as fresh food and urgent
medical equipment, so more expensive transport methods may be needed.
Customers may also need products urgently for a variety of specific reasons,
such as retailers needing to quickly fill an order.
g Information overload: Additional details to enhance your extended response answers:
r The distance that the product needs to be delivered is also an important consideration;
products to be delivered from one side of the country to the other might use air or water,
whereas deliveries within one city are likely to use trucks. Different forms of transport are
often used together. A product may be moved from one city to another by water, and then
delivered to its final destination within the city by road.
r The business may transport a product straight to a customer’s location or it might require
the customer to pick it up from another location. For example, the business might transport
the product to its nearest retail outlet for a consumer to pick up.
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Structure for:
Physical
distribution
Issue:
Transport:
‘Physically
T W I s t ’
g
Information
overload!
Ignore this section
if you are still
coming to grips
with the basics
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UNIT 2 MARKETING
Prompt for remembering:
575
STRATEGIES
y
Warehousing - Physical distribution issue 1:
Definition of ‘Warehousing’
Warehousing is a physical issue related to distribution that concerns storage of
stocks of raw materials, works-in-progress, and finished goods.
m
Goods are stored in warehouses, from which they are delivered to customers
or moved to another location. How many warehouses the producer uses and
where they are located affects how quickly the customer can get a product.
It is often cheapest for the business to use one large warehouse in a remote
location and distribute all products from there.
Structure for:
Physical
distribution
Issue:
Warehousing:
‘Physically
T W I s t ’
However, most customers will probably have to wait a relatively long time
to get the product.
By contrast, the business could use several smaller warehouses located
closer to main markets so that customers can get the goods more quickly
- but operating multiple warehouses is more expensive in terms of staff,
security, and so on, and the real estate in these locations is likely to cost
more.
Inventory - Physical distribution issue 2:
y
Definition of ‘Inventory’
m Inventories are stocks of the good. Although some stock needs to be held, storage
UNIT 2 MARKETING
costs usually make it expensive to have large inventories.
576
Inventory refers to the level of stocks that the business holds, in this case
referring to finished goods.
As you saw in the operations section, inventory management is a crucial part
of running a business. It affects costs and how smoothly business activities
can run - such as how quickly customer orders can be filled.
Structure for:
Physical
distribution
Issue:
Warehousing:
‘Physically
T W I s t ’
Holding large inventories is costly. Stocks must be stored, and warehouses
are expensive to buy and manage, and there is also the danger that inventories
could become spoiled, damaged, outdated, or obsolete. Inventories also
represent an investment of money and resources that is just sitting there,
which could have been used more productively for some other opportunity.
On the other hand, having low or no inventories is risky as a sudden increase
in demand may mean that customer orders can’t be met. If customers are
forced to wait for new deliveries, the business may develop a poor reputation
and lose customers.
If the business uses a strategy of having low or no inventories, such as a ‘just
in time’ strategy, it needs to have very good relationships with its suppliers
and very good monitoring systems to ensure that customers aren’t faced
with long waiting times.
Even then, though, there is always a risk of unforeseeable interruptions to
deliveries, such as natural disasters or traffic accidents.
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EXAMINATION FOCUS - Distribution:
Preparing for your Trial and HSC examinations:
1. Short answer and multiple choice questions:
1a. Memorise the definitions that are found in the text boxes.
1b. Answer the following questions.
•
Describe two distribution channels. •
Account for the channel choice of “intensive channel”.
•
Describe two differences between intensive and exclusive channel choice.
•
Describe the physical distribution issues.
2. •
•
STRATEGIES
3
Preparing for extended response questions:
Critically evaluate the marketing strategies for a good/service.
Analyse a marketing plan for a business.
6 lines/QPI = 6
4 lines/QPI = 4
6 lines/QP = 4
6 lines/QPI = 5
QPI = 7
QPI = 5
3. Key points to remember in the examinations:
m Determining the distribution channel requires deciding how many and which intermediaries
(wholesalers, retailers, and agents) will be involved.
Whether a long channel (many intermediaries) or short channel (few intermediaries) is used
depends on the product and the business.
m
With a direct channel approach the business benefits from getting a higher profit margin and
retaining greater control over the image of the product.
m
The costs of this strategy are that the business has to bear a greater burden of the promotion
of the product, and may lack skills or information needed to succeed in certain markets.
m
The business may benefit because intermediaries have special access, knowledge, and skills,
and it transfers some of the burden of promotion to the intermediaries.
There are also costs, though, as intermediaries must each make a profit, so the profit margin
for the business is lower, and the business has less control over the product’s image.
m
m
Indirect channels of distribution are common in consumer markets.
m An intensive channel choice has the benefit of gaining wide exposure for the product, generating
more sales.
An intensive channel choice has the detriment that the producer has less control over the
stockist and the sale.
m
An exclusive channel choice has the benefit of giving the producer a great deal of control over
the stockist and the sale.
m
m The detriment of exclusive channel choice is that exposure, and therefore sales, may be limited.
A selective channel choice has the benefit of giving the producer more control over the stockist
and the sale.
m
The detriment of a selective channel choice is that exposure, and therefore sales, may be
limited.
m
Warehouses must be designed to store goods as cheaply as possible while protecting them
and allowing for the efficient performance of tasks such as shipping, sorting, and inventory
management.
m
Q A
Recounting a question to clarify a Business Studies issue!
&
Question to: John Howard, Prime Minister
Question: ‘Why is it cheaper to ship a goods from Asia than to transport these goods
from the port of Sydney to a Sydney location? Do you have plans to reform this transport
system in Australia?’
Asked by:
Peter Brereton - 3rd in the State in 3 Unit Economics, 1984
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UNIT 2 MARKETING
m
577
STRATEGIES
e Focus:
Case studies - Syllabus requirement
Marketing strategy for a product - Case study - Coke Zero
The marketing plan:
i. Situational Analysis – SWOT, Product life cycle
ii.
Researching the market
iii.
Marketing objectives
iv.
Target markets
v. Developing marketing strategies
vi.
Implementation, monitoring and controlling
vii.
Revising the marketing strategy
Situational analysis:
e
Exam tip!
Information in this
case study might
be relevant for
‘Section 4: Extended
response’ of the
HSC/Trial papers
SWOT
Strengths
Coke Zero is associated with the Coca-Cola brand, arguably the most powerful
brand in history. The 2009 Interbrand’s Best Global Brands report identified
the Coca-Cola brand as the most valuable in the world.
Any product released under the Coke brand is almost guaranteed to experience
strong sales. The other strength of Coke Zero is that it is made with zero sugar
which means it appeals to increasingly health-conscious consumers.
UNIT 2 MARKETING
Weaknesses
578
By the time that Coke Zero was launched, Pepsi already had 15 years experience
in the sugar-free cola market.
The biggest weakness and fear for the Coca-Cola Company was that Coke
Zero would destroy the market share of Diet Coke. In other words, Diet Coke
consumers would switch to Coke Zero since the core product is similar.
Opportunities
Marketers have rejuvenated interest in Coca-Cola and have generated very
strong sales from consumers wanting to at least try the new product out of
curiosity. Another opportunity for the Coca-Cola Company would be increasing
the markets around the world where Coke Zero is offered for sale.
Threats
The greatest threat to the Coke Zero product is Pepsi.
Indeed, some drinks experts have noted that Pepsi Max is closer in taste to
normal Pepsi than Coke Zero is to classic Coke; giving Pepsi Max an edge in
the sugar-free market. There is also a threat that cost of raw materials used
in Coke Zero may increase, this would either decrease profit margins or result
in a price rise.
Product Life Cycle
With the Coca-Cola Company (CCC) recording sales growth of over 20% for
Coke Zero in 2010, Coke Zero is most definitely still in its growth stage, five
years after its introduction.
Establishing market objectives:
The Coca-Cola Company launched Coke Zero with the expectation that it
would surpass Pepsi Max as the leading sugar-free cola.
Coke Zero has achieved this in a number of markets, including the key North
American market. Indeed, in 2009 Coke Zero attained 1.7% of the U.S.
carbonated soft-drink market, according to Beverage Digest, while Pepsi Max
attained just 0.4%.
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STRATEGIES
Focus:
Marketing strategy for a product - Case study - Coke Zero (continued)
Target market:
The primary target market for Coke Zero is 20-29 year old males.
Coke Zero is targeting males. Its name, packaging and promotional efforts
have also been tailored to appeal to males.
Marketing strategies
Promotional strategies:
CCA employed a mix of promotional elements.
Coke Zero was heavily advertised on TV, especially during sports related
programs, such as The Footy Show and NRL and AFL games. Advertising
during these programs was effective as sports coverage is very popular
amongst Coke Zero’s target market of 20-29 year old males.
Sales promotions for the products included free Coke Zero giveaways at
shopping centres and football games.
Again, this was effective as such places are popular amongst the Coke Zero
target market and because it gave consumers the opportunity to try the
product and hopefully become ‘hooked’ on it.
In terms of pricing, CCA chose a ‘competition-based’ pricing method for
pricing Coke Zero.
It is priced similarly to Pepsi Max and other Coke products at about $3.50 for
a 600ml bottle.
Place:
Like for other Coca-Cola products, the place strategy for Coke Zero includes
intensive distribution. This is effective as it must be convenient for consumers
to purchase.
Product:
The product strategies of branding and packaging were crucial to appealing
to this target market.
Implementation, monitoring and controlling:
After implementing its marketing strategy, Coca-Cola constantly monitors the
effectiveness of its marketing strategy.
Financial forecasts:
Overall, the $18 million marketing campaign that launched Coke Zero was
certainly successful. Coke Zero took 35% of Pepsi Max’s market share. At the
same time, the release of Coke Zero had only a minimal impact on Diet Coke,
which lost only 1% of its market share.
The fact that both Diet Coke and Coke Zero could be successful side-by-side
confirmed that CCC was right to segment the diet cola market into a male
and female target market. If there was no need for this segmentation, then
the release of Coke Zero would have just ‘cannibalised’ the market share of
Diet Coke.
Physical
evidence, people, processes - Marketing mix elements 5-7:
http://www.lib.uts.edu.au/gta/?page=show&id=716
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UNIT 2 MARKETING
Price:
579
STRATEGIES
Marketing has traditionally been about the ‘Four
Ps’ (product, price, promotion, place), but it
Y
has become increasingly common to talk about
Strategies on marketing
three additional ‘Ps’ of marketing - people,
Syllabus point:
processes, and physical evidence.
People, Processes, Physical evidence
These are particularly relevant for the marketing
of services, and marketers sometimes talk
about the ‘Seven Ps’ of services marketing the traditional four, and these extra three.
(Services only)
‘Strong men eat global peas‘
7 PEAS
3 KEY SYLLABUS / EXAM DOT POINTS - The additional 3 Ps in services:
Additional three Ps for the service sector:
i. ii.
iii.
Physical evidence
People (reliable & experienced)
Processes
UNIT 2 MARKETING
Prompt for remembering:
580
Aim of the story The story Sir
=
Phil
=
Peter
=
Protest
=
To help you remember the additional Ps for a service
against
=
nothing
Rex
=
Reliable
Sir Phil & Peter protest against Rex
Services - the focus of the story
Physical evidence
People
Processes
T- REX
SIR PHIL
Physical Evidence - Marketing mix elements 5:
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STRATEGIES
y
\Definition of ‘Physical Evidence ’
m Physical evidence is a marketing strategy that involves giving potential customers
exposure to the actual product (as opposed to, for example, promotional material)
so that they can judge the product and be persuaded to purchase it.
Structure for:
Services
Services are not tangible products - this is what separates them from goods.
However, there are many physical aspects associated with the provision
of services, such as the location and the tools used. Customers make
judgements about the service based on these aspects. They are called
physical evidence.
‘Sir Phil & Peter
protest against
Rex’
Issue:
Physical
evidence:
Imagine you are choosing a restaurant for dinner, and there are two
candidates next to each other. You’ve never eaten at either, so don’t know
what the food is like.
One restaurant is neat and clean, with clean floors, soft lights, crisp white
tablecloths, and tasteful artwork on the walls. The second one has shabby
tables, bright fluorescent lights, peeling orange and green wallpaper from
the 1970s, and unswept floors. The food at the second restaurant might
actually be amazing, but based on the physical evidence you are likely to
choose the first one.
The physical evidence associated with services must be functionally
appropriate for the provision of the service - restaurants should be clean
and tidy so that food can be served safely. It can also be presented in ways
that entice customers - the pleasant ambiance of a restaurant can become
a feature that attracts customers.
Physical evidence includes the whole range of physical aspects associated
with services. This includes the location in which the services are provided,
signage, brochures and advertisements, business cards, furniture and fixtures,
tools, receipts, invoices, and so on. Customer decisions are influenced by
the whole range of physical aspects - they influence how the business and
service is perceived.
People - Marketing mix elements 6:
Definition of ‘People’
y
m
One of the most important strategies for marketing services is selecting the right
people and instructing them properly.
Structure for:
Services
Additional point for the exams:
Issue:
People:
m They must have the ability to perform the service, and they must also leave a good
impression on the customers. The provision of services usually involves interaction
between customers and the people providing the service, so the impression they
give has a big impact on how the business is perceived.
‘Sir Phil & Peter
protest against
Rex’
The people involved are important to any product (the quality of a good
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UNIT 2 MARKETING
Physical evidence is in some ways similar to the packaging of goods. It
must meet customer expectations and can also be a way to promote the
product.
581
STRATEGIES
or service depends on the ability of the business’s human resources), but
they are especially important in the marketing of services. Customers make
judgements about the service and business based on their impressions of
the people involved. Imagine you are dining in a restaurant.
The food is very tasty and is brought out to you in a timely manner, but the
staff are sloppily dressed, impolite, can’t answer your questions about the
menu, and you need to repeat your order three times before they finally
remember it. You are likely to have a negative impression of the restaurant
and would hesitate to go back or recommend it to your friends, despite the
fact that its core service (the serving of food) was done well.
The staff involved in services must have the appropriate personal attributes
and training for the job. They need to be good at dealing with people and
knowledgeable about the business and product - not to mention good at
the service itself. The business may need to impose minimum appearance
standards, such as a dress code or a uniform, to improve the professional
appearance of staff. This is an example of how the human resources and
marketing functions are interdependent, as human resources is responsible
for hiring and training staff. Marketers must clearly convey their staffing
needs to human resource managers.
UNIT 2 MARKETING
Processes - Marketing mix elements 7: Definition of ‘Processes’
An important strategy for marketing services involves implementing effective
processes to allow the business to provide the service in a way that best suits the
customer’s needs.
m It is not enough for the business to perform the service well. For example, it must
be able to provide it in a time frame and location that meets the customer’s needs.
m
Processes refer to the systems (processes) used to deliver a service. This
is not just an operations issue, but a marketing issue, as customers judge
the business on how efficient and customer-friendly these processes are.
Marketers must strive to ensure that there are processes in place to allow
services to be provided to customers in a timely fashion, and to consult
customers where appropriate.
y
Structure for:
Services
Issue:
Processes:
‘Sir Phil & Peter
protest against
Rex’
Cast your imagination once again to the restaurant scenario. If you are left
waiting half an hour for the next course of your meal, or you have to wait
while others’ meals have already been delivered, you are likely to be annoyed.
Similarly, you may have ordered several dishes, expecting that some will be
brought out as entrees, to be followed by mains, but the restaurant brought
out all the dishes at once. Again, you are likely to form an unfavourable
impression. The restaurant must work on developing processes that allows it
to deliver the service in a way that meets the customer’s needs. This might
mean working out a more efficient way for the kitchen to handle orders, and
asking customers about the order in which dishes should be brought out.
Specialised marketing strategies:
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Definition of ‘Global marketing ’
Global marketing is the process of marketing a product that is sold around the
world. Conditions are different in different markets around the world, so marketers
must reassess the marketing strategy that is used.
m
STRATEGIES
E-marketing - Specialised strategy 1: Businesses are increasingly choosing to expand globally by selling their
products in foreign markets. This has become
Y
more possible for many businesses because
Strategies on marketing
of globalisation.
Technological advances in areas such as
transport and information and communications
has made global business easier, and
governments have reduced political/economic
barriers such as tariffs.
Syllabus point:
Global marketing
‘Strong men eat global peas‘
3 KEY SYLLABUS / EXAM DOT POINTS - Global marketing issues:
Key points to memorise Global marketing strategies:
i. Global branding
ii.Standardisation vs customisation
iii.Global pricing
iv.Competitive positioning
Prompt for remembering - Global marketing issues
Aim of the story To help you remember the
special global strategies
The story Mars
=
On Mars they brand Stan with a
pricey custard pie
Global marketing
they
=
nothing
Brand
Stan
=
=
Branding - global
Standardisation
with a
=
nothing
Pricey
Custard
Pie
=
=
=
Price
Customisation
Positioning - competitive
Creative Classroom
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‘Stop
branding
me with a
custard
pie!’
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UNIT 2 MARKETING
From a marketing perspective, global business offers exciting opportunities
but also important challenges. Markets around the world may vary considerably
from the domestic market - for example, there may be different government
regulations, economic conditions, and cultural tastes, preferences, and values.
Marketers must decide how they will deal with these differences in the marketing
mix.
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STRATEGIES
Global branding - Global strategy 1:
y
Definition of ‘Global branding’
Global branding refers to the strategic decisions that must be made about
managing and developing a brand when a product is sold around the world.
m
Marketers have to make strategic decisions about how brands will be
developed for foreign markets. Broadly, the choice is between using global
branding - a uniform brand all around the world - or giving the product a
different brand (a different name, logo, and so on) in other countries.
Structure for:
Global marketing
Issue:
Global brand:
‘On Mars they
brand Stan with
a pricey custard
pie’
A global brand can be one of the most valuable assets for a business. Apart
from the fact that it saves on costs associated with rebranding (creative
design, printing new packaging, and so on), a brand that is recognised all
around the world is very powerful and helps the business in every market.
UNIT 2 MARKETING
Many of the most successful businesses in the world own global brands,
such as McDonalds, Coca-Cola, Microsoft, Apple, and Nike. A global brand
can add prestige to the product and reassure customers about its quality,
which can boost the business’ reputation not just in new markets, but in its
original markets too.
Example: McDonalds - When people travel to new places on holidays they
might be nervous about eating the local food because they don’t know what
it tastes like and which restaurants are best. They may avoid the local fast
food chains, but would be happy to eat at McDonalds. McDonalds is a
global brand and its status gives people confidence that they can expect
food of consistent quality and taste anywhere in the world.
A global branding strategy isn’t always the best approach, though. There
may be practical hurdles.
Cultural or linguistic differences, for example, might make a certain brand
name inappropriate in certain countries, or a local business may already be
using a similar brand name, legally preventing the business from implementing
global branding. Moreover, it may be a strategic decision as the product may
occupy different positions in various markets.
Example: In the domestic market the product might have a luxury or highend image, whereas in an overseas market it may be positioned more as a
mid-level product.
Using one brand name around the world would be confusing to customers
and potentially detrimental to the business because the product doesn’t
have a consistent image in all markets. Different brands can be used in
different countries to develop independent identities for the products.
Recounting a question to clarify a Business Studies issue!
Q A
&
Question to: Kerry O’Brien, ABC
Question: ‘Why would a business go to the trouble of trying to develop a global
brand when many businesses are quite prepared to steal their intellectual property, with
the only way to protect their global brand being very expensive litigation?’
Asked by:
Adrian Yap - Equal 10th in the State in 3 Unit Economics, 1998
584
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Definition of ‘Customisation’
Customisation is the strategy of tailoring the marketing mix for a product sold
around the world to individual markets.
m
Definition of ‘Standardisation’
Standardisation is the strategy of using the same marketing mix for a product in
different markets around the world.
m It has the benefit of being cheaper and simpler to implement, and may help build
a global brand.
m
Marketers must decide whether the exact same product is sold everywhere
around the world or whether the product design is tweaked for local conditions.
Standardisation is an attractive strategy because it saves money. Adapting
products takes time and money as they must be redesigned, and operations
must make different batches of goods. On the other hand, standardisation
helps the business maximise economies of scale - by producing the one
product in greater volumes it can reduce per unit costs, such as by buying
materials in bulk and increasing the specialisation of production tasks.
Structure for:
Global marketing
Issue:
Standardisation /
customisation:
‘On Mars they
brand Stan with
a pricey custard
pie’
Standardisation also means that the same packaging design can be used
for all markets. However, it is often necessary to customise products for
local markets. This may be necessary because of different government laws
(such as safety standards), standard practices (such as electricity voltage
and socket designs) or because of cultural sensitivities or taboos. Judaism
and Islam, for example, prohibit the consumption of pork, so food products
would have to be customised to remove pork content for markets with large
Jewish or Muslim populations.
It is often a good idea for businesses to customise goods to take into account
local tastes and preferences. Marketing is all about satisfying customers,
after all, and customer demands vary from market to market. Market research
might show, for example, that Australian customers prefer umbrellas with a
curved ‘J’ handle, whereas Britons prefer a straight handle.
In this case, an Australian umbrella manufacturer looking to expand to the
UK would probably be well-advised to customise its umbrella design to suit
British tastes. It will cost money in the short term to redesign, but should
prove profitable in the long term because it better meets the wants and needs
of customers.
Global pricing - Global strategy 3:
y
Definition of ‘ Price - global’
One of the main decisions that must be made in global marketing is whether a
uniform or customised pricing strategy is used.
m
Marketers may decide to use a uniform pricing strategy around the world, or
tailor prices for each market.
Using one standard price across all markets has the benefit of simplicity
and may help develop a consistent global brand image. If a product is
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STRATEGIES
y
Structure for:
Global marketing
Issue: Price
‘On Mars they
brand Stan with
a pricey custard
pie’
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UNIT 2 MARKETING
Standardisation vs Customisation - Global strategy 2: t
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STRATEGIES
a heavily discounted loss leader in one market and priced at a premium
level in another, customers may become confused or annoyed. The rise of
e-commerce means that customers can often compare prices across global
markets, and even buy the cheaper version from overseas.
If a uniform price is used, though, marketers have to decide how often it is
updated to reflect exchange rate fluctuations. An American business, for
example, might sell its product in the US for US$5. Using a global uniform
price, it might have set the Australian price as AU$10 when the Australian
dollar was worth only 50 US cents. If the Australian dollar then rises to parity
with the US dollar, though, and the business does not adjust the price,
Australian customers might feel disgruntled about paying effectively twice
as much as their American counterparts.
UNIT 2 MARKETING
It often makes sense for businesses to use different pricing strategies in
different markets. For one thing, the costs of production, transport, and
promotion are likely to be different. The product may occupy a different
position in the market, and different strategies may be appropriate based
on market conditions. The product may have a large market share in one
market, for example, making a price skimming strategy viable. It might only
have a small share of another market, so a penetration pricing strategy
might be needed to boost market share.
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Additional Contemporary issues/Case studies
Focus: Global pricing
Global corporations must also ensure that they adhere to the laws of foreign
countries. For instance, in 2006 the US Department of Justice fined Qantas
A$70 million for being involved in price fixing in the US on freight charges.
Qantas’ fine was a fraction of the fines imposed on British Airways and Korean
Airways. The fine for price fixing in the US for these other airlines was A$340
million.
http://www.theage.com.au/business/airlines-told-to-cooperate-in-accc-pricefixing-case-200904029l7z.html
Positioning competitively - Global strategy 4:
y
Definition of ‘Positioning competitively (globally)’
m When marketing globally, the business must decide whether to change its strategy
relating to the competitive positioning of the product in global markets.
m Markets around the world will always be different to the domestic market - with,
for example, different competitors, cultural factors, and regulations. An effective
marketing strategy will take these factors into account and alter the competitive
positioning of the product accordingly.
Structure for:
Global marketing
Issue: Positioning
‘On Mars they
brand Stan with
a pricey custard
pie’
One theme that runs through the previous sections is that marketers may
have to adapt the marketing mix because the product might be positioned
differently in various international markets. A marketer’s job might be easier
if the product occupied the same position in each market, and this is also
useful for helping to consistently meet certain customer expectations, but this
is often not possible.
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STRATEGIES
It may be possible to position a product in the same way in some international
markets, particularly if they are economically similar. However, it is often
necessary to make adjustments to competitive positioning because each
market is likely to be different in a number of ways.
Customers, for example, may have different ideas about what ‘quality’
means, based on cultural or material factors, so that a product positioned at
the ‘luxury’ end of the market in Australia might not qualify for the ‘luxury’
end of the French market.
Moreover, the product may have to be repositioned to take into consideration
local competition. What was a niche in the market in Australia may already
be filled by several companies in Germany, so marketers might need to look
for a different gap to fill. Repositioning a product often means changing
promotional strategies, altering prices, redesigning packaging, and perhaps
even customising the core product itself.
e
e
Contemporary issues - Syllabus requirement
Focus: Impact of globalisation on marketing
Globalisation has had a significant effect on the marketing and operations
strategies of many businesses, including the famous sports company Adidas.
In line with its major competitors, including Nike, Adidas has looked
to capitalise on the advantages of globalistaion by adopting a global
perspective for its marketing strategy.
Exam tip!
Information in this
contemporary
example might
be relevant
for ‘Section
3:Business Report’
of the HSC/Trial
papers
Global sourcing and outsourcing are widely used by Adidas, indeed the company that has its
roots in Germany today sources materials and outsources production to companies across the
world, from Asian countries such as Indonesia and Vietnam to Turkey in more recent times.
From a logistics perspective, Adidas has looked to use fewer warehouses to serve a larger
number of countries. For instance, Adidas originally had four different warehouses for its
Northern European operations, serving retailers in the UK, Ireland and Benelux.
In order to reap the benefits of economies of scale, Adidas merged these four warehouses into
one £20 million automated site in Trafford Park, Manchester. The convergence of consumer
tastes worldwide and improvements in technology and transportation have allowed such
mergers of warehouses.
With global distribution companies allowing products to be efficiently transported anywhere in
the world, Adidas has also embraced e-commerce with its product now available for purchase
across the globe over the World Wide Web.
http://www.logisticsmanager.com/Articles/13293/adidas+invests+20m+to+automate+Trafford+site.html
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UNIT 2 MARKETING
In Australia, for example, many European cars are positioned as prestigious,
partly because they are expensive and because of a certain ‘image’ attached
to European goods. In Europe, though, where these cars are made, many
of them don’t have the same luxury tag as they are cheaper and more
commonplace. These kinds of differences are particularly likely between richer
and poorer nations. In most advanced countries, for example, McDonald’s
has the same competitive positioning - at the ‘budget’ end of the market.
In poorer countries, though, it may be viewed as more prestigious as fewer
people can afford to eat there and it is a symbol of Western advancement or
decadence that people may aspire to.
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STRATEGIES
E-marketing - Specialised marketing strategy 2:
Definition of ‘E-marketing’
E-marketing is the strategy of marketing over the internet.
Marketing online presents new opportunities to reach potential customers, but
the attributes of the internet also present new challenges and decisions to be made
about each element of the marketing mix.
m
m
The internet has transformed commerce in a
variety of ways, and marketing has been heavily
affected. Virtually all aspects of the marketing
mix have been impacted in some way by the
internet. E-marketing refers to the strategic use
of the internet to perform marketing functions.
Y
Strategies on marketing
Syllabus point:
E-marketing
‘Strong men eat global peas‘
Competitive approaches:
The growth of online shopping has opened up
new ways to segment the market. It may allow
businesses to target markets they had previously
been unable to reach - because of distance, for
example, or because these customers were previously less likely to visit
physical shops. There are many different types of customers that shop online
of course, but online shoppers may constitute a new group of customers for
the business to target that appreciate the convenience and cost-savings of
e-commerce. Businesses can also develop a competitive advantage based
on its superior web services.
UNIT 2 MARKETING
7 PEAS
588
Product - E-marketing element 1: ducts
The internet can be used to develop a brand because of its wide reach.
Marketers may use the internet to help develop a uniform brand image
across many markets, especially internationally. Businesses increasingly
also develop ‘online only’ versions of products to attract a particular target
market - generally younger and more tech-savvy. For example, Apple’s online
music store, the iTunes Store, routinely offers versions of albums featuring
bonus tracks not available on any of the physical CDs.
Pricing - E-marketing element 2: products
Pricing strategies have evolved to take into consideration the internet. Online
stores are cheaper for businesses than physical stores (fewer staff, no rent,
and so on), so one business might offer cheaper prices in its online store
compared to its physical outlets.
This can be seen as a form of strategic price discrimination, as different
types of customers are likely to use online or physical stores. This also
raises some ethical concerns, though, as customers may feel disgruntled or
deceived about seeing one price on the store’s webpage but being charged
a higher price when they visit the physical store to buy the product.
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However, the popularity of websites that aggregate search results for online
shops, allowing customers to compare prices from many businesses at once,
makes this more difficult. Customers are less likely to simply ‘browse’ one
shop and make a decision because they can quickly and easily hunt for the
lowest price on the web.
Promotion - E-marketing element 3:roducts
STRATEGIES
The internet also poses some unique challenges in terms of pricing.
Marketers may wish to use traditional strategies, such as loss leaders, in the
online world.
However, at this stage online promotions should be used carefully and only
to supplement traditional promotional activities. For example, internet ads
are cheap but are also much less effective than traditional advertising as
they are easily ignored, and some strategies such as popup ads and ‘spam’
emails may actually drive customers away. E-marketing also reduces the
personal aspect of selling, which may make it more difficult to persuade
customers.
Place/Distribution - E-marketing element 4:
The internet offers businesses new ways to distribute products to customers.
Firstly, it allows existing distribution channels to be managed more
efficiently. Electronic and online systems can make communication and
ordering processes between producers and intermediaries easier and more
efficient.
Secondly, it reduces producers’ reliance on intermediaries, giving more
opportunities for direct selling. It is difficult and costly for a producer to set up
lots of physical stores to sell directly for customers, but it is quite cheap and
easy to set up one website through which customers can place orders directly
with the producer. However, this must be managed carefully, as producers
may still want their products to be sold by intermediaries, and intermediaries
may resent the producer undercutting their prices through a website.
Other Ps - E-marketing element 5-7: products
The internet also helps in the marketing of services. The internet can be
used to make delivery processes more efficient. For example, customers
may order services at any time that is convenient, and various parts of the
business may be able to communicate more efficiently, allowing the service
to be provided more quickly.
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UNIT 2 MARKETING
E-marketing offers many opportunities for promotion, as it is a cheaper
way to distribute promotional material. For example, advertising space can
be bought on many websites at a fraction of the cost of a TV or radio ad,
discount coupons are commonly distributed through the internet, customers
can be emailed, and public relations strategies increasingly try to utilise
social media websites such as Facebook, YouTube, and Twitter to generate
publicity and word of mouth.
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STRATEGIES
Websites are also an example of physical evidence, and businesses must
pay particular attention to website design if they plan to use e-marketing.
A professionally-designed website that is easy to navigate will leave a good
impression on customers. On the other hand, a sloppy, incomplete website
that is difficult to use will frustrate customers and make the business appear
cheap and untrustworthy.
Additional Contemporary issues/Case studies
Focus: E-marketing
of the internet in recent years, many companies have begun to use webWith the growth
based advertising.
Google Adwords is popular way of doing this for many organisations, from Flight Centre to
The Good Guys.
Google Adwords is responsible for the ads that come on the side of your Google page when
you make a search. For instance, if you google ‘travel’ or anything related to travel you
will most likely get an ad for Flight Centre on the side of your page. The internet has also
allowed many companies to reduce their number of distribution channels.
For instance, Bloomsbury Publishing Company, the publisher behind Harry Potter, once could
only sell its books through retailers such as Borders. Today, Bloomsbury can still do this but
it can also sell products through its own website, giving it the option to either increase its
profits margins or pass on lower prices to consumers due to the removal of an intermediary.
UNIT 2 MARKETING
http://www.bhatt.id.au/blog/danny-rand-discover-flightcentre-possible-blackhat-cloaking-smx-sydney-day-2/
3
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EXAMINATION FOCUS - E-marketing & globalisation:
1. 1a.
1b.
•
•
•
• 5
Short answer and multiple choice questions:
Memorise the definitions that are found in the text boxes.
Answer the following questions.
Describe the global marketing approach.
6 lines/QPI = 4
Identify and describe two global marketing strategies.
8 lines/QPI = 7
Evaluate the importance of global branding. 6 lines/QPI = 4
Describe the differences between marketing a product and a service. 8 lines/QPI =
• Describe the importance of physical evidence when marketing a service. 6 lines/
QPI = 4
2. Preparing for extended response questions:
•
Describe the methods of e-marketing.
QPI = 5
•
Describe the impact of globalisation on marketing.
QPI = 5
b
The ‘Question Possibility Index’ (QPI) - See page 105 for details.
3. Key points to remember in the examinations:
Prices, methods of promotion, distribution channels, and even the product itself often need
to be changed because buyers and sellers interact differently online differently than they do in
traditional exchanges.
m
A uniform pricing strategy involves setting one price level for every country. This is the easiest
method to use, but has many drawbacks.
m
A customised pricing strategy involves setting a different price for each market. This takes
extra research, but can better take account of local market conditions and different costs of
production that arise from operating in different parts of the world.
m
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STRATEGIES
Case studies - Syllabus requirement
e e
Exam tip!
Focus: Effects of globalisation on marketing management - McDonalds
Information in this
Standardisation
Global
marketing: Vs Customisation: f the
case study might
McDonalds
is a‘Customisation’
truly global business with more than 31 000 stores spanning
Definition of
be relevant for
‘Section 4: Extended
m Customisation
over
119 countriesis. the
http://www.mcdonalds.ca/en/aboutus/marketing.aspx
strategy of tailoring the marketing mix for a product sold
Itaround
has become
one
of the iconic
companies synonymous with globalisation response’ of the
the world
to individual
markets.
HSC/Trial papers
m Customisation
due
largely to its highly
global
takes effective
more time
and marketing.
effort than standardisation but is usually
necessary because cultural, economic, social, and political factors differ from
Global
country branding:
to country
McDonalds
the same name, famous golden arch logo and slogan ‘I’m Lovin’
Definition uses
of ‘Standardisation’
It’
worldwide. This strategy has been effective for McDonalds. This approach
m Standardisation is the strategy of using the same marketing mix is used for a
has
giveninthe
company
a consistent
global
image. As a result, ‘McDonalds’ is
product
different
markets
around the
world.
today one of the most recognisable brand names in the world.
Additional points for the exams:
m It has the benefit of being cheaper and simpler to implement, and may help build
Standardisation:
McDonalds
is a company that has achieved remarkable success through
a global brand.
m In many cases
standardising
mostdiffering
of its products
cultural,worldwide.
economic, social, and political factors make
Harvard
Professor
James L or
Watson
observed that even in China “little
standardisation
inappropriate
impossible
emperors and empresses...were downing burgers, fries, and Cokes.”
Professor Waston even argues in his book, Golden Arches East: McDonalds in
East Asia, that McDonalds’ global success resides largely in its standardised
French fries that are “consumed with great gusto by Muslims, Jews, Christians,
Buddhists,
Hindus, vegetarians, communists, Tories, marathoners, and
armchair athletes”. http://www.brandchannel.com/features_effect.asp?pf_id=261
Hence, McDonalds achieved global acceptance through selling products that
focused on consumer preferences.
Customisation:
While McDonalds generally embraces standardisation, it still undertakes
customisation to some extent.
For instance, the quantity of a McDonalds meal varies. A large fries in the US is
substantially larger than a large fries in Australia. This reflects US consumers
preference for ‘supersized’ meals. Hence, to ensure customer satisfaction,
McDonalds will adapt products to local preferences to some extent.
Global
pricing:
‘
If McDonalds used standardised global pricing then the prices of all its products,
when
expressed in the same currency, would be the same worldwide. However,
‘
as shown by the famous ‘Big Mac Index’ compiled by The Economist, this is
not the case. For instance, according to the 2010 Big Mac Index, a Big Mac in
Sir Lanka cost just $US1.86 whereas a Big Mac in Switzerland costs $US6.20
. http://www.economist.com/node/16646178?story_id=16646178
This
reflects
a number
of products
factors. For
Price
- global
: f the
example, input costs such as the cost
of labour would be lower in Sir Lanka than Switzerland, meaning it would be
substantially cheaper for McDonalds to produce Big Macs in Sir Lanka.
Also, $US6.20 would still be considered relatively cheap in Switzerland where
a main meal at an average restaurant typically costs around $US30 ; however,
$US6.20 would not be perceived as cheap in Sir Lanka. If global pricing was
used McDonalds it would not be able to maintain its profit margin.
Hence, global pricing is not practical, as McDonalds must adapt to local factors
such as the cost of inputs and socioeconomic context.
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UNIT 2 MARKETING
http://www.foreignaffairs.com/articles/56052/james-l-watson/chinas-big-mac-attack
591
STRATEGIES
e Case studies - Syllabus requirement
Focus:
Analysis of a marketing plan - IMAX
e
SITUATIONAL ANALYSIS – SWOT, PRODUCT LIFE CYCLE:
SWOT:
Strengths:
The strength of the IMAX brand is its unique business – specifically its
giant screens with 3D capabilities.
The IMAX brand is identified globally and IMAX cinemas are generally
located in central city locations.
Exam tip!
Information in this
case study might
be relevant for
‘Section 4: Extended
response’ of the
HSC/Trial papers
Weaknesses:
Many of the films shown at IMAX have an education focus, which has limited
appeal beyond the educational market.
Opportunities:
IMAX could offer deals with businesses that are located near the theatres.
For example, IMAX could implement a deals with nearby cafés whereby a
meal could be combined with a ticket to the theatre.
IMAX could also increase the number of conventional movies.
Threats:
The most significant threat to IMAX is introduction of 3D movies in cinemas.
This reduces the unique nature of the product. This would mean that the
competitive edge is only the large screens.
UNIT 2 MARKETING
PRODUCT LIFE CYCLE:
IMAX is entering the stage of ‘decline’ in the product cycle.
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MARKET RESEARCH:
Primary research is conducted by IMAX to constantly obtain current
information on its target market.
IMAX uses surveys at the conclusion of the film to obtain additional primary
research. Targeted ‘focus groups’ are constantly used by the advertising
agency to assist in new campaigns.
http://www.imax.com.au/content/resources/Big%20Screen%20Business%20
2007.pdf
IMAX uses data from the ABS as a form of secondary research to assist in
the decision to geographically locate a new cinema.
ESTABLISHING MARKET OBJECTIVES:
Market share targets involving Australian cinema. The sales objectives are
the level of ticket sales, which translate into broader profit objectives.
IDENTIFYING TARGET MARKETS:
IMAX has 3 key target markets:
1) Tourists.
2) Families with young children under 15.
3) Single adults that are 25-34 years of age.
http://www.imax.com.au/content/resources/Big%20Scre.
http://www.imax.com.au/content/resources/Big%20Screen%20Business%202007.pdf
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Planning answers:
Using the case study on page 198, construct a plan for the following question.
Analyse a marketing plan of a product.
www.hscbusinessstudies.com
STRATEGIES
ROLE
For
information
click on
Section 2:more
Examining Business
Studies:
Identify key definitions:
Describe the benefits of e-marketing.
1.
2.
3.
Making paragraphs:
Answer the following question in point form:
Describe the importance of physical evidence when marketing a service.
© © Creative
Creative
Classroom
Classroom
UNIT 3
2 FINANCE
MARKETING
Prepare three key points that could be used to answer the following question:
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