HSC Business Studies Topic 3 Marketing
 Nature and role of Markets and Marketing
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Marketing is the process of planning and executing the conception, pricing, promotion and
distribution of ideas, goods and services to satisfy customers.
The Role of Marketing in the Firm and in Society
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Role in society: facilitates efficient decision making by consumers {providing information}
Role in business: helps them discover what customers want and how to produce according to
those wants.
Role of marketing at Billabong: the primary role is to attract new customers to the billabong brand.
Marketing also allows the company to maintain contact with its existing customers.
Types of Market
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Resource Markets
They provide the raw resources for the manufacturing process, e.g. aluminium for cans.
≥ Industrial Market
It is the sale of various products that form a part of another business’s production process.
≥ Intermediate Market
It is the sale of products to another business who will later sell the product to customers.
≥ Consumer Market
It is the sale of goods and services to consumers for personal or household consumption. It
can be categorised into:
 The Mass Market
This is when a business targets a mass market [usually the general public]. The
product will appeal to large and relatively homogeneous group, e.g. Coca-Cola
 The Niche Market
This is when the business targets small groups of people with SPECIFIC
characteristics. Sometimes, businesses will create a niche market for their product in
order to maintain exclusivity, which maintains high prices, high profit margins and
brand desirability.
Billabong is mainly operating in the consumer market, within a niche surfwear and skatewear
markets, while also exposing its products to a broader mass audience.
Production-Selling-Market Orientation
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Production Orientation
 Industrial revolution saw demand for products exceed this production capabilities of
many business
 Marketing consisted of simply taking orders and delivering products. [little or no
concern for customers preferences]
 Business was production-orientated.
Selling Orientation
 After WW1, production became more efficient and productivity increased. [high
quality, mass produced products came on to the market and competition increased.]
 Businesses developed a new marketing approach Selling orientated.
 Change in focus created the notion of one-way communication with customers
(businesscustomers)
 Marketing departments took a more dominant role in the organisationadvertising
increased.
Marketing Orientation
 Began with the economic boom after WW2
 Most Australian families had discretionary income [more than needed]
 Producers had to learn to satisfy wants as well as needsemphasis shifted to
development of marketing concept.
 Marketing evolved as a two-way communication process (business to consumer to
business).
The Marketing Concept
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The marketing concept is the idea that customer satisfaction is the KEY GOAL of business
operations.
≥ Customer Orientation
It focuses a business on delivering products to consumers in a way that maximises the
satisfaction they gain from purchasing the product and dealing with the business. [2 way
communication]
≥ Relationship Marketing [focus on building a relationship with customer]
It is the focus on encouraging repeat purchases and loyalty to the business by managing
customer relations, at the time of and after the initial purchase.
Billabong uses marketing strategies, such as sponsoring professional surging tournaments and music
tours, that are designed to strengthen the company’s relationships with its existing customers as
well as to attract new customers. These strategies helped billabong to develop a loyal customer base
and expand its sales in many markets.
Marketing Planning Process
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The marketing plan is a formal document that identifies all the business’s marketing
objectives and the strategies it intends to use to achieve these objectives.
The marketing planning process refers to the process of planning, organising and evaluating
the appropriate marketing strategies to ensure that customer not only knows about the
product but will also buy it.
 Elements of a Marketing Plan
Situational Analysis [Where is the business and the market now?]
 SWOT
Strengths: [ internal ]
- Areas in which the business holds a competitive advantage; positive factors that contribute
to the success of the business.
Weaknesses: [ internal ]
- Areas within the business that exhibit problems or disadvantage when compared to its
competitors.
Opportunities: [ external ]
- Potential growth opportunities that come from the external environment.
Threats: [ external ]
- Aspects of the external environment that could negatively influence the business.
Woolworths conducts a situational analysis and have the following results:
Strengths: excellent reputation, and brand strengths (Homebrand and Select)
Weaknesses: scale of operations can be slow to make change
Opportunities: global market opportunities exist in India, new sourcing opportunities in South- East
Asia.
Threats: social trends mean consumers are more critical of big business.
 Product Life Cycle
The product life cycle is the changing set of stages that a product passes through over time, with
the sales of the product differing between stages.
Introduction:
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Birth or launch stage of the product. The primary objective here is to build customer
awareness and trial.
Growth:
- Increased customer awareness, the business begins to experience significant sales increases
from repeat purchases.
Maturity:
- Demand for the product is now at its peak and there is strong product awareness and loyalty
among customers. [PLC2new product]
Decline:
- The product life cycle is waning and sales falls as consumers switch to new, more innovative
products. [managers focus on promoting PLC2new product]
In the early 1990s, billabong realised that its surfwear products were nearing the maturity stage
of their product life cycle. In order to boost sales growth in the future, the company expanded
into other markets, such as skatewear and snowboarding, that had greater growth potential.
Establishing Market Objectives
Market Objectives: the clear set of goals that help the business plan its marketing campaign.
 A business’s market objectives will need to be closely aligned with the business’s financial
objective.
 Market objectives need to be quantifiable and SMART.
 Possible market objectives are:
- Diversifying product base
- Increasing market share
- Expanding into new market
- Increasing size of existing markets
Billabong establishes its market objectives for its marketing strategies. They include broad goals,
such as expanding market share, increasing customer awareness or strengthening brand loyalty.
Billabong also set quantifiable targets for goals such as sales growth.
Identifying Target Market
Target Market is the specific market the product is aimed at.
There are two approaches:
1. The Total Market Approach
- When a firm chooses the total market for a particular product as its target
market. There is one type of product with little or no variation. The business will
product a single marketing mix and directs it at the entire market.
- Only limited in a number of situations
2. Market Segmentation Approach
This is when the total market is subdivided into groups of people. Marketers use four
main variables when segmenting the total market:
Demographic Factors:
- Defining the personal attributes of customers such as age, sex, education or
income.
Geographic Factors:
- Classifying where customers make purchases decisions, defined by variables
such as location and climate.
Psychographic Factors:
- Concerned with lifestyle characteristics, including the personality types of
customers and their perceived social class.
Behavioural Factors:
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Identifying the motivation behind customer purchase decisions and how they
make those decisions.
Billabong traditionally targeted young consumers who live active lifestyles and enjoy sports such as
surfing and skateboarding. However, many customers do not fit this description, therefore the
company must ensure that they do not alienate particular market segments.
Developing Marketing Strategies
 A marketing strategy is a plan that outlines how the business will use its resources to achieve
its objectives.
 Marketing strategies are manipulations of the marketing mix, aimed at specific target
markets.
 Four P’s : Price, Product, Place, Promotion.
Implementation, Monitoring and Controlling
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Implementation: process of putting the marketing strategies into operation.
Monitoring: means checking and observing the actual progress of the marketing plan. This
requires gathering information and report on any important changes, problems or
opportunities that arise during this stage.
Controlling: involves the comparison of planned performance against actual performance
and taking consecutive action to make sure the objectives are attained.
Developing a financial forecast
 A financial forecast predicts the cost, revenue and profits associated with a
particular plan.
 Any marketing strategy should be developed on a budgeted cost bases, thus
marketing department will be cautious when adjusting marketing plan.
 Most marketing strategies will produce tangible, measurable, financial results.
Comparing actual and planned results
3 key methods of comparing actual and planned results from markets:
1. Financial forecasting allows management to judge whether predicted levels of sales and
expenditures were accurate
2. Market Share information is a useful indicator of how well a business is performing
against its competitors. {sales may drop, but market share may go up}
3. Profitability goals can indicate the success of marketing strategies. An overall
assessment of how profit changes following the strategy will give a strong indication of
how successful they have been.
4. Other measures, e.g. brand awareness, brand recall, product preference and knowledge
of brand identity.
Revising the marketing strategy
 Monitoring the marketing plan may reveal a need for modification, thus changes to the
marketing mix may be necessary, e.g:
 Product: introducing new product, redesigning packaging
 Price: lowering price
 Promotion: increasing funding for promotion, increasing in training sales staff
 Place: changing distribution channels, updating transportation methods
 Business managers must constantly assess their product range with a view to
introducing new products, modifying existing ones or deleting “lame ducks”
Billabong implements its marketing strategies at the final stage. It monitors sales level and other
indicators at regular intervals in order t gauge the success of its strategies. If a strategy is not
achieving its planned outcomes, billabong must determine whether it is possible to revise the
strategy to achieve a better result.
 Market Research Process
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Market research is the process of collecting, recording and analysing information concerning
a specific marketing problem. It plays a significant role in gathering information and
determining factors that may influence the business. Market research increases the
likelihood of success by allowing for effective marketing decisions.
Steps:
1. Determining information needs
This will allow a more efficient and effective information search. Right questions can be
asked to customers, decreasing the amount of irrelevant information collected.
2. Data Collection
This involves collecting all relevant data using primary or secondary collection techniques.
Primary Research: research carried out by the business to find out the best way to meet
consumer needs and wants, e.g. survey, questionnaire..etc
Secondary Research: previously collected and processed information.
3. Data Analysis
This involves the process of analysing the primary or secondary research. Data is
transformed into results or diagrammatic presentations that both accurately and effectively
communicate the findings of the research.
4. Interpretation
This involves the ability of the user to effectively and efficiently read the findings without
bias. If data suggested that a particular strategy will not work, then they must not push, but
instead revise the strategy.
Billabong regularly conducts market research to determine customer impressions of its brands,
products and marketing strategies. Billabong uses primary data by carrying out questionnaires, and
secondary data from organisations such as the ABS.
 Customer and Buyer Behaviour
Types of Customers
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People and Households
People purchase goods and services for themselves, for their households, or for others they
interact with, such as relatives or friends.
Firms
 Purchase products as inputs into the production process {intermediate goods}
 Purchase final goods, such as furniture, office supplies, office space to allow the firm
to carry out its operations
 Purchase services, e.g. maintenance/outsourcing other services, which add to the
value chain of their products.
Educational institutions
Educational institutions produce products which facilitate their prime functioneducation.
However, they do not allow for a large degree of non-essential expenditure as budgets are
regulated through funding of government..etc.
Government
 Purchase goods and services to facilitate their operations.
 Purchase services, as in outsourcing services required to run the states, cities or
districts which they are responsible for. {projects, e.g. building bridge, requires
government funding}
Clubs and societies
They purchase products to allow the provision of services to their members.
Religious organisations
They operate mainly on funds from donations, but they still require products to facilitate the
administration of churches, temples, synagogues or other such religious houses.
The Buying Process
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The buying process analyses the steps involved in making consumer purchase decisions, and
the factors that influences these stages.
 Steps in the Buying Process:
1. Need Recognition
2. Information Search: can be done internally {knowledge}, or externally {brochures, shops}.
3. Preference: ranking of goods according to desirability
4. Purchase: if desired, then purchase, if not, then move down the rankings to another
brand.
5. Post-purchase Behaviour and Evaluation: opinion gained by customer at this stage will
feed back into the next buying cycle. This evaluation of satisfaction depends on the
product’s performance and any pre-purchase expectations.
 Buyers: people who purchase the product
 Users: people who use the product
This creates a dilemma: should they market to the users or the buyers? E.g. child
Factors Influencing Customer Choice
Main influences are:
 Psychological factors:
They are personal factors such as personality, self perception, personal motivators that
influence a customer’s buying decisions.
Abraham Maslow suggested a theory of human motivation that is based on a hierarchy of
needs.
1. Physiological needs, e.g. food, water shelter
2. Safety and security needs, e.g. protection, order, stability
3. Social needs, e.g. affection, friendship, belonging
4. Ego needs, e.g. prestige, status, self-respect
5. Self-actualisation, e.g. self-fulfilment
 Sociocultural Factors
They are social and cultural factors that affect the customer’s buying decisions.
 The idea of “conspicuous consumption”, is that rich people waste their money on
purchasing items solely to show off and exhibit their wealth.
 Sociocultural factors also encompass a person’s position in the family cycle, a
person’s purchase decisions will be heavily influenced by their family status, e.g.
married, unmarried..etc
 Economic Factors
- Can be considered as the most important factor as it relates to “money”. It
influences the ability of a consumer to purchase a product.
- Consumer expectations of the future also influence the purchase decisions of
customers, e.g. if economy slows down, there will be less job opportunities, thus
less income, thus consumers may start saving.
 Government
Governments influence purchase decisions by regulating businesses, distribution channels,
incomes and the economy as a whole. Governments can influence all aspect of the
marketing mix.
 Product: gov. can make some products illegal
 Price: gov. taxes influence price levels.
 Promotion: regulations governing television advertising content influences what
products consumers are exposed to, e.g. smokingnegative exposure
 Place: local gov. zoning regulations will determine if a particular intermediary can set
up in a particular area, restricting consumer access to some products.
Also, income tax rates on individuals, and redistributing income throughout the economy
has an effect on consumer’s abilty to make purchases
 Developing Marketing Strategies
Market Segmentation
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Market Segmentation: the process of identifying niche markets within a mass market.
Factors in which markets can be segmented includes:
Demographic Factors; age, sex, education and income.
Geographical Factors; location and climate
E- commerce offers benefits to businesses to overcome geographical limitations and reach
global markets.
3. Psychographic Factors; interests, beliefs, lifestyle and aspirations
4. Behavioural Factors; customer loyalty and purchase occasion
It is also concerned with the rate at which consumers use a given product, e.g. frequent
users or less-frequent users.
Billabong identified a niche market of people with psychographic factors, which is the people with
active lifestyles who enjoy sports.
Product/Service Differentiation
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Produce differentiation can be achieved by changing the look of the products, the way the
product operates, its quality or its image.
Services can be differentiated by fast and reliable delivery; after sales service; expert
installation and customer training; knowledge and experience of employees.
Product and Service
Products are the goods and services sold by a business
 Positioning
- Refers to the development of a product image as compared with the image of competing
products.
- The positioning of a product can be achieved through the product’s name, price, packaging,
styling, promotion and channels of distribution.
- Positioning Strategies can manipulate the rage of product attributes in the consumer’s mind:
1. Product users; emphasising the type of people that would use a product to create an
image in the mind of the consumer that they can relate to, or desire to emulate.
2. Product usage; creating an image of how the product could be used by them
3. Competition; openly positioning a product in relation to its competitors.
Billabong positions its product as high quality, cutting-edge, fashionable items. However, a product’s
positioning is determined by its customers, which is influenced by factors such as price, promotion
and place.
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Branding
Branding is the use of names, terms or symbols/designs to identify a product.
To be successful, a brand must:
Attract attention
Be memorable
Assist in communicating the position of the product
Be easily distinguishable from other competitors.
If consumers associate a certain level of quantity with a brand, it will: increase brand loyalty;
encourage repeat purchases, and it is able to be sold at a premium price.
From its earliest days, billabong has sought to establish a brand identity that represents its
heritage as an Australian surfwear company. Today, the billabong “wave” logo is widely
recognised throughout Australia.
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Packaging
Packaging helps preserve, inform, protect and promote the product; and plays a role of
branding; which creates an image in the customer’s mind.
Cost is a consideration; customers are prepared to pay a higher price for good quality
packaging, but there is a limit to customer’s tolerance.
Environmental degrading packaging must be avoided.
Governmental requirements need to be considered: ingredient disclosure; whether the
product meets Australian-made standards.
Question: does the packaging enhance the positioning of the product?
At Woolworths, most packaged goods will be stacked on supermarket shelves and package
designs must therefore accommodate this market need. Moreover, packaging should be
environmentally friendly.
Price
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Price is the amount of money a customer is prepared to offer in exchange for a product.
Setting a “correct price” may be difficult; too high lost sales; too low cheap/poor
quality impression
Pricing Methods:
 Cost-Plus Margin
- The business adds a profit margin to the cost of product per unit. This extra margin is
referred to as a marker.
 Market-Based
- Setting price according to the level of supply and demand
 Competition-based
- This is often used when there is a high degree of competition in the industry.
- A business can choose a price that is either below, equal to or above that of the competitors.
Billabong operates with a competition based pricing method and sets price with reference to those
of its competitors.
Pricing Strategies/Tactics
 Price Skimming
- A pricing strategy where the business sets the price at a relatively high level and then
reduces it over time in a market with little competition
- Used to create price exclusiveness or prestige pricing.
 Price Penetration
- A strategy used to gain large amounts of market share by offering very low prices compared
with competitors, may set a higher price at a later date.
- Problems of penetration pricing:
1. Customers get used to the low price, and it could create a backlash if the business later
increases prices to market rates.
2. The low prices could create an incorrect perception of low quality.
 Loss Leader Pricing
- A strategy used to eliminate the competition no matter the cost
- It sets price so low that it is making a loss. However, stores may use this strategy to bring
customers in and then make up this loss with the additional purchases in store on other
products.
 Price Points
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A strategy that uses a base price for a product with optional extras or variations of the
product costing extra.
Billabong rarely uses pricing strategies such as price skimming or loss leadership to raise its market
share. In the long term, such strategies could have a devastating impact on customer perceptions of
the quality of billabong’s products and on the desirability of its brand.
Price and Quality Interaction
- Usually, products of superior quality are sold at higher prices. This is due to the higher
manufacturing cost involved in producing them.
Promotion
- Promotion is the strategies used to draw the consumer to the product.
Elements of the Promotion Mix
 Personal Selling
- It is direct, spoken communication between a business and its potential consumers.
- It is an effective strategy because:
1. Flexibility of adapting the marketing mix to the customer’s requirements.
2. Establishing a relationship with a customer, thus create repeat business
3. Sales representative can leave with a sale.
- However, high costs involved.
 Advertising
- Gives people information about the product and attempts to alter their perceptions of the
product’s branding and positioning.
- Low cost per consumer contact
- When deciding which media to use; advertisers will consider:
 What target market they want to reach
 How often they want the target market to be exposed to the advertisement
 When they want to reach their market
 The most cost-effective method
 Below-the-Line Promotions
- Sales promotions using direct methods to induce customers to purchase the products; e.g.
free samples, discounts or coupons.
 Public Relations
- It is the business function concerned with improving the relationship between the business
and its markets. The objective of public relations is to improve the business’s image.
- It serves 2 purposes; free marketing toolpositive image; Damage controlPR can be used
to ensure right information is released to avoid negative image.
- E.g. holding press conference, product launches
Billabong establishes a range of below-the-line promotional campaigns, which raise customer
awareness of its products. Also, billabong sponsors a team of professional surfboarders and
skateboarders.
The Communication Process
- Marketers must be able to communicate clearly, efficiently and succinctly to their target
markets.
- Marketers can use channels to carry a massage, e.g. print and electronic media advertising.
- Any interference or distraction that affects any stages in the communication process is
referred to as noise, e.g. faulty printing, inappropriate language or images, jargon,
misinterpretations…etc.
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Feedback is then needed, but it may not be immediate
Opinion Leaders
An opinion leader is a person who influences others, e.g. actors, athletes, musicians..etc
Their opinions are respected and they are often sought out for advice.
Marketers use opinion leaders as information outlets for new products or to endorse an
existing one.
Word of Mouth
When people influence each other during conversations it is called word-of-mouth
communication.
This method is one which the marketer can use effectively.
However, marketers also need to be aware that a consumer will inform MORE of others of
any unfavourable experience.
Place/Distribution
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It is where customers make their purchase decisions; take final ownership of the product,
and also how the product gets to these locations.
Distribution Channels
It is the link between the producer/supplier and the customer.
There are 2 types of distribution: direct and indirect (intermediary involved)
Reasons for Intermediaries
They exist to move functions of distribution away from the manufacturers allowing them to
concentrate on their core purpose.
Increases efficiency, reduces the number of transactions and hassels.
Channel Choice including Intensive, Selective, Exclusive
Intensive:
Using all possible intermediary at stage
Selective:
Where restrictions are placed on the numbers of intermediary at different stages. E.g.
clothing
Exclusive:
Severely restrict the intermediaries involved in the distribution of the product.
Billabong has adopted a selective channel choice, selling its products through specialty surf and
skate shops, but generally avoiding department stores and discount outlets. This strategy allows
Billabong to sell its products through a wide distribution network while reinforcing its image as a
serious manufacturer of surfwear and skatewear.
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Physical Distribution Issues including Transport, Warehousing, Inventory
Transport:
Different forms of transports will each have different advantages and disadvantages; one
form of transport might be cheaper, but take longer or less safe.
Additional costs may be required, for insurance, administration costs…etc
Warehousing:
Businesses must decide where to store their goods, how to store them and how to organise
them when they need to be moved.
If the warehouse is a long way from customers this will also increase the transport costs;
customers may be forced to wait.
Locating warehousing overseas? Close to customer or retailer?
Inventory:
Keeping inventory levels low.
Businesses must balance the desire to minimise storage costs and the loss of each reserves
with the costs associated with relying on inventory systems such as Just-in-Time.
Billabong manufactures products in more than a dozen countries throughout the world,
resulting in a complex chain of transport and inventory links. In 2003, the company experienced
slow sales in Europe due to difficulties in introducing a new warehousing system in that region.
Environmental Effects on Distribution
- Technological advances leads to increased efficiency, convenience…etc.
- Growth of internet removed the need for intermediaries to exist.
- Local governments: land zoning regulations and building codes; influencing distribution
channels.
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Ethical and Legal Aspects
Dishonest or unethical marketing managers ultimately drive customers away.
There are some criticism of marketing practices including:
1. High advertising costs are passed on to customers in higher prices
2. Advertising wastes resources
3. Creating false needs
4. Encouraging people to be more materialistic
5. Desire to make money overrides ethical considerations
Environmentally Responsible Products
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Business can damage the environment in 2 ways:
1. By depleting natural resources in production
2. By creating products or packing that is not environmentally friendly.
There is an increasing trend towards using renewable sources or power that are
environmentally friendly; e.g. solar power, wind powergovernment acting by offering
rebates for the use or installation of these products.
Businesses are using recycled inputs and creating packaging that is biodegradable, e.g.
Maccas from polystyrene burger boxeswaxed paper
Increasing awareness of demand for environmentally responsible products, e.g. hybrid cars,
body shop “no testing on animals”
Other Issues
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Creation of Needs
Use of advertising creates false needs.
Some European countries have placed strict limitations on children advertising aimed at
avoiding problems: children sees toysnag mummum buys.
Impulse purchases occurs when business lowers their prices and creates an urgency for the
purchase by setting some TIME LIMIT on the discounted price.
Impacts of retail developments
Growth in retail accessibility has increased pressures on consumers to make purchases.
Convenience in shopping centres means a decline in smaller shops businesses.
Also, it creates debtcredit cards debt due to excessive shopping.
Sugging
It is the process of selling under the guise of research
Salesperson approaches customer for an “interview”, yet pressures customer to buy the
product.
Role of Consumer Laws in Dealing with:
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Consumer laws protect customers from a range of unethical business practices.
Sale of Goods Act 1923 (NSW)
Trade Practices Act 1974 (Cth) administered by ACCC (Australian Competition and
Consumer Commission)
Deceptive and Misleading advertising
It is the use of untrue statements by businesses when selling their products.
Price discrimination
It is the act of charging different prices for the same product to different people.
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However, there are some exceptions, e.g. students, pensioners and war veterans receive a
number of discounts which others are unable to access.
Implied conditions warranties
An Implied condition of sale is a condition that is “expected” of the sale product. It must be
of “merchantable quality” [to be in condition reasonable for its price and condition] and be
“fit for its purpose” [product must exhibit all characteristics it is advertised with, and be able
to reasonably perform its intended duty].
Implied warranty governs any defect that is the fault of the manufacturer or seller of the
product.
Resale price maintenance
It occurs when the supplier of a product tells the retailer that the business must sell their
product for a particular price. This is illegal.
Hutchison works hard to strike a balance between providing a service people use everyday
and delivering the best possible infrastructure solutions, while protecting local amenities as
much as possible and with the least possible disturbance.