TOPIC1: INTRODUCTION TO MARKETINGStudy unit 1: The nature of marketing1. The Nature of Marketing

1.1.Marketing

‘Marketing is the process of planning and executing the conception, pricing, marketing communication and distribution of ideas, products and services to create exchanges that satisfy individual and organisational goals”

Marketing encompasses a set of processes for creating, Communicating, Delivering value to customers in a mutual beneficial relationship between organisation and all stakeholders

Marketing deals with the offering of products or services – thus an exchange needs to happen – between the place of production & place of consumption

1.2.Exchange and MarketingExchange is someone is prepared to offer something up to receive something in return (satisfy a need)

For exchange to take place there must be:

1. Two parties2. Each party must have something the other values3. Each party must be able to communicate with the other party and deliver the goods or services sought by the other4. Each party must be free to accept or reject the other’s offer5. Each party must want to deal with the other party

1.3.Gaps between production and consumptionThere are 5 types of Gaps

Space gap – geographical distances between manufacturer and consumer Time gap – time difference between when product produced and when it’s consumed (apples all year round) Information gap – Customers must be aware of a product to develop a need for it e.g medication Ownership gap – Customer can take possession of a good or service before they have fully paid for it e.g. bank Value gap – value attached by buyer and seller must be the same, an acceptable exchange rate

Retail also contains two more gaps: (study guide)

Assortment gap – producers act according to economies of scale, but customers want assortment, therefore retailed purchase from multiple producers to supply assortment to customers

Quantity gap – Consumers want to buy small amounts of products due to limited storage space and funds, but producers/wholesalers sell cheapest in bulk thus retailers perform ‘break-in-bulk’ activities for consumers

Gaps are covered by 3 main kind of intermediaries

Middlemen: are directly involved in taking title 01 products which are later sold to others. Sales Intermediaries: are agents who do not take title of products they sell. 1 hey provide and are paid for services

to facilitate the sales process. Auxiliary Enterprises: - not involved in transfer of title but provide support services to help the selling process

2. Marketing ActivitiesMarketing activities can be defined: activities used to transfer the market offering to the buyer. They are:Primary , Auxiliary & exchange Activities

Primary marketing Activity is Transport

Exchange marketing activities are buying and selling. Ownership is transferred. Buying is not regarded as marketing activity but selling is.

Auxiliary marketing Activities include:

o Sourcing and Supply information – seller must know who and where the buyers are. Info obtained by marketing research. Seller can supply info by using market communication methods like Advertising and personal selling

o Standardisation & Grading – products must be designed to conform to specific norms/standards

o Storage – . This is an activity that closes the time gap.o Financing – Costs which are incurred in the transfer of products and services from

sellers to buyers must be financed - usually by banks and other financial institutions.o Risk Taking – , The owner of the product is exposed to certain risks, such as arson or

theft. and can take out insurance as a form of protection against them.

3. Defining Marketing

‘Marketing is the process of planning and executing the conception, pricing, marketing communication and distribution of ideas, products and services to create exchanges that satisfy individual and organisational goals” Marketing is thus:

Anticipating & satisfying consumer needs. By means of mutually beneficial exchange process and Doing it more profitably & effectively than competitors through a efficient managerial process

4. Retailing in South Africa (study guide)

Retailer, definition: a business that sells 50% or more of its good’s to the general public for private or household consumption.

5.

Study unit 2: Orientation to markets1. Orientation to markets

There are 4 common marketing orientations: Production Sales Marketing Societal marketing

1.1.Production orientationFocus on internal capabilities of the business, does not consider if the product meets the need of the market placeOrganisational belief that consumers will select the products that are available, and therefore an organisation should focus on improving its production efficiency. A retailer focuses on the internal capabilities of the organisation rather than on the needs of the consumer. The disadvantage of this orientation is that the organisation does not take into consideration the fact that the products or services it produces may not be the ones consumers desire or need.

1.2.Sales orientationFocus on aggressive sales techniques, either to consumers or to intermediaries; can’t convince people to by what they don’t want or need

Organisation focuses on improving its sales volumes, not just to end-consumers but also to intermediaries in order to encourage them to promote the manufacturer's product more actively.

The emphasis of a sales-orientated retailer is on selling at any cost. Mail order retailers often apply the principle that if they use aggressive sales techniques then the organisation will make large profits.

A disadvantage - consumers may not be persuaded to purchase products or services that they do not need or want.

1.3.Marketing orientation (pure marketing concept)Combines sales message and price with a focus on quality, packaging, distribution channels and supplying info through advertising; understanding that sales depend not on sales people, but on a customer’s decision to buy thus perceived value key;

3 core principles:

Long-term maximisation of profitability Consumer orientation The integration of all business activities directed at profitability and the satisfaction of consumer needs, demands

and preferences

1.3.1. Consumer orientationAll the organisation's actions are aimed at satisfying consumers' wants and needs.

1.3.2. Profit orientationOrganisation achieves its profitability by providing market offerings that satisfy consumers 'wants and needs.

1.3.3. Organisational integrationAll departments in organisation work together in order to be successful in achieving the organisation's objectives.

1.4.Societal marketing orientation (study guide)

Striving to maintain a balance between customer needs, profitability and the long-term good of society and the environment.

2. Relationship marketing

Relationship marketing is the shift from one-off sales to ongoing relationships – the sale is a beginning of the relationship, not the end. Price, place, product, promotion expand to include people and processes. This includes relationships with suppliers, current and potential employees - not just customers. TQM and organisational integration key to success.

2.1.A broader view of the marketRelationship marketing focuses of the maintenance of long-term relationships between the organisation, government, public, suppliers of raw materials, employees and current/potential consumers all efforts are aimed at building relationships – this is crucial for survival and growth – in an economic decline and to protect the competitive position.

2.2.Expansion of the market offeringAccording to the principles of relationship marketing, the four traditional marketing instruments (or four Ps), namely place, price, product and promotion, are expanded to include people and processes. It is important to note that synergy (where the whole is more than just the sum of its parts) between various departments or functions becomes very important, and the focus on Total Quality Management (TQM) in anentire organisation is emphasised.

2.3.A bigger marketOrganisations should adapt from traditional Segment-based marketing to include micro- segmentationsReasons are:

Consumers are more sophisticated & knowledgeable (their expectations are rising) Drastic changes in technology Increase in competing vendors and products

Study unit 3: The marketing process1. The marketing process

Consists of the 4 P’s (product, price, place/distribution, promotion/marking communications) which must be combined into a strategy that takes in the environmental and consumer variables.

the product - should satisfy the needs of the target market the distribution channel - should deliver the product to the consumer (including the retail institution from which

the consumer will purchase the product) the Promotion - should inform the target market about the product offering the price - the consumer will be willing to pay it

Consumers always look to gain the maximum satisfaction for their sacrifice – total needs satisfaction vs maximisation of long-term profitability.

2. The marketing function in the Organisation2.1.The Place of the Marketing function

Several functional areas in an organisation, including: Operations function - comprises the physical utilisation of raw materials and their conversion

into manufactured materials and finished products, and is usually performed in a factory. Human resources - the acquisition, training, utilisation and retaining of a sufficient number of

competent personnel. Finance - the acquisition, utilisation and control of the funds necessary for running the

business. Purchasing - I ensures that the materials necessary for production are bought at the right

places. at the right times. in the right quantities and at the right prices. Public relations - maintains and cultivates a favourable and objective image of the

organisation among those whose opinion is important to the achievement of the business objectives.

Informational - makes available internal information for planning and control. Marketing - generates income from sales and is responsible for managing the marketing

process. General management - includes the activities of persons in managerial posilions. These

persons in top, middle and lower management have to plan for, organise, lead and control the organisation as a whole, as well as its individual functions.

2.2.The management tasks in marketing – (planning, implementation, control) Marketing management IS responsible for various tasks in an organisation including:

o identifying opportunities and threats in the marketing environmento compiling marketing data to be used in decision makingo selecting specific distribution channelso Selecting specific target markets

2.2.1. Planning Entails the examination of and the choice between various ways of utilising

marketing opportunities, countering marketing threats and achieving marketing objectives.

Adaptive planning is a framework for organising information, analysis, issues and opinions that form part of strategic decision making.

situation assessment is done to identify the internal and external factors impacting the organisation,

Creative and strategic solutions are then conceptualised to address these factors. Marketing decisions thus begin with the identification and evaluation Contingency planning is another subdivision of planning that entails developing

plans to provide an alternative to the main plan in the event that an unlikely but possible, external factor impacts on the original plan.

The contingency plan deals not with unforeseen but with events that were foreseen but considered unlikely to Occur

2.2.2. Implementation once the marketing strategy has been formulated

o people have to be found to perform the required marketing activities (staffing);

o they have to be instructed as to what they should do and told how well they are doing it (communicating);

o positive attitude towards work and the organisation must be carefully cultivated and maintained (motivating),

o Leading is therefore of paramount importance in the effective performance of the other management tasks.

a few contemporary leadership styles have emerged including:o Contingent reward leadership is a leadership style where management

closely supervises the employees, and facilitates all their activities and tasks.

o Laissez faire leadership is the opposite of contingent reward leadership in that management is minimally involved in the daily activities of personnel, leaving personnel to resort to their own devices.

o Management-by-exception leadership is a leadership style what a managers intervene only when personnel's performance standards have not been met.

o Transformational leadership, leaders use inspiration and charisma, seeking to intellectually stimulate the sales personnel. and treat each employee as an individual. To move personnel beyond their own self-interests toward those of the organisation

2.2.3. Control · In order to exercise Control,

o Step 1 – set standards - this requires determination of what has to be controlled and where marketing control is necessary.

o Step 2 – measured and compared marketing performance against set standards.

o Step 3 – evaluate differences between actual performance and standardso Step 4 - implement corrective measures to ensure future performance is in

line If the marketing management tasks are not properly performed:

o purchasing management will not know which raw materials and components to purchase;

o public relations management will not know how to perform or improve its liaison function;

o financial management will not know how much funding is required; ando human resource management will not know how many people to employ.

3. Marketing challenges that lie ahead (study Unit)

Identified future trends include:

Growth of non-profit marketing Globalisation Changing world economy (!) Call for a more ethically and socially responsible approach to marketing

Retail specific challenges include:

Rise of single person household (including single parents) Shifting social values and shopping behaviour (violence pressuring shopping developers to provide customers with

a sense of safety) Urban retail renaissance (urbanisation on the rise, renewed interest in inner cities) Changing needs of the middle-aged (due to increasing number and the cost of living and raising children, this

group will have less retail and leisure spending money)

Youth, more fashion, more violence (teen fashion, alcohol consumption, entry level workers, petty crime and shoplifting)

TOPIC 2: THE MARKETING ENVIRONMENTStudy unit 4: Composition and functioning of the marketing environment1. Composition and functioning of the marketing environmentThe marketing environment has three components, also called the sub-environments:

Micro-environment, Market environment Macro-environment.

Study unit 5: The microenvironmentThe micro-environment

Comprises the internal environment of the business, and largely consist of variable the organisation controls

Mission and objectives of the business − Mission statement is important and should consider the following: − Should describe the business and the customer domains of the business; − should include the retailers responsibilities to its stakeholders; − should describe how goals will be achieved; − how a business interacts with the marketplace – competitors and suppliers; − Should be realistic and acknowledge how capital and resources will be used; − Mention sustainable competitive advantage.

The business and its management e.g. marketing operations Resources e.g. human resources, capital, know-how

Top management (executive) has four basic decisions:

1. Basic line of business (product or service)− Product/service category (manufacturing, distributor, wholesaler)− Technology category (Tourism, fast food, clothing, hotel industry)− Geographic category (Neighbourhood, city, region, province, national international− Ownership category (sole proprietor, partnership, company)− Specific business category (e.g. Retail, city, clothing)

2. Overall goals− Sales targets (increase in turnover or market share)− Profit (Rate of return on investment, gross profit margin on sales, margins per product)− Customer acceptance (Environmentally friendly standards, socially responsible products)

3. The role of marketing management− Importance in business (line or staff functions, budget and resources, role in strategy formation)− Functions (research, planning, distribution, franchising)− Integration ( integrated or decentralised)

4. The role of other management functions− Human resources management− Financial management− Operations management− Purchasing management

5. variables in the micro-environment controlled by marketing management− Selection of target market

Size - Mass market, specific market segment. geographic area Characteristics - Male. female. young. old. conservative. Liberal

− Marketing objectives Sales - Brand loyalty, new products, new markets Profit - Profit ratio per product, area, quantity Image - Quality, friendly service Competitiveness - Competitive advantage through better product, lower price, extensive marketing

communication− Organisational structure

Type - Functional. Product area− Marketing plan

Product/ service - One basic model, one colour, sizes, styles Distribution - Direct, wholesale, cybermarketing/ e-commerce Price - High. Iow. Skimming Marketing communication - advertising, personal selling, publicity

− Control - Audit, cost analysis, control systems

Study unit 6: The market environment1. The Market EnvironmentThe variables in the market environment will affect a business to some extent. It is the task of the management to evaluate these variables and their influence on the business, and to recommend strategies to utilise the opportunities in the market environment and counteract threats from, for instance, competitors, to ensure the business's long-term prosperity.

The four key variables of this environment are:

Consumers – their buying power and behaviour determine the number of entrants to the market Competitors – who are established in the market and wish to maintain or improve their position, including existing,

new and potential competitors Intermediaries – who compete against each other to handle the business’ products, or wish to handle only those of

competitors Suppliers – who provide or do not wish to provide products, raw materials and services, including financing to the

business

opportunities and threats These variables will affect the business, which makes it imperative for management to react

to opportunities and threats in the market environment.

1.1.Consumers1.1.1. Consumer Markets - consumers, buy our products and services from these markets.

We are consumers of products as diverse as Ciro Coffee and Black Cat Peanut Butter for example. Services supplied by dentists, for example, also fall into this category.

1.1.2. Industrial Markets - are markets in which manufacturing organisations buy products and services for their own consumption and/or use in the production of further products or services (eg Ciro Coffee for the staff canteen in the Samcor motorcar factory).

1.1.3. Government Markets - These are the markets that are generated when the government, as the consumer, buys products and make use of service.

1.1.4. Resale Markets - These are the markets created by intermediaries, such as a wholesalers and retailers, who are the consumers in this case, and who purchase products and services to resell them at a profit. Shoprite/Checkers and OK Bazaars are examples of businesses that operate in the resale market.

1.1.5. International Markets - These are markets created by foreign buyers of products who are the consumers in this case. For example, there is an international market for gold, which is exported from South Africa. Gold is sold in South Africa and in other markets creating an international market for the South African gold producers.

1.2.Competitors

five competitive forces or factors that affect a business's competitiveness are the following: The threats of potential new entrants or new competitors in the market. The bargaining power of suppliers. The bargaining power of consumers. The availability of substitute products. The number of existing competitors.

Intra-type competition refers to the competition between two or more marketers who use the same type of business format. For example, Checkers/Shoprite supermarkets compete with Pick 'n Pay supermarkets using the same type of store, layout, stock carried and information systems.

Inter-type competition refers to the situation where two or more marketers compete with different retail formats in the market. An example is the Edgars fashion retailing group, which also competes with Pick'n Pay Hypermarkets in selling clothing to customers.

1.3.Intermediaries

Intermediaries bridge gaps between production and consumption, and include financial services

Intermediaries are wholesalers and retailers, commercial agents and brokers and in the Third World, even spaza stores.

Decision making by marketing management regarding intermediaries Is complicated by the following:

- Intermediaries are dynamic and ever changing affected by societal trends i.e. extended shopping hours, power of retail groups

- E-commerce, growth of black retailers, increased advertising by shopping centres- Intermediaries need to be cultivated as long-term allies

1.4.Suppliers

Businesses have a high degree of dependence on suppliers. If a business cannot obtain the necessary inputs of the required quality in the right quantity and at the right price for the achievement of its objectives, it cannot hope to achieve success in a competitive market environment.

1.5.Opportunities and threats

Opportunity is a favourable condition or tendency in the market environment which can be utilised to the benefit of the organisation by means of a deliberate, managed effort.

A thread is an unfavourable tendency in the market environment that can, in the absence of a deliberate effort by management lead to the failure of the business, its product or its service

Study unit 7: The macro environment1. The macro-environmentThe macro-environment is the wider environment that an organisation operates in, and trends and actions within it can affect the business either directly or indirectly, over which the business has little or no control. Megatrends are uncontrollable forces in the environment.

1.1.The composition of the Macro-environment1.1.1. The technological environment - new process and technology constantly change the way we

do business, open new markets and give competitive advantages. Marketing has three points of involvement:− Promoting technological innovation when if identified new consumer needs and wants, increasing

satisfaction− Marketing tracks down and commercialises new tech there by distributing it− Marketing must scan/research the technological environment for opps. and threats.

1.1.2. The Economical environment - this covers economic factors such as the inflation rate, economic growth rate, consumer income, fiscal and monetary policy

1.1.3. The social environment - highly influenced by the other variables, culture is not static and changes over time, demographic change (e.g. urbanisation, aging population, increasing power of women, increased number of small households), HIV/AIDs is a huge social factor in SA, also consumerism is key – the increasing power of consumer demand on organisations and the pressure they exert.

1.1.4. The physical environment – includes physical terrain, raw materials, and pollution (waste disposal); current factors include: increasingly scare or expensive resources; increasing cost of energy; pollution and its cost to society and the costs to a business to control it; environmentalism trend ‘green’ through citizens and government institutions.

1.1.5. The politico-government environment– Government policy as well as political trends exerts pressure on businesses, annual budget, taxation, exchange controls, import and export tariffs, price control and health regulations are just some of the ways government effects business. Government can also be a customer and a producer

1.1.6. The international environment – all the above variables can be found in the international field and increasing globalisation is a major trend, the exchange rate can heavily affect businesses that trade internationally

1.2.The dynamic environment In a free-market system, a business exists in a dynamic environment in which technological

innovation, economic fluctuations, changing communities and lifestyles as well as political change continually alter the environment and ultimately affect it.

This knowledge requires environmental scanning that enables management to identify threats and demands in the environment timeously and, wherever possible, to turn them into opportunities.

2. Methods of environmental scanning

The importance of environmental scanning is clear from the following:

Environments constantly change so business needs to keep abreast of these changes It is necessary to determine business threats and opportunities A business that scans will be more successful than one that does not

Environmental scanning depends on the nature of the business and it’s industry, and the source and scope of the changes occurring

Methods include:

Reading relevant secondary or published information Primary information or special studies on aspects of the environment Establishment of a unit in the organisation that scans relevant variables and makes forecasts

Study unit 8: SWOT analysis1. SWOT analysisIn order to ensure the success of an enterprise, management should have a careful look at the marketing environment.This is done by means of a SWOT analysis. This means that the enterprise's(S) Strengths,(W) Weaknesses(O) Opportunities(T) Threats that exist in the environment should be identified.

Strengths and weaknesses

Strengths and weaknesses are internal (micro-environmental) qualities. Strengths can include specialised management skills, productive and well-trained workforce, capital etc. Weaknesses include, obsolete product range, internal theft by staff or a lack of capital.

Opportunities and threats

These are found in the market and macro-environment. Opportunities can be found in trends such as: the increase of women in the work place means that families are time-poor and there is more demand for convenience and take-away food. Threats can be found in events such as a dramatic increase in the exchange rate hurts import businesses (but the same event is an opportunity for export businesses).

TOPIC 3: MARKETING INFORMATIONStudy unit 9: Information needed for decision making1. Information needs of marketing management

Successful companies make use of marketing information in order to keep up with changing consumer demands, and to keep ahead of their competition

2. The role of marketing research in decision making

2.1.The value of marketing information – is the process of gathering and analysing data based on solving problems or exploiting an opportunity and then reporting information on this opportunity or problem in such a way that marketing management can utilise it in decision making

2.2.Marketing research and the marketing mix - research determines what combination of the 4P’s will best take advantage of existing marketing opportunities

2.3.Marketing research and the macro-marketing environment – information about social and cultural environment, economic environment, political environment and technological environment is important in decision making. Research consists of constant scanning of the environment to spot new opportunities, threats and trends in the social and cultural environment, technological environment, economic environment and political environment

2.4.Marketing research identifies and defines marketing opportunities and problems – thus defining those wants and needs in market that are not being me by the competition. Opportunities and threads are imminent and decision makers need this info by continuous research

2.5.Marketing research monitors marketing performance – feedback on existing marketing strategy is required to judge goal achievement. Measuring actual performance against desired performances.

2.6.Marketing research improves understanding of the marketing Process – research done to expand basic knowledge of marketing is known as basic research e.g. studies to determine optimum returns on promotional expenditures, operating characteristics of most profitable firms in industry basic research is to expand the frontiers of knowledge & not aimed at specific problems. Is conducted to improve understanding of market place – info on strategy fail is applied research. Also Marketing information systems (MIS) is also a source for information

Study unit10: Marketing information systems1. Information management

1.1.The Marketing Information System (MIS)

Marketers must gather data (raw facts) and analyse this into information. A Marketing Information System (MIS) is a planned combination of methods for the continuous gathering, filtering, storing and flow of relevant information for the purposes of marketing decision making.

An MIS has various characteristics, which include the following:

An MIS can be complex as it can address a wide range for marketing issues And MIS can draw on a variety of data sources The contents of an MIS are subject to cost-benefit considerations

A simple MIS consists of the following:

Routine data component – Internal environment (sales, stock, debt, creditors) + external environment (local population growth, competitive activities, trade association statistics)

Special purpose data component – Internal marketing research (CSI surveys) + external marketing research (external feasibility survey)

An MIS is an organised way of continually gathering and analysing data, which provides marketing decision makers with the information they need to make decisions. It is thus important that an MIS within an organisation has information that is accurate, timely, adequate, available, relevant, easily accessible and that has low maintenance costs.

The role of information in retail decision making is of cardinal importance.

2. The components of a marketing information system2.1.Components of a MIS

2.1.1. The internal reporting subsystem - Information generated from existing internal data and reports. It can include: Financial records; Expense accounts; Inventory systems. Focuses on results.

2.1.2. The marketing intelligence subsystem - A set of procedures and sources that manager use to obtain everyday information about pertinent developments in the marketing environment. Focuses on happenings. Formal and informal information gathering procedures may be used – formal done by dedicated staff, informal gathering including scanning newspapers, magazines and trade publications.

2.1.3. The statistical subsystem - A statistical subsystem is integrated system of data, statistical analysis, modelling and display formats that uses an IT infrastructure (database and querying software) to provide information for the marketing decision making process – regular standard reports can be pulled. It is frequently used to analyse happenings, but also to focus on the ‘what if’ questions.

2.1.4. The marketing research subsystem - Marketing research is ad hoc research that is conducted for a specific situation. It is project based and has a beginning, an end and a goal to achieve, or a problem to solve.

3. The interaction between the components of a marketing information system

Study unit11: Marketing research1. Marketing research

Marketing and retail research projects that have proven to be productive ventures for the retailer in the past include the following studies:

consumer attitudes to retailers and/or marketers and their efforts consumer purchase motives and preferences demographic and psychographic profiles of both customers and noncustomers buyer behaviour patterns and their relationship to the retailer's mode of operation service and performance records of suppliers; price and cost comparisons between suppliers merchandising and operational strengths and weaknesses of competitors employee perceptions of the store and its dealings with them

Marketing research is a systematic, objective process of designing, collecting, analysing and reporting data that is relevant to a specific marketing situation facing a company.

2. The marketing research process

Marketing researchers should keep in mind that the marketing research process consists of two parts.The first part is the preliminary marketing investigation and the second part is the formal marketing investigation.

2.1.The preliminary marketing investigation

Step 1. Identify and define the problem

The process begins when a marketing problem or opportunity is identifies. There are four broad categories that researchers can investigate:

Unanticipated chance – what is happening in the market environment, and why? Planned chance – aimed at the future e.g. research into how to improve products Serendipity in the form of new ideas – listen to staff or customer’s ideas and complaints Research and development – by following findings of previous research projects, problems or opportunities may be

identifiedStep 2. Formulate hypotheses

A possible answer to the stated research question needs to be formulated, which helps to focus the specific aims and directions of the research. The hypotheses is unproved. Researches may attempt to create more than one hypothesis.

Step 3. Determine the research objective

The objective needs to be a specific and unambiguous as possible, they must state the precise information required to solve the problem.

When determining the objectives of the research study, the researchers should use the following questions as a broad guidelines:

Is there additional background information necessary before research objectives can be determined? What information is needed to make decisions or solve the marketing problem? How will the information gathered be used?

In general there are four basic research objectives:

To explore – often informal research aimed at gaining more information about the problem, often used to create new hypotheses

To describe – used when knowledge about a particular market or marketing aspect is vague. Provide answers to the who, how, what and when of a topic

To test hypotheses (causal research) – obtain evidence of cause-and-effect relationships between two or more variables( (independent and dependent), and the extent of the changes caused

To predict – to forecast future values e.g. sales forecasts, market shares, retail orders

Step 4. Determine the data needs

Objectives must be translated into specific data needs.

Secondary data is existing data, which is cheaper and faster to collect as it either exists in the MIS or in external suppliers’ systems.

Primary data are data that are collected through original research for a specific purpose. It relates to the specific problem at hand, but it is costly and time-consuming to collect.

If the secondary data is sufficient to confirm or reject the hypothesis there may be no need to collect primary data.

2.2.The formal marketing investigationThe formal marketing investigation

Step 5. Selecting the method of collecting primary data

Research methods include:

Observational research – research respondents actions are monitored without direct interaction from the researcher. It can be time consuming, and does not address the underlying cause of behaviour, but the results are objective

Focus groups – A small number of people are interviewed under the direction of a moderator. An unstructured discussion about a topic in encourage in order to draw out ideas, feelings and experiences that a more formal method would stifle. Group dynamics make people feel comfortable to share.

Experimentation – involves testing something in controlled conditions by changing a variable – although often a field setting. Can be used to test change in prices, advertising campaigns effectively.

Survey research – the gathering of primary data from respondents via mail, phone or in person. Can be highly structured or unstructured. Three types of data usually sought: facts, opinions and motives.

Purchase intercept technique – in-store information gathering technique that capitalised on the observation technique, but includes interviewing customers on the spot about their purchase or shopping behaviour.

Step 6. Design the questionnaire

This is the most common method of gathering primary data.

Questions – question content and phrasing is important. Wording must be kept simple, leading questions avoided, the sequence of questions considered (move from the general and easy to the particular and/or sensitive)

Validity and reliability – does the questionnaire measure what it’s supposed to measure, and does it produce accurate results on repeat use

Pretesting – test the questionnaire on a small sample (similar to one to be used later) of respondents to identify and eliminate potential problems.

Contact methods – − Mail – flexible, low cost, but non-response error high and no guarantee who in the household will respond.

Good for hard to reach areas. Email survey’s gaining ground, but only reach those with email− Telephone – medium cost and reduced potential for bias, however data that can be obtained is limited− Personal survey – best response, but can be bias in the answers and most expensive method− Online contact – effective and highly adaptive, online is a good way to test response (experimentation) and

to obtain quick responses (especially if the survey is incentivised)

Step 7. Sampling plan

Sampling involves selecting representative units from the total population; this is the design of the sampling plan. The group the marketer wants to know about is called a population or universe – sometimes this group is small enough that all members can be studied. If the population is large it may only be convenient or possible to research a subset or sample.

Census – when the survey includes all members of the population

Sample – when the survey only includes a representative selection

Probability (or random) sampling – each unit of the population has a known chance of being included in the survey through strict statistical procedures

Simple random sampling – same as taking numbers from a hat, units assigned numbers and selected randomly Stratified random sampling – population divided into mutually exclusive sub-groups (strata) on the basis of

common characteristics (e.g. age, occupation, gender) Cluster sampling – groups the population into clusters and only some clusters will be randomly selected.

Groups should be different within subgroups, but the externally similarNon-probability (or non-random) sampling – where not every unit of the know population has a chance of being involved

Convenience sampling – used in ‘on the street’ interviews, or asking people in a supermarket their opinions Judgement sampling – units are chosen on the basis of the researcher’s opinion of their representativeness

Step 8. Selecting, training and controlling the interviews

The complexity and demands of the questionnaire as well as the sample group chosen will determine the selection of the interviewers. Interviewers need to be trained to ensure they can administer the questionnaire in the same manner so that all the data can be collected uniformly. Control of the interviewers must be exercised continuously – researcher must monitor data that is being returned and verify veracity.

Step 9. Fieldwork

At this stage the interviewers are out in the field and the data is being obtained.

Errors that can occur include:

Non-response error – caused by respondents who are not available when contacted, or who refuse to participate, follow-up calls should be made and reluctant parties encouraged

Respondent bias – some respondent may pre-empt the interviewer by providing answers that they think the interviewer is looking for

Interviewer bias – the interviewers tone, voice, age, gender and manner of interviewing may unconsciously result in bias. In some instances interviewers may also complete questionnaires themselves. This can be limited through thorough training, motivated interviewers and through strict control of fieldwork.

Step 10. Data processing

Data processing entails editing and coding the collected data to facilitate analysis. Editors check questionnaires to eliminate those answered by wrong respondent and check legibility. Data is coded and entered into computers (databases).

Data analysis done next using processed and statistical techniques that would have been designed as a part of the original research design – complex queries can be designed to answer existing and new questions.

Step 11. Communicating information to the decision maker

The final step involved interpreting the findings and reporting them to the marketing manager. Care needs to be taken to produce a high-quality report document (define problem, analyse findings from primary and secondary sources, make conclusions and recommendations).

Study unit12: Market potential and sales forecasting1. Market potential and sales forecasting

Market potential = consumer population (number of people) + consumer requirements (needs and wants) + consumption potential (willingness and ability to consume).Marketer should be able to predict the market accurately – this means 2 things: 1st assessing the market potential (how big the total market is) and 2nd forecasting sales (calculating the slice of market share)

Levels of market measurement

Consumer level – most popular level used as it provided info on the number of final consumers defined in the different market segments e.g. demand for coke in schools, at sports events.

Product level – measurement of consumer demand for one brand or all brands in a given product category e.g. sales of all soft drinks in SA.

Geographic level – total market divided into geographic segments e.g. sales in the Cape metropolitan area Time level – sales/demand over a time period e.g. monthly sales, seasonal sales and annual sales

Relevant markets for measurement

Total market – (market potential) all actual and potential buyers of a product type Available market – refers only to those actual and potential buyers with the interest, income and ability to buy the

product at a particular point in time Target market – the part of the available market to which the company has chosen to direct its marketing activities Penetrated market – the number of consumers who have already bought the product

2. Market and sales potential

Market potential is defined as “the maximum possible sales of a specific product in a specific market over a specific period for all sellers in the industry”.

Sales potential is defined as “the upper limit of sales that a firm could possibly reach for a specific product in a specific market over a specific time period”. Sales potential can be used to plan sales territories, quotas, sales force compensation and targets for prospecting.

Estimating market and sales potentialMethods used for estimating the market and sales potential depend on how new or innovative the product or service is:

Breakdown methods – taking total market potential, breaking it down to market segment level and finally, to a company’s own sales potential. This method relies on the availability of data on industry sales volume and consumption but complete, detailed data is rarely available. Potential often estimated from what is available. Sales potential derived by subtracting competitor’s market shares and then adding possible results from expected actions or promotions.

Build-up methods – there are three main build-up methods:− Census – a detailed consideration of every potential and actual buyer, difficult in consumer markets, but

more feasible in industrial situations− Survey method – widely used in consumer markets, results from a sample can be used as a basis of

calculating total market or sales potential. The trouble is respondents aren’t always truthful.− Secondary data – secondary data such as internal sales records can be used to predict customers

purchasing based off past behaviour. Sales potentials produced first and market potential is then derived.

3. Market and sales forecasting

Market forecast is defined as “an estimate of the expected sales of a specific product in a specific market over a specific time period for all sellers in the industry.” It is the portion of the potential market that is expected to be realised.

Sales forecast is “an estimate of the number of units a firm expects to reach for a specific product in a specific market over a specific time period.”

The difference between market forecasting and sales forecasting is that market forecasting looks at the expected number of sales of a product in a market over a period of time for all sellers in the industry. Sales forecasting, on the other hand, estimates the number units a company expects to reach for a product in a market over a period of time.

The forecast is starting point for all subsequent decisions – if done incorrectly company can encounter majour capacity or cash-flow problems.

Different forecast methods reach different results

Forecast methods should share some common characteristics, they should:

Be based upon historical information from which a projection can be made Look forward over a specific, clearly defined time period and, Make clearly specified assumptions, since uncertainty characterises the future

The methods commonly used to forecast markets and sales include:

Sales-force surveys – can provide a wealth of information as sales people have an expert opinion of their clients dealings, but affected by bias and naivety

Expert surveys – bringing in outside expertise, involved the participation of people outside the firm who have special knowledge and experience in the market under consideration

Time series analysis – using historical data to predict the future, including cycles, trends and seasonality. A forecast must also make allowances for random factors such as strikes, riots and civil commotion.

TOPIC 4: CONSUMER AND BUSINESS BEHAVIOURStudy unit13: Types of purchase decision1. Types of purchase decisionConsumer decision making varies with the type of purchase decision being made.The type of purchase decision is largely influenced by the degree of buyer involvement and the number of differences between the brands.

Six types of decision making are identified:

1. Complex purchase behaviour: The consumer is highly involved in the purchase and there are significant differences between the brands. An example would be when a consumer is considering purchasing a new motor car.

2. Dissonance reducing behaviour: Consumers are highly involved in the purchase, but perceive few differences between the brands. The purchase of a new carpet would involve dissonance reducing behaviour because consumers are highly involved but perceive few differences in the available brands.

3. Habitual purchasing behaviour: Buyers are not highly involved and do not perceive significant differences in the brands. The items are bought habitually. Consumers who purchase milk are normally not concerned whether it is Clover or Douglasdale.

4. Variety-seeking behaviour: Products are purchased for the sake of variety or ``trying something different''. There is usually a perceived difference between the brands.

5. Routine decision making: Similar to habitual decision making, routine decision making is also characterised by low buyer involvement and few differences between the brands, however, routine decision making involves the continual re-purchase of the same brand. Families might, for example, continually re-purchase the same brand of toothpaste.

6. Impulsive decision making: Impulsive decision making normally occurs at point-of-purchase allowing the buyer to progress quickly through the decision-making process and to take action immediately. The last minute purchase of a magazine while standing in the queue to pay is an example of impulsive decision making.

High Involvement Low InvolvementSignificant differences between brands Complex purchase behaviour Variety-seeking Purchasing behaviourFew differences between brands Dissonance reducing behaviour Habitual purchasing behaviour

2. example of impulsive decision making.

Study unit14: Individual factors influencing consumer behaviour (redo)Let us consider the following scenario as an illustration of how individual factors influence consumer behaviour. If you like a certain product, like Coca-Cola for example,:

You will probably buy it when you are thirsty (motivation). You will probably buy the Coca-Cola in a store that you regard as not being too expensive

(perception). Previous experience has taught you that Coca-Cola is better than Tab, for example

(learning). Therefore you will not buy Tab because you do not like it (attitude). You like being with your friends when you watch rugby (lifestyle and personality) and all

drink Coca-Cola.

Individual factors are the factors that influence decision making yet are unique to the individual.

6 INDIVIDUALFACTORS INFLUENCING CONSUMER BEHAVIOUR: Motivation Perception Learning ability Attitude Personality Lifestyle

1. Motivation

All behaviour starts with wants and needs. Needs are basic forces that motivate and individual to do something. Wants are needs that are learned during an individual’s lifetime. A motive is a need or a want strong enough to stimulate an action to seek satisfaction.

Buying motive may be grouped into three different Awareness levels:

Awareness need level. Consumers know their motives and are quite willing to talk about them. Pre-awareness need level. Consumers are aware of the motives but will not reveal them to others. Unawareness need level. Consumers cannot explain the factors motivating their buying actions because they are

unaware of these natives, or they are subconscious motives.

Three different levels of motives:

Conscious level – consumers know their motives and are quite willing to talk about them Preconscious level – consumers are aware of their motives but will not reveal them to others Unconscious need level – consumers cannot explain the factors motivating their buying actions because they are

unconscious or subconscious motives. Maslow’s hierarchy: Basic physiological needs – Safety needs – Social needs – Ego needs – Self-actualisation needs

2. Perception

Sensory stimuli: Seeing; Hearing; Feeling; Tasting; Smelling

Perceptual defence mechanisms protect a person against undesirable stimuli and include the following:

Selective exposure – people selectively choose what they expose themselves to e.g. turning down the radio during ads, quickly paging through a magazine

Selective attention – does not pay full attention to stimuli, causes a person not to comprehend the content of the message (Overcome by: Larger stimuli, higher frequency, colour and movement, centre of vision/eye-level)

Selective interpretation – stimuli are perceived, but message is not interpreted as intended – meaning distorted or misunderstood (Overcome by: pre-test message, determine how cultural differences influence ad components, don’t set unrealistic expectations)

Selective recall – ability to remember only certain stimuli and to forget others which may have been important. (Overcome by: Remind consumers at point of purchase of message, demonstrations, repetition and use of customer’s ability to learn)

3. Learning ability

Learning can be described as the result of a combination of motivation, attention, experience and repetition. Required is: motivation, full attention, effective repetition.

Following learning principals are important when formulating a marketing message:

Repetition in important to reinforce the message A unique message is best remembered The law or primacy states that the aspect mentioned at the beginning of the message is best remembered, but the

law of recency states that the last-mentioned aspect is best remembered Demonstrations facilitate learning (vicarious-learning) Promise of rewards (or threat of punishment) facilitate learning Serious fear-producing messages should be avoided, consumers then to distort such messages

4. Attitude

Attitude is a positive or negative feeling about an object that predisposes a person to behave in a particular way towards that object.

Attitudes have the following in common:

Attitudes are learned through experience, which includes secondary experience such as word-of-mouth and reading reviews

Attitudes are about an object, and can vary from object to object Attitudes have a directions and intensity Attitudes tend to be stable, the longer they endure, the harder they are to change

Options to change attitudes include:

Changing the consumers beliefs about the attributes of brands e.g. heart foundation campaign for red meat Changing the importance of beliefs e.g. fibre always considered important in cereals, but cancer prevention due to

high fibre makes it more important Add new beliefs e.g. toothpaste that fights decay and whitens; organic only really healthy food

5. Personality

Personality refers to those psychological characteristics of people which both determine and reflect their reaction to environmental influences. Often quantified into traits.

6. Lifestyle

The way of living of individuals or families. Describes the behaviour and purchasing patterns of consumers especially how people spend their time and money. Activies, interests and opinions (AIO) is one classification system. I. Personality. motives and attitudes also influence lifestyle.

Study unit15: Group factors influencing consumer behaviourFactors that influence consumer decision making:

Culture Social class Family Reference groups Opinion leaders

Humans need to be affiliated with other groups in the social environment. Group norms therefore influence individual’s behaviour patterns. Sanctions (rewards or punishments) are used in formal or informal ways – ostracism is a powerful threat and is therefore often used to advertise hygiene products or clothing. One individual can belong to multiple groups all with their own norm, which means that individuals are under immense pressure from social needs.

1. Culture

Culture comprises a complex system of values, norms and symbols which have developed in society over a period of time and which all its members share. Culture is transmitted via people, usually from parents to children, but schools, churches etc all play a part on socialisation. Culture can be fragmented into subcultures, and those into further smaller subcultures.

2. Social class

3. Family

Closest ties are with family – family frequently forms a decision making group, or a household.

Family life-cycle phases are:

Newly wed Phase of family growth Maturity phase – children have reached adolescence and therefore have their own norms, preferences and

lifestyles Post-parental phase (empty nest) Sole survivor

Roles in the family decision making process:

Initiator – person who first identified the need and suggest products to be purchased Influencer – person who explicitly or implicitly influences the final decision, their wishes reflected in final decision Decision maker – person to makes the actual choice between alternatives Purchaser – person who makes the transaction User – the person who actually uses the product

4. Reference groups

Reference group involves one or more people that a consumer uses as a basis for comparison or ‘point of reference’ in forming responses and performing behaviours. In all reference groups, there are distinctive norms of behaviour, and members are expected to conform to them in order to avoid sanctions being applied against them.

Following are types of reference groups:

Membership groups – formal or informal, e.g. friends or a social club Automatic groups – groups to which a person belongs due to their demographics i.e. age, sex or occupation Negative groups (dissociative) – group that a person does not want to be associated with e.g. bikers, smokers Associative groups – those groups that a person aspires to belong to, e.g. higher status groups, celebrity, sports

teamReference groups can be shown in advertising to consumers the type of person who buys the product and how it’s used.

Reference groups affect consumer behaviour in three ways:

Normative influence – norms of behaviour are laid down by the group and group members behave accordingly (e.g. wear same type of clothing)

Value-expressive influence – behaviour portrays certain values, e.g. health consciousness, ‘green’ Informational influence – consumers often accept the opinions of group members as credible, especially when it is

difficult to assess a product or brand by observation.

The following situations are where strong reference group influence occurs:

Publically consumed luxuries – strong influence on decision to buy product and the choice of brand Privately consumed luxuries – strong influence on decision to buy, but not on brand Publically consumed necessities – strong influence on brand choice Privately consumed necessities – no reference group influence

5. Opinion leaders

Important in the purchasing of new high-risk products e.g. new fashion – gradual acceptance is known as diffusion. Opinion leaders affect only their own groups.

Study unit 16: The buying decision-making process1. The buying decision-making process

1.1.Need for recognitionNeed recognition or problem recognition occurs when buyers become aware of a difference between a desired state and an actual condition.When an individual perceives a difference between the desired state of affairs and the actual state of affairs, an unsatisfied need is felt or recognised.

Other reasons: Availability of new / improved products Change in personal circumstances Out-of-stock situations Dissatisfaction of current product

1.2.Information searchAfter recognising the problem or need, buyers search for information about products to help resolve the problem or satisfy the need. In the internal search, buyers search for information about products. If they cannot retrieve from memory enough information for a decision, they seek additional information through an external search. A successful search yields a group of brands, called an evoked set, which a buyer views as possible alternatives.The following sources are used: (REDO)

Internal sources - is information lodged in the person's memory. routine purchases or those made out of habit

Group sources – · The consumer often consults with other people (family, friends and colleagues).

Marketing sources – :. Consumers obtain information from marketers, through salespeople. advertisements. product displays and packages.

Public sources – These are sources independent of the marketer, for example reports in the media or ratings by independent organisations

Experiential sources – The consumer may also experience the product while shopping, for example by handling it, tasting it, smelling it or trying it out.

From all these sources the consumer usually identifies several alternatives to satisfy the need. The set of alternatives that the consumer identifies is known as the consideration or evoked set. The extend of a search depends on:

Perceived risk – the higher the risk the more extensive the search Knowledge level of buyer – better informed consumers are, the less the need to search

info. Prior experience – if no experience in product the more time is spend seeking info Level of interest in the product – consumer interested in product the more info is

searched.

1.3.Evaluation of alternativesTo evaluate the products in the evoked set, a buyer establishes certain criteria by which to compare, rate and rank different products.Evaluation Criteria:

Product Criteria Psychological CriteriaCost / price Satisfaction of Social needs

Quality / Durability Satisfaction of Ego needsAesthetic Qualities Image of product -Contribution of product to lifestyle

Perceived risks also impact evaluation process: Financial Risk Functional Risk Physical Risk Social Risk Psychological Risk

Marketers can influence consumers' evaluation by framing alternatives.1.4.Purchase decision

In the purchase stage, consumers select products or brands on the basis of results from the evaluation stage and on other dimensions. Buyers also choose the seller from whom they will buy the product.Series of related decisions:

Brand decisions Vendor decisions Quality decisions Time decision Payment method decision

1.5.Post-purchase behaviourAfter the purchase, buyers evaluate the product to determine if its actual performance meets expected levels. Shortly after the purchase of an expensive product, for example, the post-purchase evaluation may result in complete satisfaction, dissatisfaction or cognitive dissonance.

1.5.1. Post-purchase satisfactionSatisfaction is determined by how close product expectation is met by products perceived performanceExpectations are formed on the basis of messages received from seller, friends & other information sources. If seller exaggerates the benefits - consumers will experience unfulfilled expectations this leads to dissatisfaction

1.5.2. Post-purchase actionsSatisfaction or dissatisfaction influences future behaviour satisfied customer will purchase again and talk positive about the product.

1.5.3. Cognitive dissonanceNegative feelings of doubt and uncertainty in the post –purchase period / negative emotion stemming from a psychological inconsistency in the cognitions Dissonant consumers will try and correct this by attempting to convince themselves that original decision was correct and very judiciousThe post – purchase evaluation phase can be regarded as the beginning of a new decision making process. Routine decision making develops when a brand-loyal consumer insists on purchasing the same brand every time

Study unit17: Business buying behaviour1. Business buying behaviour

Business buy goods and services for the following purposes: To manufacture other goods and services To resell to other organisations/consumers To conduct the organisations operations

1.1.Differences between organisational buying behaviour and consumer buying behaviour

Unique characteristics of organisational buying behaviour: More people involved in purchasing process – each has a specific role Process is technically more complex Buyers acquire products for further production Focus more on rational needs Post-purchase process is more significant Greater interdependency between buyer & seller Buyers have unique needs there require customised solutions More “personal selling” is involved Decisions making is more time consuming Buyers must follow local organisational policies

1.2.Types of buying decision

4 types of buying decisions: New-task buying. This is an organisational buying situation in which the buyer purchases a

product or a service for the first time. The greater the cost or risk, the larger the number of participants in the decision and the greater their efforts to collect information.

Straight rebuy. This is an organisational buying situation in which the buyer routinely reorders something without any modifications.

Modified rebuy. This is an organisational buying situation in which the buyer attempts to modify product specifications, prices, terms or suppliers.

Systems buying. This involves buying a packaged solution to a problem and not making all the separate decisions involved.

1.3.Buying centre

The buying centre is the decision-making unit of the buying organisation

Members of the buying centre play one the following 5 roles: User of the product – people who initiate the act of purchasing & defining purchasing

specifications Influencers – persons with direct/indirect influences on purchasing decisions Buyers – persons who have authority to select suppliers and sign contacts Decision makers – people concerned with the approval of transactions Gatekeepers – are people who control the flow of information from 1 person/department to

another

1.4.Buying decisionsThe organisational buying process consists of eight stages:

1. Problem recognition – recognising a problem or need2. General need recognition – describing characteristic or quality of needed item3. Product specification – specifying the best technical product specification4. Supplier search – find the best supplier.5. Proposal solicitation – inviting qualified suppliers to submit proposals/tenders6. Supplier selection – reviewing proposals and selecting best supplier

7. Order routine specification – writing final order ,listing tech specification, quantity needed - etc

8. Performance review – rating suppliers & deciding to continue, modify or stop using them

TOPIC 5: MARKET SEGMENTATION, TARGETING AND POSITIONINGStudy unit 18: Introduction to market segmentation1. The role of market segmentation (5.2)

Market segmentation is a business decision that is crucial for organisations to make as it can ultimately lead to either success if done properly, or failure if done wrong. It allows a business to divide its market into ``blocks'' or ``groups'' of customers - the segments.

Each will have similar needs and will respond to specific types of products or services and marketing communications.Segments are not identical to each other, nor should they be treated as such. Segments will be more similar to each other than to members of any other segment. a market offering and marketing mix aimed at a specific segment will be more powerful than one aimed at the market in general.

2. Market targeting and product positioning (5.2)

Once a market has been segmented into similar groups with common needs and profiles, the organisation must decide which of these segments it intends focusing on.The market may be very large and it may be possible to divide the market into many different segments. The organisation's products and services may fit well with some of these segments and not at all with others, or perhaps the products and services fit better with some segments than with others.

It makes sense, therefore:Organisations to focus only on the most appropriate market segments, rather than attempting to meet the needs of all segments - this is referred to as market targeting.Once the most suitable market segments have been targeted, the next step is to ensure that the organisation decides on how best to compete within the segment(s) selected. This is referred to as product positioning and requires the organisation to identify its unique competitive advantage within the segment in question.

3. The benefits and drawbacks of market segmentation (5.3.1)

Market segmentation advantageous (4): it forces organisations to focus all their energy on satisfying the needs of one (or just a few)

group(s) of customers, rather that many it may highlight an untapped market segment - think of airlines where once uniform pricing

now varies by city, route, time of day and by passenger; in other words, it allows a firm to specialise

it sets the parameters for the development of a separate market offering and marketing mix for each segment

it helps focus resources more profitably on acquiring and developing customers, and may enable a firm with limited resources to compete with larger organisations

Market segmentation disadvantageous (3): Market segmentation is expensive, as the cost of providing differentiated products and

services, as well as marketing communications is high and requires considerable effort in its own right; a standardised product and communication message is much cheaper.

It limits the marketing efforts of the company to part of the market only (limited market coverage), resulting in the reduction of any economies of scale the organisation might have had (the company may miss out on other lucrative opportunities).

There is also the danger that the company may create too many different market offerings in an attempt to meet the needs of the various market segments, with the added complexity of staff having to cope with different strategies for different customers; cannibalisation may also occur when one product takes away market share from another product being marketed by the same organisation.

4. The prerequisites for market segmentation (5.3.2)Criteria for effective market segmentation (5):

be measurable - the marketer should have clear criteria for describing segments within the market

be large and profitable enough - to warrant marketing effort on the part of the company (ie substantial)

be accessible - the marketer should be able to reach the market segment with a product or service and marketing communication

be actionable; in other words the organisation should be able to do something about the segment (ie develop a specific market offering for the market segment)

be differentiable - in other words each segment should be similar enough (homogeneous) within the segment, yet different enough between the various segments

Study unit19: Bases for segmenting consumer markets1. Bases for segmenting consumer markets

consumer markets are divided into categories: Geographic Demographic Psychographic Behaviouristic

The following 3 factors should be remembered: That a relationship exists between some of the variables that comprise each of these bases, Needs seldom relate to one segment basis only. The market segmentation bases mentioned are not complete.

1.1.Geographic segmentation

Customers within a particular geographic location, be it a country, region, city or even suburb, may be targeted with the same product offering and marketing mix.

One or more locations would then be targeted by the organisation. This is a particularly important variable in the retailing sector, as retail outlets usually serve

a specific geographic location. This approach on its own doesn't define a marketing strategy; it doesn't define the product

or service required, or the promotional stance to take. It can, however, play a role in segmentation by providing further help in identifying how to

reach customers found in particular segments. The logic is that people who live in the same area share some of the same needs and wants

and these differ from those who live in different areas.

1.2.Demographic segmentation

This approach assumes that customers differ according to certain personal variables, such as age, gender, marital status, race, religion, family size, occupation, income or education.

Demographic information helps marketers identify a profile of the typical customer to be found in each segment, which will guide them in what marketing strategy to use to reach the segment in question.

The South African Advertising Research Foundation (SAARF) publishes a regular Living Standards Measure (LSM) report that serves as one of the

most comprehensive surveys of a range of variables that can be used to describe the living standards of people in South Africa. The report is a powerful marketing research tool and divides the population into 10 LSM groups, ranging from LSM1 (the poorest group) to LSM10 (the most well-off group).

1.3.Psychographic segmentation

Psychographic variables refer to the inner or intrinsic qualities of individual consumers. Using this base, marketers are able to segment markets according to the psyche of consumers such as:

lifestyle, personality and social class.

In the process of segmenting a market using this basis, the marketer would normally make use of information about consumers':

1. Attitudes, Interests and Opinions (AIO) and2. values and lifestyles (VALS).

Using a statistical technique called factor analysis, information gathered is used to identify subgroups of consumers.In South Africa, the ACNielsen MRA Socio monitor Value Groups is a standard for psychographic profiling in the country and results in the identification of various ``value groups''. These are

Conformists - this Value Group is characterised by conformity to group value systems. Transitionalists - "This Value Group is characterised by traditional values with some focus

on personal achievement · \ and thus the assumption of individualistic and more modern values.

Progressives - a modernised group whose primary needs are self-development but also some harmony in acquiring meaning from and giving back to the group

Non-conformists - This group rejects any group-oriented, civil, and/or traditional values in favour of individualism.

Today-ers - l present a tough do-not -care exterior to the world.

1.4.Behaviouristic segmentation

Buyers are segmented according to their buying behaviours (7):

1. Purchase occasion. Here the marketer looks at the occasion for which the product is being bought, whether it is for everyday use or for use on special occasions.

2. Benefits sought. This variable attempts to understand the value that a consumer seeks when buying a particular product.

3. User status. User status divides consumers into non-users, ex-users, potential users, occasional users or regular users.

4. Usage rate. This variable looks at the frequency of use of a particular product such as heavy versus light users, or frequent versus infrequent.

5. Loyalty status. Here the marketer attempts to identify how loyal the consumer is to a product.

6. Buyer readiness stage. This variable measures whether consumers are ready for a product or whether they first need to be made aware of the product and its benefits.

7. Attitude towards the product. Here the effort is focused on identifying whether consumers are indifferent, negative, hostile, positive or enthusiastic towards a product.

2. Developing segment profilesOnce the segmentation process has been undertaken by an organisation, it is essential that each segment be fully described in terms of the variables we have already mentioned. These profiles become the framework that the organisation can use for developing a suitable product offering and marketing communications package that meets the needs of the customers that fall within the selected segments.

Study unit 20: Market targeting1. Selecting potential target markets

Criteria for selecting potential markets: segment size and growth possibilities attractiveness and potential profitability resources and skills of the enterprise compatibility with the enterprise's objectives cost of reaching the target market

5 Steps in the evaluation of potential Market Step 1 – decide on criteria to measure attractiveness & competitive position Step 2 – weigh attractiveness & competitive position to reflect importance Step 3 – access current position of potential target market on each of the factors Step 4 – project anticipated future position of each market based on expected changes Step 5 – evaluate implications of changes for business strategies & resource requirements

Such an evaluation has an external and an internal focus. The external analysis entails looking at each market segment in terms of it’s:

present size, its future growth potential, competitive situation and, Ultimately, its profit potential.

An important aspect of this analysis is the ``competitor traffic'' in the segment.

Even a segment containing many consumers and which show great future growth potential may not be attractive to enter because of the many, well-entrenched and financially strong competitors already operating in the segment.

The internal analysis entails deciding whether the marketer is able to serve the market segment profitably, given its strengths and weaknesses.

Three factors are of specific importance, namely,1. Whether the business possesses the resources to effectively serve the segment, 2. Whether its existing operations are in line with its possible venture in this segment and3. Whether the cost of serving this segment, in terms of investment and operating costs, is not

too high for the firm.

If the external and internal analysis of the market segment shows positive results, the marketer can seriously consider choosing the segment as a target market.The marketer might, however, have to choose between a number of lucrative segments since it might not have the financial capacity to serve too many segments.

2. Targeting market segmentsThe exercise of choosing which market segments to serve is called target marketing. Many business ventures fail not because of:

poor product offering to customers, but because the wrong customers were chosen to be served.

An important responsibility is to advise top management about the potential of serving the different market segments in the marketplace.

Such advice should be:1) Based on an in-depth knowledge of the market,(through experience) and 2) Conducting market research on customer and competitor behaviour.

2.1.Concentrated Targeting - organisation decides to focus all its efforts on one segment in the market by satisfying the unique needs of this segment better than its competitors can,

2.2.Differentiated Targeting - firm operates in several market segments and designs different programmes for each segment.

2.3.Undifferentiated Targeting - exists in a homogeneous market where all customers are basically similar in their needs and usage of the product, very few opportunities exist for competitors to distinguish their products from one another. In such a market a business can only pursue an un differentiated marketing strategy by developing a product that will appeal to most customers in the market. The organisation therefore ignores market segment differences and goes after the whole market with one market offering.

Study unit 21: Product and store positioning1. The positioning process (REDO)The positioning process thus consists of the following steps:

identify a relevant set of competitive brands identify relevant determinant or differentiation variables determine consumers' perceptions analyse the intensity of a brand's current position analyse the brand's current position determine customers' most preferred combination of attributes

1.1.Identify a relevant set of competitive brands1.2.Identify relevant determinant or differentiation variables1.3.Determine consumers’ perceptions1.4.Analyse the intensity of a brand’s current position1.5.Analyse the brand’s current position1.6.Determine consumers’ most preferred combination of attributes 1.7.Select positioning strategies

2. Repositioning a product or a store (study Guide)

The evolution of images and product positions over time is natural and to an extent inevitable. Product repositioning, on the other hand, refers to a deliberate decision to significantly alter the way the market views a product. This could involve its level of performance, the feelings it evokes the situation in which it should be used, or even who uses it.The perceptual position of a product can usually be improved, even if its current position is merely strengthened. The organisation should therefore decide what position it wishes to hold on the positioning map.Those characteristics of their product offering which must realise the new perceptual position should then be worked on.

3. Positioning methods

The final step in the positioning process is the selection of a positioning or a repositioning strategy. A number of positioning methods may be used to:

establish a specific perceptual position for a new retailer, to strengthen the existing perceptual position of a current retailer or to reposition a business that has an unsatisfactory perceptual position.

The most commonly used positioning methods are the following: attribute positioning – one or more outstanding attributes are used benefit positioning- a unique benefit of the enterprise or product use application positioning – enterprise or products use or application possibility is used user positioning - specific products are connected to specific users competitor positioning – enterprise product is positioned against competitors product category positioning – enterprise positions itself in a product category not

normally associated with quality/price positioning - enterprise positions itself as high quality or low price

After positioning method is decided it must be communicated to target market

TOPIC 6: INTEGRATED MARKETINGStudy unit 22: Integrated marketingWe look at the two primary decision areas of marketing management, namely deciding "who" to serve with “what kind” of product.

The first question requires extensive analysis of the marketing environment by carrying out marketing research and developing a marketing information system. Using this information the marketer would be able to subdivide the market into meaningful market segments in order to choose a target market.

The second question is addressed by developing a marketing mix, which constitutes four main decision areas, namely, product, price, distribution and promotion.

1. Estimating the need for a product1.1.Market orientation

A business with a marketing orientation has 3 characteristics1. Customer focus – efforts done to discover customer needs so that satisfaction can be

delivered2. A team approach – using cross-functional teams and an integrated approach to develop &

deliver customer solutions3. Competitor orientation – a continues recognition of where competitors have an advantage

& their competitive position and marketing strategiesLoyal customers can ensure for a business over a long period of time:

Increased purchases Reduced operating costs Referrals to other potential customers The ability to justify a price premium to differentiate the product from price competitors

The effect of strong marketing orientation by stating that the ultimate goal is to develop & implement marketing strategies that:

Attract Satisfy and Retain target market customers

Market strategy = target market + the marketing mix

1.2.The marketing environment1.3.Obtaining and using marketing information1.4.Perspectives on consumer behaviour

2. Delineating the target market3. Developing the total market offering (marketing mix)

3.1.Product decisions3.2.Price decisions3.3.Distribution decisions3.4. Promotion decisions