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24109 - Lecture Notes

Marketing and Customer Value (University of Technology Sydney)

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24109 – Marketing and Customer Value

Lecture 1 - Introduction to Marketing

Assessment content:

What is Marketing?
Marketing  the activity, set of institutions, and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, clients, partners and
society at large.

Definition of Marketing
 Marketing is something that happens throughout
the organisation.
 It’s an orientation that puts the market at the
centre of business decisions.
 The marketing department is not the only
department in the organisation concerned with
creating, communicating and delivering value OR
marketing exchanges.

Value – A Perception
 A customer’s assessment of the utility of an
offering based on perceptions of what is received
and what is given.
 From Utility  transforming raw materials/knowledge into a usable product/service.
 Place Utility  making offering available to customers.
 Time Utility  having offerings available when they are needed.
 Possession Utility  allowing customers to own (or use) a product/service.
 Value refers to the ‘total offering’
o Reputation of organization
o Features of products
o Associated ideals
o Quality & price
 Value is hard to quantify/measure.
 Can change interpersonally and situationally.
 Value = quality / price (simplified form)
 Value evolves continuously and is unique for each individual.
Marketing Exchange

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 Exchange  the mutually beneficial transfer of offering of value between the buyer and
seller.
 A successful marketing exchange involves:
o Two or more parties, each with something of value desired by the other party.
o All parties must benefit from the transaction.
o The exchanges must meet both parties’ expectations (e.g. price, quality).
 We engage in daily marketing exchanges.
 Seller deems a transaction valuable when it is able to generate:
o Profits
o Prestige
o Ability to educate, delight, motivate and engage

Marketing For Who

 Marketing is focused at meeting the needs and wants of various stakeholders.
 These include
o Customers
o Clients
o Partners
o Society at large

The Marketing Evolution

 Trade
 Product orientation
 Sales orientation
 Market orientation
 Societal market orientation

Triple Bottom Line

 Corporate social responsibility
o Businesses have an obligation to act in the interest of societies that sustain them.
 Sustainability
o Business philosophy that is needed to ensure our future.

The Marketing Process  involves understanding, creating, communicating and delivering

an offering for exchange of value.

The Market
 Market  a group of customers with heterogenous (different) needs and wants.
 Examples include:
o Geographic markets (Australia vs American market)
o Product markets (smartphone vs tablet market)
o Demographic markets (university students vs high school students)

The Marketing Mix

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 A set of variables that a marketer can exercise control over in

creating an offering for exchange.
 Traditionally known as the 4 p’s:
o Product
o Price
o Promotion
o Place (distribution)
 Also: people, process, physical evident (will be covered during the services lecture)

Product
 Anything offered to the market.
 Can be a good, service, or idea (even a person)
 Best understood as a bundle of attributes.
o Features and functions of the product.

Price
 Price  the amount of money a business demands in exchange for its offerings.
 Pricing is a complex marketing decision that must take account of many factors,
including:
o Production, communication and distribution costs
o Required profitability
o Partners’ requirements
o Competitors’ prices
o Customers’ willingness to pay

Promotion
 Promotion describes the marketing activities that make potential customers, partners,
and society aware of and attracted to the business’s offering.
 Promotion should not be thought of merely as advertising.
 While advertising is an important component of promotion, many organisations use
other methods to promote products as well.
 Often, a combination of promotional methods is used.

Place
 The means of making the offering available to the customer at the right time and place.
 Largely a logistics function.
 Marketers need to understand how logistics impact their ability to deliver a product at a
time and place that suits customer need or wants.

The Marketing Environment

 The Marketing Environment  all of the internal and external forces that affect a
marketer’s ability to create, communicate, deliver and exchange offerings of value.
o Internal Environment
o External Environment
 Microenvironment
 Macroenvironment

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 Environmental Analysis  a process that involves breaking the marketing environment

into smaller parts in order to gain a better understanding of it.
 Why is an environmental analysis important?
o Helps marketers develop a strategy and direction
o From factors under marketer’s control: identify strengths and weaknesses
o From factors not under control: identify opportunities and threats
SWOT Analysis

Internal Environment
 The parts of the organisation, the people and the processes used to create,
communicate, deliver and exchange offerings that have value.
 The organisation can directly control its internal environment.
 Strengths and weaknesses are internal factors that positively and negatively affect the
organisation’s ability to compete in the marketplace.

External Environment
 The people and processes that are outside the organisation and cannot be directly
controlled.
o Marketers seek to influence external environment.
 Opportunities and threats: External factors that positively and negatively affect the
organisation’s ability to serve the market.
 Can be divided into micro-environment and macro-environment.

Micro-Environment
 Micro-environment  the forces within an organisation’s industry that affect its ability
to serve its customers and clients – target markets, partners and competitors.
 Consists of customers, clients, partners and competitors.
 Customers and Clients
o Markets must understand the current future needs and wants of their target
market:
 Understand what their customers value
 Identify changes in customers preferences
 Be willing and able to respond to changes
 Anticipate how needs and wants might change
 Be able to influence customer preferences
 Partners
o Partners include:
 Logistics firms – storage and transport
 Financiers – banking, loans, insurance and electronic payment infrastructure
 Retailers
 Wholesalers – storage and distribution
 Suppliers
 Competitors
o Five differing structures of competition in the microenvironment:
 Monopoly  one main supplier dominates the market
 Monopsony  one main buyer dominates the market
 Oligopoly  few main players; entry barriers high

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 Monopolistic Competition  numerous competitors; striding to differentiate

 Pure Competition  numerous competitors; undifferentiated products
o Marketers must ensure their offerings provide their target market with greater
value than their competitors’ offerings. Logistics firms – storage and transport.
o Marketers seek to understand their competitors’ marketing mix, sales volumes,
sales trends, markets share, staffing, sales per employee and employment trends.

Macro-Environment
 The macro-environment framework has been called the PESTEL framework
 Macro-environmental factors include:
o Political forces
o Economic forces
o Sociocultural forces
o Technological forces
o Environmental forces
o Legal forces – Laws & Regulations
 Political Forces
o The influence of politics on marketing decisions
o Politics is directly relevant through:
 Lobbying for favourable treatment
 Lobbying for favourable regulation
 The effect of political issues on international marketing.
 Economic Forces
o Factors that affect how much people and organisations can spend and how they
choose to spend it.
o Economic forces include income, prices, the level of savings, the level of debt and
the availability of credit.
 Sociocultural Forces
o The social and cultural factors that affect people’s attitudes, beliefs, behaviours,
preferences, customs and lifestyles.
o Demographics:
 Statistics about a population: age, gender, race, ethnicity, educational
attainment, marital status, parental status etc.
 Technological Forces
o Technology allows a better way of doing things
o Technology changes the expectations and behaviours of customers, clients and
suppliers.
 Environmental forces
o Natural disasters, weather and climate change
o Growing ecological awareness and social changes influence how firms will operate.
 Legal Forces
o Laws:
 Legislations enacted by elected officials
o Regulations:
 Laws and regulations govern what marketing organisations can cannot legally
do.

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 Laws and regulations fall into the following categories: privacy, fair trading,
consumer safety, prices, contract terms and intellectual property.

Situational Analysis
 Identifying the key factors that will be used as a basis for the development of marketing
strategy.
 An ongoing process that combines organisational objectives and situational analyses to
formulate plan that moves the organisation from where it currently is to where it wants
to be.

Marketing Metrics
 Marketers need to be able to isolate the key, or most important,
factors that need to be addressed to continue to compete
effectively in the market.
 SWOT is short for:
o Strengths
o Weaknesses
o Opportunities
o Threats

SWOT Analysis
 Analysis that identifies the internal strengths and weaknesses and
the external opportunities and threats in relation to an
organisation.
o Strengths  attributes of the organisation that help it achieve its objectives.
o Weaknesses  attributes of the organisation that hinder it in trying to achieve it
objectives.
o Opportunities  external factors that are potentially helpful to achieving
objectives
o Threats  external factors that are potentially harmful to achieving objectives.

Lecture 2 – Market Research

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What is Market Research?

 Market Research  a business activity that discovers information of use in making
marketing decisions.
o Essential component of understanding the market
o Should contribute to improved performance.
 Market research informs many types of decisions, including:
o Market Segmentation
o Sales Performance
o Product
o Price
o Promotion
o Place

Marketing Information System

Big Data
 Big data has changed marketing practice
 Improvements are constantly being made and more links are possible
 Linking data informs decision making
 Systems are being created to help more people understand complex data.
 By understanding what people do and when, where and why, we can build explanations
that:
1. Describe people’s current behaviour
2. Identify trends
3. Identify changes in behavioural patterns over time
4. Identify opportunities and areas for action
 A lot of online businesses naturally use and are able to generate big data
 User’s watch history, search queries, time spent scrolling, watching the show
 Demographic, internet-based behaviour, browsing behaviour.

Insight
 As the sheer volume of data has grown, so has the need for insight
 According to the UK’s National Social Marketing Centre, insight is a piece of
understanding that guides strategy.

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 Insight is generated from a combination of

analytics and market research and the deep understanding that emerges about what
moves and motivates people.

Market Research Considerations

 Before undertaking a market research, the following factors should be considered:
o Relevance
o Timing
o Availability of resources
o Need for new information
o Cost benefit analysis
 Ethics in market research
o Market researchers have an ethical responsibility to their clients or employers and
to those who participate in the research.

Components of Market Research

Defining the Research Problem

 The questions that the market research project is intended to answer
o Needs to be clearly specified
o Needs to enable the organisation to make marketing decisions.
 As the research proceeds the original questions asked may be redefined.
 Setting a good research problem is important
 The decision maker is aware of only 10% of the true problem.
 Leads to wrongly defining the research problem.
 If 90% of the problem us submerged, we cannot find a solution.
 Marketers quite often prepare a market research brief.
 Make sure their problem is well defined
 A research brief outlines the research problem and describes the specific information
required
 A research brief generally states the:
1. Research problem
2. Information required
3. Timeframe
4. Budget
5. Any other conditions of the project
Designing a Research Methodology

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 Detailed methodology created to guide the research project and address the research
problem/question.
 Multiple approaches possible: how you frame your research questions will determine
the type of research method.
 Exploratory Research  gathers information about a loosely defined problem.
 Descriptive Research  solve a particular and well-defined problem by clarifying the
characteristics of certain phenomena.
 Casual Research  assumes that a particular variable causes a specific outcome and
then, by holding everything else constant, tests whether the variable does indeed effect
that outcome.
 Hypothesis  a tentative explanation that can be tested.

Data Types
 Primary Data  data collected specifically for the current market research project.
 Secondary Data  data originally gathered or recorded for a purpose other than to
address the current market research problem, information that is already available.
 Where possible, marketers should always seek to learn from available data sources to
avoid unnecessary data collection.

Qualitative Research
 Qualitative Research  research intended to obtain rich, deep and detailed information
about the attitudes and emotions underlying a consumer’s behaviour.
 Often used for exploratory research.
 Qualitative research techniques such as interviews and focus groups.
 Interviews:
o Depth interviews that are researcher driven
o Structured vs semi-structured
o More focused, easy to steer conversation in intended direction
o More natural – can lead to unknown discoveries
o Interviewer can bias the results on solicitation and interpretation
o Relatively long duration
 Focus Groups:
o Involves a group of respondents that are brought together, introduced to an idea,
concept or product and their observations and interactions are observed.
o Great way to get multiple perspectives
o Give rise to common issues not foreseeable by researchers
o Good moderator VERY important
o Participants can influence each other
o Role of social influence is very strong

Quantitative Research
 Quantitative Research  research that collects information that can be represented
numerically.
 Usually used for descriptive and casual research
 Quantitative market research approaches include: survey, experimentation, observation
and neuroscience.
 There is a global shift towards quantitative.

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 Quantitative research is useful for:

o Monitoring market size
o Identifying market patterns and trends
o Predicting the success of proposed marketing campaigns
o Tracking customer perceptions for existing products
 Can (mostly) be more generalisable than qualitative research methods, we can sample
larger pockets of the population.
 Surveys:
o Surveys tend to be the most common quantitative research tool.
o Can be interviewer-led OR self-response.
o They rely on the research to formulate questions that can elicit a relatively closed
answer.
o All surveys are prone to distortion as people’s reported behaviour does not
precisely match their actual behaviour.
o Low response rates
 Experiments:
o Involves manipulating variables of interest whilst holding everything else constant.
o Often used for casual research
o Variable of interest = independent variable
o Outcome variable = dependant variable
o Artificial settings don’t always reflect real life
o Other variables not being measured could be influencing the outcome.
 Biometrics:
o Often called neuro-marketing
o Involves monitoring participant’s physiological responses to stimuli.
o Can include heart rate, emotional responses, brain activity.
o Provides actual behaviour
o Extremely expensive and invasive
o Cannot tell us how

Managing the Research Project

 Data must be collected according to the methods specified in the research design and
ethical practices must be followed.
 During research, processes are applied to ensure the research design is properly
followed.
o Responses are to be recorded correctly
o Biases are to be minimised
o Errors are not to be included
 Data can be stored or collected in-house, or it can be outsourced.
 Outsources to an agency taking on the responsibility of the data collection, scraping or
mining processes.

Managing Data Collection

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 Population  all of the things (often people) of interest to the researcher in the
particular research project.
 Sampling  the process of choosing members of the total population.
 Sample  the group chosen for the study.
o Random Sampling  each member of the population has a random chance of
being sampled.
o Stratified Sampling  each member is grouped on a characteristic and a sample is
extracted from that.
o Quota Sampling  the population is divided into groups based on a number of
characteristics. Researcher chooses arbitrarily from them.
o Convenience Sampling  participants are selected on the basis of who is
available.
 Given that time and financial resources are limited, budgeting and scheduling need to be
planned and managed to ensure the most benefit is derived from the investment in
market research.
 Budgets can be determined by estimating the likely actual cost of each phase of the
project or determining the amount of time that each phase is likely to take and then
applying a standard cost estimate to the hours.
 A market research project is a substantial investment.
 During a project, some phases must be completed before others can begin.
 It is important to note that the project must also be able to accommodate revisions as it
proceeds. The market research process is not always a straightforward, linear path from
start to finish.
 A number of tools exist to help project managers maintain control of projects.
 The most commonly used are Gantt charts and the critical path method.

Data Analysis
 Once data has been collected, it needs to be filtered and organised.
 Depending on how the data was collected, it may be necessary to perform some quality
control techniques to eliminated invalid data.
 Once data is cleaned, results need to be analysed.
 A wide range of analytical techniques is available, and researchers and analysts need to
understand which analytical techniques are appropriate for the data in hand.
 Quantitative analysis – statistical analysis in various programs (e.g. R, SAS, Excel, Pyhton)
 Qualitative data:
o Looking at results as rich detailed information
o Reduction
o Coding

Reporting the Findings

 Once data is analysed and conclusions drawn, the findings must be presented in a format
that will enable the marketing decision makers to use the information.
 Reporting should be concise and to the point
 Market researchers most typically report key findings in presentation formats (e.g.
PowerPoint or reports).
Responding to the Research Problem
 Market research is a continuous process

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 It is essential that marketers evaluate the effectiveness of each and every marketing
activity undertaken to optimise effectiveness.
 By undertaking high-quality research, we can deliver irrefutable evidence of the return
on investment.
 Findings can build business cases for future projects.

Lecture 3 – Consumer and Buyer Behaviour

What is Consumer Behaviour?

 Consumer Behaviour  the term used to describe the analysis of the behaviour of
individuals and households who buy goods and services for personal consumption.
 An understanding of consumer behaviour informs every decision made about the
marketing mix.
 The range of possible consumer behaviours is almost limitless.
 However, we can identify a range of consumer decision-making behaviour.
 From simple habitual decision-making behaviours at one end to highly complex extended
decision-making at the other.

Influences on Consumer Behaviour

 Range of factors that may influence a consumer is virtually limitless.
 Studying them systemically and comprehensively is mammoth task.
 Develop awareness and sensitivity to the issues that
may influence an organisation’s target market.

Situational Influences
 Situational influences on consumer behaviour are
perhaps the easiest to understand.
 The principal situational influences may be
classified as:
o Physical
o Social
o Time
o Motivational
o Mood
 Nudge Theory
o Makes (positive) advantage of situational influences
o Involves slightly altering the environment – choice architecture
o Make people behave in a predictable way
o Does so in a way without disposing of alternatives
o Does not provide significant incentives to for the behavioural change

Group Influences
 Consumers’ purchasing decisions are profoundly affected by group factors

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 Or influences from groups with which the individual interacts

 Group influences comprise of:
o Cultural Factors  the influence of the values beliefs and customs of the person’s
community.
o Social Factors  the influence of other people
 Cultural Factors:
o Cultural factors come from the level of the whole society or major groups within
society.
o From a marketing perspective, this level of analysis corresponds with that of the
mass market.
o Concerned with the aggregate behaviour of markets as a whole.
o Social class is of interest to marketers when can explain or reliably predict
differences in buyer or consumer behaviour.
 Culture
o The broadcasting group influence on behaviour is arguably that of culture.
o A precise definition of ‘culture’ is perhaps debatable.
o A system of knowledge, beliefs, values, rituals and artefacts by which a society or
other large group defines itself.
o Culture is multidimensional and includes both tangible and intangible elements.
o Various cultural frameworks exist that seek to categorise these influences.
o Hofstede found that national cultures could be distinguished by variations across
four core dimensions.
1. Power distance  the extent to which the less powerful members accept and
expect unequal distributions.
2. Uncertainty avoidance  to what extent members tolerate uncertainties.
3. Individualism  focus on the rights and concerns of each member. Antonym =
collectivism
4. Masculinity  extent to which members stress different expectations for men
and women.
 Subculture
o Groups of individuals who differ on some influential dimensions.
o Extracted from the broader culture in which they are immersed.
o Important to consider when their shopping and purchasing behaviour is
significantly different from the remainder of the population.
o In this case, they may represent a distinct and commercially significant marketing
opportunity.
 Social Class
o Individuals of similar social rank within the hierarchy
o Often better to pay attention to economic indicators.
 Income
 Occupation
 Educational background
o Socioeconomic status can be useful concept where the primary focus is on
‘purchasing power’.
 Social Factors:

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o The social level is concerned with developing an understanding of the behaviour of

the individual within the wider group
o From the traditional domain of ‘social psychology’
o Focused on understanding how the group influences the behaviour of its individual
members.
o Typically, through group pressures on the individual to conform with group norms.
Such influences are collectively known as social factors.
o Reference group  any group to which an individual looks for guidance.
o Guidance on what is appropriate.
 Values
 Attitudes
 Behaviours
 The influence of reference groups is particularly strong when the individual
lacks previous experience as a guide for behaviour.
 Or where that behaviour carries a level of social risk.
 Reference Groups
o Three major types of reference groups have been identified.
1. Membership reference groups – those we are part of already
2. Aspirational reference groups – those we want to be associated with
3. Dissociative reference groups – those we don’t want to be associated with
o Some individuals occupy the role of opinion leader
o A reference group member who provides relevant and influential advice about a
specific topic of interest to group members.
 Family
o For most people, the social groups with the most influence over their behaviour is
the family.
o The family life cycle describes the stages through which most families pass.

Individuals Influences
 Factors that influence the consumer’s behaviour which operate independently of social
circumstances.
 Known as individual factors
 Relate to personal and psychological characteristics
 These factors can be measured for an individual and are presumed to differ significantly
between individuals.
 In large part, they explain the individual’s purchase process and final product choice.
 Personal characteristics:
o At the level of individual buyer or consumer, we can identify a range of personal
characteristics.
o These have been shown to exert a significant influence on consumers’ choice
processes and ultimate purchase decisions.
o These personal characteristics, in some ways, constitute and individual’s identity
and, in this sense, are objective and relatively stable in the short term.
 Demographics
o Demographic Factors  describe the general make-up of the population.

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o Describing using existing objectives, measurable characteristics that are either

assumed or demonstrated to be related to the purchase or consumption of
products.
o Demographic factors should always be used as a part of the description and
explanation of consumer behaviour.
o In many cases, these demographic characteristics will be sufficient for the
marketer’s purposes.
 Lifestyle
o Defined by how they spend their time and how they interact with others.
o Significant difference between an individual’s actual lifestyle and their preferred
lifestyle.
o Consumers regularly purchase products that play a role in their lifestyle.
o The also often purchase products to enhance or express their preferred lifestyle.
Such products are aspirational or symbolic in nature.
 Personality
o The most distinctive characteristic that defines an individual’s behaviour.
o Notoriously difficult to measure reliably
o While relatively consistent and enduring, it does change throughout life
o Changes are normally in response to social and environmental influences and
personal experiences.
 Psychological Characteristics:
o Psychological Characteristics  describe internal factors that shape:
 Thinking
 Aspirations
 Expectations
 Behaviours of the individual
o These characteristics are particular to the individual
o Independent of their situational and social circumstances
 Motivation
o Used to describe the individual’s internal drive to act to satisfy
unfulfilled needs or achieve unmet goals.
o Often specific to the individual and situation, but some
motives are consistent over time and across the population.
o The most widely recognised theory of motivation is Maslow’s
Hierarchy of needs.
 Beliefs and Attitudes
o Beliefs and attitudes make up the ‘mental map’
o Consumers rely upon these when making judgements and products for which
there is no readily apparent need.
o The three components that make up an attitude are:
1. The cognitive component
2. The affective component
3. The behavioural component
 Perception
o Perception  the psychological process that filters, organises and attributes
meaning to external stimuli.

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o Perception is selective and can result in the following

 Selective exposure
 Selective attention
 Selective distortion
 Selective retention
 Learning
o Learning  the process by which individuals acquire new knowledge and
experiences.
o They can apply to future problems, opportunities and behaviour.
o Behavioural learning theories stress the roll of experience and repetition of
behaviour.
o Cognitive learning theories describe learning that takes place through rational
problem solving, and that emphasise the acquisition and
processing of new information.

Consumer Decision-Making Processes

 The consumer decision-making process involves five stages.
 These stages are typically present in all consumer decisions.
 The relative importance and duration, and in some instances, the
sequence of each varies considerably from one decision to another.
 There are expectations to this process:
o Habitual Decision Making  involves little involvement with
the purchase.
o Limited Decision Making  involves seeking limited
information to evaluate options for infrequent purchasers within familiar product
categories.
o Extended Decision Making  involves a high level of involvement with the
purchase decision in a protracted, deliberate and detailed way.
 A further category of decisions – namely, impulse purchases – are made with very little
involvement and, arguably, no planning or even forethought.
 In such instances, the purchase decision is taken before the buyer has even recognised a
need.
 The level of involvement is fundamentally important to the type of marketing that will be
effective.

Buyer Behaviour

Introduction to Business Markets

 Business markets (or ‘B2B’ markets) have distinctive characteristics that make them
different from consumer markets.
 Business markets frequently have a small number of large competitors and are made up
of a small number of large buyers.
 Purchases are often for large amounts.
 Business markets are much larger in revenue terms than the consumer markets they
services.

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Business Markets
 Business markets are made up of individuals or organisations that purchase products for
one or more of the following three purposes.
1. To resell the product
2. To use the product in the production of other products
3. To use the product in their daily business operations
 The overall business market comprises four major categories
1. Reseller markets
2. Producer markets
3. Government markets
4. Institutional markets

Reseller Markets
 Reseller markets buy products in order to sell or lease them to other parties for profit.
 Wholesalers purchase products from suppliers and producers for resale to other
intermediaries.
 Industrial distributors purchase products from producers and sell them on to
organisational buyers.
 Retailers purchase products from supplies, manufacturers or other intermediaries for
resale to consumers.

Producer Markets
 Producer markets purchase products for use in the production of other products or for
use in their daily business operations.
 They operate across all sectors of the economy – primary, secondary and tertiary
(services) industries.
 The share of GDP generated by manufacturing in Australia and NZ has been steadily
declining as manufacturing moves to lower-cost countries.
 Recently, many service roles have been ‘offshored’

Government Markets
 The government sector represents a substantia provider and purchaser of goods and
services.
 Demand can fluctuate widely due to ‘fiscal’ policy is used to attempt to smooth
macroeconomic fluctuations or as governments of competing political persuasions
alternate in power.
 The time, cost and uncertainty makes many companies reluctant to do business with
government, regardless of the potential sales revenues.

Institutional Markets
 Many organisations are neither public nor for-profit. The commonly have charitable or
social objectives (e.g. schools, universities, religious organisations, hospitals, charities).
 The markets in which these organisations buy and sell products are knows as
institutional markets.
 NFP organisations typically have different goals and fewer resources than commercial
organisations.

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 Marketing to such organisations will often be less financially profitable, but overall, the
NFP sector still comprises a very substantial market.

Business Buying Behaviour

 Business purchases usually take the from of a straight rebuy, a modified rebuy or a new
task purchase.
 The level of involvement is also reflected in the buying approach the business takes,
which may involve some or all of the following.
o Negotiation
o Description
o Inspection
o Sampling
 A Straight Rebuy  occurs when buyers purchase the same products routinely from
established vendors under already-established terms of sale, often through an
automated or semi-automated ordering system.
 A Modified Rebuy  usual involves some degree of evaluation of alternative product
options.
 When a business identifies a new problem or introduces a new process or product, it will
often need to make a purchase in a product category for the first time. This is known as a
new task purchase.

The Business Decision-Making Process

 The Business Decision-Making Process  involves the same basic
stages as the consumer decision-making process.
 For business purchases most stages are more protracted and
formalised.
 The business decision process will vary between straight rebuys,
modified, rebuys and new task purchases.

Lecture 4 – Segmentation, Targeting and Positioning

Knowing the Market

 Market  a group of customers with heterogenous needs and
wants.
 Consumers and businesses vary considerably in their needs, wants and demands.
 It is virtually impossible for an organisation to successfully appeal to every consumer or
business.
 To overcome this problem, marketers seek to identify and understand those parts of the
total market to which it can offer the most value.

Introduction
 Identifying potential customers and understanding their needs is fundamental to market
success.
 Consumer markets consist of households and individuals that by products for private
consumption.

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 Market segmentation enables the organisation to from a strategy for a group, or

segment, that has common features, rather than try to market to everyone.
 The organisation develops the most effective marketing mix for each segment. This
approach is known as the target marketing concept.

Target Marketing
 Individuals and organisation in a market have different wants, needs and demands.
 The choice of marketing strategy typically involves a degree of compromise.
 Compromise between the necessity to respond to the particular desires of potential
customers and the objective of achieving the lowest possible production and marketing
costs.
 Principally done through achieving economies of scale.
 Target marketing is based on three premises:
o Individual buyers or groups of buyers can be identified
o Sellers understand the needs of buyers
o Sellers seek to shape their offer to meet the needs of target buyers.
 Buyers have common wants, needs and demands  mass marketing
 Buyers have unique wants, needs and demands  one-to-one marketing
 The market contains subgroups  target marketing: target specific
subgroups
 When choosing target markets, the organisation will generally consider
three factors.
1. Its own resources
2. Market demand
3. Competition
 With a differentiated targeting strategy, an organisation identifies a range of target
market segments.
 These cover the majority of the total market
 For each market segment the organisation develops a tailored marketing mix.

Mass Marketing
 A mass marketer sees buyers as having common wants, needs and demands.
 A single product offering is created, communicated and delivered to meet the needs of
most people in the market.
 This is an undifferentiated approach to marketing.
 Organisations that practice mass marketing can capture very large markets at very low
cost per unit, ensuring high levels of profitability.
 This strategy is characteristic of commodity products and global mass market products.

One-to-one Marketing
 The one-to-one marketer seeks to appeal to each customer by providing unique,
customised offering that will meet their individual needs.
 Many small services businesses take a one-to-one marketing approach.
 A one-to-one approach usually results in higher unit costs and a more restricted market.
 These conditions typically form the basis of a focus or niche strategy.

Product and Market Specialisation

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 Small organisations with limited financial resources frequently adopt one of the
following specialised approaches to target marketing.
o Product specialisation
o Market specialisation
o Product–market specialisation
 Specialisation approaches work if:
1. The market is characterised by a wide
range of needs and product preferences
2. Clear market segments/product
categories are identified
3. Market is clearly divided
4. Market segments/product categories are profitable enough
5. Segment/product categories are actionable

The Target Marketing Process

 The target marketing process is a fundamental component of marketing strategy for any
organisation.
 The process involves three main stages, with each requiring detailed analysis and
decision making.
o Segmentation
o Targeting
o Positioning

Market Segmentation
 The first stage of the target marketing process is
market segmentation.
 There are two steps in the market segmentation
phase.
1. Identifying variables that can be used to
define meaningful market segments.
2. Profiling the market segments so they can be assessed in the second stage of the
target marketing process.

Identifying Segmentation Variables

 Segmentation variables are characteristics that buyers (i.e. individuals, groups or
organisations) have in common and that might be closely related to their purchasing
behaviour.
 The possible variables for segmenting consumer markets fall into four broad categories.
1. Geographic
2. Demographic
3. Psychographic
4. Behavioural
 Geographic Segmentation
o Geographic variables are reliable predictors of customer needs and purchasing
behaviours for a wide range of products.
o Useful geographic variables include:
 Climate

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 Local population density

 Region
 Topography
 Urban, suburban and rural location
 Demographic Segmentation
o Demographic segmentation is based on demographic variables, which are related
to the quantifiable social characteristics of populations.
o Useful demographic variables include:
 Age
 Ethnicity
 Household composition
 Income
 Gender
 Psychographic Segmentation
o Like demographic and geographic variables, psychographic variables (psychology
plus demographics) are based on consumer characteristics.
o Psychographic segmentation is based on difference in:
 Psychological traits (personality attributes and motives)
 Geodemographics
 Lifestyles (the expression of the two former categories)
 Behavioural Segmentation
o Behavioural segmentation is not based on consumer characteristics.
o Likely to be a better indicator of market segments and their purchasing behaviour.
o Behavioural variables include:
 Benefit expectations
 Brand loyalty
 Occasion
 Price sensitivity
 Volume of usage

Segmenting Business Markets

 Business markets are often characterised by a small number of buyers, each of which
might display a very close relationship with the seller.
 Traditional market segmentation variables may be less relevant.
 ‘Customised’ or ‘one-to-one’ marketing may be the most logical approach
 Demographic equivalent relates to industry
 Geographic indicator of buyers in a certain area

Effective Segmentation Criteria

 An almost limitless number of segments can be created using segmentation variables.
 It is crucial that the segments are evaluated against the following criteria to ensure the
segment is worthwhile in pursuing.
o Measurability
o Accessibility
o Substantiality
o Practicability
Profile Market Segments

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 Having identified the range of ways in which market segments can be described, the next
task is to develop a market segment profile.
 This describes the typical potential customer in the market segment – the common
features shared by members of market segments and how they differ between market
segments.
 Segment profiles will typically be described in terms of a number of segmentation
variables.

Market Targeting
 Market targeting involves a systematic examination of the range of possible market
segments.
o Potential sales volume
o Potential revenues
o Ability of the organisation to satisfy the
expectations
 It requires a close understanding of competitors
 How their offerings are seen by potential target
market segments
 It is important to realise that no company or brand can be all things to all people

Evaluate Potential Segments

 The evaluation of potential market segments involves detailed and rigorous analysis of:
o Sales potential
o Competitive situation
o Cost structure
 SWOT is a good tool to use
 Strengths & Weaknesses
o Evaluate what the company’s strengths and weaknesses are
 Opportunities & Threats
o Evaluate whether target market is attractive
o Evaluate whether target market is good fit with the company’s strengths &
weaknesses.

Select Target Markets

 Estimating market potential in each target market segment is important.
 It determines whether the chosen target market strategy will lead to healthy sales
volumes and sustainable profitability.
 Selecting particular market segments (and deciding to ignore others) is therefore at the
heart of the marketing concept.
 The organisation is no longer referring to an individual buyer or the entire mass market –
it is now a target market segment or segments.

Positioning
 Positioning  describes how target markets perceive the organisation’s offer relative to
competing offers.
 It is how customers distinguish the organisation, its products and its brands from
competitors.

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 Consideration for when they are selecting from among the available alternatives.
 Notice that positioning is based on customer perceptions.
 May or may not closely correspond with the product’s objective characteristics.

Determine Positioning for Each Segment

 To determine the appropriate positioning for its products, an
organisation needs to undertake detailed market research.
 To understand its current position in the minds of its target market
segments.
 A common technique for determining positioning is called perceptual
mapping.
 Typically produces tow-dimensional maps showing how each of the
competing brands relate to each other in terms of a range of product
attributes.
 SEE LECTURE 4 SLIDES FOR BRANDPOSITIONING AND REPOSITIONING

Analysing Current Positioning

 Establishing an organisation’s current positioning is of strategic importance.
 It should be undertaken based on rigorous analysis and market research.
 Some commonly used positioning variables include:
o Attributes
o Use/application
o Product user
o Price and quality
o Product class

Determine the Marketing Mix for Each Segment

 The final step in the target marketing process is to
determine an appropriate marketing mix for each target
market segment.
 The marketing mix for each segment should:
o Be consistent with the desired positioning
o Be internally consistent
o Be sustainable in the long term

Lecture 5 – Product

Product
 The product is what the marketer takes to the market to get consumers to buy or engage
in some type of exchange.
 Products rarely stay the same and will change suit new technology and changing tastes.
 Developing, launching and positioning products can be difficult and uncertain.

Goods, Services and Ideas

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 Product plays a vital role in the marketing process. Without a product, a marketer has
nothing to offer.
 A product is defined as a good, service or idea offered to the market for exchange.
 Goods are physical, tangible offerings that are capable of being delivered to a customer.
 Services are intangible offerings to the market.
 An idea can also be offered to the market in the form of a concept, issue or philosophy.

The Total Product Concept

 Products have many different features that can provide value for customers, clients,
partners and society.
 The total product concept is a way of viewing a product as the totality of value and
benefits it provides to the customer.
 It is crucial for marketers to understand that when customers choose a product, they do
not purchase a ‘thing’; rather, they buy a solution or a problem.
 Core Product  the fundamental benefit that responds to the customer’s problem of an
unsatisfied need or want.
 Expected Product  attributes that actually deliver the benefit that forms the core
product.
 Augmented Product  a bundle of benefits that the buyer may not require as part of
the basic fulfilment of their needs.
 Potential Product  all possibilities that could become part of the expected or
augmented product.

Product Relationships
 Many organisations produce multiple products or several different styles of a product.
 The relationships between the organisation’s products can be described as follows:
o Product item
o Product line
o Product mix

Product Classification
 Consumer products are products purchased by households and individuals for their own
private consumption.
 Consumer products are classified into one or more of the following main categories:
o Shopping products – electrical appliances, furniture, cameras, clothing
 Involve moderate to high engagement with the decision-making process.
 Expected to last a long time
 Purchased relatively infrequently
 Stocked up small number of retail outlets
 Sell in low volumes
 Reasonably large profit markets
o Convenience products – staple, impulse, emergency
 Frequently purchased
 Stocked up large number of retail outlets
 Sell in high volumes
 Low profit margins
o Speciality products

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 Unique characteristics desired by their buyers

 Consumers know exactly what they want
 Pre-selected by consumers
 No close substitutes or alternatives
 Available at a limited number of outlets
 Purchased infrequently
 Sell in low volumes
 High profit margins
o Unsought products
 Unknown or unconsidered by the consumer
 Challenge = making consumers aware
 Marketing communication = crucial
 Business-to-business products are products purchased by individuals and organisations
for use in the production of other products or for use in their daily business operations.
 Business-to-business products can be classified into three categories:
o Parts and materials – raw materials, components
o Equipment
o Services and supplies

Product Life Cycle

 An organisation needs to be adept at developing new products and successfully
launching them into the marketplace.
 The products must be effectively managed to ensure their ongoing profitability.
 Consider environmental changes
o Technological changes
o Changes in fashion
o Action of competitors
 The way products progress through the life cycle
varies with the product and the marketing
environment.

Overview of the Product Life Cycle

 The product life cycle (PLC) has five stages
o New product development  sets out
eight phases for introducing products.
 Idea generation
 Screening
 Concept evaluation
 Marketing strategy
 Business analysis
 Product development
 Test marketing
 Commercialisation
o Introduction
 Considerable investment required
 Goal: build awareness and interest
 Lag in building sales

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 Sales recoup R&D costs

 Minor profits toward ends
o Growth
 Increase in popularity, sales and profit
 Dependent on welcomeness of market
 Competitors begin to enter the market with similar products
o Maturity
 Novelty wears off
 Competitors more of and established
 Sales peak and profitability falls
 Decision to determine future of the product
 Change marketing mix (move back to growth)
 Leave the market and allow decline
o Decline
 Sales and profits fall
 New products entering
 Little interest
 Drop or change the product

Product Adoption Process

 Marketers understand how a consumer perceives a new product, learns
about it and decides to adopt it.
 This typically entails five sequential stages which form the product
adoption process:
o Awareness
o Interest
o Evaluation
o Trial
o Adoption

The Diffusion of Innovation

 The Diffusion of Innovation  describes how innovations are adopted by the market
over time.
 It suggests that the influence of social groups on the decisions made by individuals how
new products and ideas are adopted.
 The speed and pattern of market penetration for a new product innovation usually differ
sustainability between markets.
 The categories of product adopters are defined by both their product adoption
behaviour and characteristics that lead them to that behaviour.
o Innovators
o Early adopters
o Early majority
o Late majority
o Laggards

Product Differentiation

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 Product Differentiation  the creation of products and product attributes that

distinguish one product from another e.g. design, brand, image, quality, features.
 Most of a product’s differentiating features are part of the augmented product layer of
the total product concept.
 Product differentiation must not be viewed as a static concept.
 Marketers usually modify, upgrade and reposition products during their life cycle to
maintain or improve their competitive advantage.

Branding
 Brand  refers to a collection of symbols intended to create an image in the customer’s
mind that differentiates a product from competitors’ products.
o Name
o Logo
o Slogan
o Design
 Brand Image  the set of beliefs that a customer has regarding a particular brand.
 When marketers make decisions about products, the decisions must relate to the
products’ brand and brand image.

Brand Name
 A brand name is part of a brand that can be spoken and can include words, letters and
numbers.
 A brand mark is the part of a brand not made up of words – it often consists of symbols
or designs.
 To protect the brand, an organisation can register it as a trademark with the relevant
body e.g. IP Australia or the Intellectual Property Office of New Zealand.

Brand Equity
 A well-known brand can be very valuable to an organisation in financial and non-financial
terms. The added value that a brand gives a product is known as brand equity.
 For marketers the brand:
o Identifies the organisation’s products
o Differentiates the organisation’s products from competing products
o Attracts customers
o Helps introduce new products
o Facilitates the promotion of same-brand products
 Brand Loyalty  exists when the customer:
o Shows a highly favourable attitude towards a specific brand
o The customer would then prefer to buy that brand
 Brand Equity Metrics  measuring the value of brand is extremely useful to
organisations.
o Brand assets (e.g. trademarks and patents)
o Stock price analysis
o Replacement cost
o Brand attributes
o Brand loyalty

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o Willingness-to-pay analysis
 High brand equity can be a valuable asset for a company and provide a strong
competitive advantage.

Brand Strategies
 When developing brands within a product mix, an organisation may decide to pursue the
following possible strategies.
o Individual Branding  uses a different brand on each product, giving each its own
specific identity
o Family Branding  uses the same brand on several of the organisation’s products.
o Brand Extension  gives an existing brand name to new product in a different
category.

Brand Ownership
 Manufacture brands are owned by producers and are the most common type of brand.
 Private label brands are owned by resellers, such as wholesalers or retailers, and are not
identified with the manufacturer.
 Generic brands are those products that only indicate the product category
 Some organisations can enter a licensing agreement to use the names and symbols of
other brands for a fee
 Franchising has many parallels with licensing

Co-Branding
 Co-Branding  the use of two or more brand names on the same product. The use of
co-branding has grown recently as organisations try to:
o Capitalise on the brand equity of multiple brands
o Improve the perceived value of a product
o Maintain existing branding after another organisation’s brands are acquired

Packaging
 Packaging can become an important recognisable way for customers to identify a
particular product, much like a brand.
 Marketers may want to change the package to:
o Express to customers that the product has changed in some way
o Update the style of package or logo to broaden the customer appeal
o Emphasise certain elements to further differentiate it from competition

Labelling
 Labelling usually forms part of the package and provides identifying, promotional, legal
and other information.
 This information can be an important factor in a customer’s decision to purchase
 At its most basic level, the label identifies the product and brand name, but can also
provide useful information.
 Some of the information provided on labels is compulsory.

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Managing Products
 The product strategy is a central and complect part of the organisation’s marketing mix.
 From the new product development process through the remaining part of the product
life cycle, there are many decisions to be made which affect the success of the product.
 These decisions are not simply made once and implemented; rather, the product
strategy consists of ongoing evaluation and responses to the changing marketing
environment.

Approaches to Management
 Managing the product may require coordination and cooperation across different
business departments.
 A business may employ product managers to manage particular products or product
lines, or brand managers to manage a particular brand within the organisation’s portfolio
of brands.
 Another alternative is to appoint a market manager who will be responsible for
managing the marketing activities aimed at a particular part of the target market.

Managing Products Through the Life Cycle

 Marketers must determine which life cycle stage their product is in to make appropriate
decisions related to the marketing mix.
 Line extensions are the most common form of ‘new’ product. They are variations or
derivatives of an existing product added to the product line, rather than superseding the
original product.
 There may be the need to change an aspect of the marketing mix to reposition the
product.
 Eventually products may become obsolete. Product obsolescence may be either planned
or unplanned.

Lecture 6 – Price

Introduction
 Price is a measure of value to both buyers and sellers.
o Buyers needs prices that reflect product worth and what they can pay.
o Sellers need prices to cover their costs and provide sufficient profit margin to
justify the risk.
 Price is directly related to profitability:
o Profit = (price x sales volume) – total costs
 If a buyer and seller cannot agree on the value expressed in the price, the transaction is
unlikely to proceed.
 Price serves as a visible expression of the value.

Intricacies of Pricing
 ‘price shoppers’ or ‘price seekers’ will always be a key market segment in almost all
markets.
 In today’s internet-driven markets, price shopping has become a more dominant market
driver.

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 The web has made price comparison shopping much easier and more efficient.
 Other segments seek lower prices for greater value (price aversion)

Determining Pricing Objectives

 More specific pricing objectives tend to focus on various combinations of the following
issues:
o Profitability
o Long-term prosperity
o Market share
o Positioning
o What eh customer is prepared to pay
 Pricing objectives should be specific, measurable, actionable, reasonable and
timetabled.

Not-for-Profit Pricing
 While not-for-profit organisations do not seek to make profits, they do generally seek a
return on their activities and many charge for their products.
 Their pricing objectives may be to generate enough funds to sustain their activities.
 Alternatively, a not-for-profit organisation may price its products to make them
appealing to their target market.
 In such circumstances, state and provincial governments will often subsidise such loss-
making services as part of their ‘service obligations’.

The Legal Environment

 All organisations are subject to laws and regulations when establishing prices.
 A number of government regulations and laws seek to prevent activities aimed at
controlling or manipulating prices.
 Under Australian Consumer Law, there is a clear intention and expectation that pricing to
consumers should be explicit and transparent.
 Consumers should not be the subject of deception or discrimination.
 They should know clearly the total price before purchasing.

Selecting the Pricing Method

 Like all marketing decisions, pricing decisions should be based on an understanding of
the customer.
 The value of the product to the customer places a ceiling on prices.
 The organisation must ensure it obtains value from the marketing exchange.
 The organisation’s costs place a floor on prices.
 Organisations must make pricing decisions that make their products competitive in the
marketplace.

Fixing the Price

 Pricing can be based upon:
o Costs
o Demand
o Competition

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Demand Pricing

Demand Considerations
 Demand exists when consumers are willing and able to buy a product.
 Demand for a product arises when it can fulfil an unsatisfied need or want of a customer.
 Understanding the nature and extent of consumer demand is central to the formulation
of pricing strategy.
 Demand-based Pricing  sets prices according to the level of aggregate/individual
customer demand in the market.

The Demand Schedule and Demand Curve

 Demand Schedule  simply a table that shows the actual or estimated quantity
demanded for a particular product at particular prices.
 For the vast majority of products, there is an inverse relationship
between price and quantity sold – as price rises, the quantity sold
falls, and vice versa.
 Hence, the demand curve has a downward, or negative slope.
 Prestige products are exception.

Price Elasticity of Demand

 The sensitivity of the quantity demanded to change in price is
known as the price elasticity of demand.
 In numerical terms, it is the percentage change in quantity
demanded relative to a given percentage change in price.
 Price Elasticity of demand varies from product to product and
industry to industry.
 Demand is said to be price elastic if Ed is greater
than 1 (i.e. if the percentage change in the
quantity demanded exceeds the percentage
change in price).
 Demand is, thus, price sensitive
 Demand is said to be price inelastic if ed is less than 1 (i.e. if
the percentage change in quantity demanded is less than the
percentage change in price).
 Demand is, thus, price insensitive.

Ethical Issues of Demand-Based Pricing

 Demand-based pricing can often lead to very high profits but
can lead to other problems.
 Would it be ethical to increase the price of insulin by 1000%?
 Flexible pricing

Cost Pricing

Pricing Based on Costs

 In cost-based pricing, the selling organisation adds a percentage or dollar amount to the
cost of the product.

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 Cost-plus pricing is often used when it is difficult or impossible to determine the costs of
the product until it has been made or completed.
 Markup pricing is used by wholesalers and retailers and involves adding a percentage of
their purchase cost to determine the resale price.

Cost and Revenue Analysis

 Profits represent the difference between total revenues and total costs.
 Costs establish a price floor, below which prices are not sustainable for a for-profit
organisation.
 Price floor is something that can be introduced by the government
 If priced near cost, a product is called and price leader; if priced below cost, it is called a
loss leader.

Break-Even Analysis
 A break-even analysis determines the volume of unit sales at which total costs equals
total revenue. This is known as the ‘break-even point’.
 Estimating the break-even point is a crucial starting point, especially for new products.
 Break-even analysis can be conducted for a specific period, a project or the life of a
product.
 Break-even point
o The Quantity at which Total revenue = Total Cost
o Firm starts making profit after the BEP
o Price X Quantity = Total Fixed Cost + total Variable Cost

Marginal Analysis
 Marginal analysis is concerned with understanding the
effects on costs and revenue when a company produces
and sells on more unit of product.
 Marginal analysis can be useful in pricing individual units
of output or to individual buyers.
 Profit is maximised by selling the quantity at which marginal cost equals marginal
revenue.
 Marginal analysis requires detailed data on actual and estimated costs and revenues at
all volumes and prices. It is difficult to implement precisely.

Competition Pricing

Competition Considerations
 Competition-based pricing involves setting prices based on the prices charge by
competitors.
 Competition-based pricing serves to ensure that an organisation maintains its sales
volumes and market share, but it does not guarantee profitability.
 Price competition is therefore a difficult strategy to sustain over the long term.
 Unless or organisation enjoys clear market or cost advantages.

Understanding Competitors Pricing

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 In price-sensitive industries, organisations monitor their competitor’s rices on a daily or

even more frequent basis.
 The likely response of competitors to the organisation’s pricing will in part be
determined by the competitive structure of the industry.
o Oligopoly
o Monopoly
o Perfectly competitive

Alternatives to Competing on Price

 Organisations with a strategy of differentiation focus on product attributes such as
uniqueness, quality, brand, image or service.
 When it is feasible, non-price competition is clearly preferable to price competition as it
gives the organisation greater power to decide on the profit margin per unit sold.
 Therefore, for most organisations, non-price competition should from the basis of the
competitive strategy.

Busines-to-Business Pricing
 Business-to-business marketing relationships between suppliers and organisational
buyers tend to be close, long-term and formal in nature.
 This leads to pricing practices that are more formal than those in consumer markets.
 Pricing is also often more complex and open to negotiation in business markets than in
the consumer market.
 Business purchasers are more likely that private consumers to consider lifetime costs
involved in a purchase.

Pricing for Intermediaries

 Organisations will only choose to deal with intermediaries who can add value to the
organisations offering.
 Most producers recommend a final retails price or ‘list price’ that consumers should pay,
but each intermediary needs to make a profit.
 To ensure the profitable operation of the various partners involved in getting products
from the producer to the consumer or organisational buyer, various discounts apply to
transactions in business markets.

Price Management

The Psychology of Pricing

 Consumer purchasing behaviour is usually based on a
rational evaluation of value.
 The relative importance of price varies between
individual consumers.
 An important indicator of the importance of price in
consumers’ purchasing decisions is the perceived
uniqueness or differentiation of the product.
 Different market segments will have varying levels of sensitivity to price.

Pricing Through the Product Life Cycle

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Pricing New
Products
 Penetration
pricing uses a low
launch price below market price.
o Gain maximum sales volume
o Rapid market share
o Turnover of a new product
 Price Skimming  involves charging the highest price that customers who most desire
the product are willing to pay.
 Over time, the price is lowered to bring in larger numbers of buyers, again at the highest
prices that these buyers are willing to pay.

Pricing Established Products

 Differential Pricing  the practice of charging different buyers different prices for the
same (or equivalent) product.
 A related approach is special-event pricing. This approach links discounted prices across
an organisation’s entire product range with some special or seasonal event. Special-
event pricing is designed to increase total sales volumes.
 Such a campaign requires the pricing strategy to be combined with promotion. Such an
approach is called promotional pricing.

Setting and Managing the Final Price

 Once implemented, the price must always be monitored in relation to all of the factors
we have discussed as they can change over time.
 Pricing is perhaps the most flexible element of the marketing mix. The flexibility ensures
that pricing is the most dynamic and volatile element of the marketing mix.
 The internet has made prices more visible, more flexible and, consequently, more
competitive than ever before.

Lecture 7 – Promotion and Communication

What is Promotion?

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 Promotion  the marketing activities that make potential customers, partners and
society aware of and attracted to the business’s offerings. (not only about sales or
advertising)

What are Marketing Communications?

 Marketing Communications  another term for promotion that refers to
communicating a message to the marketplace.

Objectives of Promotion
 Support marketing objectives
 Demonstrate features and benefits of products
 Distinguish from competitor offerings
 Encourage product trial and create demand
 Increase awareness about and goodwill for the organization
 Build a relationship between customer and brand
 Increase general awareness and goodwill towards an organization
o When this is linked to product sales, this is known as caused-related marketing

Integrated Marketing Communications

 When carefully combined and coordinated to achieve a consistent and effective
message, the promotional approach is known as integrated marketing communications
(IMC).
 The idea behind IMC is that the planning of each part of the promotion mix should not
be done isolation.
 Integrated Marketing Communications (IMC)  the term given to the coordination of
promotional efforts to maximise the communication effect.
 The goal of IMC is to consistently send the most effective possible message to the target
market.
 The best return on promotional efforts is achieved when there is a high degree of
consistency, and hence synergy, across the four areas of promotion.

The Promotion Mix

 Various combinations of promotional methods are used to promote a specific product
(good, service or idea).
 The following is a list of the four main elements of the promotion mix.
o Advertising
o Public relations
o Sales promotion
o Personal selling

Integrating Promotion Mix Elements

 The most effective choice and mix of promotion elements will vary with:
o Specific goals of the marketing effort
o Individual product characteristics
o Individual target market characteristics
o Nature of the marketing organisation itself
o Resources and budget available to the marketer

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 The appropriate promotion mix is likely to change over time as each of those
characteristics’ changes and as the effectiveness or otherwise of the current promotional
mix is evaluated.

Pull Policies and Push Policies

 Pull Policy  an approach in which the producer promotes its products to consumers.
 Usually done through advertising and sales promotion, which then generates demand
upward through the marketing distribution channel.
 Push Policy  an approach in which the product is promoted to the next organisation
down to the marketing distribution channel.

Advertising
 Advertising  the transmission of paid messages about an organisation, brand or
product to a mass audience.
 The main benefit of advertising is the ability it offers to reach a lot of people at a
relatively low cost per person.
 Product advertising usually aims to demonstrate the features and benefits of the product
to promote the product or group of products above competitor’s products.

Creating an Advertising Campaign

 Within the IMC strategy, the overall advertising plan is known as the advertising
campaign.
 Any decisions about advertising should be made in the context of an IMC approach.
 The more complex and ambitious the campaign, the more likely it is the marketing
organisation will engage the services of a specialist advertising agency. (to assist in the
creation, production or placement of an advertising campaign)
 Key steps in creating an advertising campaign:
o Understand the market environment
 Advertising cannot be viewed in isolation
 Emerging issues in the marketing environment may affect the advertising
campaign.
 Technological changes
 Competitor actions
 Need for a situational analysis
o Know the target market (audience)
 If you are sending a message, it is important to know about who you are send
the message to.
 Demographic factors
 Lifestyle factors
 Marketing organisations that run advertising campaigns that are not built on
knowledge of the target market set themselves up to fail
o Set specific objectives
 A marketing organisation contemplating an advertising campaign will probably
know the overall aim of the campaign.
 Often objectives will be set with the sight to increase sales, but there need to
be clear, measurable communication objectives.

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 Once these are correctly defined, it can facilitate later evaluation of the
campaign’s success.
o Creates the message strategy
 A main messaging approach needs creating
 E.g. emotional vs rational
 Type of emotional appeals
 Intimately linked to knowledge of the target market and to the specific
objectives of the advertising campaign.
 A lot of research is put into understanding which strategies are more effective.
o Allocate resources
 Determine a budget for its advertising campaign
 Budget will be based on its financial and other resources, the objectives of the
campaign and what it expects the return on the investment to be.
 What is the right amount of capital and labour to invest?
 Businesses can choose to:
 Match its competitors spend
 Set a certain percentage of sales or revenue aside
 Make and educated guess
 Work backwards from the objectives to determine what will be required
to produce the appropriate advertising.
o Select media
 Marketing organisations can choose among a variety of media, each with their
own special characteristics.
 Two of the most important considerations in choosing media are reach and
frequency.
 Reach measures what proportion of the target audience is exposed to the
advertisement at least once (how many).
 Frequency measures how many times each target market member is exposed
to the advertisement (how often).
 LOOK AT LECTURE 7 SLIDES FOR EXAMPLES
o Produce the advertisement
 The marketing organisation must create content (based on the message
strategy) and then work out how the best to present that content.
 Small organisations may undertake the creative execution themselves.
 Large scale organisations might contact an advertising agency.
 The creative services may include copywriting, graphic design, illustration,
scripting and photography.
 Advertisements should aim first to grab the potential customer’s attention.
o Place the advertisement
 Involves the buying and placement of media space and time.
 Dedicating people and resources to ensure the campaign proceeds.
 Monitoring effectiveness
 In some cases, it may be ended early if unsuccessful.
o Evaluate the campaign
 Advertising campaigns can be evaluated before (pre-tests), during and after
(post-tests) the campaign is run.

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 During the campaign, its effectiveness can be monitored by measuring

changes in sales and enquiry levels, and any extra publicity generated by the
campaign.
 After the campaign, its effectiveness can still be measured through changes in
sales and enquiry levels, as well as by conducting market research to assess
the level of attention or awareness, such as brand recognition or brand recall.

Attention Economy
 Attention is one of the most valuable resources in the digital age
 Increasing problem for advertisers
 Consumer attention span of ~8 seconds
 AIDA is becoming an increasingly more difficult task

Legal Issues in Advertising

 While the advertising sector is largely self-regulating, there are a
number of legal restrictions on what can be advertised and how.
 While some promotions undoubtedly stretch the truth or add
‘puffery’ (exaggeration), outright lying is not only illegal, but damaging to customer
relationships.

Public Relations
 Public Relations  a term used to describe promotional efforts designed to build and
sustain good relations between an organisation and its stakeholders.
 Stakeholders include customers, employees, neighbours, shareholders, regulators,
governments, competitors, the media and society in general.
 Public relations is also used reactively to counter poor publicity or as a part of crisis
management.

Approaches and Methods

 Publicity  the exposure a marketing organisation receives when it obtains free
coverage in the media.
 Positive coverage is preferred, but many marketers adhere to the old idea that ‘any
publicity is good publicity’.
 Organisations can generate publicity by promoting something newsworthy to news
media.
 One of the highest-profile public relations tools is sponsorship.

Public Relations as a Profession

 Many organisations and individuals use public relations specialists to manage their
publicity.
 This is particularly the case among celebrities and public identities, whose publicists
have the dual role of ensuring regular positive media attention while minimising negative
press.
 Given the complexity of running a public relation campaign to deal with an incident,
marketing organisations should prepare contingency plans and materials so they can
make a response quickly and efficiently.

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Sales Promotion
 Sales promotion offers extra value to resellers, salespeople and consumers in a bid to
increase sales.
 The main benefits of sales promotions are to smooth out sales in periods of low demand
and to facilitate retailer support.

Customer Sales Promotion

 Sales promotion methods aimed at the consumer.
o Free samples
o Premium offers
o Loyalty programs
o Contests
o Coupons
o Discounts
o Rebates
o Point of purchases promotions
o Event sponsorships

Trade Sales Promotions

 Trade sales promotions are aimed at business purchasers and are run by producers or
industries to present products to business customers.
 Major examples are conventions and trade shows.
 Trade sales promotions are not aimed at consumers. As such, they are push policy
methods.
 Trade sales promotion methods include the following:
o Trade allowances
o Gifts and premium money
o Cooperative advertising
o Dealer listings

Personal Selling
 Personal Selling  the use of personal communication with consumers to persuade
them to buy products.
 Personal selling is the most expensive from of promotion as it requires the full dedication
of a salesperson, or sales representative, to a customer.
 It does have strong advantages over the impersonal forms of promotion – in particular
that the salesperson can tailor the promotion to the customer’s needs, adjusting the
promotion as they receive feedback from the customer.

Managing a Sales Force

 Salespeople are the public face of a business. They are crucial to customer’s experience
of interacting with the business, and determine no only whether the customer makes a
purchase, but where they will repurchase in the future and initiate positive or negative
word of mouth about their experiences.
 Retailers and/or sales managers need to both choose salespeople carefully and manage
them effectively.

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Additional Forms of Promotion

 Ambush Marketing
o Ambush marketing is the presentation of marketing messages at an event that is
sponsored by an unrelated business or even a competitor.
o Ambush marketing is legal and can be extremely successful.
o Major events are becoming more sensitive to ambush marketing and taking steps
to reduce its impact and protect sponsors.
 Guerrilla Marketing
o Guerrilla marketing is used to describe nay aggressive and unconventional
marketing approach.
o Its aim is simply to grab the attention of consumers when they are unaware.
o It was more commonly used by small businesses that could not afford large-scale
marketing efforts, but this is changing due to the large amount of publicity it can
generate.
o Its effectiveness relies on its ability to take its target unawares – they don’t expect
it, so they don’t filter it out.

Product Placement
 Product Placement  the paid inclusion of products in movies, television shows, video
games, song and books.
 It can be featured or incidental.
 Product placement of one product or brand often also involves the exclusion of
competitors’ products and brands.

Viral Marketing
 Viral Marketing  the use of electronic social networks to spread a marketing message.
 Because the marketing message is spread by friends and colleagues it has greater
credibility – and is more likely to be considered than marketing messages sent via mass
media.
 The flipside of viral marketing is that it can go very wrong.

Permission Marketing
 Permission Marketing  the broad term given to activities that are centred around
obtaining customer consent to receive information and marketing material from a
company.
 Marketers actually ask and gain permission to contact the customer.
 This reduces waste and may encourage genuine customers who want to ‘opt in’ and be
informed about new stock or sales.

Sponsorship
 Sponsorship – the paid association of a brand with an event or person.
 As media become more and more fragmented with smaller, niche audiences, the pay-off
on the extraordinary sums of money required to sponsor events diminishes.
 Social consciousness and environmental awareness are prompting consumers to think
about the overall activities of marketing organisations, rather than to analyse and accept
the promotional message in isolation.

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Lecture 8 – Place (Distribution)

Distribution Channels
 Requires a chain of individuals and organisations.
 This chain exists between producers and consumers.
 Flow of this chain is what we call a distribution channel.
 There are two main distribution channels:
o Direct distribution
o Indirect distribution

Direct Distribution
 Manufacturer sells directly to the consumer
 Often referred to as a one-level distribution channel
 Increased in use in recent years
 E.g. Apple, Dell
 Can bring great benefit to consumers
o Personalisation
o More value for money

Indirect Distribution
 Manufacturers use marketing intermediaries to sell to indirectly sell to the customer.
 Intermediaries take on various responsibilities on behalf of the manufacturer.
 The shift of responsibilities can:
o Be more cost effective
o Make use of greater knowledge/skills
o Provide better service outputs to the final consumer
 Indirect consumer distribution
o It’s not uncharacteristic of brands and companies to use multiple distribution
channels e.g. Apple.

Supply Chain Management

Distribution Chain Management

 Each party has expectations and obligations
 Different amount of power in the supply chain
 Relationship management is crucial
 Not all arrangements are successful

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Integration
 Horizontal
o When organisations at the same level are combined under one management
structure.
o A channel member on the same level buys out a competitor e.g. Facebook and
Instagram
 Vertical
o When different stages of the distribution channel are combined
o Vertical marketing system

Franchising
 Franchising  type of business where you sell products to the right to use the main
elements of the business model are licenses to each other.
 Franchisor
o Rights to the business model
o Provides services such as advertising, business know-how and supplier networks
o Stipulates standards and rules by which the franchisee must abide
o Promises exclusive rights to a certain area
 Franchisee
o Pays the franchisor a fee/or percentage of the sales.
o Supplies labour and capital
o Operates the business in accordance with the standards

Marketing Intermediaries

Wholesalers
 Wholesaling comprises exchanges in which products are bought for resale, for use as
inputs in other products, or for some other use in a business.
 Wholesaling does not include transactions with end consumers.
 A wholesaler is simply an organisation primarily engaged in wholesaling.

Major Wholesaling Functions

 Wholesalers act as both the connection between producers and retailers and offer
benefits to both.
 For many producers, these benefits – and the facts that wholesalers, being specialists,
can provide the services more efficiently than the producer can perform them itself –
outweigh the financial costs of dealing with wholesalers in the marketing channel.
 Merchant Wholesaler – independently owned (not owned by the producer.
 Manufactures’ Wholesalers – also known as manufacturers’ sales branches and offices,
are similar to merchant wholesalers, but are owned by the producer itself and this
represent a form of vertical integration.

Retailers
 Retailing describes any exchange in which the buyer is the ultimate consumer of the
product.
 Retailing excludes transactions in which the buyer intends to resell the product or use it
in the making of another product.

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 Other business may undertake retailing, but their primary focus is on something else.
 Many types of organisations undertake retailing, whether or not they are primary
retailers.
 The marketing organisation must decide what retailing approach (or approaches) is
suitable for its products.

Retailing Considerations
 Location
o The natural geographic area from which customers will be drawn
o Proximity to competitors
o Proximity to complementary retailers
o Customer access to public transport and public parking
 Positioning
o Retail positioning  the practice of identifying a gap in the market and targeting it
by creating some distinguishing feature in the mind of customers

Type of Retailers
 There are many different forms of retailer, each offering relative strengths and
weaknesses for the customer and the producer or wholesaler.
 Specialty retailers
 General merchandise retail stores
 Online retailing
 Other forms (direct marketing, telemarketing, catalogue marketing, door-to-door
marketing)

Agents
 Agents are engaged by buyers or sellers on an ongoing basis to represent them in
negotiations with other marketing channel participants
 The main type of agents are as follows
o Manufacturers’ agents
o Selling agents
o Buying agents
o Commission merchants

Brokers
 Brokers are engaged on a short-term or one-off bases to negotiate on behalf of buyers or
sellers.
 They have a more limited role than agents.
 Their value is in their specialist knowledge and well-established contacts in their
industries.
 The insurance and mortgage broking industries have been widely criticised over the past
decade, as some brokers have guided their customers towards products that maximise
the brokers’ income rather than providing the most suitable product.

How Many and Which Intermediaries to Use?

 Forms and functions

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o Physical distribution
o Distribution of services
 Market coverage
o Intensive distribution
o Exclusive distribution
o Selective distribution
 Service outputs
o Bulk breaking
o Spatial convenience
o Product variety and assortment
o Waiting and delivery time
o Information provision
o Customer service

Physical Distribution

Forms and Functions

 Physical products need to be moved from
producers to consumers via a number of
activities that are collectively known as
physical distribution.
 Physical distribution involves order processing,
inventory management, warehousing and
transportation.
 Physical distribution activities can be
performed by any member of the distribution
channel.

Order Processing
 All activities involved in managing the information required to receive, handle and fill a
sales order.
 Minimise costs; maximise customer satisfaction.

Inventory Management
 Involves managing stocks of products to ensure availability.
 Aim is to hold enough stock to fit customer demand and minimise holding costs
(associated with storage and expiry)
 Inventory based on:
o Order lead time
o Usage rate
o Safety stock
 Just-in-time (JIT) approach

Warehousing
 Use of facilities to store and move goods
 Important tool in inventory management
 Many businesses buy or lease space

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 Alternative option: distribution centre which is a type of warehouse focused in moving

rather than storing goods.

Transport
 Transportation  the process of moving products from their place of manufacture to
their place of consumption.
 The key modes of transportation are road, rail, sea, air and – somewhat less obviously –
pipelines.
 Specialist transportation companies (freight forwarders).

Distribution of Services

Physical Inputs
 The creation and delivery of most services products require physical inputs.
 The service business must ensure that the various physical inputs it needs to deliver the
service are available.

Scheduling
 Scheduling in service businesses is designed to smooth demand.
 Some businesses can not so easily control demand for their services e.g. hospital

Delivery Infrastructure
 Some services are distributed via a physical infrastructure.
 Some service providers bring the service to you.
 For example, the electricity supply to your home is delivered via an extensive network of
above-ground, underground and undersea cables.
 The web has expanded the range of services available in this format e.g. internet banking

Market Coverage

Intensive Distribution
 Distribution via every suitable intermediary
 Covers a wide range of the market
 Preferred when high sales target/low margins
 Convenience products

Exclusive Distribution
 Distributes products through a single intermediary in any given geographical region.
 Helps keep focus simple for a firm
 Give an impression of exclusivity
 Often done by luxury brands

Selective Distribution
 Distributes through intermediaries chosen for some specific reason
 Good when there is not a need to be on ever market shelf
 Also gives an impression of prestige
 Allows to select based on service outputs

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Service Outputs
 Bulk Breaking  allow customers to buy in required sizes and quantities
 Spatial Convenience  reduces the transportation requirements between customer and
seller.
 Product Variety and Assortment
o Variety – breadth of classes of goods
o Depth – within the same category
 Waiting and Delivery Time  reduces the time period between consumption, ordering
and receiving
 Information Provision  facilitates education to customers about
o Product attributes
o Usage capabilities
o Pre-purchase services
o Post-purchase services
 Customer Service  all the services that make it more easy and less difficult for
customers

Lecture 9 – Services and International Marketing

Services

Introduction
 The strong growth of the services sector over the past few decades in many ways has
been the result of external macro-environmental forces.
o Economic changes
o Social changes
o Technological advances
 Services now account for the major share of total economic activity in developed
economies.
 The services sector provides the most jobs, by far, of all sectors of the economies of
developed countries.

Service Dominant Economies

 Service industries generate about 70% of the national incomes of Australia and NZ.
 Private-sector organisations in Australia and NZ are the primary providers of services
including retail, property and construction, with the government sector being a major
provider in defence, health, education and welfare.
 The most rapidly growing service industries are communications, education and health.
 The finance, tourism and hospitality industries can be quite volatile.
‘Service Outputs’ and ‘Service’
 Services are distinguished from goods – services are not ‘things’; rather, they are deeds,
activities or performances.
 Service  the activity, deed or performance that delivers value
 Service Outputs  involved in the distribution of a good.

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 Marketers need to be concerned with offering a competitive range of services and

ensuring those services are delivered with the highest standards of customer service.

Service Product Classification

 Consumer Services  those services purchased by individual consumers or households
for their own private consumption.
 Business-to-Business Services (or professional services)  those services purchase by
individuals and organisations for use in the production of other products or for use in
their daily business operations.

The Services Marketing Mix

 The following characteristics formally distinguish services from goods.
o Intangibility
o Inseparability
o Heterogeneity
o Perishability
 Each of these characteristics has important consequences for the development of the
marketing strategy for service products.

Intangibility
 The characteristic of services that most fundamentally distinguishes them from goods is
their intangibility.
 Because a pure service is an activity and not an object, it cannot be easily perceived by
the five physical senses.
 However, pure services are very rare. Most products contain elements of both goods and
services.
 Intangibility makes it more difficult to promote the features and benefits of service
attributes.
 2 over-arching strategies to reduce uncertainty:
o Using tangible cues
 Logos, uniforms, brands
 Servicescape/physical evidence
o Reduce the level of risk perceived by customers through such techniques as:
 Service guarantees
 Testimonials
 Positive word-of-mouth

Inseparability
 For most services, it is impossible to separate the production of the service and the
consumption of the service.
 The inseparability of services presents a significant challenge in the marketing and
delivery of services.
 Buyers and sellers of services are frequently ‘co-producers’ of the service, it can be very
difficult to control quality and, hence, customer satisfaction.

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 Service providers needs to be concerned with both their technical skills and their
customer service delivery.
 Production and consumption occur together in time, or simultaneously.
 In this context, many ‘people processing’ services are delivered in real time.
 For most professional service providers, their services cannot be mass produced.
 Limits to how many patients or clients can see.
 Need to provide appropriate hours of provision.

Heterogeneity
 The inevitable variations in the service provided give services the characteristic of
heterogeneity.
 For service marketers, the challenge is to provide a product with a reasonably consistent
level of quality that matches customers’ expectations.
 It is important to measure and manage service quality in order to ensure consistently
high performance.
 This should be a continuous process (e.g. ‘mystery shoppers’, customer service surveys,
online customer reviews and benchmarking).
 The key strategies for the marketer to address:
o To develop service delivery systems
o Manage customer expectations
o Invest heavily in staff training
o Select customers carefully

Perishability
 Perishability  refers to the inability to store services for use at a later date – they are
‘time bound’.
 The challenge that perishability presents to marketers is to balance supply and demand
over time in such a way as to maximise availability demand and profitability.
 Key strategies to balance demand:
o Manage demand over time
o Stimulate demand
o Restrict demand
o Increase supply/capacity

Unique Characteristics of Services

 The intangibility, inseparability, heterogeneity and perishability of services create a range
of issues for marketers.
o Inability for customers to inspect and evaluate a product prior to consumption
o Inevitable variability in service quality
o Inability to store product

The Extended Services Marketing Mix

 The unique characteristics of services suggest an additional range of variables to
consider (along with the 4 Ps) when formulating the marketing mix.
 These new variables have been conveniently labelled to make up the 7 Ps marketing
framework.
o People

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o Process
o Physical evidence

People
 The people involved in the extended services marketing mix are those coming into
contact with customers who can affect customers’ experiences and perceived value.
 The most influential and controllable factor in service delivery is the organisations’ staff.
 A key issue for the delivery of high standards of customer service is the concept of
‘empowerment’, which enables staff to respond to the particular needs of individuals
customers.

Process
 This refers to all of the systems and procedures used to create, communicate, deliver and
exchange a service offering.
 The key concern is that the process delivers the service in a way that at least matches the
customer’s expectations.
o Functional expectation
o Customer service expectations
 It is generally advisable to be ‘efficient first and friendly second’. Service providers should
therefore rightly focus their attention primarily on the delivery of effective and efficient
service.

Physical Evidence
 The intangibility of services makes it difficult for customers to evaluate the quality and
suitability of services.
 Customers look to tangible cues (logos, staff uniforms, architecture and décor) and other
physical evidence as a way of valuating the service prior to purchase.
 The physical environment should be designed to shape customers’ experiences,
expectations and behaviour.

Services Marketing Challenges

 There are three key issues which make the marketing of intangible services more difficult
to manage than the marketing of tangible goods.
1. Achieving a sustainable differential advantage in marketing services
2. Managing profitable customer relationships
3. Delivering consistently high levels of customer service

Managing Differentiation
 Services do not usually enjoy the protection of legal patents or copyright and can be
more readily mimicked by competitors.
 For service organisations, the sources of sustainable differentiation are relatively few.
 Another potential source of differentiation is in distribution coverage or quality.

Developing Profitable Customer Relationships

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 For many service organisations, long-term survival depends upon the ability to create
and maintain profitable relationships with target customers or customer segments.
 The problems of high customer turnover, together with high average transaction
volumes, but low transaction values, mean that many customers may never be
profitable.
 The challenge is to measure the profitability of individuals customers, and particularly, to
develop close relationships with profitable customers.

Delivering Consistent Customer Service Quality

 The intangible nature of services makes it difficult for customers to evaluate some of the
services they receive.
 Services can be evaluated in terms of the following.
o Search qualities
o Experience qualities
o Credence qualities

Delivering Consistent Customer Service Quality

 In delivering high levels of customer service, organisations need to consider four key
issues.
1. Understand customers’ expectations
2. Establish service quality standards
3. Manage customers’ service expectations
4. Measure employee service performance

International Marketing

Introduction
 International marketers need to understand the similarities and differences that exist in
the marketplaces and marketing environments in which they operate.
 International marketing has presented both huge opportunities and threats for
organisations.
 Even businesses that do not choose to actively participate in international marketing
may find themselves competing with businesses and products from overseas.

International Marketing Fundamentals

 A global village
o The global village/global citizen/global market concept is derived from the
process of globalisation.
o Globalisation  the process through which individuals, organisation and
governments become increasingly interconnected.
o This has consequences for national identity, national sovereignty, economic
activities, laws and culture.
o Almost every aspect of our lives is touched by globalisation.

Standardisation vs Customisation
 A key decision faced by international marketers is whether to standardise or customer
their offerings.

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o Standardisation  refers to applying a uniform marketing mix across

international markets, with only minor modifications to meet local conditions
o Customisation (adaption)  refers to carefully tailoring the marketing mix to the
specific characteristics and wants of each market.

Global
Trade
 An

organisation contemplating moving into the international markets faces numerous

decisions and risks.
 The Australian Trade Commission (Austrade) is a government agency that provides
advice, marketing intelligence and support to organisations to help them reduce the
cost, time and risk involved in their international marketing efforts.
 The New Zealand Trade and Enterprise agency performs a similar role.

The International Marketing Environment

 A set of forces is at play – political economic, sociocultural, technological, environmental
and legal – in the international marketing environment.
 Ideally, international marketers should understand the international market in the same
ways they would understand their local market.

Political Forces
 Alliances and agreements
o Some alliances favour trade between countries, enhancing the chances of
success, while others can work against international marketing goals.
 Country-specific political forces
o Marketers need to understand the political system of each target country and
understand its influence on business and commerce.

Economic Forces
 The global economy
o The economic conditions within any specific country are
likely to be significantly influenced by the global
economy.
 Country-specific economic factors
o The economic environment in a particular country will to
some degree determine the relative attractiveness of
that country as a potential target market.

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Sociocultural Forces
 Sociocultural forces are among the most important factors at play in the international
marketing environment.
 They are often the forces that display the most subtlety and complexity.
 Each international market is likely to have sociocultural variations within it.

Technological Forces
 Technology has become a great enabling force in international marketing over the past
20 years.
 Technology has created, revolutionised and destroyed entire industries (e.g. the
introduction of digital television has causes the demise of the video rental market).
 A great influence of technology in the sphere of international marketing is the
infrastructure in different foreign markets.

Environmental Forces
 The health and sustainability of human civilisation are dependent on the oceans, lands
and flora and fauna.
 International markets need to understand the relationships between their commercial
activities and the environment.
 The Global Green Economy Index evaluates the efforts of countries to create
environmentally sustainable economies, focusing on efforts to invest in clean energy
technology, sustainable forms of tourism and improved domestic environmental quality.

Legal Forces
 Marketing organisations must be aware of the laws in force in the markets in which they
operate to ensure their marketing mix compiles with all legal requirements.
 Some countries restrict trade practises through laws and regulations, international
marketers need to be aware of trade barriers such as the following.
o Tariffs
o Quotas
o Embargoes

Why and How Organisations go International

 Internationalising can be a profitable way of expanding a business.
 Internationalisation can help businesses to become more efficient.
 Businesses that internationalise also increase their potential to gain new knowledge.
 Diversifying risk is a potential advantage of internationalising.
 Internationalisation activities can help the wider community by creating jobs and wealth
for all partners in the business activity.

Selecting Overseas Markets

 The ‘easiest’ (i.e. lowest risk) international markets to enter are those which share
similar cultural and business practices and a common language with the domestic
market, and that are geographically close.

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 Selecting an international market involves a two-step approach.

Methods of Market Entry

 Choosing a market entry mode is a management function, but the marketer must
understand the implications of each mode of entry in order to devise the best marketing
plan.
 Different entry modes will require different structures. It is important that the company
is structured in a way that allows the business to be resources and manage
appropriately.
 The mode of international market entry depends on a wide array of environmental and
organisational factors.

Exporting
 Exporting  an approach to international marketing involving the sale of products into
foreign markets while remaining based in the home market.
 Direct Exporting  an approach to exporting in which the marketing organisation deals
directly with the international market.
 Indirect Exporting  allows marketing organisations to access the international mark
without having to develop the expertise and contacts required to successfully place
products into what is often a relatively unfamiliar market.

Contractual Arrangements
 Licensing  a business in a foreign country manufactures and sells the products of the
home country company (the licensor) and pays a commission of the sales it makes.
 Franchising  a busines (the franchisee) pay for the franchisor a fee in return for the
right to market the franchisor’s product.
 Contact Manufacturing  a domestic business pays a foreign business to manufacture
its product and market it in that foreign country under the domestic company’s name.

Strategic Alliances and Joint Ventures

 A business that does not wish to or cannot make a direct investment in a foreign market
may choose instead to form an international strategic alliance with a business based in
that country.
 In a joint venture arrangement, rather than form an alliance, the two businesses actually
form a new business together in the target market and forge a new identity for it,
distinct from the parent businesses.

Direct Investment
 Foreign direct investment involves outright ownership of a foreign operation.
 Direct ownership a long-term commitment, considerable investment and acceptance of
risk, and would usually only be pursued by an international marketer who was highly
confident of success.
 Most marketers would only consider direct ownership once they have experience and
success using the other approaches to international marketing.

Born Global
 A born global business is one that views the whole world as its market from day one.

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 It will source materials from the most efficient country to source them, locate
manufacturing operations in the country the provides the optimum conditions, manage
itself from wherever it pleases and sell to anyone who wants its products anywhere in
the world.
 The business model is not suitable to all industries or products. Most born global
marketing organisations are internet-based e.g. eBay

The International Marketing Mix

 The product mix needs to respond to customer preferences.
 Branding is also an important consideration.
 Pricing is one of the most complex issues facing international marketers. Not only must
pricing be sensitive to the local conditions in each market, but it must also reflect the
costs involved in the international marketing effort.
 Language barriers, advertising regulations, differing media infrastructure and differences
in market maturity are factors that can require significant changes to promotional efforts
in different markets.
 International marketing introduces an enormous range of distribution (place) challenges
(e.g. the need to transport products over a much larger distance, exchange rate,
fluctuations, and appropriate use of marketing intermediaries).

Lecture 10 – Social and Non-For-Profit Marketing

Introduction
 A marketing philosophy centres on making customers happy – and doing it better than
competitors can.
 The importance of the marketing philosophy is increasingly being recognised by
governments across the globe.
 Today, governments in developed nations such as Australia and New Zealand are faced
with many social problems, such as tobacco use and obesity.
 Social marketing can help governments tackle these problems.

What is Social Marketing?

 Social marketing definition has been debated.
 However, social marketing practitioners and researchers agree that social marketing
practice is guided by ethical principles.
 Social marketing seeks to integrate research, best practice, theory, audience and
partnerships insight to inform the delivery of competition-sensitive and segmented
social change programs that are effective, efficient, equitable and sustainable.

Scope of Social Marketing

 Social marketing is used by organisations such as:
o Government departments
o Universities
o Corporate organisations
o Non-profit organisations

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o Marketing research films

o Advertising agencies and consultants

Benchmark Criteria for Social Marketing

 Alan Andreasen put forward six social marketing criteria, with the aim of distinguishing it
from other change disciplines (such as public health).
1. Behaviour change
2. Audience research
3. Segmentation
4. Exchange
5. Marketing mix
6. Competition

Behaviour Change
 Behaviour change is considered the bottom line for social marketers.
 In practice it is found that many social marketing practitioners and researchers often aim
to change attitudes, awareness and behavioural intentions rather than focusing on the
actual behaviour itself.
 Evaluation us used by social marketers to identify activities that could increase the
effectiveness of the intervention.

Audience Research
 Audience research provides an opportunity for the social marketer to learn about the
target audience and to understand how to best design an intervention for that specific
audience.
 A qualitative approach could include focus groups, interviews and/or literature reviews.
 Quantitative methods used for formative research may consist of surveys, observations
and/or analysis of previously collected data.

Segmentation
 Segmentation can be based on one or more demographic, psychographic, geographic,
behavioural and epidemiological factors.
 Social marketers can choose different targeting strategies to reach the market.

Exchange
 Exchange has been debated widely by social marketing researchers, because it is not
always present in social marketing campaigns.
 Exchanged describes something that a person has to give up in order to get the proposed
benefit.
 Exchange can be difficult to detect when analysing social marketing campaigns.
 Understanding what the alternatives are to the desired behaviour can provide insight
into what would represent a valuable exchange to the target audience.

Marketing Mix
 Regardless of which marketing mix you choose, emerging evidence suggests that social
marketing will deliver greater behaviour change when more marketing mix elements are
applied.

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 Social marketing efforts should extend beyond communications, and a full marketing mix
should be directed at initiating new behaviour and encouraging repeat behaviours.
 Product
o Product may take different forms in social marketing, namely tangible (e.g.
condoms for safe sex) and intangible (e.g. socialisation for walking in a group).
 Place
o Place refers to where and when the target audience enter into an exchange (e.g.
the places in which exchange occurs).
 Price
o Price is widely debated in social marketing as the use of dollar pricing in social
marketing interventions is rare.
o Some social marketers explain the price is viewed in terms of the cost or sacrifice
exchanged for the benefit (product).
o This mixes the concept of price with exchange, which is concerned with
understanding what a consumer has to give up in order to get something.
 Promotion
o When planning integrated social marketing communications, social marketers
need to emphasise the mix.
o Tactics that are known to drive consumer behaviour (e.g. direct selling, price
discounts, loyalty schemes and sales promotions).
o Advertising and public relations activities should be used to remind the target
market of the social brand.
o Messages need to be relevant and connected with behaviours-inducing
strategies.

Competition
 Recognising and addressing the competition of the behaviour targeted by an
intervention remains a key ingredient to success for social marketers.
 Social marketers have to understand what other behaviours are competing for the
chosen target audience’s time and attention in order to develop strategies that minimise
the impact of the competition.

Three Social Marketing Streams

 Promoting behaviour change in social marketing can be achieved through three main
streams:
1. Downstream
2. Midstream
3. Upstream
 Each stream differs in the target audience and the way of measuring behaviour change.
 Social marketing scholars suggest that action at all levels is needed in any comprehensive
approach to delivery.

Downstream Social Marketing

 Downstream social marketing is focused on individual behaviour change and is the most
dominant stream in social marketing literature.
 The downstream concentrates on individuals seeking to change their own behaviour.

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 The majority of downstream social marketing considers behaviour change as voluntary

and seeks to provide offerings of greater value than continuation of the risky behaviour
by the individual being targeted.

Midstream Social Marketing

 Midstream measures target behaviour change at the collective level.
 Communities that social marketers might consider can include religious organisations,
families, friends and clubs.
 Midstream social marketing may be considered preferable to downstream social
marketing because it has the potential to affect a larger number of people.

Upstream Social Marketing

 There is increasing evidence to suggest that ‘changing contexts’ by influencing the
environments within which people act can change behaviour.
 Upstream social marketing is concerned with influencing public policy, prioritisation and
budget allocation.
 Target audiences of upstream social marketing may include ministers and their staff,
judicial organs, peak body representatives, lobbyists and activists.

What is (and is not) Social Marketing?

 Social marketing was initially proposed as a means to change ideas to benefit the society
as whole. This is now referred to as integrated social marketing communication.
 Over time definitions of social marketing have shifted from emphasising the promotion
of ideas towards actual behaviour change.
 Social marketing efforts should be directed at initiating new behaviour and encouraging
repeat behaviours.
 What distinguishes social marketing from its parent discipline of commercial marketing is
the end goal.
o Commercial marketing is concerned with profit.
o Social marketing is concerned with changing or maintaining behaviours to
achieve a social good.
 Social marketers often have the job of persuading people to change a less desired
behaviour (e.g. drink less alcohol, exercise more).

Not-For-Profit Marketing
 Not-For-Profit Marketing  the marketing activities of organisations or individuals
intended to achieve objectives other than conventional business goals such as profits.
 Many NFP organisations practise marketing in the same way as commercial organisations
and so their methods, objectives and tools are similar.
 Many NFP organisations are competing for clients or members and do so by providing
desirable products and client satisfaction, while building long-term relationships.
 While NFP organisations often enjoy strong community support, this support also brings
with it strong community expectations regarding what is considered appropriate for such
NFP organisations.
 These expectations limit the range of marketing activities that the community will accept
(e.g. the use of aggressive telemarketing through commission-based fundraising
organisations).

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Lecture 11 – Digital Marketing and Marketing Analytics

Digital Marketing

Introduction
 Digital marketing is professional marketing practice applied to the digital space.
 Virtually all businesses are online in some capacity.
 It is important to remember that the availability and nature of technology is quite
different around the world.
 Any organisations wishing to participate in digital marketing must be aware of the
relevant legal and ethical issues.

What is Digital Marketing?

 Digital Marketing  all of the activities involved in planning and implementing
marketing in the electronic environment.
 This includes the internet and web on computers, tablets and smartphones, and other
information and telecommunications technologies.
 Digital marketing allows consumers to interact deeply with the marketing organisations
without the need for dealing with an actual person.

Characteristics of Digital Marketing

 A number of key characteristics of digital marketing differentiate it from other forms of
marketing.
o Profiling
o Interactivity and community
o Control
o Accessibility and comparability
o Digitalisation

Profiling
 Profiling  the process of getting to know about potential customers before they make
a purchase and to find out more about existing customers.
 Marketing organisations can gather information about their customers in the digital
environment through the following methods.
o Requiring registration
o Use of cookies on websites
o Competitions

Interaction and Community

 Other than an in-person interaction, digital marketing offers the most opportunity for
interaction between the marketer and the customer.
 Interactivity can occur in many ways, including the following
o A virtual customer service officer
o A real customer service officer

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o Email newsletters and RSS feeds

o Survey participation
o Online communities

Control
 Individuals exercise varying degrees of control over their interaction with marketing.
 Push Advertising  advertising sent from the marketer to the customer.
 Pull Advertising  advertising that the customer actively seeks out.
 Control is the ability of the customer to determine how they interact with the marketing
message and to influence the presentation and content of the marketing message.

Accessibility and Comparability

 The web provides individuals with more ability than ever before to research products,
compare products and seek the opinions of others about products.
 Their research is conducted outside the influence of a salesperson.
 Customers are far more informed about products and competing products than ever
before.

Digitalisation
 Digitalisation  the ability to deliver a product as information or to present information
about a product digitally.
 Some products can be completely digitalised e.g. music
 While not all products can be completely digitalised, many retailers are finding that their
services can be e.g. online grocery shopping.

Digital Marketing Methods

 There are numerous specific methods used in digital marketing
o Paid, owned and earned media; brochure sites
o Social media; viral marketing; portals
o Search engine optimisation; search engine marketing
o Email, SMS and MMS marketing
o Apps; VR; e-commerce

Paid, Owned and Earned Media

 Paid Media  any digital advertising that business pays for.
 Owned Media  any digital channel owned by a business in which content is controlled
and governed by the organisation.
 Earned Media  content that is generated via people outside the business.
Brochure Sites
 Brochure Sites  websites that are essential an online advertisement for the
organisation.
 The usually present product and contact details in a highly visual and eye-catching way
but offer little other functionality.
 They are particularly useful for service businesses who seek to present a portfolio of
work that shows the customisation of their offering.
 They often suit the limited budget of a small business, or one that offers a highly
customised service or bespoke products.

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Social Media
 Social Media  the various websites using technologies and experiences that involved
online communities where members contribute to and build the community and
content.
 Spaces where users can substantially control their own online experience through
customisation and interactivity.
 These websites do not just allow users to retrieve information but encourage interactive
information sharing and user-generated content.
 Social media forms part of the earned media strategy a marketer may engage for the
business.

Viral Marketing
 Viral Marketing  the use of social networks to spread a marketing message via earned
media.
 Because viral marketing messages are spread by friends and colleagues, they have a
much greater chance of being considered than traditional advertising.
 Virial marketing online is very much controlled by the online community and some
businesses have paid a heavy price for trying to manipulate online word-of-mouth or use
social networking sites for commercial purposes.

Portals
 Portal  a website that is designed to act as a gateway to other related sites.
 The popularity of the portal has declined as search engines have become more powerful
and as users have realised they can often better find content themselves.
 Portals are still widely used by government where the intention is to provide citizens
with a starting point from which to access all government services.

Search Engine Optimisation

 Search Engine Optimisation (SEO)  tailoring certain features of a website to try
achieve the best possible ranking in search results returned by a search engine.
 An enormous industry has developed around SEO and numerous businesses exist that
specialise in providing SEO services to other businesses.
 The effectiveness of SEO has also declined as users have become knowledgeable and
cynical about how businesses work to appear among the top hits on search engines.

Search Engine Marketing

 May search engines now seek paid advertising to place on search results pages.
 The advertisements that appear at the top of search results are known as sponsored
links or ‘ads’.
 Sponsored links are appealing to businesses because they are only returned for searches
that are relevant to the advertised product, effectively ensuring the link is places more
prominently than links that are returned purely due to SEO efforts.

Email, SMS and MMS Marketing

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 While span is an unwelcome and illegal approach to marketing, legitimate email and SMS
marketing can be an effective way to build customer relationships.
 When a business makes a sale, a well-timed follow-up email can help reduce purchase
dissonance and can prompt a further purchase.
 The chances are that an SMS will be read (and perhaps responded to) within minutes of
receipt.

Apps
 A phenomenon that has coincided with the increased availability, affordability and
consumer uptake of smartphones.
 The development of application software (or ‘apps’) to run on these mobile devices.
 Australian consumers are becoming increasingly mobile-active, with an estimated 17.9
million smartphone users in Australia and 15 million of us having access to a tablet
device.
 Apps (e.g. Ticketmaster) have the capability to:
o Find events you like
o Access setlists for shows you have attended
o Turn on auto-location to find nearby events
o Access your account and see past or upcoming orders
o Integrate with social media
o Access artist and venue info

VR
 When Facebook launched their virtual reality system Oculus Rift, it was difficult to
predict the roll-on effect, but the business community knew this was something that
needed to be taken seriously.
 Virtual reality (VR) is not new; it has been experimented with since the 50s and 60s.
 VR has now expanded into retailing.

E-Commerce
 When the marketing exchange occurs via the internet, mobile phone or other
telecommunications technology, it is known as e-commerce.
 E-commerce is particularly attractive to small, niche businesses.
 The web enables them to reach consumers across the globe, potentially making viable a
business that would not be able to generate adequate turnover just through local
customers.

Ethical and Legal Issues

 Digital marketing raises many ethical and legal issues that need particular attention
because of the:
o Pervasive nature of modern information technologies
o Personalised nature of digital marketing
o International nature of modern information technologies
o Failure of laws and international agreements to keep place with technological
change and innovative use of new technologies

Privacy

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 One of the main focuses of digital marketing is to gather information about customers
and potential customers to use in formulating marketing strategy.
 Virtually everything an individual does in the online world leaves a digital footprint.
 For many people, collection of the information itself is not a problem (although privacy
advocates oppose it). What most people are concerned with is how the information is
used.
 There are few laws or rules aimed directly at regulating privacy protection online.

Misleading or Deceptive Conduct

 Companies must be honest and truthful in all their business dealings and, if they are not,
they are liable to be punished by the law.
 Unfortunately, the internet is used by some people to fraudulently obtain money from
others.
 Online fraud has grown to be a multi-million dollar global industry.

Spam
 The most prevalent type of spam is advertising-related email (36%). The second most
common is adult related in subject (31.7%). The third most common is unwanted emails
related to financial markets (26.5%).
 In Australia, the relevant legislation is the Spam Act 2003. In New Zealand, it is the
Unsolicited Electronic Message Act 2007.

Evaluating Digital Marketing Effectiveness

 Practitioners actively engaged in digital marketing know that it is notoriously difficult to
measure the effectiveness of digital marketing campaigns.
 Online advertising is one area that offers further potential for marketers to assess the
effectiveness.
 Deciding on a particular metric that quantifies an aspect of marketing performance can
be invaluable information for the online marketer to know how successful a marketing
activity is.

Marketing Analytics

Introduction
 The use of large amounts of data, sometimes referred to as ‘big data’, is part of a data-
driven approach to marketing.
 Data analytics is the art and science of turning large quantities of data into meaningful
and commercially valuable information.
 Data analytics combines databases, machine learning and statistics, and applies this to
practical problems.

The Significance and Importance of Data

 Rather than a lack of data, marketers now have almost too much data.
 If the data is structured, it means it is sorted in a relational format in tables (such as
Microsoft Excel) that are composed of rows and columns.
 Unstructured data is not organised in any matter. It is usually textual data such as
tweets, blogs or product reviews, but can also be unorganised numeric data

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 The proper use of information from big data is what creates value for a company.
 As the amount of data available becomes very large, it becomes important to look at
‘useful data’ rather than just ‘big data’.
 Gartner first reported the use of three V’s for describing big data: volume, velocity and
variety.
 Some industry analysts have expanded the definition of big data and included four more:
validity, veracity, value and visualisation.

Understanding and Obtaining Data

 For data analytics to be effective, an organisation must know the context in which the
data was gathered and entered into the database and make sure the data measured
what it was supposed to measure.
 If data can’t reliably be made anonymous, customers will be less likely to provide it.
 To help make sense of the data marketers must often use a specialised analyst called a
data scientist.
 If the data is an internal management information system (MIS) the IT department can
help the marketing team obtain the data using structures query language (SQL).
 SQL can be used to clean up errors in data.
 Another benefit of SQL is that the data is kept in a remote location.

Sources of Data
 Databases – the information stored in databases can be organised using a databased
management system (DBMS).
 Internet of Things – a term used to describe a system of electronic devices that are
connected to a network, such as the internet.
 Scanner Data – also known as scanner panel data, is detailed on sales of consumer
goods.
 Web Data – there a few ways to get data from the web
o ‘Scrape’ the data from the website
o Use web-based application programming interfaces (APIs)
o Extract data from PDFs that are posted online
 Mobile Data – there are projected to be more then 4.78 billion smart phone users in the
world in 2020, and their phones all have tracking and search history information of
them.
 Social Media Data – social media groups can be though of as online focus groups and
can be very informative even though they are secondary data.
 Survey Data – historically, marketing analysts obtained data by surveying people from
their target markets and analysing that data. A drawback to online surveys is that the
company’s marketing analyst is unable to know if the respondents are responding
truthfully.

Data Issues
 Spurious Correlation – a big problem in analytics is the presence of spurious correlation,
which is where variables that have nothing to do with each other appear to be related.
 Data Leakage – occurs when data from the model is shared with data that was not used
in the modelling process (sometimes knows as test data).

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 Noisy Data and Data Preparation – although data is now cheap and abundant, it is also
very ‘noisy’ or ‘dirty’ which means it can contain all sorts of issues such as extreme
values, missing data, incorrectly measured data, corrupted data. Another issue is the
absence of data. known as missing data.
 Computing Resources – there are two issues related to computing resources. One is
having the physical hardware capacity to store and distribute the data. The other
resource bottleneck is having the software to analyse the data.
 Analysis Resources – marketing data scientists use commercial software packages such
as SAS, Minitab, Tableau, SPSS, Matlab and Stata.
 Storage Resources – to help reduce the burden and cost of storing terabytes of data, in
general we should be focused on keeping current customer data. A way to get around
the issue of data storage is using cloud computing. What data format is used in analytics
depends on the size and type of data.

Data Governance
 The high volume of data available means many organisations now regard it as a
monetised asset/commodity.
 Others argue that since data can be cleaned and aggregated to fit a purpose it is not a
true raw commodity.
 Large companies often now have a chief data officer (CDO) who is in charge of data
governance and security.

Data-Driven Marketing
 A data-driven organisation is one that rests on a base of well-governed data.
 Companies now need to be aware of and using data analytics to drive decision making.
 In today’s environment, where there are few remaining areas of differentiation in
marketing capabilities, you need to have the ‘right’ people who are trained in using
statistical software as well as understanding business processes and how the data was
obtained.

Data and Analytics

 Data are facts about or details of objects that can be complied into information.
 Analytics is the process of organising data into meaningful information.
 The benefits of analytics come from not only using the right analytics, but also using the
right data to generate insights.
 To truly be effective in using data, an organisation must integrate the data from multiple
silos and departments.

Data-Driven Decision Making

 Data-Driven Marketing  the marketing insights and decisions that arise from the
analysis of data about or from consumers.
 One of the easiest ways to become a data-driven organisation is to provide dashboards
for the organisations so that employees at all levels can see and use data to help them in
their jobs.
 The key to insightful data and analytics is transforming the data into meaningful objects
for the business.

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 Data-driven marketing approaches to analytics must use the SMART principle, just as in
any other marketing campaign.
 One of the more important issues in marketing is determining which marketing channel
is the most important for driving sales.
 This is known as attribution modelling, which seeks to find out which touchpoint is most
instrumental in a customer’s purchase decision.
 There are many different types of marketing that are data driven.
o Customer relationship management (CRM)
o Dashboards
o Customer lifetime value
o Social media listening

Customer Relationship Management (CRM)

 A form of technology that companies use to manage and analyse customer interactions
and data throughout a customer’s life cycle.
 The goal of a CRM is to improve business relationships with customers, assist in
customers retention and drive sales growth.
 By using CRM, we can keep customers engaged with our product, and if done properly,
we can have them become an extension of the internal sales team.

Dashboards
 Dashboard  a data visualisation tool that displays the current status of metrics and
key performance indicators (KPIs) for an enterprise.
 Dashboards consolidate and arrange numbers, metrics and sometime performance
scorecards on a single screen. They provide aggregated data to users who do not need to
see individual-level data.
 Companies such as Salesforce offer dashboard products that are used for customer
contact and CRM.

Customer Lifetime Value (CLV)

 CLV assesses a customer’s value over their lifetime as a customer.
 Using data collected from customers over time, we can see how much a customer has
purchase and how often.
 If a customer has high lifetime value, it may be worth marketing to them.
 Part of using a customer’s lifetime value is forecasting future sales.

Social Listening
 Social Listening  the process of judging how a brand or organisation is being talked
about on various social media platforms.
 Since reviews and social media comments about a company or its product are valuable
data, marketing analysts can better tailor a good or service based on the voice of the
customer.

Data-Driven Results
 Data-Driven Result  the empowerment that comes with transformative knowledge of
customer, guest, product, patient or fan information, as well as ongoing access to
relevant, real-time data in an easy to understand format.

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 This enables businesses to make educated, actionable and profitable decisions.

 The proper use of data analytics for marketing decisions can require an organisation to
change the way they have been operating, which can be difficult and time consuming.

Data Analytics in Marketing

 Marketing Analytics  the practice of measuring, managing and analysing marketing
performance.
 Descriptive Analytics  the simplest type and is typically used to explain what has
happened.
 Predictive Analytics  forecasts what might happen in the future.
 Analytics can be used for customer insight, segmentation and targeting, as well as
automating menial tasks.

Marketing Analytics
 In order for marketing analytics to be successful, there must be a business case as well as
appropriate data and an ability to deploy and analytics situation.
 Predictive modelling, k-means clustering, association rules and visual data analytics are
examples of different types of analyses that might be used depending on the specific
business case.
 A popular method for implementing an analytics project within an organisation is still the
cross-industry process for data mining (CRISP-DM) methodology.
 Due to the large volumes of data available to analysts, one of the main focus of
marketing analytics is data reduction.

Artificial Intelligence and Machine Learning

 Machine Learning  involves the study of algorithms that can extract information
automatically.
 For marketing, machine learning is mostly used to make predictions and understand the
market.
 There three major types of machine learning
1. Supervise
2. Unsupervised
3. Reinforcement
 Many industries that have been using business intelligence (BI) are now shifting to
artificial intelligence (AI).
 Machine learning is a type of AI (the converse of this is not true though).
 AI uses customer data to anticipate a customer’s next move such as digging into a
customer’s online information to customise a product offering for them.
 Another use of AI in marketing is the deployment of chatbots.

Data Ethics and the Future of Marketing Analytics

 Being relatively new, there are still some issues related to the field of analytics.
 However, as organisations become obsessed with data and the potential cost savings,
there may be too much overreliance on data.
 Many customers dear that their personal data is being misused by companies.
 Organisations must realise that in marketing analytics, there are opportunity costs.

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Legal and Ethical Issues in Data Analytics

 An issue with big data is that sometime there is too much data to go through and
analyse, but sometimes it is not ethical to analyse data.
 Data Snooping  when an analyst picks a model to confirm what they want to prove.
The ethical issue related to data snooping is that of confirmation bias. It is a serious issue
in analytics.
 Data Breach  when information is intentionally or unintentionally released from a
secure location in a company.

Analytics Skills for Decisions Makers

 To be prepared for a data centric world, even non-quantitative marketers need to have
basic numeracy and data literacy skills.
 Lack of knowledge of statistics can lead to serious errors in analytics interpretation.
 Marketers that use a combination of human intuition, data and analytics to inform
marketing strategies are better positioned for the future job market.

Future of Data Analytics in Marketing

 It is important that analytics is valued at all levels of an organisation.
 A ‘real time’ business is about being able to make a decision at the ‘real time’ it matters.
 To do this effectively, companies need to integrate data with their business processes.
 It is important to ensure there is a balance between real-time data and having enough
data to be statistically valid.

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