EFFECTIVE: OCTOBER 2022

TUNKU ABDUL RAHMAN UNIVERSITY COLLEGE

CENTRE FOR PRE-UNIVERSITY
STUDIES

FOUNDATION IN ARTS
FOUNDATION IN BUSINESS

FPBS1024 PRINCIPLES OF MARKETING

LECTURE NOTES

ACADEMIC SESSION: 202209

PREPARED BY: MR JASON

Name:
Class:

*FOR INTERNAL CIRCULATION ONLY

Principle of Marketing

Introduction
to
marketing
 Objectives
• Definitions of marketing
• Implications of marketing
• The marketing concept
• The marketing management process
 Marketing
• Definition of marketing:
– Marketing is about understanding
customers and finding ways to
provide products or services which
customers demand
– Understand customers needs and
wants in order to satisfy their
satisfaction
 Marketing
Goals:
1. Attract new customers by promising
superior value.
2. Keep and grow current customers by
delivering satisfaction.
3. To make customers aware of the
products and services
 Marketing Defined
• Marketing is the activity, set of instructions, and
processes for creating, communicating,
delivering, and exchanging offerings that have
value for customers, clients, partners, and
society at large.

OLD view of NEW view of

marketing: marketing:
More focus product More focus customers

Making a sale— Satisfying

“telling and selling” customer needs
 Marketing Defined
• Many people think of marketing only as selling and advertising.
• Selling and advertising are only the tip of the marketing ice-berg.
• Marketing is one of three key core functions that are central to all
organizations.
• Marketers act as the customers’ voice within the firm and marketers
are responsible for many more decisions than just advertising or
sales:
– Analyse industries to identify emerging trends.
– Determine which national and international markets to enter or
exit.
– Conduct research to understand consumer behavior.
– Design integrated marketing mixes – products, prices, channels
of distribution, and promotion programs.
Marketing is a social and managerial process by which individuals
and groups obtain what they need and want through creating and
exchanging products and value with others.
7
 Marketing Defined
To explain marketing definition, we
examine the following important terms :
– Needs, wants, and demands
– Products and services
– Value, satisfaction and quality
– Exchange, transactions, and relationships
– Markets

8
 Needs, Wants, and Demands
Needs:
• The most basic concept underlying marketing is that of human needs.
• Human needs are states of felt deprivation.
• Human have many complex needs:
– Physical needs for food, clothing, warmth, and safety
– Social needs or belonging and affection
– Individual needs for knowledge and self – expression
Wants:
• Want are the form taken by human needs as they are shaped by culture and
individual personality.
• People have almost unlimited wants but limited resources.
• They want to choose products that provide the most value and satisfaction for
their money.
Demands:
• When backed by buying power, wants become demands.
• Consumers view products as bundles of benefits and choose products that give
them the best bundle for their money.

9
 Products and Services
Product:
• Anything that can be offered to a market to satisfy a
need or want.
• The concept of product is not limited to physical objects
– anything capable of satisfying a need can be called a
product.
Services:
• In addition to tangible goods, products also include
services, which are activities or benefits offered for sale
that are essentially intangible and do not result in the
ownership of anything.

10
 Values, Satisfaction, and Quality
Values:
• Customer value is the difference between the values the customer gains from owning
and using a product and the costs of obtaining the products.
• Customers often do not judge product value and costs accurately or objectively. They
act on perceived value.
Satisfaction:
• Customer satisfaction depends on a product’s perceived performance in delivering
value relative to a buyer’s expectation.
• If the product’s performance falls short of the customer’s expectations, the buyer is
dissatisfied.
Quality:
• Customer satisfaction is closely linked to quality.
• Quality has a direct impact on product performance.
• Quality can be defined as “freedom from defects”.
• TQM programs designed to constantly improve the quality of products, services, and
marketing processes.

11
 Exchange, Transactions, and
Relationships
Exchange :
• The act of obtaining a desired object from someone by
offering something in return
Transaction :
• A trade between two parties that involves at least two
things of value, agreed – upon conditions a time of
agreement, and a place of agreement.
Relationship marketing :
• The process of creating, maintaining, and enhancing
strong, value – laden relationships with customers and
other stakeholders

12
 Markets
The set of all actual and potential buyers of a
product or service

Communication

Products / Services
Industry Market (a
(a collection collection of
of sellers) buyers)
Money

Information

A simple marketing system

13
 Main actors and forces in a modern marketing system

Competitors

Marketing
intermediaries End user market
Suppliers
Company
(marketer)

14
 Marketing Management
The analysis, planning, implementation,
and control of programs designed to
create, build, and maintain beneficial
exchanges with target buyers for the
purpose of achieving organizational
objectives.

15
 The Marketing Process
A simple model of the marketing process:
• Understand the marketplace and customer
needs and wants.
• Design a customer-driven marketing strategy.
• Construct an integrated marketing program that
delivers superior value.
• Build profitable relationships and create
customer delight.
• Capture value from customers to create profits
and customer quality.
 A Simple Model of the
Marketing

Understand Build Capture

Construct a
the Design a profitable value from
programme
marketplace customer- relationshi customers
that
and driven ps and to create
customer delivers
marketing create profits and
needs and superior
strategy customer customer
wants value
delight equity
 MARKETING MANAGEMENT PHILOSOPHIES

• The role that marketing plays within a company varies

according to the overall strategy and philosophy of each
firm.
• There are five alternative concepts under which
organizations conduct their marketing activities:
– Production concept
– Product concept
– Selling concept
– Marketing concept
– Societal marketing concepts

18
 Production Concept
The philosophy that consumers will favour
products that are available and highly
affordable and that management should
therefore focus on improving production
and distribution efficiency.

19
 Product Concept
The philosophy that consumers will favour
products that offer the most quality,
performance, and innovative features.

20
 Selling Concept
The idea that consumers will not buy
enough of the organization’s products
unless the organization undertakes a large
– scale selling and promotion effort.

21
 Marketing Concept
The marketing management philosophy
that holds that achieving organizational
goals depends on determining the needs
and wants of target markets and delivering
the desired satisfactions more effectively
and efficiently than competitors do.

22
 Societal Marketing Concept
The idea that the organization should
determine the needs, wants, and interests
of target markets and deliver the desired
satisfactions more effectively and
efficiently than competitors in a way that
maintains or improves the consumer’s and
society’s well – being.

23
Three Considerations Underlying The Societal Marketing

Society
(Human welfare)

Societal
marketing
concept

Consumers Company
(Want satisfaction) (Profits)

24
 MARKETING CHALLENGES
INTO THE NEW CENTURY
• GROWTH OF NON-PROFIT MARKETING
• THE INFORMANTION TECHNOLOGY BOOM
• RAPID GLOBALIZATION
• THE CHANGING WORLD ECONOMY
• THE CALL FOR MORE ETHICS AND SOCIAL
RESPONSIBILITY

25
 THE NEW MARKETING LANDSCAPE

The past decade taught business firms

everywhere a humbling lesson. Domestic
companies learned that they can no longer
ignore global markets and competitors.
Successful firms in mature industries learned
that they cannot overlook emerging markets,
technologies, and management approaches.
Companies of every sort learned that they
cannot remain inwardly focused, ignoring the
needs of customers and their environment.

26
 Topic 2
The Marketing
Planning
 Today’s discussion

• Overview of Marketing
Planning
–Marketing Planning Defined
–Contents of a marketing Plan
 Marketing plan - Def
• A marketing plan is a business document
written for the purpose of describing the
current market position of a business and
its marketing strategy for the period
covered by the marketing plan.
• Marketing planning is the process to
identify or analyze current situation and
information in the market.
 Purpose Of A Marketing Plan
• Acts as a roadmap
• assist in management control and
monitoring the implementation of strategy
• informs new participants in the plan of
their role and function
• to stimulate thinking and make better use
of resources
 Content Marketing Plan
• Executive Summary
• Situation Analysis
• Marketing Objectives
• Strategy and Tactics
• Monitors and Controls
• Financial Documents
 Executive Summary
A one to two page statement of the key
actions to be taken, the major reasons for
those actions, the anticipated results and
the associated risks. The executive
summary presents an abbreviated
overview of the marketing plan.
 Situation Analysis
• Review of Status and Future
Outlook
– Not just data, but implications
– Brevity, prioritization of information
– Diagnostic, not descriptive
– Contains:
• Category Analysis and Forecast Trends
• Sales Analysis
• 3 C Analysis
• Planning Assumptions
• Summary (Problems and Opportunities)
 Situation Analysis - Market
Analysis- 3C(Company)
An intensive evaluation of the businesses’
objectives, capabilities, vulnerabilities, and
status.

This section addresses these questions:

• What are your goals and objectives?
• What products and services do you sell?
• What key concept(s) differentiate your firm?
• What are your firm’s strengths and weaknesses?
 Situation Analysis - Market
Analysis- 3C (Customer)
A thorough analysis of customers and potential
customers in terms of their needs, product related
behaviors, attitudes, and lifestyles.

This section addresses these questions:

• Who is your current target customer?
• What their primary sources of information?
• Why would a customer buy your product or
service?
 Situation Analysis - Market
Analysis-3C (Competitor)
A complete analysis of the capabilities and likely future
moves of key competitors.

• This section addresses these questions:

• Who are your major competitors?
• Where are they located and what are their markets?
• Why do customers buy their products?
 Marketing Objectives

• “If you don’t know where you want to

go, any road will take you there”
• Precise, with dates and numbers
• Sales, profits, share, etc.
• Measurable and achievable
• Subsequent strategy and tactics
must demonstrate compliance with
objectives
 Strategy and Tactics
• Strategy is means to accomplish goal,
e.g., awareness goal will be met by
advertising
• Tactics pertains to the implementation,
e.g., media schedule, agency, message,
etc.
– how to, by whom, by when, with what
resources
 Strategy and Tactics
• This section addresses the actions and tactics
regarding price, promotion, product, distribution,
and services issues.
• Strategy more focus on the marketing mix
strategy (4Ps), (Price, Promotion, Product and
Place also consider as distribution)
 Product and/or Service Positioning

This presents a clear statement of how you want your total

offering to be perceived by each target segment. Your
product positioning must offer your target customers
superior value.

This section address these questions:

• How would you describe your product or service position
within the market?
• What is unique about this position?
• What are the key differentiating factors?
 Price
The pricing strategy includes the
approach, expected margins, discounts
and terms.

This section address these questions:

• How do you establish the prices for your products and
services?
• What margins—broken down by product if margins
vary— does this pricing strategy offer?
• How does that compare with your margin objectives?
 Product and/or Service
Product features, capabilities, and benefit-
based statements describing how they will
provide value to the customer.

This section address these questions:

• What features does the product and service provide?
• Are there advantages these features offer compared to
other alternatives available in the market?
 Promotion
• Promotion is the ways or process to
promoting, communicating, persuading
and influence the consumers to
understand the products or services.
• Example: personal selling, direct
marketing, advertising, sales promotion,
publicity and public relation.

10/10/2022 business studies 43

 Distribution
The various ways the product will be made available to
consumers. If applicable, this section will include a clear
statement of the benefits that will motivate intermediaries
to carry and effectively support the product line.

These are examples of the questions this section may

address:
• How will consumers—the end users—purchase the
products or services?
• Will this go through some form of distribution?
 Monitors and Controls
Measurement systems will assess progress
throughout the implementation process toward
achieving the plan’s stated objectives.
“Milestones” can be incorporated into this
system, particularly in the early stages of
execution. Contingency plans will be enacted if
key goals are not realized.

• How is the effectiveness of the strategy going to

be measured?
 Financial Documents
A summarization of the expected financial
implications of the plan based on the projected
costs and revenues. This may include initial
investment requirements, sales and revenue
projections, profit and loss statements, and cash
flow projections as they relate to the marketing
plan.

• What are the initial investment requirements for

implementation of this strategy?
 Evaluating the marketing plan
• Business Advantages
– identifies needs and wants of consumers
– determines demand for product
– aids in design of products that fulfil
consumers needs
– outlines measures for generating the cash for
daily operation, to repay debts and to turn a
profit
 Evaluating the marketing plan
• Disadvantages
– leads to faulty marketing decisions based on
improperly analysed data
– creates unrealistic financial projections if
information is interpreted incorrectly
 Summary
• By researching markets, competition, and
determining the organization's unique
positioning, the organization is in a much
better position to promote and sell its
product or service.
• By establishing goals for the marketing
plan, the organization can better
understand whether the efforts are
generating results through ongoing review
and evaluation.
 Topic 3
Market Research
 Learning Objectives
Topic Outline
• Marketing Information and Customer
Insights
• Assessing Marketing Information Needs
• Developing Marketing Information
• Marketing Research
• Analyzing Marketing Information
• Distributing and Using Marketing
Information
• Other Marketing Information
Considerations
Market Research

The process of planning,

collecting, and analyzing data
information that relevant to
make a marketing decision.
 Market research – important
• Gauges/identify customer satisfaction
• Identify opportunities
• Minimizes the chances of loss or potential
problems
• Serve as an evaluation tool
• Analyze competitors and create strategic
plans to beat rivals
 Market Research
• Advantages of Market Research
– Helps to get more focus attention on objectives
– Aids forecasting, planning and strategic development
– May help to reduce risk of new product development
– Communicates image, vision, etc.
– Get more information before entering to global
market.
– Globalisation makes market information valuable
(HSBC adverts!!)
 Market Research
• Disadvantages of Market Research
– Information only as good
as the methodology used
– Can be inaccurate or unreliable
– Results may not be what the business wants to hear!
– May stifle initiative and ‘gut feeling’
– Always a problem that we may never know enough to
be sure!
 MANAGEMENT USES OF
MARKETING RESEARCH
• Marketing research can help managers in
term of:
– Improves quality of decision making.
– Helps managers trace problems.
– Helps managers focus on the importance of
keeping existing customers.
– Assists them in better understanding the
marketplace.
– Alerts them to marketplace trends.
MARKETING RESEARCH
PROCESS
PROBLEM
DEFINITION

DEFINING
RESEARCH
OBJECTIVES

DEVELOPING
RESEARCH PLAN

DATA COLLECTION &

ANALYSIS
 Types
of
Market Research
Types of Market Research

Primary Secondary
Research Research

59 business studies
 Primary research
• Primary research involves finding out
new, first-hand information.

Methods of primary research include:

• Questionnaires
• Consumer Panels
• Observation
 Primary research
• Questionnaire: a set of questions
focusing on finding information. It can be
postal, telephonic or face to face
• Consumer Panels: Groups of people who
are willing to provide their input and
feedback on particular products or
services.
• Observations: recording, watching or
auditing a particular activity or product
Primary Data
Information collected for the
first time.
First hand information
ALWAYS

USE THIS LAST

 Primary research
Benefits Drawbacks
Directly relevant to the Time consuming
business

Up-to-date data Often expensive

obtained
 Secondary research
• Secondary research involves gathering
existing information.
 Secondary research
• Secondary research often includes data
collection through the use of statistics that
are already published
• Data can be collected through internet,
newspaper and etc. All these data is
published by others people.
 Secondary research
• Secondary data can be collected
from internal and external sources.
 Secondary research
• Internal sources
– Information which is available for inside the
business such as
• Sales reports
• Stock control reports
• Accounts
• Transaction records
• Loyalty cards
• Company records
 Secondary research
• External sources
– data generated from outside the
organisational
• Governments statistics
• Trade associations
• Research organisations
• Electronic sources
• Publications of MR agencies
Secondary Data

Data previously collected for

any purpose other
than the one at hand.

ALWAYS
USE THIS FIRST
 Secondary research
Benefits Drawbacks
Often quick and easy Data may not be
to collect reliable or up-to-
date

Readily available at May not be totally

cheap rates and is relevant
usually quite
inexpensive.
 Difference between Primary and
Secondary research
Primary research Secondary research
Collecting original or Us of data have already
primary data been obtained, analyses and
used for some other
purpose
Specific to the firm and up Inexpensive and no time
to date but expensive and consuming but can be out
time consuming of date and not specific to
the user’s needs

71
 Sample size and sampling methods-
Introduction

• Market research involves the

collection of data to obtain
insight and knowledge into the
needs and wants of
customers and the structure
and dynamics of a market.
72 business studies
 Sample size and sampling methods-
Introduction

• In nearly all cases, it would be

very costly and time-consuming to
collect data from the entire
population of a market.

73 business studies
 Reasons for Drawing a Sample

• Less time consuming than a

census
• Less costly to administer than a
census
• Less cumbersome and more
practical to administer than a
census of the targeted population
74
 Relationship between population
and sample

• A population is the set of all

measurements of interest to the
sample collector.
• A sample is any subset of
measurements selected from the
population.

75
Relationship between population
and sample
 Sampling
• Sampling involves selecting a
relatively small number of elements
(sample) from a larger defined group
(population) and expecting the
information gathered from the small
group will enable judgments about the
larger group.
 Sample Design
• Sample design covers the method of
selection, the sample structure and plans
for analysing and interpreting the results.
• Two different type of sampling method:
A. Probability sampling
B. Non-Probability sampling
 Types of Samples Used

Samples

Random Cluster Stratified Quota

Samples Samples Samples Samples
 Sampling Methods - Random
Samples
• Random pick your respondents
from sample.
 Sampling Methods - Stratified
Sampling
• Divide population into two or more
subgroups (called strata)
according to some common
characteristic
• Each strata is randomly sampled.
• Samples from subgroups are
combined into one
 Sampling Methods - Cluster
Sampling
• Cluster Sampling
– Primarily based on geographical areas or
‘clusters’ that can be seen as being
representative of the whole population
– A random sample of clusters is taken, then all
units within the cluster are examined
 Sampling Methods - Cluster
Sampling
• E.g. If you want to survey parents
of primary school children in your
country, you probably don’t have a
list of every child.
• Randomly select schools
• then
• Randomly select parents
 Sampling Methods - Quota
Sampling
–This method involves the
consumers being grouped into
segments which share certain
characteristics (e.g. age or gender).
–The interviewers are then told to
choose a certain number of
respondents from each segment.
 Sampling Methods - Quota
Sampling
• samples that set a specific number of
certain types of individuals to be
interviewed
Topic

The Marketing
Environment
 Learning Objectives
• After studying this chapter, you should be able to:
– Understand the nature of the marketing
environment and why it is important to
marketers.
– Describe the major components of the social
environment and how trends in the social
environment affect marketing.
– Understand how the economic environment
affects marketing.
– See how the political/legal environment offers
opportunities and threats to marketers.
– Appreciate the importance of the
technological environment to marketers.
 The Marketing Environment
•The marketing environment
consists of all factors external
to an organization that can
affect the organization’s
marketing activities.
 External Marketing
Environment
External Environment
is not controllable Social
Change
Demographics Ever-Changing
Marketplace

Economic
Product Conditions
Distribution
Promotion
Price
Competition
Target Market
Political &
Legal Factors
Technology
Environmental
Scanning
 PESTLE Analysis

• Political
• Economical
• Social Culture
• Technology
• Legal
• Environmental
 Environmental Scanning

Environmental scanning is the process

of continually acquiring information on
events occurring outside the organization
to identify and interpret potential trends.
 The Economic Environment

• The conditions of the economic

system in which an organisation
operates
 Economic constraints

• Economic constraints
– Economic growth
– The Business cycle
– Inflation and Deflation
– Unemployment
– Exchange Rates
 ECONOMIC GROWTH

• Economic growth is the increase in the

value of goods and services produced
by an economy
• Measured by Gross Domestic Product
(GDP)
– the value of output of goods and services
in the economy over a period of a year
 ECONOMIC GROWTH

• Low growth – business sales low,

profit margins tight, excess capacity,
orders reduced, excess stock,
redundancies
• High growth – business sales rising
quickly, profits rising, skill shortages,
inflationary pressure on prices, capacity
squeezed, stocks running down
 WHAT CAUSES ECONOMIC
GROWTH?
• Anything which allows the country to
produce more goods and services.
– More business investment * Better
productivity
– Better machinery * Improved training
– Better skills * New technology
– New ideas * Increased efficiency
 Advantages of Economic
Growth
• Higher Living Standards –increase in
income per head of population
• Employment effects: Growth stimulates
higher employment.
 Advantages of Economic
Growth
• Fiscal Dividend: Growth has a positive
effect on government finances - boosting
tax revenues
• The Investment Accelerator Effect:
Rising demand and output encourages
investment in new capital machinery
 Disadvantages of economic
growth
• Inflation risk: - demand races ahead of
aggregate supply. Producer then take
advantage of this by raising prices for
consumers
 Disadvantages of economic
growth
• Environmental concerns: Fast growth of
production and consumption can create
negative externalities (for example,
increased noise and lower air quality
arising from air pollution and road
congestion, increased consumption of de-
merit goods, the rapid growth of household
and industrial waste and the pollution that
comes from increased output in the energy
sector)
 The Business cycle

• The business cycle

– The rise and fall of economic activity
relative to the long term growth trend of
the economy
 The Business cycle
Output
BOOM
GROWTH

SLUMP Recession
Time
 The Business cycle

• BOOM:
–The economy is at its peak
 The Business cycle

• SLUMP:
–This is the bottom of the trade cycle
 The Business cycle

• GROWTH (RECOVERY):
–A period when the economy moves
between recession and a boom.
 The Business cycle

• Recession
–This refers to a situation where the
G.D.P. of an economy has fallen for
two successive quarters (6
months).
 Is a recession all bad?

• Capital assets and other business -

relatively cheap
• Demand for inferior goods could actually
increase
• Difficult conditions can force businesses to
address their weaknesses.
 Unemployment

• Level of joblessness among people

actively seeking work in an economic
system
• Types of Unemployment
– Cyclical
– Frictional
– Structural
 Cyclical Unemployment

• Cyclical Unemployment is associated with

an economic recession or a sharp
economic slowdown.
• It occurs due to a fall in the level of
national output in the economy causing
firms to lay-off workers to reduce costs
and protect profits. This is a process
known as labour-shedding.
 Frictional Unemployment

• This type of unemployment reflects job

turnover in the labour market.
• Even when there are plenty of vacancies
available, it takes time to search and find
new employment and workers will remain
frictionally unemployed.
 Frictional Unemployment

• People may be between jobs. For

example, a teacher may be unemployed
because they are looking for a job as an
accountant , janitor and etc
 Structural Unemployment

• The reduction in demand for certain types

of industries. These goods / services are
no longer required in large numbers
• People don’t have the right skills and
qualifications for today’s work and the
needs of businesses
 Structural Unemployment

• The reduction in demand for certain types

of industries. These goods / services are
no longer required in large numbers
• People don’t have the right skills and
qualifications for today’s work and the
needs of businesses
 Structural Unemployment

• Structural unemployment exists even

when there are unfilled job vacancies due
to a mismatch between the skills of the
registered unemployed and those required
by employers.
 Advantages of unemployment

• Cheap labour force

• Reduce cost of production
 Disadvantages of
unemployment
• Lack of purchasing power
• Low household income cause low
demand for business products
 Inflation

Inflation
P
 Inflation

 Inflation is defined as a general

and sustained rise in the average
prices of good and services within
an economy over a period of time.
 The Main Causes Of Inflation

• Inflation:
– DEMAND PULL INFLATION
– COST PUSH INFLATION
 DEMAND PULL INFLATION

• There is too much money chasing too few

goods, therefore firms realise they can put
up their prices.
• where the level of customer demand
outstrips the number of products that the
business can produce
 COST PUSH INFLATION

• This occurs when firms increase prices to

maintain or protect profit margins after
experiencing a rise in their costs of
production.
• Where an increase in the costs of the
business, such as raw materials or wages,
forces the producers to increase their
prices
The Impact of Inflation on Business

• Ways business benefit from high inflation

– Financial account look stronger as rising
property and stock values boost reserves
– Smaller firms benefit from the reducing
importance of brand names, they can
compete on price/service
– It is easier to increase the price of your own
product when prices are rising generally. So
cost increases can be passed on to the
consumer
The Impact of Inflation on Business

• Ways business benefit from high inflation

– Financial account look stronger as rising
property and stock values boost reserves
– Smaller firms benefit from the reducing
importance of brand names, they can
compete on price/service
– It is easier to increase the price of your own
product when prices are rising generally. So
cost increases can be passed on to the
consumer
The Impact of Inflation on Business

• Problems for business from high inflation

– Cash flow is squeezed by the rising cost of
new materials and equipment
– Owners of big brand names may struggle, as
greater consumer price consciousness makes
customers more prices sensitive. This cut the
value added by brand names.
The Impact of Inflation on Business

• Staff become much more wage conscious

as inflation poses a threat to real living
standard, therefore industrial disputes and
labour turnover tend to rise
 Exchange Rates

• Def: The exchange rate is the rate at

which one currency will exchange for
other international currencies.
• So £1 may be worth $1.55 and €1.33.
 Exchange Rates

• Def: The exchange rate is the rate at

which one currency will exchange for
other international currencies.
 Exchange Rates

• Currency – stronger

APPRECIATION

• currency - weaker

DEPRECIATION
 Exchange Rates

• A change in exchange rates might affect a

business in the following ways:
– Exchange rates changes can increase or
lower the price of a product sold abroad
– The price of imported raw materials may
change
– The price of competitors’ products may
change in the home market
 The Effect of Exchange Rates

• The value of exchange rates affect the

demand for exports and imports.
• An appreciation of the pound (pound
becomes stronger) will lead to exports
becoming more expensive and imports
cheaper.
• This will harm exporters and increase the
leakages from the circular flow of income.
 The Effect of Exchange Rates

• Were the pound to depreciate the opposite

effect would occur.
• In order to avoid confusion remember
SPICED!
The Effect of Exchange Rates

Strong
Pound
Imports
Cheap
Exports
Dear
 WHAT HAPPENS WHEN THE £
CHANGES IN VALUE?
• CONCLUSION
– A strong RM or an increase in the value of the
RM makes it more difficult for exporters to sell
their goods abroad. This is because
foreigners have to pay more in order to buy
our goods.
• The Malaysia exporter could lower the
price but then will lose some profit and
may make a loss.
 Advantages of a strong pound

• A high pounds leads to lower import prices

–
– Increase living standards of consumers
– E.g. an increase in the real purchasing power
of UK residents when travelling overseas
 Advantages of a strong pound

• Import cheap –
– it is cheaper to import raw materials,
components and capital inputs
– Business more competitive
 Advantages of a strong pound

• A strong exchange rate helps to control

inflation
– domestic producers face stiff international
competition from cheaper imports and will
look to cut their costs accordingly
 Disadvantages of a strong pound

• Cheaper imports
– Leads to rising import penetration and larger
trade deficit
– E.g. the £28bn trade deficit in goods in 2000
 Disadvantages of a strong pound

• Exporters lose price competitiveness and

market share
– this damages profits and employment in some
sectors - notably manufacturing industry in the
last three years
– If exports fall, this has a negative impact on
economic growth
The Political/Legal Environment
•The political/legal environment
encompasses factors and trends
related to governmental activities and
specific laws and regulations that affect
marketing practice.
 The Political/Legal Environment

• Product-Related Regulation
 Company Protection
• Patent Law
-for ideas and inventions

• Copyright Law
-for written works
 The Political/Legal Environment

• Product-Related Regulation
 Consumer Protection
• Nutritional Labeling & Education Act

• Consumer Product Safety Act

 Consumer Product Safety Commission

•The above and other laws came about

due to cultural shift towards Consumerism
 The Political/Legal Environment

Advantages of Political/Legal Environment

Improve business reputation

Disadvantages
Incresea cost of production
The Technological Environment

•The technological environment includes

factors and trends related to innovations that
affect the development of new products or the
marketing process.
•These technological trends can provide
opportunities for new product development,
affect how marketing activities are performed,
or both.
 Technology and communication

• Communication:
– Faster…………..
– More efficient…………..
– helps speed up the movement of
information
– improves the analysis of information
• Communication is improved through
the use of the intranet and Internet.
 Technology and marketing

• E-commerce is the ability of businesses to

trade with the world via websites.
– This means that there is a larger market
(expand the size of the market)
– The business is now open 24 hours a day.
– e.g. Amazon as world wide book and CD
sellers.
 Disadvantages of technological

• Technological can be very expensive:

– Purchasing the equipment
– Installation
– Training staff
– Maintenance
– Replacement/upgrading
 Advantages of technological

• technological c can bring the following

benefits to a business:
– Improved productivity
– Lower costs per unit of product
– Improved quality of service (e.g. speed of
service)
– Reduced wastage
The Competitive Environment
•The competitive environment consists
of all the organizations that attempt to
serve similar customers.
The most direct competition, offering the
Brand
same types of products as competing firms.
Competitors For example, Nike is a brand competitor of
Reebok as both companies manufacture
shoes.

Product Offer different types of products to satisfy

Competitors the same general need. Domino’s Pizza,
McDonald’s, and Kentucky Fried Chicken
are product competitors.
 The Social Environment
•The social environment includes all factors and trends
related to groups of people, including their number,
characteristics, behavior, and growth projections.

Number of
People

Growth Social Characteristics

Projection
Environment

Behavior
 The Social Environment
Demographics

Demographics describes a population

according to selected characteristics such
as age, gender, ethnicity, income, and
occupation.
 The Social Environment
Demographics

•The aging of the population is especially

evident in Italy, Japan, Britain, and the
United States.
 An ageing population

• Impact on the economy

Ageing populations may have implications
for the following:
– labour availability
– economic growth?
– the size and nature of markets
– welfare services such as pensions, old peoples
homes
 Chapter 5:
Buyer Behavior
 Objectives
• Consumer buying process
• Maslow's hierarchy of needs
• Organizational buyer behavior
What is Consumer
Buying Behavior?
 What is Consumer Behavior?
The study of individuals, groups, or
organisations and the processes they
use to select, secure, use, and dispose
of products, services, experiences, or
ideas to satisfy needs and the impact
that these processes have on the
consumer and society.
 Consumer Behavior

• Buying Behavior is the decision processes

and acts of people involved in buying and
using products.

5-4
 Why do we need to
study
Consumer Behaviour?

Because no longer can we take the

customer/consumer for granted.
Customers always change their
behavior.
Why should Consumer Behavior be Studied

– Need to understand:
• why consumers make the purchases that they
make?
• what factors influence consumer purchases?
• the changing factors in our society.
Why should Consumer Behavior be Studied

• Buyers reactions to a firms marketing strategy has

a great impact on the firms success.
• The marketing concept stresses that a firm should
create a Marketing Mix (MM) that satisfies (gives
utility to) customers, therefore need to analyze the
what, where, when and how consumers buy.
• Marketers can better predict how consumers will
respond to marketing strategies.
The Buyer Decision Process
Buyer Decision Making Process
 The Buyer Decision Process
Need Recognition

• Occurs when the buyer recognizes a

problem or need triggered by:
– Internal Search
– External Search
 Internal Search
An information search in which buyers
search their memories for information about
their products that might solve their problem.
 External Search

An information search in which buyers seek

information from sources other than memory.
 The Buyer Decision Process
Information Search
Sources of Information
• Personal sources—family
and friends
• Commercial sources—
advertising, Internet
• Public sources—mass
media, consumer
organizations
• Experiential sources—
handling, examining, using
the product
 The Buyer Decision Process
Evaluation of Alternatives

• How the consumer processes information

to arrive at brand choices
Factors that Effect the
Consumer Buying
Decision Process
 Motivation

Maslow’s
Hierarchy
of Needs
A method of classifying human
needs and motivations into five
categories in ascending order of
importance.
 Motivation
Self-
Maslow’s
Hierarchy of Actualization
Needs Esteem

Social

Safety

Physiological
Motivation (Maslow’s
SelfModel)
Actualization
“Be All That You Can Be”

Personal Needs (Ego)

“Status, Prestige, Achievement”

Social Needs
“Friendship, Love, Belonging”

Safety Needs
“Freedom from Harm, Financial Security”

Physiological Needs
“Food, Water, Shelter”
 Motivation

Maslow’s
Hierarchy
of Needs
A method of classifying human
needs and motivations into five
categories in ascending order of
importance.
Two Consumer Entities

Personal The
Organizational
organizational
Consumer Consumer
consumer
• The individual • A business,
who buys goods government
and services for agency, or other
his or her own institution (profit
use, for or nonprofit) that
household use, buys the goods,
for the use of a services, and/or
family member, or equipment
for a friend. necessary for the
organization to
function.
 Topic 6:
Brand management

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 Chapter Objectives
• After reading this chapter, you should be
able to:
• The nature of brand
• Brand equity
• Brand strategy
• Brand quality

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 What is a Brand?

Brand Elements

Brands versus Products

 Brand Elements
• Different components that identifies and
differentiates a brand
– Name, logo, symbol, package design, or
other characteristic
• Can be based on people, places, things,
and abstract images
 Brand versus Product
Brand Product
Has dimensions that differentiate it Anything available in the market
in some way from other products for use or consumption, that may
designed to satisfy the same need satisfy a need or want

Can be differentiated on the basis Can be categorized into five levels

of: namely:
• Packaging • Core benefit level
• Services provided • Generic product level
• Customer advice • Expected product level
• Financing •Potential product level
• Delivery arrangements
• Warehousing
• Other things valued by the
customers
 To Sum Up ....
• Through branding, organizations:
– Create perceived differences amongst
products
– Develop loyal customer franchise
– Create value that can translate to financial
profits
Why Do Brands Matter?

Consumers

Firms
 Consumers
• Encompass all types of customers,
including individuals as well as
organizations
• Functions provided by brands to
consumers
– Identify the source or maker of the product
– Simplify product decisions
– Lower the search costs for products internally
and externally
– Helps set reasonable expectations about
what consumers may not know about the
brand
 Consumers
– Signal product and attributes
• On the basis of attributes products can be
classified as:
– Search goods
– Experience goods
– Credence goods
– Reduce risks in product decision
• These risk can be categorised as
– Functional ,physical, financial, social psychological, and
time
 Firms
• Brands provide valuable functions
– Simplify product handling and tracing
– Offer the firm legal protection for unique
features or aspects of the product
– Provide predictability and security of demand
for the firm and creates barriers of entry for
competitors
– Provide a powerful means to secure
competitive advantage (CA)
Roles that Brands Play
Can Anything Be Branded

Physical Goods

Services
 Physical Goods

Business-to-Business
Products

High-tech Products
 Services

Role of Branding with

Services

Professional Services
Can Anything Be Branded

Retailers and Distributors

Online Products and Services

People and Organizations

 Role of Branding

Sports , Arts, and Entertainment

Geographic Locations
Ideas and Causes
 To Sum up....
• Branding is universal and pervasive in
different product categories
• Applicable to both tangible and intangible
offerings of an organization
• Technological developments have
impacted the way firms market their
offerings
• Organizations reap financial benefits from
positive brand images
 Brand Equity
• Principles of branding and brand equity
– Brand equity = Brand value
– Differences in outcomes arise from the “added value”
endowed to a product
– The added value can be created for a brand in many
different ways
– Brand equity provides a common denominator for
interpreting marketing strategies and assessing the
value of a brand
– There are many different ways in which the value of a
brand can be exploited to benefit the firm
 Business

Product Branded

Consumer
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 Advantages of brands
• The advantages of having a strong brand
are:
– Inspires customer loyalty (repeat sales)
– charge higher prices
– Retailers or service sellers want to stock top
selling brands.

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 consumer
How Product Branded

Product Positioning
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 Product Positioning
• Positioning is the consumers
perception of a product in relation
to others.

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 Product Positioning
• Product positioning involves
creating a unique, consistent, and
recognized customer perception
about a firm's offering and image.

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 Product Positioning
• Products can be positioned according
to attributes
– price
– Quality
– Competitors
– Application
– product user
– product class

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Product Positioning

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Product Positioning

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 Product Positioning
• A positioning map graphically illustrates how
consumers perceive competitive products
within an industry
• Look at the example below using the auto
market:
– Product: Ferrari, BMW, Kia, Range Rover, Saab,
Hyundai

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Product Positioning

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 Product Positioning
• Positioning Map for Cars
– The six products are plotted upon the
positioning map.
– It can be concluded that products tend to
bunch in the high price/low economy (fast)
sector and also in the low price/high economy
sector.
– Maybe Hyundai or Kia could consider
introducing a low cost sport cars.

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 Brand Equity

When a commodity becomes a

brand, it is said to have equity
 What is brand equity?
• The premium it can command in the
market
• Difference between the perceived value
and the intrinsic value
 What happens when
equity increases?

Commodity Brand Power Brands

Presence
+
Personality
 What is Brand Equity?
Brand equity is the added value endowed
on products and services, which may be
reflected in the way consumers, think, feel,
and act with respect to the brand.
 What is Brand Equity?
• A brand's power derived from the goodwill
and name recognition that it has earned
over time, which translates into higher
sales volume and higher profit margins
against competing brands.

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 What happens when brands
have high equity?
• The company can charge a premium on
their product
• The company can have more brand
extensions
• The company can have some defense
against price competition
 What is a Brand Promise?
A brand promise is the marketer’s vision
of what the brand must be and do for
consumers.
Something must be done by the marketer
for the customers.
Principles of
Marketing:
Topic 7
Product

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 Chapter Objectives
• After reading this chapter, you should be
able to:
– Introduction to Product Life Cycle (PLC)
– New product development process

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What is marketing

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 Definition of marketing
• Marketing is about understanding
customers and finding ways to provide
products or services which customers
demand
• Understanding customers need and wants
in order to fulfill their need and wants to
satisfy their satisfaction. It also can help to
make customer more loyal to the products.

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 The Marketing Mix
• The marketing mix consists of four basic
marketing strategies known as the 4 P’s.
– Product
– Promotion
– Place
– Price
 The 4 P’s of Marketing
explained
Product Promotion Place Price
1. Is there a 1. Making 1. Distribution is 1. How much
demand for customers getting the are
the product or aware of a right product customers
service? product to the right willing to
2. How to make 2. Advertising place at the pay?
the product 3. Coupons right time in 2. Is the price
appeal to 4. Rebates the right competitive
consumer 5. Sales amount and with other
3. Packaging— 6. Free give in the right products?
includes the aways condition 3. Can the
design, color, 7. Publicity 2. Storage company
size, and 3. Warehousing make a
brand names 4. Transporting profit?
 The Marketing Mix - product

First marketing mix: product

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 What Is a Product?
• Product is anything that can be offered in
a market for attention, acquisition, use, or
consumption that might satisfy a need or
want
• Products include more than just tangible
objects such as cars, computers or cell
phones.
• Product can be tangible or intangible
(Services)
 What Is a Product?

• Broadly defined, “products” also include

service, events, persons , places ,
organizations , ideas , or mixes of these.
• Services are the form of product that
consists of activities, benefits or
satisfactions offered for sale that are
essentially intangible and don’t result in
the ownership of anything such as
Banking
 What is a Product?
There are 4 general categories of
‘products’:

• Good
Can you think of
• Service an example for
• Place each category?
• Person
Goods
Place
Services
Person
PRODUCT

• PRODUCT = Anything that can be offered to a market

for attention, acquisition, use or consumption that
might satisfy a want or need
>industrial goods = installations, assessories, raw materials,
component parts and materials, supplies
>consumer goods =convenience goods, shopping goods,
speciality goods, unsought goods
• SERVICE = Any activity or benefit that one party can
offer to another that is esssenntially intangible and
does not result in the ownership of anything
• EXPERIENCE = memorable, personal, take place in
minds
Tangible & Intangible!

What is the
difference between
TANGIBLE &
INTANGIBLE?
Tangible & Intangible Products
Tangible Intangible
 Is more quantitative…
 Is more qualitative…
 Can be measured
specifically & see the  Cannot be scientifically
actual results measured.

 E.g. Car speed, safety  Focuses on how people

standards, efficiency feel or the image or
(mpg) pleasure gained…
 The Product Life Cycle
• The product life cycle is an
important concept in marketing
because it describes the stages
a product goes through from
when it was first thought of
until it finally is removed from
the market.
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 The Product Life Cycle
• A detailed picture of what happens to a
specific product’s sales and profits
over time
– Introduction
– Growth
– Maturity
– Decline

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 Product Life Cycle…..

No of
sales
Maturity

Decline

Growth

Introduction

Time line
 Where would you place these products on
the life cycle?
No of
sales

Time
 Product Strategy and
the Product Life Cycle
Introduction Growth Maturity Decline
Launch the new Enhance product (new Add brand or Reposition,
product. features, improved line extensions. reformulate, or
quality, added cut struggling
Support launch services, new Defend market products.
with marketing mix packaging). share through
programs to build competitive Manage
customer Support rising sales pricing, channel profitability
awareness, make with expanded channel expansion, through careful
product available, coverage, pricing for communicating pricing, pruning
and encourage trial. market penetration, differentiation, channel outlets,
and communications and promotion and minimal or
to start and reinforce to reinforce highly targeted
customer customer communications.
relationships. loyalty.

6-
 The Boston Matrix
• The Boston Matrix:
– A means of analysing the product
portfolio and informing decision making
about possible marketing strategies
– Links growth rate and market share

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 The Boston Matrix
• The 4 categories are :
– Problem Child
– Stars
– Cash Cows
– Dogs

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 Boston Matrix - Stars
• Products in markets experiencing high growth
rates with a high or increasing share of the
market
• Potential for high revenue
• require a large amount of money to be spent on
their promotion
• They are at the ‘Growth’ stage of the product
life-cycle.

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 Boston Matrix - Cash Cows

• High market share

• Low growth markets –
maturity stage of PLC
• High cash revenue –
positive cash flows
• This money is often used to
promote the ‘Problem Child’
products and to develop new
products
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 Boston Matrix -Dogs
• Products in a low growth
market
• Have low or declining
market share (decline
stage of PLC)
• Associated with negative
cash flow
• delete the product from
the portfolio.

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 Boston Matrix - Problem Child
• Products having a low market
share in a high growth market
• been launched quite recently
and have not had the necessary
time to establish themselves in
the market.
- Need money spent to develop
them
- May produce negative cash flow
- They are at the ‘Introduction’
stage of the product life-cycle
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 The Boston Matrix
Market Growth
Problem Children Stars
High

Dogs Cash Cows

Market Share
Low High
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 The Boston Matrix
• Implications:
• Dogs:
– Low market share in low growth markets,
likely to be draining organisation of cash
and using up too much management time,
sometimes a previous cash cow that has
had its day (end of life cycle)
– Divesting- this involves selling off the
product

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 The Boston Matrix
• Implications:
• Problem Children:
– Low market share in growing market, early
stage of development, high costs,
regarding payback potential, research,
investigation and evaluation needed
– Building - this involves investment in
promotion and distribution to boost sales
or promote them to a stronger position
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 The Boston Matrix
• Implications:
• Stars:
– High market share in growing market but
costs still high; both generating and using
significant cash, likely to be future “cash
cows”
– Holding - this involves marketing spending
to maintain sales

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 The Boston Matrix
• Implications:
• Cash Cows:
– High market share, low costs, to be
“milked”, paying for “stars” and research
– Milking - this means taking whatever
profits
– Generate large amounts of cash – use for
further R&D?

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 Conclusion:

• Cash cow: a product with a high share

of a low growth market
• Dogs: products which have a low share
of a low growth market
• Star: a product which has a high share
of a fast growing market
• Problem child – a product with a small
share of a fast growing market
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 evaluation
• The BOSTON matrix – one of the most
widely used concepts for managing
product portfolios.
• Intended to help managers in larger
organisations control and manage a
number of disparate products in the
Group

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 Question

When your product enters

decline stage, what u
needs to do?

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 Extension Strategies
• These are ways to re-invigorate sales of a
product after sales have hit maturity!

Can you think of

• New uses for product any recent
• Enter new markets products that have
used any of these
• Develop product range extension
strategies?
• Change packaging
• Encourage more frequent usage!
 Why use the Product Life Cycle?

• Identify trends /possible revenue to be earned

• Identify ‘times’ in future where a company should

INVEST in R&D

• Identify when extension strategies should be used

• Identify when to ‘end’ the life of a product.

New Product Development

What is a “New” Product?

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 New Product Development
• New” Product
– New-to-the-world products
– Additions to existing product lines
– Improvements and revisions of existing
products
– Repositioned products
– Cost reduction products

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 New Product Development
• Successful new products:
– Reflect better understanding of
customer needs, and beat the
competition to market
– Exhibit higher performance-to-cost
ratios and higher contribution
margins

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 Research & Development
• Research & Development
– R & D is technical or scientific research
that is undertaken with a view to
introducing new or improved products
and services.

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 Research & Development
• R&D can be very expensive and the
chances of success can be slim, with
a relatively low rate of commercially
successful ideas.
• However, programmed of R&D is
absolutely essential in order for firms
to maintain their competitiveness.

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Apple Mac future plans
Principes of Marketing;
Topic 8

Price

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 Chapter Objectives
• After reading this chapter, you should be
able to:
– PED
– Pricing methods
– Pricing decisions

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The Marketing Mix
Price
 Price
• Price:
• The amount of money for which
something is exchanged
IRRESPECTIVE of its value or worth”
 Price & Demand
• Firms must consider the Law of
Demand when setting prices
• This states that:
–Any increase in the price of a
product will result in a fall in the
quantity that consumers are willing
to buy
–This can be shown on a demand
curve:
P

P2
P1
P3
D
Q2 Q1 Q3 Q
 PED
• This measures the responsiveness of
demand to changes in price
• Firms must consider this because it will
have an effect upon total revenue
• It is calculated using the

PED = % Quantity Demand

% Price
 PED
• OR, if you don’t like percentages

Original
Price Quantity
X
PED = Original Price
Quantity
 Interpreting PEd
• Since there is an inverse relationship
between price and quantity the result of
any PEd calculation will be negative
• As such the NEGATIVE SIGN IS
IGNORED

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 Interpreting PEd
• Therefore there are 3 possible outcomes:
– Ped > 1 elastic demand (quantity
changes more than price)
– Ped = 1 unitary elastic demand
– Ped < 1 inelastic demand (quantity
changes less than price)
• The effect of changes in price upon TR can be
seen below:
For a Price For a Price
Increase Decrease
Demand is TR Decreases TR Increases
Elastic
Demand is TR does not TR does not
Unitary Elastic change change
Demand is TR Increases TR Decreases
Inelastic
 Therefore it is not always
profitable to increase prices!
Pricing Objectives
Five Objectives Guide Pricing Decisions:
1.Ensuring market survival.
2.Enhancing sales growth.
3.Maximizing company profits.
4.Deterring competition from entering a
company’s niche or market position.
5.Establishing or maintaining a
particular product quality image.
Factors that determine the value of
price elasticity of demand
• Number of close substitutes
within the market
– The more (and closer) substitutes available in
the market the more elastic demand will be in
response to a change in price.
– E.g. Apple and orange

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Factors that determine the value of
price elasticity of demand
• Percentage of income spent on
a good
– If the amount spent on a good relative to
income is big ( elastic)
– If small (inelastic)

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Factors that determine the value of
price elasticity of demand
• Habit forming goods
– Preferences are such that habitual
consumers of certain products become de-
sensitised to price changes.
– Wine, Cigarette, Pirated DVD

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Factors that determine the value of
price elasticity of demand
• The degree of consumer loyalty
– Price elasticity for famous (branded) product
• Nike, Volvo
– Price inelastic for not famous product
• Bata, Proton

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 Question
• Why PED important?????
• When a business want to change their
selling price why need to refer PED

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 Applications of price elasticity of
demand
• Main uses of PED
– Enabling a business to make more accurate
sales forecast.
– Assisting in pricing decisions

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Enabling a business to make more
accurate sales forecast
• Can calculate the demand and
price of the product.
– If you are in elastic range, lower price
– If you’re in inelastic range, raise price

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Factors That Affect Pricing Decisions
Organisational
and
Marketing
Objectives
Competition
Cost

Pricing
decision
Legal
Customers and
Regulatory
Issues
Other
Marketing Mix
Variables

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 Costs
• Business aim to make a profit,
– priced > total average cost. (break-even)
– products must be sold above their costs if the
firm is to remain in business.
– Reducing costs increases productivity and
profitability.
• Using labor-saving technologies
• Focusing on quality
• Establishing efficient manufacturing processes

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 Competitors

• price policies that should address the

competition in appropriate way
– avoiding clashes ( price wars ) with
competition
– attractiveness to shoppers and
challenge to competition

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 Organizational and Marketing
Objectives
• Prices = organisation’s goals and mission
• Prices must be well-matched with
marketing objectives (e.g., setting
premium prices to enhance a product’s
quality image
• Possible pricing objectives include:
• To maximise profits
• To achieve a target return on investment
• To achieve a target sales figure

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 Other Marketing Mix Variables
• Price/quality image of the product or brand
• Selective or intensive product distribution
• Product pricing used as a promotional tool

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 Legal and Regulatory Issues

• Price controls intended to control inflation

• Controls that set/regulate prices for
specific products
• Regulations and laws to prohibit price
fixing, and deceptive and discriminatory
pricing

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Pricing Method – how do business
decide what price to charge?

How do business decide what price to

charge?

Pricing strategy

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Pricing Method – how do business
decide what price to charge?
•There are 3 basic pricing decisions:
– Pricing a new product
– Cost-based pricing
– Competition-based pricing

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 Cost-based pricing
– Cost-based pricing.
• Cost-plus pricing calculates:
–The cost of producing the product
and adds on a percentage (profit)
to that price to give the selling
price.

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 Advantages of cost based
pricing
• Easy to calculate
• Minimal information requirements
• Insures firm against unpredictable, or
unexpected later costs
 Advantages of cost based
pricing
• tends to ignore the role of competitors
• provides no incentive for efficiency
 Cost based pricing
1. Cover costs
 Material
 Labor variable costs
 Capital resources
fixed costs
 Marketing
 Cost-Based Pricing
• This is where firms set prices on the basis
of production costs
• There are 4 main methods:
– Mark-up pricing
– Target pricing
– Full cost pricing
– Contribute pricing

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 Cost-based pricing
(Mark-up pricing )
– Mark-up pricing
• Here a % profit is added to the average cost per
unit
• Costs + mark-up = Sales price
• $1.00 + $0.50 = $1.50 (50% markup)
• Advantages: Simple and ensures revenue is
greater than costs
• Disadvantages: Does not account for market
conditions

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 Cost-based pricing
(Mark-up pricing )
• Example
• Calculate the selling price per unit.
– Note: each unit is sold at marginal cost plus
20%
– Costs : Material = $15
labour = $3
Overhead = $3

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 Cost-based pricing
(Mark-up pricing )
• Solution
– Total costs = 15 + 3 + 3 = $21
– Selling price = $21 X 0.20 (20%) =$4.2
=$21+$4.2 = $25.2

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 Cost-based pricing
(Full Cost Pricing )
• Full Cost Pricing
– Method of pricing in which all costs are
recovered.
– Here the firm allocates fixed and variable
costs to particular products
– Advantages: Ensures that revenue is greater
than costs
– Disadvantages: Does not account for market
conditions
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 Cost-based pricing
(Full Cost Pricing )
• Example 1:
• Ah Wing PLC (run away already) is
manufacturing wan tans. The overheads
costs are $50000. variable costs per unit is
$10. Ah Wing is currently producing 1000
unit per year. Calculate the full cost (total
cost) per uint
 Cost-based pricing
(Full Cost Pricing )
• Solution
– Total costs = fixed costs + variable costs
– Total costs = 50000 +1000(10)
– Total costs = $60000
– Full cost per unit = $60000/1000
= $60
 Cost-based pricing
(Full Cost Pricing )
• Selling price (full cost method) = > $60
 Competition based pricing

• Competition based pricing

– Where the number of competitors in the
market influences price
– Setting the price based upon prices of the
similar competitor products
 Advantages competitor based
pricing
• Sensitive to market
• Little alternative for unbranded products
 Disadvantages competitor based
pricing
• May not cover costs
Competition-based pricing strategy
• Price Leadership
• Destroyer Pricing
• Perceived value pricing
• Price Discrimination
 Competition-based pricing strategy -
Destroyer Pricing

• Destroyer Pricing
– Used to eliminate competition by setting very
low prices
– When a firm initially sells a product or service
at unsustainably low prices to eliminate
competition and establish a monopoly.

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 Competition-based pricing
Destroyer Pricing
• Simple explanation:
– You sell your good at a very low price in order
to destroy new or existing competitors.
• e.g. the Times newspaper reduced its
price in the 1990, other newspapers
followed suit and the result was the Today
newspaper went out of business in 1995.

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 Competition-based pricing
Price Leadership
• The market leader will change its price
and its competitors will follow suit.
• e.g. when the price of car or interest rates
change competitors normally follow suit
 Competition-based pricing
Perceived value pricing
– Perceived value pricing
• It sets selling prices on the perceived
value to the customer, rather than on
the actual cost of the product, the
market price, competitors prices, or
the historical price.

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 Pricing for new products
• For new product pricing strategies:
– Penetration pricing
– Market Skimming

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 Pricing for new products
Penetration Pricing
• Penetration pricing is the pricing
technique of setting a relatively low initial
entry price, often lower than the eventual
market price, to attract new customers.
– The price is by design set at low level
• to gain customer's interest
• establishing a foot-hold in the market

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 Pricing for new products
Penetration Pricing
• Price Penetration is most appropriate
where:
– Product demand is highly price elastic
– Substantial economies of scale are available.
– The product is suitable for a mass market (ie.
enough demand).
– The product will face stiff competition soon
after introduction

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 Pricing for new products
Skimming Pricing
• Price skimming is a pricing strategy in
which a marketer sets a relatively high
price for a product or service at first, then
lowers the price over time.
• It allows the firm to recover its sunk costs
quickly before competition steps in and
lowers the market price.

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 Evaluation
• Penetration Pricing
– Charging an initially low price
– Used to establish a new product, to
encourage retailers to stock it and consumers
to try it
• Market Skimming
– Charging a high price when a product is
unique
– i.e. mobile phones
– Maximises revenue whilst
business studies consumers have no
305
 Loss Leader Pricing

• Loss Leader Pricing

– Used commonly by retailers to attract
customers into their store in the hope they will
then make further purchases

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 Psychological Pricing

– Where firms set prices to influence consumer

thinking
– e.g. at £99.99 firms can claim that a product is
“less than £100 pounds” in their promotional
literature

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 Pricing Decision- an evaluation

• There is no pricing strategy which is

suitable for all circumstances.
• Firms must choose the strategy that is
most appropriate in view of their
objectives, the situation in the market and
their capacity utilisation

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 Comparing the Pricing
Strategies
Cost Plus Add % profit to the actual Ensures a profit is May not be able
cost made to sell product!

Competition Charge a price similar to Price will be Price may not be

competitor competitive profitable

Penetration Start with a low price Encourages Cannot last long

To attract customer people to try

Skimming Start with a high price Allows extra Only lasts while
For a unique product profits to be made there is no
competition
Promotional Special price for a limited Useful to get rid of Only useful for a
time old stock limited time
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Principles of Marketing;
Topic 10

(Promotion)

310
 Chapter Objectives
• After reading this chapter, you should be
able to:
– Promotion - Above vs below the line
– Factors – promotion startegy
– Importance of packaging

311
 What is
promotion ??????

312
 Promotion- definition

• Promotion refers to the tactics that a

business uses to make consumers
aware of their products and to entice
them to purchase the products, creating
sales revenue for the business.

313
What is the purpose of
promotion?
 The purpose of Promotion
• Introduces new products and
businesses.
• Creates new markets.
• To reach a target audience
• To show the product is better than a
competitors (Differentiation)
• To develop or improve the image of
firm (brand image)
What are the types of
promotion?
 Promotion Method
• Promotion:
– Above the line
– Below the line

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Promotion Method – Above the
line
• Advertising: Paid presentation of
ideas, goods, or services directed
toward a mass audience

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What are the types of Advertising
 Methods of Promotion – above
the line Advertising
Advertising – There are two main types of
advertising:
(a) Informative Advertising
–This informs and educates potential
customers about the product/service.
(b) Persuasive Advertising
–Tries to use emotions to
influence/persuade customers to
purchase your product/service.
 Methods of Promotion –
Advertising
Examples of Advertising:
• TV (national and local)
• Radio (national and local)
• Bill boards/posters
• Cinema
• Newspapers/Magazines
• Internet
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 Disadvantages of advertisings
• It adds to the cost of the products that
are being marketed. This money could
have been spent on improving the
product or reducing the price.
• It has been argues that advertising
encourages people to purchase goods
they otherwise would not.

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 Advantages of advertising
• Advertising allows consumers to make
more informed choices.
• The advertising industry employs many
people either directly or indirectly

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 Summary Advertisement
–Any paid form of non-personal
presentation and promotion of
ideas, goods, or services by an
identified sponsor
– Advertising objectives:
• Inform
• Persuade

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 Below the line promotion
• Promotional activities
–short-term tactics
–firms have some degree of control
over
 Below the line
Direct Mailing
• Direct Mailing: Type of promotion
directed to a targeted group of
prospects and customers rather than
a mass audience.
– E-Mail
– Letter
– Brochures
 Below the line -
Sponsorship
• Sponsorship : to support an event,
activity, person, or organization
financially or through the provision of
products or services
• A business will sponsor an event,
team or individual in order to build up
brand awareness.
• A sponsor is the individual or group
that provides the support.
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 Below the line -
Sponsorship
• For example, a corporate entity may
provide equipment for a famous athlete
or sports team in exchange for brand
recognition.
• The sponsor earns popularity this way
while the sponsored can earn a lot of
money.

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Below the line promotion
Sponsorships

Corporate
logos
showing
football
team
sponsors

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Below the line promotion
Sponsorships

Corporate
logos
showing
Football
team
sponsor

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 Below the line promotion
Loyalty cards
• Loyalty programs are structured
marketing efforts that reward, and
therefore encourage, loyal buying
behaviour.
• Loyalty card holders entitled to either a
discount on the current purchase, or an
allotment of points that can be used for
future purchases.
Below the line promotion
Loyalty cards

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 Below the line promotion – Sales
Promotion
• Sales Promotions – Sales promotions can be
divided into many different parts for
example:
• Coupons (to encourage repeat purchases)
• Product Endorsements (from e.g. a
celebrity)
Free Offers
Merchandising
Price reductions/discounts
Loss leaders

Images ©
thinkstockphotos.co.uk
 Sales Promotion

• One type of sales promotion may be to

include a premium with a purchase.
• premium
– any item of value that a customer receives in addition
to the good or service purchased; designed to attract
new customers or build loyalty among existing
customers,.
– Ex: With a purchase of $25 or more you get a free
CD.
 Sales Promotion

• Some companies give a rebate on

purchases.

• rebate
– a return of part of the purchase price of a product
used as an incentive for customers to purchase the
product
– Ex: New cell phone purchase
 Below the line promotion
Publicity
• Taking advantage of publicity means
calling attention to yourself and your
business.
• Publicity: placement in the media of
newsworthy items about a company, product, or
person
 Below the line promotion
Publicity
• A news release should answer these
questions:
Who? What? Where? When? Why?

• news release
• a brief newsworthy story that is sent to the media
• Publicity is both free & not free
• Ex:
– If Derek Rose comes to your store, you will have to pay for that,
– However, It’s free because you don’t pay for the news story that
you sent a news release for
 The promotional mix - Factors that
determine the type of promotional tools
used
• The competitiveness of the market –
– Where there are no alternatives available
the consumer will have less choice.
– There will be less need to persuade the
consumer to buy.

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 The promotional mix - Factors that
determine the type of promotional tools
used
• Availability
– If the product is in short supply there will
be little need to promote it. When demand
exceeds the supply the firm will be able to
sell its entire stocks with little or no
promotion, e.g., in Russia.

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 The promotional mix - Factors that
determine the type of promotional tools
used

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 The promotional mix - Factors that
determine the type of promotional tools
used
• How easily the product can be
differentiated in the market –
– If the differences are obvious to the
customer there will be less need to
promote it.

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 The promotional mix - Factors that
determine the type of promotional tools
used
• The stage of the product life cycle –
– A new product will usually need relatively
more promotional support. Promotion will
let the consumer know that the product is
available and hopefully persuade them to
buy it.
– If the product has been changed,
promotion will inform the consumers of
the changes.

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The promotional mix - Factors that determine the
type of promotional tools used

• Product Life Cycle

– Introductory - Inform -Advertising
(informative) and Sales promotion (free
samples)
– Growth - Differentiate from competitors
offering – Advertising (Persuade) and
Point-of-sale displays
– Maturity Remind customer - Reminder
advertising, Sales promotion (coupons)
– Decline - Cut budget
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The promotional mix - Factors that determine the
type of promotional tools used

• Resource availability and the cost of each

promotional tool
– The overall resource budget for the
promotional campaign will often determine
which tools the business can afford to use.
– Advertising (particularly on television and in
the national newspapers can be very
expensive).
The promotional mix - Factors that determine the
type of promotional tools used

• Market size and concentration

– If a market size is small and the number of
potential buyers is small, then personal selling
may be the most cost-effective promotional
tool.
– On the other hand, where markets are
geographically disperse or, where there are
substantial numbers of potential customers,
advertising is usually the most effective.
The promotional mix - Factors that determine the
type of promotional tools used

• Customer information needs

– Some potential customers need to be
provided with detailed, complex information
to help them evaluate a purchase (e.g. buyers
of equipment for nuclear power stations, or
health service managers investing in the latest
medical technology).
The promotional mix - Factors that determine the
type of promotional tools used

– In this situation, personal selling is almost

always required - often using selling teams
rather than just one individual.
– By contrast, few consumers need much
information about products such as baked
beans or bread. Promotional tools such as
brand advertising and sales promotion are
much more effective in this case.
The promotional mix - Factors that determine the
type of promotional tools used

n Nature of Product
– Highly standardised products with minimal
servicing requirements usually need less
personal selling than custom products with
complex features and/or frequent
maintenance needs
– Consumer products are more likely to rely
heavily on advertising than are business
products
 Question
• Aim of Promotions (above and below
the line)
– Increase profits
– Increase sales
– businesses will try to build up customer
loyalty (that is where consumers are happy
with their purchase of a particular product,
and will return to purchase it again in the
future).

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 Getting Help
• An advertising agency can handle all
phases of your advertising, including
writing the copy, creating the artwork,
choosing the media, and producing the ad.
• advertising agency: a company that acts as
intermediary between a business and the media
to communicate a message to the target market
Principles of Marketing:

Place
Topic 9
 Chapter Objectives
• After reading this chapter, you should be
able to:
– Place
– Distribution chanels
 Market
• Market
– A market is a group of consumers, who could
be individuals, businesses or governments
who might buy this type of product
 Where to sell your company
product
Niche
Marketing

Product market

Mass
Marketing
 Niche Marketing
• niche market is a focused, targetable
portion of a market.
 Advantages - Niche Market
• Advantages
– Able to concentrate on company strengths –
product can be developed from what the
business is good at, and then a niche
targeted.
 Disadvantages
• Market niches can disappear as a result of
changes in economic conditions, fashion
or taste - having all your eggs in one
basket.
 Mass Marketing
• Broad-brush, unfocussed attempt to
appeal to an entire market with one
basic marketing strategy utilising mass
distribution and mass media. Also
called undifferentiated marketing
 Mass Marketing- Advantages
• Advantages
– Allows reduction in average costs through
economies of scale
Mass Marketing- Disadvantages
• Disadvantages
– Competition is often fierce.
 question

Yes
Products
or
No
 question

Different
need Market
and segmentation
want

customer
 Segmentation – introduction
• Def:
– Market segmentation is the process of
dividing a market up into different groups of
customers, in order to create difference
products to meet their specific needs
 Market segmentation
• Segmentation can divided to:
– Geographic
• Region of the country
• Urban or rural
– Demographic
• Age, sex, family size
• Income, occupation, education
• Religion, race, nationality
– Psychographic
• Social class
• Lifestyle type
• Personality type
Advantages - segmentation
–Improved profits for business
• Diff Customers = different disposable
income (YED)
• By segmenting markets, = offer diff
products to diff customers or diff
prices businesses
• More sales, more profits
Advantages - segmentation
–Retain more customers
• Customer circumstances change:
– they grow older,
– form families,
– change their buying patterns.
• different stages of their life ("life-cycle") =
demand for diff products
• Business must offer diff products during diff
life-cycle
Advantages - segmentation
–Target marketing
communications
• deliver their marketing message -
customer audience.
 Disadvantages
• Generally there is an increase in costs
with segmentation stemming from
increased;
– Research and development - the need
to produce different products for the
different market segments.
 Disadvantages
– Production costs - the need for
different products for different market
segments.
– Administrative costs-the need for
separate marketing plans for the
different segments.
– Inventory costs-the need for additional
stock to cover variations in demand plus
additional stock holding and control
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systems.
 Disadvantages
– Distribution costs-the need for
different distribution channels for
different market segments.
– Advertising and sales costs -
separate plans have to be developed
and implemented for each segment.
Distribution / Place
 The marketing mix -
Place
Distribution-activities that make
products available to customers
when and where they need them.
 Place or distribution
• Place

Manufacturer Consumer

Channel of
distribution
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 Channel of Distribution
• A channel of distribution or marketing
channel is a group of individuals and
organizations that directs the flow of
products from producers and
customers.
 Channel of Distribution
• Channel of Distribution: The path
a product takes from producer or
manufacturer to final user.
• All the organisations through
which a product must pass
between its point of production
and consumption
 Who is involved in a basic
channel of distributer
• Types of channels
– Producer---consumer (most services, and
industrial products)
– Producer---retailer---consumer (bulky
products)
– Producer---wholesaler---retailer---consumer
(tobacco, appliances, convenience goods)
– Producer---agent/broker---wholesaler---
retailer---consumer (gum, candy bars)
 Intermediaries
• Marketing Intermediaries link producers to
other intermediaries or to the ultimate
users of the product. Operate between the
producer and the final buyer.
• Middle man
 Intermediaries
• Intermediary
– Individual or firm that helps to distribute
a product
 Intermediaries
• Wholesaler
– Intermediary that sells products to other
businesses for resale to final consumers
• Retailer
– an intermediary that sells products
directly to consumers
There are 3 basic 'channel'
decisions
Do we use direct or indirect channels?
Number of intermediaries at each level
Types of intermediary
 Channel 1
• In the direct channel, the product travels
from the producer to the consumer without
intermediaries
• An example of a direct marketing channel :
– Mail order (or catalog marketing)
– Telemarketing
– Direct selling
– Electronic Retailing
 Channel 2
• In channel 2, manufacturers distribute
products though retailers
• They sell products to ultimate users and
buy products from manufacturers.
• Types of retail stores:
– department store
– discount store
– specialty store
– convenience store
 Channel 3

• In channel 3, manufacturers
distribute products though
retailers and wholesale
• They buy from producers and
resell to retailers.
 Channel 3
• They break down 'bulk' into smaller
packages for resale by a retailer.
• They provide storage facilities. For
example, banana manufacturers
seldom wait for their product to mature.
They sell on to a wholesaler that will
store it and eventually resell to a
retailer.
Types of Channels of Distribution
• How widely a product will be distributed.
– Intensive Distribution:
• Involves the use of all suitable outlets
for a product.
• Readily available in the marketplace
(candy bars)
Types of Channels of Distribution
• How widely a product will be distributed.
– Selective Distribution:
• use of a limited number of
intermediaries in a market area
(hand tools)
• A limited number of outlets in a given
geographic area used to sell the
product.
Types of Channels of Distribution
• How widely a product will be distributed.
– Exclusive Distribution:
• Involves protected territories for
distribution of a product in a given
geographic area.
• use of only one intermediary in a
market area (Jaguar cars)
 Principles
Of
marketing

Topic 11
Digital Marketing
E-Marketing &
E-commerce
Marketing in the
Digital Age
 Digital Marketing
What is digital marketing?

Digital marketing can be described as actively

promoting products and services using digital
distribution channels as an alternative to the more
traditional mediums such as television, print and
radio
 Digital Marketing
What is Digital Marketing?

 Today’s consumer is more cognizant of the

marketing messages all around them, leaving
them more likely to tune out advertisements or
other forms of marketing communication
 Digital Marketing Strategies
How are marketers adjusting?

Digital marketers turn to technology to

help reach target consumers

1. Internet marketing

2. Mobile marketing

3. Social marketing

4. Viral marketing
 Digital Marketing
How are marketers adjusting?

The goal for digital marketers is to focus on

interactive elements, encouraging consumers
to participate in the marketing process
 Digital Marketing Strategies
Internet Marketing

The Internet, far more than any other

medium, has given consumers a
voice, a publishing platform and a
forum where their collective voices
can be heard, shared and researched,
creating a more powerful and
educated audience than ever before
Digital Marketing Strategies
Internet Marketing

1. Blogs
2. Message boards and forums
3. Social media
4. Discussions and forums on large
email portals (Yahoo!,Google, MSN)
 Digital Marketing Strategies
Mobile Marketing

Mobile marketing refers to

marketing on or with a
mobile device
 Digital Marketing
Strategies
“Apps”

Apps are individual

Apps have recently software programs
gained a lot of designed to run on the
popularity among Internet, computer,
consumers phone or other
electronic device
typically designed to
increase functionality or
ease of use
 Digital Marketing
Strategies

In June of 2013, Apple announced that 50

billion apps had been downloaded from their
online “apps” store, up from 30 billion apps in
June of 2012
 Digital Marketing
Strategies

Social Media

Social media describes the

online technologies and
practices that people use to
share content, opinions,
insights, experiences,
perspectives, media and to
otherwise interact
 Digital Marketing
Strategies

Social media presents itself in the

form of many variable applications

 Google+  YouTube

 Twitter  Digg

 Flickr  MiniClip

 Facebook  foursquare
Digital Marketing
Strategies

Social Media Marketing

 Digital Marketing Strategies
Viral Marketing

Viral marketing describes any strategy that

encourages individuals to pass on a
marketing message to others, creating the
potential for exponential growth in the
message's exposure and influence

Viral marketing is the digital marketer’s

version of “word-of-mouth” advertising
 Digital Marketing Strategies

Viral Marketing
Nike launched a video as a way to tie in with
the 2012 Euro Cup (named “My Time is Now”
featuring some of the biggest names in soccer)
that racked up nearly 10 million views in just
three days
E-Business and E-
Commerce
 What is E-Commerce?

Formal definition:
The buying and selling, marketing and servicing, and
delivery and payment of products, services, and
information over the Internet, intranets, extranets,
and other networks, between an inter-networked
enterprise and its prospects, customers, suppliers,
and other business partners.

What it really means:

It is the way companies do business with customers
and other businesses by using computer-based
(web-based in most cases) systems.
 What is E-Business?
E-Business enables businesses and
organizations to realize the potential of E-
Commerce through the creation of business
processes and strategies geared to this
objective.

In other words… it helps position organizations

with better business processes and strategies to
successfully realize E-Commerce potential
through web-based systems.
 Conclusion
• E-business:
– Uses electronic means and platforms to
conduct business.
• E-commerce:
– Buying and selling processes supported by
electronic means.
 Types of e-commerce
• B2B: E-commerce that is conducted between
businesses is referred to as Business-to-business
• (1) open to the entire public or
• (2) limited to a group of businesses who have been part of
the specific group
– Transaction cost reduced through reduction in
• search costs
• costs of processing transactions (e.g. invoices,
purchase orders and payment schemes)
• cost in trading processes

411
 Types of e-commerce
• B2C Commerce
– commerce between companies and
consumers
– involves customers gathering information;
purchasing physical goods or information
goods
– online retailing companies such as
Amazon.com, Drugstore.com, Beyond.com,
Flipkart.com, Lenskart.com
– reduces transactions costs
– increasing consumer412access to information
• B2G e-commerce
– commerce between companies and the public
sector
– use of the Internet for public procurement
– licensing procedures
• C2C e-commerce
– commerce between private individuals or
consumers
– online auctions
– auctions facilitated at a portal, such as eBay,
which allows online real-time bidding on items
being sold in the Web;413
 Advantages of Digital
marketing
• Availability of Information

• Expansion

• Low Cost

• Efficiency of Advertising
Advantages of Digital marketing

• Low Cost
–a properly planned and
effectively targeted e-marketing
campaign can reach the right
customers at a much lower cost
than traditional marketing
methods.
Advantages of Digital marketing

• Expansion
– Global access, global reach and archive
economic of scales
– Global reach – a website can reach anyone in
the world who has internet access. This allows
you to find new markets and compete globally
for only a small investment.
Advantages of Digital marketing
• Availability of Information
– if your customer database is linked
to your website, then whenever
someone visits the site, you can greet
them with targeted offers. The more
they buy from you, the more you can
refine your customer profile and
market effectively to them.
Advantages of Digital marketing

• Efficiency of Advertising
– Viral: Online, using social media
share buttons on your website, email
and social media channels enables
your message to be shared incredibly
quickly,
 Limitations / Disadvantages
• Security, privacy issues
– One of the major disadvantages may be the lack
of trust of the users because of the constant
virtual promotions that appear to be frauds.
This is an aspect that deteriorates the image
and reputation of quality and honest
companies.
– Other factor is the payment: many users still
don’t trust in the electronic methods of paying
and give up buying online because of this.
 Limitations / Disadvantages
• Low connection speed
– Slow internet connections can cause difficulties. If
the companies build too complex or too large
websites, it will take too long for users to check
them or download them and they will get bored
eventually
 Limitations / Disadvantages
• Low connection speed
– Slow internet connections can cause difficulties. If
the companies build too complex or too large
websites, it will take too long for users to check
them or download them and they will get bored
eventually
 Factors affecting Digital marketing /e business /e-
commerce

• Major forces fuelling e-commerce

– economic forces,
– marketing and customer interaction forces, and
– Technology
– low-cost technological infrastructure,
– speedier and more economic electronic transactions
with suppliers,
– lower global information sharing and advertising
costs, and
– cheaper customer service cost
 Principles
Of
marketing

International Marketing
Topic 12
 Objectives
• The international trade system
• Economic environment
• Political and legal environment
• Cultural environment
 Introduction
• Global trade accounts for 65 percent of the
Malaysia . gross domestic product
• Exporting - Marketing domestically
produced goods and services in foreign
countries
• Importing - Purchasing foreign goods and
services
- Top Malaysia Trading Partners—
Total Trade Including Exports and
Imports

426
World’s Ten Largest Marketers
(Ranked by Annual Sales)
 Nature and scope of
international marketing
• DEFINITION OF INTERNATIONAL
MARKETING
– International Marketing can be defined as
exchange of goods and services between
different national markets involving buyers
and sellers.
Nature and scope of international
marketing
Nature and scope of international
marketing

Malaysia England
Sell
Nature and scope of international
marketing

Malaysia England
Buy
 Nature and scope of international marketing
25

20
Advanced countries

15

Developing countries

10

0
1990 1997 2000 2007
 International Marketing
• International marketing occurs when a
business directs its products and services
toward consumers in more than one
country.
 Questions

• Why do countries trade with

each other
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Nature and scope of international
marketing

Thailand

Malaysia
Bolivia China

Luxembourg Panama
 Advantages
• Reduce costs
– By selling the standardised products
• Marketing strategy needs not be
duplicated
• The lower cost of production – reduce
selling price, more competitive
advantages
 Advantages
• Exploiting Product life cycle
differences:
– When the market for a company’s
product becomes mature in one country
– it may expand to another country where
the product’s market is either in its
infancy or growth stage
 Advantages
• Economies of scale
– Global market are large enough to
create the output level
• costs per unit are decreased to
provide the supplier with a competitive
advantage
• spreading the cost of advertising and
promotion
 Advantages
• Increase the potential size of the target
market
– Expanding markets
– Higher growth rate, than domestic
market
• They are growing very fast and,
hence, have immense potential.
• Domestic market (Malaysia)
• Foreign Market (China)
 Factors affecting international marketing

International marketing is dealing with more than one

foreign market. So international marketing is affected by
many factors.
Cultural

Political Legal

FACTORS

Economic Social
 Disadvantages
• Cultural differences
– language, spoken and silent
– values and norms
– E.g.
• A Roman laundry innocently
suggests:‘ Ladies, leave your clothes
here and spend the afternoon having
a good time’
• Japanese hotel notice to guests: You
are invited to take advantage of the
chambermaid’
Example

BA320- Summer 2006 17-442

 Disadvantages
• Consumer preference for local
producers
– Belief that aspects of one's culture are
superior to another's.
– Consumer ethnocentrism :belief that it
is inappropriate (immoral) to buy
foreign-made products.
 Disadvantages
• Government regulation
– Forgo control
• Product/safety/environmental
restrictions
• Financial/operating/business
restrictions
• quality
• pricing
 Government regulation

China
Austria

USA Ghana
Malaysia
Singapore

Italy
Iceland
Government regulation
Government regulation

?
 Government regulation
• However some countries need to protect
their domestic industries (and jobs) from
foreign competitors.
• They do this by using trade barriers
 Government regulation
• Trade barrier is the term that refers to a
government’s policies of protecting its
domestic business from more competitive
foreign imported goods
• Variety of trade controls can be
introduced:
– Tariff
– Quotas
– Embargo
– Voluntary export limit
 Trade barriers
• Tariff:
– Tax on imports
– Used to restrict imports and raise revenue for
the government
– Tariff will make the imported good more
expensive and making domestically produced
good more appealing and competitive
 Trade barriers
• Quotas
– Limitations on importation of a product class
– Reduces the quantity of a product that is
imported
 Other Trade Barriers
• Import quotas - Limit the number of units of
products in certain categories that can cross
a country’s border for resale
• Embargo - Complete ban on the import of
specified products
• Subsidies - Government financial support of
a private industry
• Exchange control - Method used to regulate
international trade among importing
organizations by controlling access to foreign
currencies
452
 Dumping
• Controversial practice of selling a product
in a foreign market at a price lower than
what it receives in the producer’s domestic
market

453
 Going Global
• Reasons for marketers to go global
– Saturation of the target market
– Strong domestic market share
– Globalization of customers
– New customers in emerging markets
– Globalization of competitors
– Reduced trade barriers
– Advances in technology
– Enhanced customer responsiveness
454
 Strategies for Entering Foreign
Markets
• Three basic choices
– Importing and exporting
– Contractual agreements such as franchising,
licensing, and subcontracting
– International direct investment

455
 Importing and Exporting
• Decision to import, or bring in foreign
goods to sell domestically or use as
component parts, depends on:
– Ability of supplier to maintain quality
– Flexibility in filling orders that vary
– Response time in filling orders
– Total costs

456
 Importing and Exporting
• First-time exporters can reach foreign
customers through:
– Export-trading companies
– Export-management companies
– Offset agreement

457
 Franchising
• Contractual arrangement in which a
wholesaler or retailer agrees to meet the
operating requirements of a manufacturer
or other franchiser
• Benefits are risk reduction, standardized
operations, and greater recognizability
• Success depends on ability to adapt to
local customer preferences
458
 Foreign Licensing
• Agreement that grants foreign marketers
the right to distribute a firm’s merchandise
or to use its trademark, patent, or process
in a specified geographic area
• Gives access to local partner’s marketing
information and distribution channels, and
protection from legal barriers
• Allows quick entry into a foreign market
with a known product
459
 Subcontracting
• Contractual agreements that assign the
production of goods or services to local or
smaller firms
• Can prevent mistakes involving local
culture and regulations
• Can provide protection from import duties

460
 International Direct Investment
• High involvement and high risk are the
major characteristics
• Firms choosing this method often have a
competitive advantage
• Several forms
– Acquisition
– Joint venture

461
 From Multinational Corporation to
Global Marketer
• Multinational corporation - Significant
operations and marketing activities outside
its home country
– Examples: General Electric, Siemens,
Mitsubishi

462
 From Multinational Corporation to
Global Marketer
• Reflect interdependence of world
economies, growth of international
competition, and globalization of world
markets

463
 Developing an International
Marketing Strategy
• Global marketing strategy -
Standardized marketing mix with minimal
modifications that a firm uses in all of its
domestic and foreign markets
– Can effectively market some goods and
services to segments in many nations that
share cultures and languages
– Can be highly effective for luxury products
that target upscale consumers everywhere
– Major benefit is its low cost to implement
464
 Developing an International
Marketing Strategy
• Multidomestic marketing strategy -
Application of market segmentation to
foreign markets by tailoring the firm’s
marketing mix to match specific target
markets in each nation

465