Market Research Marketing Mix

Market Research Marketing Issues and Concepts The Marketing Mix Product NPD (new product development) is crucial to survival and success for some businesses In other markets it is possible to sell the same product for many years without much or any change. For example our favorite company – coca cola ! Product development is usually based on trying to satisfy customer demands or needs based on research which can be expensive and not always successful We must realise that the development of a new product is much the responsibility of the marketing department as it is the dsigners.

Market Research Marketing Issues and Concepts Products and brands Mobile phone network is an example of a PRODUCT As opposed to Vodafone which is a BRAND. What’s the difference ? The product is the general term to describe what is actually being sold Brand is the distinguishing name or symbol that Is used to differentiate the manufactures Branding has a massive influence and can create powerful images and perceptions.

Market Research Marketing Issues and Concepts Product positioning We use market mapping to help us analysye how the new brand will relate to other brands in the market. This is called positioning First must identify the key features or attributes of a product The example I have drawn uses price and health image to map the market for soft drinks.

Market Research Marketing Issues and Concepts Once you know the key features of your product and identified your niche you promote these key features as much as you can. Once you have analysed you can see if you need to re-position your product.

Market Research Marketing Issues and Concepts New Product Development and Research and Development No firm can afford to stand still and not develop new products You need to adapt, update or create new products or even work on ‘me-to ‘ products. These are: similar products to competitors. Effective R&D is essential to be able to do this and stay in the game or ahead of the game ! Don’t think that this doesn’t apply to service providers as well !

Market Research Marketing Issues and Concepts R&D of New product opportunities These opportunities are usually identified by market research and mapping. Product orientated firms may only deal in ‘scientific’ research and will develop their new product based on them findings There maybe some instances where the company will try to lead consumer tastes rather than react to them

Market Research Marketing Issues and Concepts Product testing Ensures that the product achieves its technical targets in terms of efficient costs of production, performance and reliability Value analysis is important here which looks at the product in terms of performance, looks and economy of manufacture (eg 164) Where would a new product be in value analysis ? Middle to top If there were cheaper components available that didn’t effect performance but didn’t look as good then it would be ? Middle to right

Market Research Marketing Issues and Concepts If it is in point B do you think sales are affected ? Do you think that looks are important ? Only consumer testing can provide these answers, and this is known as ‘market testing’

Market Research Marketing Issues and Concepts Governments try to provide a suitable environment for R&D. They provide legal security. They do this how ? By allowing inventors and designers to ‘patent’ or ‘register’ a design. This is useful because ? If it proves popular the original designer is sure of receiving the financial gains, and doesn’t have to worry about people ripping off his idea – well not completely ! Government will also offer financial assistance to help with R&D. In what areas is this likely ? Areas of interest to the public/economy etc… Such as possibly pharmaceutical research

Market Research Marketing Issues and Concepts Price The fixing of price is vital to the marketing mix It has massive impact on the demand for the product Price is an indicator of the marketing objectives. Get pricing wrong then you put the hard work conducted through market research in jepordy

Market Research Marketing Issues and Concepts Demand What is demand ? Demand for a product is the quantity that consumers are prepared to purchase at the existing price at a given time. If you are to be successful you have to be aware at what affects demand. The general rule for demand is that as price falls the more they are likely to purchase. If the price rises what happens to consumer spending power ? It decreases

Market Research Marketing Issues and Concepts So price is important in determining the demand for a product but its not the only factor. What else can determine demand ? Change in your income level Increased population or an increase in the age range of target market A change in the price of a substitute good A change in price of a complimentary good A good and effective advertising campaign

Market Research Marketing Issues and Concepts Price elasticity of demand Look at the two demand curves I have drawn, the one labeled DD has a steeper gradient than D1D1 What impact does the slope of the curves have on demand for those two products when price is changed ? Demand has fallen for both products but at different rates even though the price increase is the same. This could be useful info for marketing manager/director as the revenue for A has risen but B has fallen The relationship between price changes and the size of resulting change in demand is known as price elasticity of demand and measures the responsiveness of demand following a change in price.

Market Research Marketing Issues and Concepts you can show it on demand curves or as a formula: % change in quantity demanded / % change in price The value of PED is usually negative – why ? Because a fall in price results in a increase in demand Apply this formula to the example given.

Market Research Marketing Issues and Concepts What determines price elasticity of demand ? How necessary a product is – the more its deemed necessary by the consumers the less they will react to changes in price. This makes it inelastic. Number of similar competitors – the more substitutes there are the more likely consumers will be to switch if there is a rise in price. Example fruit retailers. Degree of consumer loyalty – if through branding you have created strong customer loyalty then they are likely to stick with you through reasonable price increases. The price of the product – a cheap product which doesn’t use up much of your income, is unlikely to have a high elastic demand as you don’t care about a 10% or 15% increase.

Market Research Marketing Issues and Concepts Main uses of PED Why do we use PED ? To make a more accurate sales forecast If you are considering a price increase to cover production cost rise then being aware of PED should allow forecasted demand to be calculated (181) Assisting in pricing decisions If bus company thinking about changing its pricing structure then being aware of PED of routes is useful – why ? Could raise prices on routes that are inelastic (low PED) and lower them on routes which are elastic (high PED) – also known as price discrimination.

Market Research Marketing Issues and Concepts Many products are affected by many different things when deciding on price. We have talked about demand and elasticity but what else is there to effect pricing decisions ? Cost of production Market conditions Competitor prices Business and marketing objectives Are you a new or existing product

Market Research Marketing Issues and Concepts Pricing methods Cost based pricing The basics of this is that a firm will figure out how much it costs to make per unit and add on top of that a % for profit. There are a number of different methods to cost based pricing: Mark up pricing – used by retailers who have the price they paid the wholesaler and add a % onto that. Size of the mark up depends on the demand for the product, number of suppliers and the age and stage of the product life. Target pricing – where a company decides upon a price that will give a required rate of return at a certain level of output/sales. For example if a company has costs of $400,000 when making 10,000 units and requires a return of 20% then it will set its price by working out its total cost and expected return and divide by the output. (183)

Market Research Marketing Issues and Concepts Full Cost Pricing (Absorption Costing) Where a company try’s to calculate a unit cost for the product then adds an agreed profit margin. not easy to do especially if your company makes several different items Difficult to allocate fixed costs. Differs to mark-up pricing in the fact that it finds a method to allocate the fixed costs as best as possible Example fixed costs of making DVD’s is $10,000, the variable cost is $5,000 and they make 5,000 (184)

Market Research Marketing Issues and concepts Contribution Cost Pricing (Marginal-Cost) Does not try to allocate fixed costs to specific products Firms calculate the variable cost and then adds an amount to contribute to fixed costs. If enough units are sold then costs are covered and anything over what is needed is profit. Eg –firm has $2 per unit direct costs, fixed costs of $40,000 and they set a contribution of $1 per unit towards fixed costs so one unit sells for $3. how many units to be sold to cover fixed costs ? 40,000 How many units to be sold to make $20,000 profit ? 60,000

Market Research Marketing Issues and concepts It a good thing if a firm produces products that all make a contribution to fixed costs. A general rule is that any product that makes a positive contribution should continue to be produced as long as there is spare capacity to do so Many firms have excess capacity and use contribution costing to attract business An example being trains – mad busy at certain times of day and really quiet at others

Market Research Marketing Issues and concepts Competition based pricing Firms will base their prices around competitors Price leadership can exist in markets Some markets have bigger firms than others but all similar prices to avoid a pricing war Undercutting is done to force competitors out of the market Market pricing or can be known as consumer based pricing and prices are set based on a study of conditions and trends within the market. Perceived value pricing – this is when a value is put on a product which is inelastic depending on how valuable the consumer sees it Price discrimination - this takes place when firms know they can charge more in certain areas than in others. Supermarkets do this to an extent

Market Research New Product Pricing Strategies? …

Market Research Marketing Issues and concepts