Understand Principles of Marketing Objective 3.01 Understand Principles of Marketing

Topics Functions of marketing Importance of marketing research to the creation or improvement of products or services Selling prices of products and services Classification of channels of distribution Classification of the main types of promotion

Functions of Marketing

Functions of Marketing What happens during the marketing process? Businesses are involved in the process of origin, pricing, promotion, and distribution of products and services. These products and services are made available in order to meet the goals of individuals and businesses. Activities of marketing happen throughout the seven functions of marketing

Seven Functions of Marketing Marketing-Information Management Obtaining, managing, and using information about products and services, customers, and competitors to improve business decision-making and the performance of marketing activities Product/Service Management Designing, developing, maintaining, improving, and obtaining products and services in order to meet the needs of customers

Seven Functions of Marketing - Continued Pricing Determining and communicating the value of products and services Place (Distribution) Using the best ways for customers to locate, obtain, and use the products and services of a business Selling Communicating directly with potential customers in order to determine and satisfy their needs and wants

Seven Functions of Marketing - Continued Financing Budgeting for marketing activities, securing necessary funds for operations, and providing financial assistance to customers Promotion Communicating information such as features and prices about products and services to potential customers

Importance of Marketing Research to the Creation or Improvement of Products or Services

Marketing Research Customers find solutions to problems through carefully designed studies Steps in marketing research: Define the marketing problem. Study the situation. Develop a data collection procedure. Gather and analyze information. Propose a solution.

Types of Research Studies Surveys Specific set of questions asked to consumers Focus groups Small groups of consumers that discuss a specific product Observations Actions of consumers rather than questioning them Experiment A comparison of two controlled alternatives for consumers

Similarities of Products and Services Meet the needs or satisfaction of a target market Include a mix of the marketing elements: product, price, promotion, and place (distribution)

Differences Between Products and Services Tangible Intangible Non-perishable or perishable Perishable Separable Inseparable Easier to market More difficult to market More control over quality Less control over quality

Selling Prices of Products and Services

Factors that Influence the Pricing of Products and Services Supply and demand Uniqueness Age Season Complexity Convenience

Pricing Formula Selling Price = Product Costs + Operating Expense + Profit Example: $215 = 67 + 38 + 100

Markup vs Markdown Markup – the amount charged of the selling price to cover the operating expenses and profit usually stated as a percent Selling price = product cost + markup Example: $35 + $14 = $49 $35 * 40% = $14 Markdown – A reduction from the original selling price

Classification of Distribution and Promotion

Classification of Channels of Distribution Channels of Distribution – how products and services reach final customers and the businesses involved How does having a channel of distribution help businesses? Allows businesses to adjust quantity and assortments accessible in convenient locations for customers and storage or products

Types of Channels of Distribution Direct – the exchange of products and services between producer and consumer only Examples: Tonya makes and sells drapes to local customers Local cleaning company promotes its business and provides services to its local customers Mary sells her famous juices at the local festivals Indirect – the exchange of products and services with one or more businesses and consumers UPS delivers packages for Ann Taylor Drugstores sell Maybelline Cosmetics Macy’s sells Nautica line of clothing

How do you know when communication is effective? Consists of an understanding of information between the sender and the receiver. Senders selects a channel of communication and the receiver indicates understanding by providing some form of feedback.

What is the relationship between effective communication and promotion? Businesses use promotion to communicate with potential customers about their products and services Information about products and services is encoded in a promotional message Promotional messages may be delivered through advertisements and sales representatives Potential customers decode the message and provide feedback by way of purchasing or inquiring about products or services

Classification of the Main Types of Promotion Personalized Customized for individual customers Examples – Visits, Telephone Calls, Live Audio & Video Internet Connections Mass Communication with many people with a common message Examples – Advertisements, publicity, public relations, and sales promotion