Chapter Overview This chapter covers: –Functions of Marketing –Customers v. Consumers –Marketing Mix –Market Segmentation Demographics Psychographics Geographics Product Benefits

Marketing On-going process of planning, pricing, promoting, selling ideas, goods, and services Ideas Goods Services The Exchange

Functions of Marketing Distribution Financing Marketing Information Management Pricing Product/Service Management Promotion Selling

Marketing Concept In order to succeed, a business must satisfy customers needs and wants –Must satisfy all aspect of utility Right time Right place Right product Right price Inform customers of its existence

Customers v. Consumers Customers buy products Consumers use products –To a certain extent, they are interchangeable Manufacturers point of view –Retail stores are customers, shoppers are consumers Retail point of view –Customers and consumers are the same

Definition of Market Market –A collection of customers who share common needs & wants, AND who have the ability & willingness to purchase I want, need and am willing to buy a Bentley, but I have not the ability. OR…

Definition of Market The total sales in a given category by competing companies –Cereal market –Soft drink market –Athletic wear market

Target Market A specific group of current and potential customers that a company will focus on for all decisions affecting products and sales

Customer Profile A detailed description of the typical customer Helps to identify target market Some attributes are: AgeIncome level Ethnic backgroundOccupation LifestyleAttitudes LocationEtc.

Marketing Mix Product, Place, Price and Promotion Must first define target market, then fine tune the mix to effectively reach market Interconnected and dependent on each other

Marketing Mix Product –What to make and how –Brand name –Image –Packaging Place –Where to sell –How to get it there

Marketing Mix Price –What is the target market willing and able to pay –Can I lower my price and still make a reasonable profit? Promotion –Message –Media

Market Segmentation Analyzing a market by specific characteristics –Differing Levels Mass Marketing – no identifiable collective trait Segmentation –One simple level, i.e. sex or age or ethnicity –Several level combined, i.e yr old white male –Very specific target, i.e yr old white male, outdoors, sporting type, drives an SUV, rents a home in the city, single, who likes sushi and Indian food….

Market Segmentation 4 methods to segment a market –Demographics –Psychographics –Geographics –Product Benefits

Demographics Statistics that describe a population by personal characteristics –Age –Gender –Income level –Ethnic background –Etc.

Demographics Age –Most typical method of segmentation –Based on generations, which are determined by collective experiences and buying patterns Baby Boomers Generation X Generation Y

Demographics Baby Boomers –Between 1946 – 1964 –76 million people –$ 2.6 trillion in spending power – 51% of wealth –Prime of luxuries –Aged baby boomer will cause a dramatic rise in the average age of the population

Demographics Generation X –Between 1965 – 1981 –50 million, smallest generation –Parents typically either dual career or divorced –Exposed to media from young age –Financially conservative, skeptic consumers –Marketers use sharp images, music and irreverent humor to reach this group

Demographics Generation Y –Between 1982 – 1998 –82 million, largest generation –Exposed to computers from young age, adopt new technology quickly –$300+ billion in spending power, influence over significantly more Sometimes referred to as iGen, Millennials –Marketers seek to solidify brand loyalty

Demographics Gender –Certain products can be gender neutral Cars, beer, toothpaste, computers –Companies market different product lines to different genders Jockey, Speed Stick, Calvin Klein Income Disposable – money after taxes, used for necessities Discretionary – money after necessities

Demographics Ethnicity (as est. based on 2000 Census) –White America accounted for 87% of national spending in 1990, 80% 10 years later National spending is ~ $14 trillion dollars Median household income is $43k –U.S. is becoming more diverse African, Asian, and Hispanic American communities currently account for 33% of population, by 2040 ~ 54%

Demographics Hispanic Americans –45 million or 15% of population –$735+ billion in spending power –Median household income is $34k –Incredibly diverse, over 21 nationalities –Larger families, 3.4 compared to 2.6 for America as a whole –Best reached through Spanish speaking television and other Spanish ads

Demographics African Americans –37 million, or 13% of population –$760+ billion in spending power, or 12 th largest national amount in the world –Median income $30k –On average, 10 years younger than the rest of America –Market has a strong desire to see companies active in the local community

Demographics Asian Americans –13 million, 4.3% of population –$400 billion in spending power –Median income $57k –Fastest growing and most affluent –More college graduates per capita than any other group in U.S. –Very diverse, 16 nationalities –Very different cultural values

Psychographics Study based on social and psychological characteristics –Lifestyles – how people spend time and money Similar activities and interests lead to or are fostered by similar attitudes –Think of all the ads in specific magazines and who they are aimed toward, i.e. you won’t find pantyhose ads in Maxim, or chewing tobacco ads in Vogue

Psychographics Trends –Trends are studied through psychographics –People who desire low carb diets will purchase a wide variety or low carb items, i.e. low carb bread!! –More casual workplaces, this trend leads to different kinds of clothing trends

Psychographics Time has become a commodity, meaning it can now be brought and traded –This in the sense of leisure time as weighed against time spent working –More money than ever is spent on leisure time and relaxing away from work –Why?

Psychographics New technologies that were supposed to have Americans working less have actually increased time spent on work related activities In 1975, 3% of Americans thought money was important to happiness, recent poll indicates more than 64% now think so

Geographics Segmentation based on where you live –Locally small neighborhood newspaper City wide newspaper T.V., radio –Nationally Big retailers, Sears, Wal-Mart T.V., national papers tailored toward audience, ethnic concentrations –Globally Coke, McDonalds, largest corporations Very different methods and commercialization

Geographics Metropolitan Study Areas (MSA) –Used to study where people live in relation to demographic studies –Used by government to determine medical benefits and financial assistance –Used by marketers to target customers and launch new product campaigns Sales and Marketing Magazine reports on where people are moving and how much spending power they have

Geographics General trend in population shift is toward South, West, and Southwest –In 2007, Nevada was fastest growing Followed by Arizona, Idaho, Georgia and Texas PA ranked mid 30’s –Propensity to consume products in certain areas is used to launch new products Northwest states tend to be great for selling energy drinks

Product Benefits Marketers must first understand needs and wants of consumers (duh) Typically want to market benefits of product for consumers, not the characteristics of product –Different types of shoes, i.e. basketball, running, etc –Different types of sodas, i.e. diet, low-carb, caffeine free