Bsbmkg502 Student Book V2

Student Book BUSINESS COLLEGE

diploma

marketing

Establish and adjust the marketing mix

BSBMKG502 COURSE CODE

Student Workbook BSBMKG502 Establish and adjust the marketing mix 1st Edition 2016

Part of a suite of support materials for the

BSB Business Services Training Package

Acknowledgement Innovation and Business Industry Skills Council (IBSA) would like to acknowledge Box Hill Institute of TAFE for their assistance with the development of the resource for BSBMKG502B. BSBMKG502B writer: Mandy Lingard

Industry reviewer: Arthur D’Aprano

Revised by IBSA for BSBMKG502 (2016) Copyright and Trade Mark Statement © 2016 Innovation and Business Industry Skills Council Ltd All rights reserved. Apart from any use permitted under the Copyright Act 1968, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, or otherwise, without written permission from the publisher, Innovation and Business Industry Skills Council Ltd (‘IBSA’). Use of this work for purposes other than those indicated above, requires the prior written permission of IBSA. Requests should be addressed to Products and Services Manager, IBSA, Level 11, 176 Wellington Pde, East Melbourne VIC 3002 or email [email protected]. ‘Innovation and Business Skills Australia’, ‘IBSA’ and the IBSA logo are trademarks of IBSA.

Disclaimer Care has been taken in the preparation of the material in this document, but, to the extent permitted by law, IBSA and the original developer do not warrant that any licensing or registration requirements specified in this document are either complete or up-to-date for your State or Territory or that the information contained in this document is error-free or fit for any particular purpose. To the extent permitted by law, IBSA and the original developer do not accept any liability for any damage or loss (including loss of profits, loss of revenue, indirect and consequential loss) incurred by any person as a result of relying on the information contained in this document. The information is provided on the basis that all persons accessing the information contained in this document undertake responsibility for assessing the relevance and accuracy of its content. If this information appears online, no responsibility is taken for any information or services which may appear on any linked websites, or other linked information sources, that are not controlled by IBSA. Use of versions of this document made available online or in other electronic formats is subject to the applicable terms of use. To the extent permitted by law, all implied terms are excluded from the arrangement under which this document is purchased from IBSA, and, if any term or condition that cannot lawfully be excluded is implied by law into, or deemed to apply to, that arrangement, then the liability of IBSA, and the purchaser’s sole remedy, for a breach of the term or condition is limited, at IBSA’s option, to any one of the following, as applicable: (a)

if the breach relates to goods: (i) repairing; (ii) replacing; or (iii) paying the cost of repairing or replacing, the goods; or

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if the breach relates to services: (i) re-supplying; or (ii) paying the cost of re-supplying, the services.

Published by: Innovation and Business Industry First published: January 2016 Skills Council Ltd 1st edition version: 1 Level 11 Release date: January 2016 176 Wellington Pde East Melbourne VIC 3002 Phone: +61 3 9815 7000 Fax: +61 3 9815 7001 Email: [email protected]

www.ibsa.org.au

ISBN: 978-1-925460-47-6 Stock code: BSBMKG5021D

Table of Contents Introduction ........................................................................................................................ 1 Features of the training program................................................................................ 1 Structure of the training program ............................................................................... 1 Recommended reading ............................................................................................... 1 Further reading ............................................................................................................ 2 Section 1 – Evaluate Each Component of the Marketing Mix ........................................ 3 What skills will you need? ........................................................................................... 3 Identifying key characteristics of products or services ............................................. 4 Reviewing a pricing policy and analysing pricing variables .................................... 11 Analysing promotional methods ............................................................................... 14 Policies and procedures in marketing ...................................................................... 15 Reviewing channels of distribution .......................................................................... 18 Analysing strengths and weaknesses in customer service..................................... 19 Identifying the customer base and key pressure points for success ..................... 22 Analysing and testing the components of the marketing mix................................. 29 Section summary ....................................................................................................... 31 Further reading .......................................................................................................... 31 Section checklist........................................................................................................ 32 Section 2 – Determine Marketing Mix for Specific Markets ......................................... 33 What skills will you need? ......................................................................................... 33 Environmental factors that affect the marketing mix ............................................. 34 The effect of consumer priorities, needs and preferences ..................................... 37 Marketing objectives, target markets and desired positioning .............................. 42 Selecting a marketing mix that satisfies the target market.................................... 48 Meeting organisational, strategic and operational marketing objectives.............. 52 Section summary ....................................................................................................... 56 Further reading .......................................................................................................... 56 Section checklist........................................................................................................ 56 Section 3 – Monitor and Adjust the Marketing Mix ....................................................... 57 What skills will you need? ......................................................................................... 58 Monitoring the marketing mix ................................................................................... 58 Implications of altering marketing mix components ............................................... 65 Adjusting the components of the marketing mix ..................................................... 67 Ensuring the adjusted marketing mix meets budget requirements ....................... 69 Ensuring the adjusted marketing mix meets objectives and positioning .............. 70 Section summary ....................................................................................................... 72

Further reading .......................................................................................................... 72 Section checklist........................................................................................................ 73 Glossary ............................................................................................................................ 74

Student Workbook

Introduction

Introduction Features of the training program The key features of this program are: ● Student Workbook – Self-paced learning activities to help you to understand key

concepts and terms. The Student Workbook is broken down into several sections. ● Facilitator-led sessions – Challenging and interesting learning activities that can be

completed in the classroom or by distance learning that will help you consolidate and apply what you have learned in the Student Workbook. ● Assessment tasks – Summative assessments where you can apply your new skills

and knowledge to solve authentic workplace tasks and problems.

Structure of the training program This training program introduces you to establishing and adjusting the marketing mix. Specifically, you will develop the skills and knowledge in the following topic areas: 1. Evaluate each component of the marketing mix 2. Determine marketing mix for specific markets 3. Monitor and adjust marketing mix. Your facilitator may choose to combine or split sessions. For example, in some cases, this training program may be delivered in two or three sessions, or in others, as many as eight sessions.

Recommended reading ● Kotler, P., Adam, S., Denize, S., and Armstrong, G., 2012, Principles of marketing,

14th edn, Pearson Education Australia, Frenchs Forest. ● Maritz, A., de Waal, A. and Verhoeven, B., 2011, ‘Entrepreneurial and innovative

marketing: a systematic review of the literature’ in Innovative marketing, vol.7, no. 4. . ● Perreault, W., Cannon, J. P., and McCarthy, E. J., 2013, Basic marketing: a

marketing strategy planning approach, 19th edn, McGraw-Hill, Roseville. ● Russell, E., 2010, The fundamentals of marketing, AVA Academia, Worthing.

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Introduction

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Further reading ● Braaap, ‘About’, Braaap, viewed January 2016,

. ● Learn Marketing, ‘The marketing environment’, Learn marketing, viewed January

2016, . ● Small Business Notes, ‘Marketing plan: marketing objectives and strategies’, Small

business notes, viewed January 2016, . Please note that any URLs contained in the recommended reading, learning content and learning activities of this publication were checked for currency during the production process. Note, however, IBSA cannot vouch for the ongoing currency of URLs. Every endeavour has been made to provide a full reference for all web links. Where URLs are not current we recommend using the reference information provided to search for the source in your chosen search engine.

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Section 1 – Evaluate Each Component of the Marketing Mix

Section 1 – Evaluate Each Component of the Marketing Mix This section will demonstrate how to identify the key characteristics of products and services and their effect on the market. Once these characteristics have been identified, methods for reviewing and analysing pricing variables and promotion methods need to be determined. A number of federal and state laws that affect how marketing is conducted will also be examined. Reviewing the channels of distribution that make up the marketing mix and analysing customer service practices are studied in order to determine their significance. Scenario: Understanding the combination Hewlett-Packard is a technology company that manufactures a range of products including computers, scanners, printers and printer cartridges. They also provide technical support as part of their ongoing customer service and have a facility to repair or service Hewlett-Packard products. Hewlett-Packard have clearly defined marketing objectives and ensure defined marketing strategies are implemented in order to meet these objectives. The information below is provided on the Hewlett-Packard website and can help give some insight into the company and the many facets of their operations. For more information, visit the Hewlett-Packard website at: .

What skills will you need? In order to work effectively as a marketing manager, you must be able to:

 identify key characteristics of products and services and estimate their significance and potential impact on the market

 review pricing policy and analyse pricing variables to determine their effect on sales and demand

 analyse promotional methods to determine their importance to marketing outcomes

 review distribution channels to determine how they contribute to marketing outcomes

 identify and analyse customer service policy to ensure that it contributes to the marketing outcomes as positively as possible

 identify the potential customer base (the target audience/market) and the key pressure points for success BSBMKG502 Establish and adjust the marketing mix © 2016 Innovation and Business Industry Skills Council Ltd

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 test the contribution that each component of the marketing campaign has to the marketing mix in order to ensure that no element is redundant

 demonstrate an understanding of relevant government legislation and law.

Identifying key characteristics of products or services Products may be physical goods or services or a combination of both. We need to think of a product in terms of how well it satisfies an existing or emerging need within the market. If an organisation’s objective is to satisfy customer needs then its level of customer service will be a vital part of its product – or service alone may be the product and must be considered when devising and compiling the marketing mix. As a marketing manager you need to identify the key characteristics of products and services to effectively plan a successful marketing mix. However, understanding the differences between goods and services can help streamline marketing strategy planning. Characteristics of products or services may include: ● brand

● quality

● brand loyalty

● range of size, colour or other factors

● compatibility with other products,

● reduction of risks to health and

services or equipment

safety, such as noise

● degree of customisation

● robustness

● design

● styling

● durability

● technical features

● ease of maintenance

● upgrading

● health and safety issues

● volumes available

● packaging

● features

● pollution hazard reduction

● flexibility

● innovativeness

● functional performance.

Characteristics that need to be considered include: ● Is the product perishable? ● How tangible is the product? ● What are the products features? ● What are the benefits of those features? ● Do you need all those features? ● Is the product produced before it’s sold or produced on demand?

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Learning activity: Key characteristics Refer to the ‘Understanding the combination’ scenario at the start of this section. Review this scenario and conduct further research on the array of products offered by Hewlett-Packard. HP website: Refer to the list on the previous page to identify the key characteristics of the HewlettPackard product.

The Four Ps of the marketing mix When you can identify the product’s key characteristics it will help determine the elements that will make up the marketing mix. These elements are the basic, tactical components of a marketing plan and are referred to as ‘the Four Ps’ of the marketing mix.

Price

Product

Promotion

Marketing Mix

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Place

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Section 1 – Evaluate Each Component of the Marketing Mix PRODUCT

PLACE

PRICE

Student Workbook PROMOTION

● physical goods

● objectives

● objectives

● objectives

● services

● channel type

● blend

● flexibility

● features

● market

● salespeople

● level over PLC

● number

● geographic

● quality level ● accessories ● installation ● instructions ● warranty ● product lines

exposure ● types of

● selection

middleman ● locations and

types of stores ● transporting

● training

● discounts

● motivation

● allowances

● advertising ● targets

and storing

● packaging

● service levels

● types of ads

● branding

● recruiting

● media type

middlemen ● managing

channels

terms

● copy thrust ● who prepares? ● sales

promotion ● publicity

As illustrated by the above diagram, the Four Ps are the critical elements and areas of decision that reflect the market’s perception of your product or service. Combined, they make up the marketing mix addressing the target market’s needs. By achieving the right mix of these elements, marketers are able to improve the ability to improve customer satisfaction. A consumer’s perception of a product or service may be created by the product’s branding, its packaging, its price and/or where the product is available for purchase. As an example, Coco Chanel perfume is not generally available at your local chemist. Consumers are more likely to find it in a larger department store or specialist perfumery. Its distinct brand, history, packaging, price and place of purchase help create its sophisticated image.

Product Product is simply the tangible, physical entity that is available to meet the needs of customers. For example, a new car is a product. However when you go to purchase the car, the product can be more complex than you first thought. This is due to the other variables associated with the product, including: ● the variety

● brand name

● quality

● packaging

● design

● services.

● features

Therefore, selecting your new car (the product) involves various decisions in order to narrow down the exact description of the product required. 1st edition version: 1 Page 6 of 74

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Learning activity: Key characteristics – Secondary product characteristics Using the link below, access the ‘Learn Marketing’ website. Read the information and read the lesson ‘The marketing mix: product strategies’ at: . Apply the information in this lesson to the HP case study by selecting one HP product and answering the questions below. For further reading on HP’s products can be found on their website at: . What is the core benefit that your selected product offers?

Describe the branding and additional features and benefits of the product you have selected.

Describe the intangible benefits that augment your selected product in the eyes of its target market.

Price Price is the currency exchanged for the benefits from a product or service. Consideration of the product’s positioning is required before a price is set. If the price is set too low, the product may not be seen to hold any real quality or be worth taking seriously. Likewise, a price too high may turn a potential customer away, because, without a knowledge of the product they cannot estimate its true worth.

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Promotion This includes all the tools available to achieve marketing communication. It can be compared to the process of making a cake: the basic ingredients are always the same, but by adjusting the quantity of one of the ingredients you get very different outcomes. Just as there are different elements of marketing, there are also different elements of promotion. These include advertising and publicity, public relations, sales promotion and personal selling. The mix of these elements will differ according to the target market needs and attitudes, and it is the job of the marketing manager to determine which of these elements need to be added to the mix.

Place (or route of distribution): Place is also known as the channel or distribution route. It is the process through which goods and services are moved from the manufacturer (or service provider) to the consumer. There may be several places where products are available to maximise reach and meet the specific needs of the target market. For example, a consumer can purchase cosmetic products directly from a local chemist, department store, online, or from a consultant that visits their home (as in the case of Avon). When considering the four Ps, it is essential for the marketing manager to have the right product in the right place for the right price at the right time. For example, the Apple iPhone was promoted as a product that provides a combination of services for consumer convenience at a reasonable price through various methods of purchase. The marketing mix was extremely effective in generating significant interest in the apple brand, the product’s design and its functionality. This helped create the perceived ‘need’ amongst consumers for the product prior to its release.

Extended Marketing Mix Marketing managers will often increase the marketing mix to the Five Ps, to include people. Others will increase the mix to the Seven Ps, to include physical evidence and process.

Process People

Physical evidence

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People People are an essential element of any service or experience. People are more than just consumers or members of market segments; they are also individuals looking for products and services that satisfy their individual needs. To obtain a competitive advantage, a specific, clear and deliverable service element is essential to help raise the organisation above the competition. Hence, this element must be displayed openly in the public face of the organisation and its people. Staff should have: ● a professional and well-presented image ● appropriate interpersonal skills ● excellent product and service knowledge ● the training and skills to provide the service standards consumers expect.

The right people will provide a huge impact to the overall success of an organisation.

Process Refers to the systems used to assist an organisation in the development of a service or product, as well as the development of an accompanying marketing strategy. The process is a means to achieve the organisation’s objectives. For example, in order to achieve a 25% market share an organisation implements a marketing planning process, to coordinate how they plan to achieve this.

Physical evidence Physical evidence are all the tangible elements of as service or experience, this is a very broad category that can include supporting documents (brochures, tickets, etc.), merchandise (t-shirts, show bags, etc.), packaging, business cards and much more. Physical evidence adds to a brands market presence and provides multiple points of reference and reminders for consumers. These points of reference help create an overall atmosphere for a brand or service and are an essential element of any marketing mix. For example, a local Brisbane heavy metal band, Axolotl, want to raise brand awareness and market themselves as an underground alternative to mainstream pop. The physical evidence that they provide to support their subversive image includes wearing torn black clothing when on stage, throwing rubber toy bats to the audience while playing and staging their gigs in the basements of pubs rather than the band rooms. All of these pieces of physical evidence are signposts, clarifying their market position for consumers and creating an atmosphere that will draw in specific market segments.

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Learning activity: Physical evidence Research and consider the Apple organisation, and visit their website: What is the physical evidence that Apple provides as part of its marketing mix?

From this evidence, what perceptions do consumers have and what are their expectations of the product?

Taking time to think through your marketing strategy forces you to make decisions including: ● accurately defining the marketplace ● segmenting the market ● positioning the product ● identifying the unique selling points of the product.

This assists the process, however working through your marketing strategy forces you to also make some difficult decisions. The most difficult ones are those where you decide not to do certain things, such as deciding certain market sectors do not have a role to play in your organisation's success. The benefits of making such decisions are that it forces you to focus on a more limited and achievable set of objectives. This creates a clearer vision of the elements of the marketing mix that need to be used to ensure profitable results from your marketing budget. 1st edition version: 1 Page 10 of 74

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Reviewing a pricing policy and analysing pricing variables The price is the amount of money charged for a product or service or the value exchanged for the benefits of the product or service. When releasing a new product, understanding and defining product positioning is essential before a price can be set. Pricing variables may include: ● cost of ownership

● price point chosen

● credit terms

● psychological elements

● discount structure

● residual value

● financial deals

● sales

● lease arrangements

● stage payments.

You can formulate the calculations, consider all relevant factors and arrive at a price, but depending on the positioning of the product, the price may not be reflective of the market in which it is positioned. For example, you may decide to offer a free service that complements one of your products (a lifetime warranty for example). Such a service forms part of the pricing strategy, and needs to be weighed up in terms of its cost compared to the benefit to sales figures.

Pricing strategies There are six main pricing strategies: 1. Product line: setting price steps between product line items.

For example, a men’s fashion store will have trousers priced at various price points to meet a range of consumer imperatives $59.95, $79.95, and $99.95.

2. Optional, add-on products: pricing optional or accessory products.

For example, an airline may decide to charge consumers extra to specify a window or an aisle seat.

3. Captive product: pricing products that must be used with the main product.

For example, a razor will require specific replacement blades unique to the original product.

4. By-product: allocating low prices to certain products to sell large quantities.

For example, a discount store may have a large quantity of products that it can sell for a small margin, by pricing these at $5.00, it will generate profit from the quantity sold rather than the sales margin.

5. Product bundle: pricing bundles of products sold together.

For example, McDonalds offer the family dinner box at $19.95 which is cheaper and more convenient than purchasing the individual products.

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6. New product pricing: appropriate pricing of new entrants to the market.

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For example, if Chanel were to release a new line of perfume it would be priced according to the well-recognised Chanel name. However if a new entrant to the perfume market would need to consider the target market, the existing competitors and the market share it aims to achieve. If the range was to be positioned alongside Chanel, the product price would need to reflect this positioning.

Confusion and even diminished trust by the customer can take effect if pricing is not synchronised appropriately with the product or service. Positioning the product within the market and ensuring that the price point reflects quality is vital to product positioning. Sales people will generally rank price as the number one factor that influences consumer purchasing behaviour, over other factors such as delivery, service backup and functionality. However, research indicates that customers rank price as the number three or number four deciding factor when planning a purchase. Techniques to increase sales, such as a personalised presentation, a sample or a demonstration for the client can help sales people build value for the customer and transfer focus onto the service and product over the price. It is quite possible to sell exactly the same product to two different customers and charge radically different prices. Some customers operate in different market sectors and value the product differently. The development of a thorough and efficient servicing operation may provide your organisation with a competitive edge. To effectively manage pricing strategies, an understanding statistical data is required in order to interpret results, pricing estimates, costs and marketing budgets. The organisation should not overlook the importance of these skills and must allocate adequate resources to its management, especially when making projections associated with new product releases. When your organisation is releasing a new product, there are two pricing strategies. 1. Market-skimming: Market-skimming is when prices are initially set high to ‘skim’ revenue layer-by-layer from the market. This process works when: a. brand image and quality justify the high price b. competitors are unable to enter the market with ease c. large numbers of buyers are willing to pay a premium price for premium product d. the cost of producing a small volume is relevant reflection of anticipated return.

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2. Entry into the market is made possible by an initial low price resulting in a wide market share. This allows access to the product for all consumers and thus builds a large customer base. This process is effective when: a. the market is price sensitive b. the sales volume increases as production and distribution costs fall c. products are priced lower than their completion in order to secure market share.

Price adjustment Once one of the pricing strategies has been selected, implemented and integrated into the market, the organisation may need to revise its pricing structure in order to secure future profit. The following are price adjustments that can be made to adapt to market changes and changes in demographics. ● Discount and allowances: customers are rewarded with reduced prices for actions

such as paying early or recommending a product or service to friends. ● Discriminatory: adjusting prices to target different demographics. For example,

supermarkets price certain products higher in affluent suburbs. ● Psychological: convincing consumers to purchase through pricing alone. For

example, ‘30% off if purchased today’, or ‘purchase one get the second at half price’. ● Value: adjusting prices to offer the right combination of quality and service with a

reasonable price. ● Promotional: temporarily reducing prices to increase short-run sales.

Learning activity: Promotion – HP Conduct internet research on Hewlett-Packard. What promotion methods does Hewlett-Packard employ?

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Analysing promotional methods To produce desired marketing outcomes, it is essential to analyse the various promotion methods to ensure these goals are achieved. Promotion methods may include:

Impersonal promotions such as:

Personal promotions such as:

broadcast advertising

direct marketing

sales promotions

in-store product samples

segmentation

door-to-door selling narrow-casting social media strategy targeted online advertisements

It is easy for marketing managers to become totally snowed under by such a variety of competing opportunities. It is the role of the marketing manager to mediate all of these opportunities and only incorporate into the mix those that complement the overall marketing strategy and provide a good value for money. One of the biggest problems when starting a role as a marketing manager at a new organisation is the constant supply of promotional opportunities being offered by a range of agencies and promotional companies. If the organisation does not yet have an established marketing strategy, it is difficult to decide which of these opportunities are good and which are inappropriate. Although this is a frustrating situation to be in, it is only a matter of time before a suitable marketing strategy can be established and the most appropriate of these promotional ideas can be selected. Many marketing managers, who are not familiar with a market-led approach, start allocating resources to various marketing activities before establishing a comprehensive marketing strategy. Before choosing what will and won’t be included in the marketing mix, it is important to assess what the campaign is trying to achieve and focus all efforts on achieving that goal. If funds are randomly allocated to projects, then there can be a lot of time and resources wasted.

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Learning activity: Promotion analysis Consider the two case studies of Hewlett-Packard and Apple as previously discussed. What factors might affect the marketing activities that they decide to engage in?

Policies and procedures in marketing Employers are required to ensure their workplace is free of discrimination and harassment. Marketing personnel need to be aware of their responsibilities, which are set out in Australian state and federal law. There is a range of Acts that cover employment areas such as: the health and safety, equal opportunity, public service, and fair work. The Australian Human Rights Commission administers five federal laws that cover discrimination and breaches of human rights. They are: ● Age Discrimination Act 2004 ● Disability Discrimination Act 1992 ● Racial Discrimination Act 1975 ● Sex Discrimination Act 1984 ● Australian Human Rights Commission Act 1986.

Marketing practices should emphasise the quality, service and competitive features of a company’s products and services. They should focus on providing customers accurate information so they can make informed decisions. The gathering of market information and statistical data needs to be performed in line with the policies and procedures of the organisation and Australian state and federal laws. An organisation’s policies, procedures, products and services need to be aligned with relevant legislation. The provisions of relevant legislation that can affect the aspects of business operations include:

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Anti-discrimination legislation Laws concerning discrimination are made at both the federal and state level. Lodging a complaint on the grounds of discrimination of race, sex, disability and age will be covered by this legislation. Commonwealth and state/territory laws generally cover the same areas of discrimination. On occasion, there are ‘gaps’ in the protection that is offered between different states and territories and at a Commonwealth level, but marketing organisation should always adhere to best practice and ensure that the interests of their workers are protected at all times.

Ethical principles Ethics are principles of correct conduct that shape the decisions people or organisations make. Ethical practice in marketing involves deliberately applying the standards of fairness when developing and delivering marketing campaigns.

Codes of practice Codes of practice are developed through consultation with representatives from government agencies, employers, industry contacts and special interest groups. Codes of practice should be followed unless there is an alternative course of action that achieves the same or better standards.

Privacy laws The Privacy Act 1988 regulates the handling of personal information about individuals. This includes the collection, use, storage and disclosure of personal information, and access to and correction of that information. The Privacy Act includes 13 Australian Privacy Principles (APPs) that apply to the handling of personal information by most Australian government agencies and some private sector organisations. The principles, as stated by the Office of the Australian Information Commissioner, are as follows. 1 1.

Open and transparent management of personal information

Ensures that APP entities manage personal information in an open and transparent way. This includes having a clearly expressed and up to date APP privacy policy.

2.

Anonymity and pseudonymity

Requires APP entities to give individuals the option of not identifying themselves, or of using a pseudonym. Limited exceptions apply.

3.

Collection of solicited information

Outlines when an APP entity can collect personal information that is solicited. It applies higher standards to the collection of ‘sensitive’ information.

4.

Dealing with unsolicited personal information

Outlines how APP entities must deal with unsolicited personal information.

Australian Government, 2014, ‘APP quick reference tool’, Office of the Australian Information Commissioner, viewed January 2016, . 1

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5.

Notification of the collection of personal information

Outlines when and in what circumstances an APP entity that collects personal information must notify an individual of certain matters.

6.

Use or disclosure of personal information

Outlines the circumstances in which an APP entity may use or disclose personal information that it holds.

7.

Direct marketing

An organisation may only use or disclose personal information for direct marketing purposes if certain conditions are met.

8.

Cross-border disclosure of personal information

Outlines the steps an APP entity must take to protect personal information before it is disclosed overseas.

9.

Adoption, use or disclosure of government related identifiers

Outlines the limited circumstances when an organisation may adopt a government related identifier of an individual as its own identifier, or use or disclose a government related identifier of an individual.

10. Quality of personal information

An APP entity must take reasonable steps to ensure the personal information it collects is accurate, up to date and complete. An entity must also take reasonable steps to ensure the personal information it uses or discloses is accurate, up to date, complete and relevant, having regard to the purpose of the use or disclosure.

11. Security of personal information

An APP entity must take reasonable steps to protect personal information it holds from misuse, interference and loss, and from unauthorised access, modification or disclosure. An entity has obligations to destroy or de-identify personal information in certain circumstances.

12. Access to personal information

Outlines an APP entity’s obligations when an individual requests to be given access to personal information held about them by the entity. This includes a requirement to provide access unless a specific exception applies.

13. Correction of personal information

Outlines an APP entity’s obligations in relation to correcting the personal information it holds about individuals.

Competition and Consumer Act False advertising is sometimes called deceptive advertising. It is the use of false or misleading statements in advertising. Advertising has the potential to persuade people into buying products and/or services they might otherwise not purchase. In Australia, the national law for fair trading is the Competition and Consumer Act 2010. False, deceptive and/or misleading advertising made by Australian businesses make them liable for prosecution under this Act.

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Reviewing channels of distribution It is essential to review channels of distribution and estimate their significance in relation to marketing outcomes. Monitoring and measuring this process may highlight an area that can be extended and modified to achieve improved profitable results. Channels of distribution are the ‘place’ where customers can purchase your products as well as the actual route of distribution: ● dealers

● download

● delivery service

● streaming/cloud delivery

● distributors

● re-seller

● e-business

● retail

● franchisees

● self-service

● internet

● telesales

● wholesale

● mail order.

Consumer products are generally purchased from a retailer, who purchases them from a wholesaler/distributor, who purchases them from the manufacturer.

Sometimes, parts of this distribution chain can be bypassed. Dell computers are a case in point with their direct selling and delivery scheme. However different distribution channels can provide different levels of profitability and they can run alongside each other provided a well thought out pricing strategy has been implemented. Due to differences in distribution strategies, organisations need to keep in mind that their customers can be many different people depending on how their distribution line is structured. The customer might be: ● a consumer (if you are a retailer) ● a retailer/wholesaler (if you are distributor) ● a distributor (if you are a manufacturer).

Each of these customers will be looking for different features or different levels of service.

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Section 1 – Evaluate Each Component of the Marketing Mix

Online sales/e-commerce The internet and ecommerce has opened up new marketing possibilities for many businesses. In many cases, for producers of goods and services, online sales have enabled the bypassing of the retailing middleman, resulting in lower prices and added value for consumers. For direct sellers and retailers alike, e-commerce facilities have often resulted in higher sales volumes. Given the relatively low set-up costs, ecommerce is favoured because it provides enormous flexibility in developing a commercial site. This is especially useful for small businesses. A site can be developed inexpensively over a few months and fine-tuned as the secrets to success for your target market are uncovered at relatively minimal cost. Business owners can trial a new business-building strategy while taking minimal risk. Learning activity: Online sales How would you research and buy a new computer?

What are the possible channels of distribution?

How has the internet and online sales impacted traditional channels of distribution?

Analysing strengths and weaknesses in customer service Customer service is essential in order to meet required outcomes and to assist in becoming a successful organisation. We need to identify and analyse the level of customer service provided to determine its significance to marketing outcomes. BSBMKG502 Establish and adjust the marketing mix © 2016 Innovation and Business Industry Skills Council Ltd

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Good customer service is essential for any business. While promotions can be offered and prices slashed to attract volumes of new customers in short bursts, unless these customers return (these trends are sustained) your business will not sustain long-term profitability. Customer service is about sending customers away happy. Customers should be happy enough to return and happy enough to spread the word. A network of loyal customers is an incredibly effective method of spreading your reach and expanding your customer base. As a good salesperson, your approach to forming relationships and ability to build rapport will determine whether that customer becomes a repeat customer. Providing a good base for customers can be achieved by the following points amongst many others. ● Train all personnel in customer service and motivate them to uphold what is learnt. ● Promises made to the customer are kept. ● Listen to customers and deal with complaints appropriately. ● Be helpful – regardless if it brings profitable outcomes or not.

If you provide excellent customer service and exceed customers’ expectations, word of mouth may quickly spread and your business will quickly become well known for its service quality. Providing great customer service can potentially attract more new customers than lavish promotions and price slashing ever will. Indeed there are many small Australian businesses that do not have a marketing budget, because they thrive on a loyal customer base and word of mouth. Level of customer service may include: ● after sales service ● call centre support ● electronic client service ● the prompt handling of sales enquiries.

The needs and desires of customers change. To manage this change, the organisation needs to monitor what is happening within the customer environment and learn what makes the customer satisfied. To monitor customer satisfaction, the organisation can put forward a number of measures and activities. ● Focus groups to generate opinions. ● Personal interviews to obtain clear direct feedback. ● Questionnaires that gather a range of data. ● Mystery shoppers to analyse the current situation. ● Customer complaint forms to capture current grievances. ● Suggestion boxes to get a customer’s perspective on what can be improved. ● Online surveys to gather a range of data. ● General comments to obtain anything missed. 1st edition version: 1 Page 20 of 74

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Section 1 – Evaluate Each Component of the Marketing Mix

An organisation must exceed customer expectations in order to retain them and develop a healthy customer relationship. In order to achieve this, the organisation must keep up to date with the changing needs of customers and adapt to these needs. This will help the organisation to develop strong, long-term customer relationships. Traditional marketing focused heavily on the attraction of one-off customers and incidental sales. Recent efforts have redeveloped the focus to encapsulate brands, products and relationship building, to name only a few. Relationship marketing and the methods used to attract customers could include specific product and brand promotions, competitive pricing and superior quality in products or service. Once customers have been attracted, customer retention is the goal. This can be achieved by loyalty cards, ongoing customer service, individual account managers for large clients, product variety and quality/technological upgrades. Apple, for example, who were discussed earlier, have successfully kept a large following of dedicated customers by continually upgrading their product lines with variety and technology upgrades. Determining the level of customer service required will also determine marketing requirements and outcomes. An organisation that is innovative and willing to change along with its customers’ needs, will help develop the relationship it wants with its customer. The benefit, will lead to increased profit, market share and brand awareness. The loyalty card is a great marketing tool. When making their first purchase, customers are invited to join the VIP club. With each further purchase they make, points are awarded. When the customer reaches a certain amount then a gift voucher is generated for a set amount. This makes customers feel valued as they receive a gift voucher to reward them for shopping with them.

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Learning activity: Your organisation and customer service Consider the Hewlett-Packard or Apple organisation and answer the following questions. 1.

How does the organisation attract its customers?

2.

What processes would it utilise to monitor its level of customer service?

3.

How would the organisation implement methods to retain customers?

Identifying the customer base and key pressure points for success Before marketing your products and services it is important to define your customer base or target market. In order to ensure the proper identification of the customer base, a range of techniques for the gathering of statistical data should be undertaken, e.g. sampling. 1st edition version: 1 Page 22 of 74

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Section 1 – Evaluate Each Component of the Marketing Mix

With any statistical analysis there is a need to ensure that data is collected randomly from unbiased, independent sources. In most research situations, one would collect the data from a sample of a specific population or market segment in question. However, there are situations where data is collected from every segment of the population. An example of a large research undertaking involving data collection from the whole population is the census conducted by the Australian Bureau of Statistics. This is conducted every five years and takes approximately 18 months to two years to analyse and produce the data. A considerable budget is required for the census, as it is such a large undertaking. Such surveys of the entire population are useful to marketing managers, because they can glean specific information from the data that has been collated for them. In contrast, a target market is a collective group toward whom your organisation will direct its marketing, promotion and sales towards. The markets you are trying to reach are groups of people that have been identified as having common characteristics and are referred to as segments. Segmentation takes place in order to define the target market. This would occur if the population of interest is small and you have the resources to do the research. Segmenting and identifying the characteristics of your target market enables you to develop your marketing strategy. The table below shows examples of market segments (or groups). Each of these segmentation groups are then further described in the diagram following the table: Type of market segment

Shared characteristics within the segment

Demographic segment

Measurable statistics such as: ● age ● income ● occupation.

Psychographic segment

Commonalities in the motivations of consumers: ● brand allegiances ● environmental concerns.

Use-based segment

Frequency of usage such as recreational drinking or travelling.

Benefit segment

Desire to obtain the same product benefits such as prestige, value for money, or comfort from food.

Geographic segment

Location such as home address or business address.

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Demographic segmentation

This divides the population by age, gender, income, and lifecycle structures amongst other variables. By examining each of these elements marketers are able to gather information and create a picture of the consumer considered their target market. Some organisations develop products or services to suit people at the various stages of their lifecycle. Typically the first approach is to break the market into groups according to age. For example: ● nappies for babies

● bikes for teenagers

● toys for children

● clothes for young adults.

This market can then be further broken down into income, occupation or gender segments, etc. Industries such as personal care products, clothing and print media (magazines, newspapers etc.) are the most well known for taking this approach. For example: ● stores like David Jones and Harrods are predominantly aimed at the affluent

market ● Vogue magazine pitches its magazine at a certain age and income level of females.

In today's globally competitive environment it is also common for products or services to be developed to suit specific market segments. These market segments will be targeted based on a combination of lifestyle and demographic factors to maximise the benefit for the organisation. For example, holidays are developed for: ● families ● singles aged 18–30 ● couples in their 50s ● honeymooners.

By asking the question: ‘What type of consumer is purchasing the product or service?’ marketers are able to start building a demographic of the relevant consumer in order to create an overall consumer profile.

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Section 1 – Evaluate Each Component of the Marketing Mix

Psychographic segmentation

This segment is based on the psychology of consumers, their interests, activities, opinions, habits, lifestyles, product perceptions and behavioural patterns. This process helps organisations to sell their product based on the consumers psyche and determining how the particular group will respond to a new product. For example, a jeweller that designs and manufactures high-end, exclusive jewellery may target a market of high-income females in their 40s. The primary basis for this segmentation is that high-income groups are the customers who will consider these items as status symbols and may be willing to invest in displays of prestige. Marketers will focus their marketing campaign on the points of difference in their product, the brand value in the eyes of their consumer base and how it will benefit consumers. As marketing campaigns are very specific they can focus directly on a target market and create a simple, effective strategy that will provide a great amount of product satisfaction to the customer, generating customer loyalty and greater customer retention.

Usage segmentation This process is also known as Decile analysis or Pareto analysis. Customers are segmented by how they use the product. Customer databases are an excellent resource as they can analyse and determine the customers that are frequent users of the product compared those who use the product infrequently. For example, a chemist that sells makeup can use their customer database to identify the particular age group for a certain product. This provides valuable information so they can focus future advertising relating to that product on this specific target market. Usage can also be determined in relation to time and place. For example, McDonalds target different segments of the market at different times of the day. Their breakfast menu, which is only available until 10:30am, is clearly aimed at workers that commute by car, rather than those who take public transport, or children who walk to school. In contrast, the dinner menu is clearly targeted at time-poor families as a cost effective alternative to making dinner at home.

Benefit segment This process identifies the attributes that are important to consumers. The marketing campaign can then be designed around the needs of the market. The marketing manager needs to determine and rank the attributes of a product or service by importance in the eyes of the target market. By grouping customers who value and rank product attributes similarly, groups can be formed that are seeking the same benefits. In order to develop a comprehensive picture of each group, further consumer information can be obtained. Once the primary benefit is known then the characteristics of each group are identified.

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Geographical segmentation Geographical segmentation, as the name suggests, divides the market by their physical location such as suburb, region or country. The main advantage to this type of segmentation is that geographic segments often share similar characteristics, behaviours or attributes that markets can leverage to maximise their return. For example, all major cities have suburbs that are more affluent than others. On the shopping strips of affluent suburbs, you will typically find high-end designer label products; these products may not be available in less affluent areas. Organisations that operate globally often discuss their market in terms of regions, such as Asia, North America, etc. Typically these organisations will have different approaches to marketing activities in each of these regions. For example, McDonalds globally, sell burgers aimed at local markets. ● In India and burgers are made from lamb rather than beef because of religious and

cultural mores. ● In many middle-eastern countries, no bacon or sausages appear on the menus.

Segmentation has both advantages and limitations. Advantages of Segmentation

Limitations of Segmentation

● Small companies can actively select

and pursue segments that allow them to compete more effectively, thus ensuring more efficient use of valuable company resources. ● By identifying customer needs,

● Companies are not easily able to

achieve market saturation, unless they set up multiple campaigns targeted at every segment of the market. ● There can be extra costs associated

companies are able to design and offer a product that addresses consumer demands.

with product variations such as inventory and warehousing. ● When trying to reach various target

allocate resources to individual segments giving priority to the company’s marketing objectives.

markets advertising costs are increased and some segments are simply not viable as they are too small.

● Communication is tailored to the

● When a product or service is in the

● Companies are able to effectively

needs of the target market through the effective use of advertising media.

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early stages of its life cycle, catering to an entire market may be more profitable then concentrating on specific segments.

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Section 1 – Evaluate Each Component of the Marketing Mix

The procedure for market segmentation Segmenting a market involves three stages:

Stage

Description

Survey

Survey provides a thorough understanding of the market to ensure accurate research planning and effective decision making. Consumer needs change so it is important to factor in these changes and consider their future impact on marketing strategies.

Analysis

While the segmentation process may identify relevant market segments it is essential to analyse the information and decide which segments will be most viable for the company.

Profiling

Once you have identified consumer needs within a specific group, it is important to develop a profile of your average consumer. This profile should include psychographic and physical features of the consumers. The marketing mix will depend on these characteristics and habits.

To select the market segment most appropriate to the campaign at hand, there are three different approaches. 1. Single segment concentration. This involves companies selecting one segment and developing a marketing mix that concentrates its efforts on this singular identified segment. 2. Multiple segment concentration. This strategy is where a company selects two or more segments and devises separate marketing mixes specific to each segment. 3. Market aggregation. Known as mass marketing, this is where a company develops one marketing mix that targets all segments. This involves the company treating the entire market as one homogenous group. This generally occurs when organisations is dealing with commodity products where consumers have a similar perception of the product, such as petrol, as it incorporates production efficiency and the economies of scale.

Target market The market segment you aim to reach has been identified through the segmentation process. The more information you can gather about a target market, the more precisely you can develop your marketing strategy.

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Defining your customer base is essential before you undertake the marketing campaign. Marketing is more than just placing advertisements; it is a method of attracting new business. Prior to this being achieved, you have to identify and analyse target markets in order to develop the appropriate marketing mix. For example, when an organisation is trying to sell skiing trips, would purchasing television advertising be a wise investment? The marketer would need to consider if the target consumer, being active and adventurous, would be sitting around watching television when the ad appears. Alternatively, would consumers who are sitting watching television be interested and motivated to book a skiing trips? Defining your target consumer means getting to know everything you possibly can about them. You need to think carefully about your product or service and ask yourself a series of questions. ● Exactly who would it appeal to?

● What are their hobbies?

● What age is this person?

● What other products do they buy?

● What is his or her marital status?

● Where do they go on vacation?

● Where do they live? ● How do they like to spend their spare

time? If you can't clearly visualise your target consumer, then you need to conduct further research and develop a comprehensive profile. Until you can define your target market, making marketing decisions such as ‘how’, ‘where’, and ‘when’ to advertise will be futile. When you have clearly identified your target market, you can devise marketing strategies that will be effective and cost efficient. Marketing strategies will incorporate: ● designing

● promoting

● pricing

● positioning

● distributing

● improving your product or service.

If you know your target market is females aged between 24 and 40 who like shoes, are frequent shoe purchasers and live in the inner city, you could purchase advertising space in fashion magazines that appeal directly and uniquely to this type of buyer, rather than buying general publication exposure. Learning activity: Target market – Your organisation Research your own workplace or a workplace that you are familiar with in order to answer the questions below. You may need to speak to the marketing manager (or the person responsible for marketing).

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What is the importance of gathering information on the target market?

What is the importance of creating a picture of the target market consumer and understanding their needs, wants and influences?

Analysing and testing the components of the marketing mix What components of the marketing mix are generating positive results? The marketing mix may include several variables, including: ● customer service variables ● distribution variables ● pricing variables ● product or service variables ● promotional variables.

In order to effectively evaluate marketing performance against an organisation’s objectives, it is very important to constantly monitor, measure and regularly assess marketing measures. An excellent tool for evaluating marketing performance is to gather information in order to measure customer reactions. To sufficiently gather and understand this information, appropriate literacy and numeracy skills are needed. Gathering and collating research data and reading extensive research materials requires comprehension and fluency in language skills. A marketer must also be capable of presenting information in a range of styles depending on the audience. The different audiences could be represented by different industry types, or target markets. Different industries and target markets may also have different prerogatives in terms of the information they require. BSBMKG502 Establish and adjust the marketing mix © 2016 Innovation and Business Industry Skills Council Ltd

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Being able to sufficiently measure customer reactions enables us to analyse and gather invaluable information. However, it needs to be a managed process. This information can be used to improve the targeting of our marketing activity. There are several ways to collect information that will assist you in evaluating your marketing campaign, but it is vital that you and your team have clear goals. ● What information needs to be collected? ● How will the information be collected? ● Will the chosen methods provide the information required to draw conclusions? ● Use the same method to collect further information later in the campaign.

Steps in the monitor and assessment process are shown below:

Decide what to monitor Set objectives Establish measures Establish standards Measure results Analyse deviations from planned performance Take corrective action Periodically assessing customers’ feelings and opinions of the organisation and how well their needs are being satisfied provides further valuable information. Consider the processes that would best capture the required information for each of the questions below: ● Did we receive positive customer feedback? ● Did we successfully appeal to our targets? ● What product features were promoted? ● What benefits of the product were promoted?

Collecting consumer feedback and analysing the overall marketing performance and results enables marketers to consider if the marketing strategy and tactics achieved the objectives. This process is imperative to measure, improve and effectively implement improvements for future marketing campaigns. 1st edition version: 1 Page 30 of 74

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Section 1 – Evaluate Each Component of the Marketing Mix

Learning activity: Customer reaction – Your organisation Research your own workplace or a workplace that you are familiar with in order to answer the questions below. You may need to speak to the marketing manager (or person responsible for marketing). What is the importance of gathering information detailing customer’s reactions?

How beneficial is this information and what effect does it have on the overall marketing campaign?

Section summary You should now have gathered an understanding of how to identify key characteristics of products and or services and their significance to the market. Continually reviewing and analysing pricing variables and promotion methods in order will assist in determining their effect on demand and establish their importance in marketing outcomes. Channels of distribution are reviewed and level of customer service are analysed in relation to marketing outcomes.

Further reading ● Learn Marketing, ‘Service marketing’, Learn marketing, viewed January 2016,

. ● Learn Marketing, ‘Marketing mix: product, price, place and promotion’, Learn

marketing, viewed January 2016, . ● Small Business Notes, ‘Target market’, Small business notes, viewed January

2016, .

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Section checklist Before you proceed to the next section, make sure that you are able to:

 identify key characteristics of products or services and estimate their significance to the market

 review pricing policy and analyse pricing variables to determine their effect on demand

 analyse promotional methods to determine their importance to marketing outcomes

 review distribution channels to determine significance to marketing outcomes  identify and analyse level of customer service provision to determine its significance to marketing outcomes

 identify potential customer base and key pressure points for success  analyse and test the effect of the components of marketing mix on each other, and establish their relative importance to customer base.

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Section 2 – Determine Marketing Mix for Specific Markets

Section 2 – Determine Marketing Mix for Specific Markets This section is about identifying the environmental factors, consumer priorities, needs and preferences and analysing their effect on the marketing mix. Reviews of pricing and distribution channels will be taken, along with an analysis of promotion methods and customer service strategies. Scenario: Braaap Brad knew he could design the best pit/dirt bike available in the world using his and his fathers’ personal experience and knowledge. To get this bike, Brad felt he had no option but to go to China himself and source a factory that was willing to effectively and strictly use his expertise. At the tender age of 18 Brad boarded a plane and headed to China. Brad made some great contacts there where he sourced two factories that were willing to listen to him and make the bikes exactly to his own specs. It is now four years since then, Brad is almost 22 and he is selling his very own designed mini bikes all across Australia. Debatably the best pit bike available in the world today. Brad travels to China twice a year to visit the factories and meet with the people who are building his bikes. Part of Brad’s vision was to have his bikes sold in exciting braaap© stores across Australia. The shops to be of the same image as surf shops, pumping music, TV’s running Moto DVDs and every extreme toy one can find for motocross riders under the one roof. This vision was given to several people but no one wanted to take it on. ‘Street clothes and motorbikes won’t sell under the one roof’, he was told. Thankfully this was their attitude, as Brad opened his first retail outlet 12 months ago and his second six months ago. He is in the process of organising his third, which will be in Victoria. Brad wanted the buying of a braaapster bike to be an exciting experience. The stores are destination stores! A place where people want to go just to hang out and tell tales of great rides. 2

What skills will you need? In order to work effectively as a marketing manager, you must be able to:

 identify and assess environmental factors for their impact on the marketing mix  identify consumer priorities, needs and preferences that affect the marketing mix

2

Braaap, ‘About’, Braaap, viewed January 2016, .

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 consider product, pricing, promotional, distribution and service variations, and evaluate these against marketing objectives, target market characteristics and desired positioning

 select a marketing mix that best satisfies target market needs and meets marketing objectives

 ensure the marketing mix decision meets organisational, strategic and operational marketing objectives.

Environmental factors that affect the marketing mix The organisation’s marketing strategy should be focused on meeting needs and providing benefits in the market. The customer should be the central focus of the business; however, there are factors within the organisation’s marketing environment which can impact on this activity. These factors are both controllable and uncontrollable and have to be carefully monitored by the organisation. Controllable and uncontrollable elements influence the strategic direction of the organisation’s marketing environment, which can be analysed on two broad levels. 1. The macro environment involves looking at uncontrollable variables that influence organisations strategy. 2. The micro environment involves analysing controllable variables close to the organisation that the organisation does have an influence over. This usually involves undertaking a stakeholder analysis.

Controllable and uncontrollable variables The four Ps focus on the customer and emphasise the variables which the marketing manager can control. However, the reality of the situation is far more complex. The external market environment has a huge bearing on marketing operations and external/macro factors can limit the marketing manager when they are planning a campaign. They can be placed in the following categories: ● cultural and social environment ● political and legal environment ● economic environment ● existing business structures.

The interrelations of these particular variables can be seen more clearly in the diagram on the following page.

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Section 2 – Determine Marketing Mix for Specific Markets

The four controllable variables, the marketing mix components or four Ps are in the centre, while the surrounding areas are the live new variables. The marketing manager cannot change or even control the new variables in the short term. However these must always be considered when planning marketing strategies. In the long run, the marketing manager’s actions may affect these factors and this will affect future strategies, but current planning generally accepts these factors as being fixed.

Political and legal environment The political and legal environment encompasses the fields of political science, history, philosophy, law and economics. As the role of business grows in our society, the reactions of the populace, politicians and government become more important to the organisation’s business and marketing managers. Events such as war, internal conflicts and forthcoming elections may influence consumer behaviour, limit business activities, or affect markets that you are planning to enter with your product or service. War or internal conflicts create unstable environments that may have a negative effect on the success of the business activity planned for the chosen market. In times of crisis, consumer behaviour changes to a focus on security and basic life requirements such as essential food items, shelter and basic health care. If the business activity being planned does not relate to these necessities and your research has shown that there is a possibility of war or internal conflict in a region, then this information should be included within the research report so that it can be considered as part of any decision-making process.

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The current political environment between America and some Middle Eastern countries is creating difficulties for marketers working with multinational organisations that wish to operate in these countries.

Economic environment The economic environment encompasses the fields of economics and business administration, as well as the natural sciences and engineering. The marketing manager must consider all potential fluctuations in the level of economic activity in the regions selected as target markets. An extremely good marketing strategy may still fail if a region is experiencing economic uncertainty. Business cycles make the contribution of economists important to the marketing manager. Knowledge of macroeconomics (the behaviour of whole economic systems) is very important. Governments are constantly creating and updating legislation that can directly and indirectly affect business operations both positively and negatively. Taxation law and government subsidies to small businesses are two great examples. Recent interest rate increases in Australia have resulted in an increase in mortgage payments for the average household, and a possible rent rise for those without a mortgage. This money needs to come from somewhere in the household budget which could affect consumer spending. Alternatively, consumers may purchase low cost impulse items to make themselves feel better about bleak economic times.

Existing business structure The existing business structure refers to the competitive situation the business is situated in within the broader market. The manager must appraise the degree of competition facing her/him in various target markets and the nature of marketing strategies being used by competitors. The business may be part of a franchise chain or a sole proprietor with a single store. The business structure will have an impact on the organisation’s resources when facing competition. A large franchise operation has far greater marketing capacity compared to a smaller small business vying for the same target market.

Resources and objectives of the organisation Business administration and economics are concerned with the existing business structure, as well as the resources and objectives of the organisation. Two separate variables are involved here: resources and objectives. Both are important because although management (present or past) may have set these variables, in the long term, the marketing manager may be able to modify them. For example: An organisation’s resources will impact on their objectives. If management have grand plans, it may be necessary for the marketing manager to demonstrate that the allocated budget is insufficient to meet the objectives.

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Section 2 – Determine Marketing Mix for Specific Markets

Learning activity: Braaap – Environment factors Consider the Braaap scenario discussed earlier and research it further at . What environment factors have impacted on Braaap?

What effect did these have on devising a suitable marketing mix?

The effect of consumer priorities, needs and preferences With continually changing environments, organisations have to stay in touch with consumer’s priorities in order to accommodate them and ensure business longevity. ● What are the consumer’s expectations? ● What are their needs and preferences? ● How do these affect marketing mix?

Customer’s priorities, needs and preferences can include: ● required or preferred products/services ● preferred price point ● preferred purchase volume in units and in dollars ● preferred method of payment ● preferred time and place to take delivery

Consumers also have preference as to how they receive marketing information and how they respond to it. Such preferences for the methods of delivery include: ● Over the phone: For example, an electricity provider calls and offers to compare a

consumer’s current rates with their own. ● On the internet: For example, a website that mentions a special event or offer which

can be redeemed via online shopping. BSBMKG502 Establish and adjust the marketing mix © 2016 Innovation and Business Industry Skills Council Ltd

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● In person: For example, door-to-door representatives with special offers on

newspaper subscriptions. ● By mail: For example, receiving an invitation to a VIP night at a store they have

previously purchased electrical goods from. ● Over the phone: For example, an electricity provider calls and offers to compare a

consumer’s current rates with their own. ● On the internet: For example, a website that mentions a special event or offer which

can be redeemed via online shopping. Prior to formulating a marketing campaign it is essential for marketers to study, analyse and understand consumer behaviour in order to devise an effective campaign that will generate a positive consumer response and sales revenue. There are a number of theories developed by various researchers in an effort to explain human behaviour and generate understanding of the factors that influence buyer behaviour. By examining the fields of psychology and sociology marketers are able to gain greater understanding of individuals and groups and their motivations, perceptions, personality and learning patterns.

Maslow’s hierarchy of needs One of the most common theories discussed in management and marketing circles is Abraham Maslow’s hierarchy of needs. This discusses and defines the motivations behind consumer behaviours. According to Maslow there are five levels in the hierarchy of primary needs that are common to everybody.

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Section 2 – Determine Marketing Mix for Specific Markets

Need

Description of need

Physiological needs:

These are the strongest needs as they are the basis for survival. They focus on the need for food, water and a place to rest.

Safety needs:

These can be defined as physical or psychological safety needs. When our strongest needs have been satisfied it is then necessary to seek a safe and secure place to provide protection from danger.

Social needs:

When the previous need have been satisfied then we are able to consider our need for social interaction. We then need to feel love, affection, as well as a sense of belonging and acceptance.

Esteem needs:

Respect and status, combined with a sense of achievement provides self-confidence and boosts our self-esteem.

Self-actualisation needs:

This is a constant process where we are continually driven to be the best we can be.

Maslow’s theory identifies people’s fundamental needs and therefore highlights the main drivers which dictate human behaviour. As an extension of this, they also assist in identifying and explaining consumer behaviours and choices. Maslow suggests a sequential hierarchy, indicating that fundamental needs must be met before others are addressed, however, depending on the circumstances, several later needs could be addressed or, at the very least, planned, in advance.

Perception Marketers need to consider consumer’s perceptions of a product in order to effectively generate marketing messages. Perception The individual or group interpretation of stimuli from the environment. Stimuli can relate to sight, sound, touch, smell and sense. In an effort to satisfy consumer’s needs, marketers need to consider the way perception affects consumer decision-making. Why is it when faced with two similar options we will select one over the other? Customers will always select the product that they perceive to be of better value or quality. This perception can hinge on very minor differences between products, the colour of the packaging for example, and it is a marketer’s role to pre-empt these perceptions where possible. Marketers need to devise and generate marketing strategies to create a positive consumer perception of their product or service. With the incredible amount of information consumers absorb and filter daily, marketers need to create stimuli that will generate further consideration.

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A consumers filtering system will be influenced by their present situation, their previous experiences, their attitude and cultural influences. Marketers need to have an understanding of the aspects of psychology and its influences on decision-making as perceptual processing is relatively complex. The diagram on the right shows the four stages that cause a consumer to form a perception of a product or service.

Exposure, attention and opinion The constant repetition and continual exposure of stimuli on the sensory receptors can create a change in the consumer’s attitude. Marketers will focus a marketing campaign by using exposure to create awareness through constant repetition of the product and its message. Marketers gain and retain a consumer’s attention through this process. Once the marketing campaign has attracted the consumer’s attention the message is then absorbed for further processing. Once this has occurred, the consumer then undergoes the interpretation process by attributing meaning to the incoming information. This is the first step in the formation of an opinion about the particular campaign, product and brand.

Learning We are constantly learning and with increased channels of information comes increased knowledge. Marketers often formulate campaigns centred on the provision of information or the raising of community awareness about a product or service, encouraging consumers to formulate opinions and make informed decisions. For example, the Quit campaign focuses on providing consumers with information regarding the dramatic health effects of smoking. This not only provides smokers with important knowledge of the health dangers, but also informs children of the dangers to deter them from smoking in the future.

Lifestyle The way a consumer chooses to allocate their time and resources is considered their lifestyle. By measuring the activities, interests and opinions (AIOs), marketers are able to create more effective and targeted campaigns. Activities incorporate everything that the consumer does in their daily life, their occupation, interests, hobbies, social events even holidays. Interests influence the activities the consumer partakes in, they could be recreational interests, enjoying time with family and friends, home life even food. A consumer’s values influence their opinions. The consumer may have a strong focus on the importance of family life and spending quality time with their children. Alternatively, while they will have an opinion on certain things they may have a stronger opinion about education, politics, the environment and even themselves. 1st edition version: 1 Page 40 of 74

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With today’s changing lifestyles and vast differences in community opinions, marketers need to constantly analyse lifestyle aspects to identify new areas of opportunity. For example, an interest and participation in sport, leading a healthy lifestyle and convenient time saving products and services are currently at the forefront of consumer’s needs and desires. Marketers are able to tap into these areas to generate positive responses to marketing campaigns. Another important consideration is the evolution of the internet, consumers now have the convenience of shopping from their home computer, and this provides them with more time to search for the most appropriate product. Organisations have been forced to embrace this technology and its offerings, good and bad, at risk of being left behind. In doing so, an organisation’s marketing mix components will also need to be modified to accommodate consumers changing needs and priorities. Organisations need to be there at the time that the consumer is looking to purchase. A website can achieve this because it is constantly present, like a store whose door is always open for business. This is a component of the marketing mix that needs to be utilised to its maximum potential in order to ensure they gain the customer’s attention and capture the sale. Offering a delivery option will also accommodate the customer’s needs. The customer has the convenience of 24 hour shopping at their fingertips and the organisation has now captured the customer’s details. Capturing this invaluable customer information now provides the organisation with a fantastic marketing opportunity to reach their customer directly. Adapting the marketing mix to accommodate these situations allows organisations to improve sales, increase marketing performance and benefits overall business profitability.

Software tools to analyse consumer behaviour Take a moment to read this interesting article on analysing consumer behaviour: ● Van, J., August 22, 2005, ‘Marketers tap software that predicts consumer

behaviour’, Chicago Tribune, viewed January 2016, . Software tools enable marketers to use powerful data-analysis tools to investigate the results of campaigns and identify consumer reactions by evaluating consumer behaviour. This process can be accessed through various software tools and applications. These include: ● customer databases ● customer relationship management systems ● point of sale (POS) systems ● spreadsheets ● data analysis.

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A marketer can analyse the success of a marketing campaign by accessing and analysing sales results through a POS system and investigating the information accumulated through the customer database. This highlights the consumer reaction and action to the marketing message. Loyalty cards and VIP memberships track vital consumer information enabling patterns of behaviour to be identified. When a marketing campaign achieves results can be read and interpreted through the software tools which can be analysed and interpreted. Learning activity: Consumer expectations Research and consider the Apple organisation. Apple wholesales their product to retailers, also has their own retail stores and an online store. What priorities, needs and preferences of Apple customers could influence Apple’s choice of marketing mix? Do they cover all the bases when marketing their products? And how could they fulfil any unmet needs in the marketplace?

Marketing objectives, target markets and desired positioning Marketing objectives Setting objectives is important: all businesses need to set objectives for the products or services they are launching. Marketing objectives focus the organisation on specific aims over a period of time and can motivate staff to meet the objectives set. SMART is a simple acronym used to set objectives.

Specific

Objectives should specify what they want to achieve.

Measurable

You should be able to measure whether you are meeting the objectives or not.

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Achieve

Are the objectives you set, achievable and attainable?

Realistic

Can you realistically achieve the objectives with the resources you have?

Timeframed

When do you want to achieve the set objectives?

An organisation can set a number of business objectives with the SMART model in mind. Examples of market share objectives with the SMART model are: ● To reach a 3% market share of the mobile phone industry by 2011. ● To increase profit by 10% each quarter for 2 years. ● For the business to survive the current economic downturn. ● To increase brand awareness over a specific period of time.

Learning activity: Braaap and SMART Research and consider the Braaap organisation at . What does Braaap aim to achieve?

List the SMART objectives relevant to Braaap.

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Segmenting As previously discussed the segmentation process will define the target market on which to focus your marketing mix components. An organisation cannot satisfy the needs and desires of all consumers. Segmentation is simply the process of dividing a particular market into sections of people who display similar characteristics or behaviour. There are a number of segmentation variables that allow an organisation to divide their market into homogenous groups. The most common segmentation variables include demographic and geographic factors. Elements to consider: ● geographic demographics

● occupation

● age

● dependants

● gender

● disposable income

● education

● spending patterns.

● marital status

The following chart will help you to further define your target market:

Targeting It is essential to analyse the available data and focus the marketing strategy on the most effective marketing activities based on available resources. Following the process of segmentation, the organisation needs to decide how it is going to target the specific segments it has identified. There are three targeting options an organisation can adopt.

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1. Undifferentiated marketing This is mass marketing whereby the organisation focuses its resources at the entire market in order to promote one particular product. If a product is aimed at the general market, it is in the hope that consumers will do the filtering themselves and the message will reach a significant amount of buyers. For example, Coca-Cola’s original marketing strategy was based on undifferentiated marketing. There are now numerous changes in Coca-Cola’s product line to cater for the growing dietary and caffeine-free needs of consumers. 2. Differentiated marketing strategy This is when the organisation decides to target several segments and develops distinct products/services and campaigns with separate marketing mix strategies aimed at the various groups. An example of this would be airline companies offering separate marketing programmes to appeal to two distinct market segments and developed two distinct products to meet their needs. Business and first-class fares are aimed at business executives and wealthy fliers, while economy fares are aimed at the everyday flyer. In this case the segmentation is industry-wide. 3. Concentrated marketing This is where an organisation concentrates its marketing effort on one particular segment. It will develop a product that caters for the needs of that particular group. For example, Mercedes Benz aims its vehicles at the high-earning segment of the market while Toyota aims its vehicles at the mid-range salary segment.

Positioning Positioning is the way organisations want consumers to perceive their products or services within the broader market. Once an organisation has selected its local/national or international target market, the next step is to: ● decide how it wants to position itself within that chosen segment ● determine what message about the product or service the company intends to

portray. For example: ● Car manufacturer Ford has successfully positioned themselves as a family-focused

value for money brand. ● BMW appeals to a more affluent market

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Developing a positioning strategy The positioning strategy developed by an organisation will depend on how they wish to be seen in relation to their competitors. Organisations can have a choice of two main approaches: ● To position themselves in a similar way to their competitors by offering similar

products and services so that customers can make an easy comparison. ○ For example, Borders and Dymocks book stores both offer similar range of products and service, have loyalty programs for their clients and set similar prices. ● To set themselves apart from their competitors by offering a different, product or

service, or adjusting their marketing mix. ○ For example, Telstra and iiNet both offer communication and phone services but with a different range of products, pricing and plans. Perceptual maps are often used to help the organisation identify and develop a market positioning strategy. For example: This is a perceptual map of the Jewellery market in Australia.

This allows us to identify brands which are high price and high quality. Tiffany jewellery is plotted as high quality compared to Zamels, which are identified as low quality and low price. This is essentially a linear map – quality and prices have a linear relationship, as quality increases so does price. Once completed, the perceptual map will help identify where an organisation can position its product with minimum competition. Perceptual maps are plotted on the basis of someone’s perception; however what may be considered a quality product to one person may not be perceived the same way by another person. Market research can provide an overall consensus.

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Learning activity: Perceptual map Undertake research and create a perceptual map for Braaap’s core product. For information on the company, visit the Braaap website at: .

Provide a written explanation of your findings:

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Selecting a marketing mix that satisfies the target market Numerous marketing activities can be used to influence consumer purchases, and organisations must implement a marketing mix that best satisfies our target market and meet organisational objectives. You will need to have a comprehensive understanding of the various advertising applications and vehicles that are available to successfully reach your target market. A marketing manager should ask themselves a series of questions to reach their goal. ● What are our marketing objectives? ● How do we reach our target market?

● Which marketing mix will satisfy our

target market and meet organisational marketing objectives?

Marketing vehicles can include: ● press

● sales promotion

● direct marketing

● trade fairs

● taxi signage

● billboards

● television

● exhibitions

● public relations

● point-of-sale advertising

● demonstrations

● cinema

● radio

● bus signage.

As previously discussed, the objective is to source the most effective means of communicating with the target market. While we can examine ideas, at this point it would be beneficial to research the target market and define what is considered to be culturally and socially appropriate for marketing mix activities. This also applies to development, coordination and implementation of the activities, the available resources, as well as financial and ethical constraints. Consultation with relevant industry bodies may also prove beneficial. They can provide information regarding relevant industry current issues, collaborations and opportunities and have access to varied information and resources that can help your organisation to identify ideas and ways to ensure marketing mix performance. They can also help your organisation to identify and deal with challenges and capitalise on future opportunities.

Cultural factors By examining the culture and cultural practices of your target market, as well as subcultures and social class we are able to gain an understanding of the areas of influence on consumer behaviour. As human behaviour is mostly learned the external environment is the most fundamental determining factor of the consumer’s wants and behaviours. As a child grows up in a particular society they are imprinted with a set of values, perceptions, preferences and behaviours through a process of socialisation through key institutions (the family, schools, etc.).

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Television and cinema may be an appropriate marketing channel depending on the organisation and its product.

Subculture Within each culture there are different subcultures, which are a more specific group with their own unique defining characteristics, motivations and patterns of behaviour. However, those within the subculture will still share the same core values of the wider community. Groups made up of a diverse range of people may exhibit distinct ethnic or cultural tastes and be seen as subcultures within a culture. Other subcultures, particularly those with young demographics, shift often and rapidly between trends, tastes and desires, and therefore consumer imperatives.

Diverse cultures within a community Australia embraces its cultural diversity, and there are many ethnic groups within our community that also represent viable markets. When people migrate to another country they will adopt some behaviours of the host nation, but also retain influences from their home lands. This needs to be taken into consideration by organisations as they should not assume that a specific ethnic group behaves or reacts in the same way as another, or that one method or style of communication is the most appropriate for everyone. Culturally appropriate communication skills are required to relate to people from diverse backgrounds and people with diverse abilities. Such communication should show awareness of what words may offend a certain groups and how a phrase, for example, when translated into another language, may have an entirely different meaning. Simple colours and forms can have a symbolic meaning that can be deceptive as they mean different things to different cultures. For example, the colour black is a sign of mourning in Mexico and the US while black and white are the mourning colours in the Far East. Green is a favourable colour in the Islamic world; packaging and marketing material containing the colour green is looked upon favourably. In the US and Australia mints are packaged in green or blue, while they are packaged in a red wrapper in Africa.

Social class Within every society there are various social levels, often referred to as social classes. Evidence of these social classes varies between societies. Sometimes there is very overt stratification based on race, income, religion, level of education, etc., sometimes, as in Australia, social class is more subtle and can change and shift through a lifetime or between generations. Individuals are able to move from one social class to another, up or down during their lifetime although the extent of this mobility can vary according to the rigidity of social stratification within a given society. Consumers often formulate and develop their consumer attitudes and behaviour with significant influence from their social class peers. Marketers may employ a marketing mix that plays to the social class aspirations of consumers.

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Social class is generally measured by three categories: 1. Subjective: the self-perception of individuals being measured. 2. Reputational: the way an individual is viewed by others and views others. 3. Objective: the verifiable, factual data that relies on socioeconomic measures.

Social grouping The primary group is considered as one with whom an individual continuously interacts; their everyday environment; their sphere of influence. This usually includes family, friends and close business contacts. These all have a direct or indirect influence on a person’s attitudes and behaviours. A consumer’s family can exert a strong influence over the consumer’s behaviour. Traditionally in Australia it is the parents who have the most influence on an individual’s leanings in terms of politics, religion and ethics. Even when the consumer matures and no longer interacts with parents, their influence on the unconscious behaviour of the consumer is firmly entrenched and can be significant. In countries where parents continue to live with their children, their influence continues to exert itself for an extended period. The market needs to determine which family member exerts the greater influence in the purchase of certain products or services and focus the marketing mix on that person, either directly or indirectly. When the campaign is direct, it targets the decision maker – they see the ad and take action. When the decision-maker is targeted indirectly, an ad convinces the consumer to in turn convince the decision-maker to take action. A classic example of this is an ad screened during a children’s television show that depicts a child convincing their mother to buy a certain product while they are at the supermarket together. The child is compelled to go to the appropriate decision-maker, in this case their mother, to request action. The marketer also needs to consider the changing composition of the family group. There are an increasing number of single parent families, couples without children, same sex couples and single person households. All of these factors affect consumer’s purchasing habits. These changes or variations on the nuclear family are referred to as situational influences.

Temporal influences Temporal influences relate to the amount of time a consumer has to dedicate to making a purchase. With time such a precious commodity these days, temporal influences exert considerable influence on consumers’ decision-making process. As such consumers are becoming more loyal to brands, once they are familiar with a product, approved of its quality and its cost, they stick with it. They simply do not have the time to shop around and conduct comparative analysis. The temporal perspective also relates to seasonal elements. An example of this would be Mother’s Day when florists promote the purchase of flowers to express ones love and gratitude.

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Social influences Social influences are generally governed by a consumer’s peers who exert influence and impact on the consumer’s behaviour. For example females in their late teens shopping together will form a consensus as to the most popular store and everyone will shop there. What garments the group considers look good will have a significant influence on the consumer’s purchase. This is particularly influential amongst young consumers who seek the approval of their peers and just want to ‘fit in’. However it is not limited exclusively to younger market segments, corporate executives and grandparents alike are all governed by social influences – however subtle they may be.

Symbols We must also be aware of symbols. Symbols do not have any meaning in and of themselves; they are an arbitrary shape to which we attribute meaning. The same symbol can have a different meaning in another cultural context. Symbols A symbol is something such as an object, picture, written word, sound, or particular mark that represents something else by association. The same symbol can have multiple meanings depending on the cultural context in which it is being read. For example, in China, Korea and Japan, the number four is traditionally unlucky as, when spoken aloud, it sounds too similar to the word for death.

Form Form is another aspect that needs to be considered. This could affect the design of packaging and marketing materials. In parts of Asia, Feng Shui is very important. It is believed that if buildings, furniture, roads and other human made objects are placed in harmony with nature, they can bring good fortune.

Language Differences in values, assumptions and language structures make it difficult to meaningfully translate marketing messages ‘word-for-word’ from one language to another. A translator must keep in mind the cultural nuances of the language that they are translating into. Often the intended meaning of a word may differ from its literal translation. For example, the Japanese word ‘hai’ is literally translated as ‘yes’. To Americans, that would mean ‘Yes, I agree’. To the Japanese speaker, however, the word may mean ‘Yes, I hear what you are saying’, without expressing any agreement.

Music Marketing activities containing music are popular globally; particularly those that couple music and images alone. The lack of written and spoken text makes the message universal.

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You must know what type of music your international target market prefers and accepts. Australian clothing label, Bonds, were forced to pull an advertisement for a range of undergarments in 2007 because the music that accompanied the campaign by Brazilian band, Bonde do Role, contained lyrics in Portuguese that were incredibly inappropriate. Learning activity: An organisation’s target market/s Within the Australian marketplace, what cultural aspects would Apple need to consider when devising an effective marketing mix?

Meeting organisational, strategic and operational marketing objectives Meeting organisational strategic and operational marketing objectives effectively, will lead to product or service awareness and increased sales. In order to meet them, they should: ● be clear ● be measurable ● have a set timeline for achievement.

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Objectives can be set at two levels. 1. The corporate level: These are objectives that concern the organisation as a whole. As in the following examples. a. We aim for a return on investment of at least 15%. b. We aim to achieve an operating profit of over $10 million on sales of at least $100 million. c. We aim to increase earnings per share by at least 10% every year for the foreseeable future. 2. The functional level: These are objectives specific to developing marketing campaigns that fit comfortably within the corporate objectives. As in the following examples. a. We aim to build a customer database of at least 250,000 households within the next 12 months. b. We aim to achieve a market share of 10%. c. We aim to achieve 75% customer awareness of our brand in our target market. Both corporate and functional objectives need to conform to the SMART criteria. If multiple objectives are required, you need to ensure they are consistent and not in conflict with each other. When developing functional objectives in marketing, the following need to be taken into consideration. ● marketing plan components ● marketing strategy ● budget ● action plans ● controls and measures.

Are the necessary resources available to achieve your objectives? Setting marketing objectives and finalising the remaining components of your marketing plan may serve as a reality check. The marketing strategy is the heart of the marketing plan: it details your action plan to achieve your marketing objectives. The marketing strategy section should include information about the Four Ps: ● Product: your product/s and services. ● Price: what you will charge customers for products and services. ● Promotion: how you will promote or create awareness of your product in the

marketplace. ● Place (distribution): how you will bring your product/s together with your customers.

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Learning activity: Braaap’s marketing strategy Visit the Braaap website at and answer the following questions. Describe Braaap’s marketing philosophies and methods.

Do they employ an aggressive sales or a relaxed method?

What are the differences between aggressive and relaxed sales methods? Do they produce different results?

How is their marketing mix relevant to the philosophy and atmosphere they are trying to convey to their target market?

Promotion plan A promotion plan describes the tools or tactics needed to accomplish your marketing objectives. For example, if the marketing objective is to create awareness of Braaap products among the youth market, the tools or tactics employed might include: ● ads in relevant magazines ● sponsor local riders to use Braaap bikes at their local dirt bike tracks ● buy time on a TV program that reaches their target consumers ● distribute free Braaap stickers at local tracks ● sponsor events attended by the youth market. 1st edition version: 1 Page 54 of 74

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Placement (sales and distribution) Where will your product be placed so customers have access to it, in a store, online, at a farmer’s market? When a marketing manager is deciding where their product or service is going to be marketed, they need to consider their organisation’s production and storage capacity, distribution channels, the habits of their target market, the turn-around time, etc. Marketing managers also need to be aware of any cyclical or seasonal fluctuations in demand for their products. For example, the demand for Braaap products peaks at Christmas and over the summer period. Organisations need to prepare adequately for the peaks and troughs in demand, both those that can be predicted and those that are unexpected. Do you sell to individuals or to wholesalers? Does your organisation use more than one method to distribute its product? Do you sell single units directly to customers online, but also sell to retailers who place large orders? Apple is an example of an organisation that sells their products to various parties through various channels.

Identify marketing strategy It is necessary to identify the marketing strategy from which your plan is being developed. Often a product will follow more than one strategy such as selling more of the same product to current customers but also extending their market reach by identifying new customers in new markets. Marketing managers should refer to an organisation’s mission statement. This helps to ensure strategies are in line with the organisations views, philosophies and goals. A situational analysis also allows marketing managers to obtain guidance and develop rationale for strategies. Your marketing strategy should discuss the following elements that are of vital importance to your marketing plan. Market growth:

● Higher market penetration (extend the product’s reach). ● Sell more to same market (i.e. get current customers to buy

more or buy more frequently). Maintaining market stability:

● Techniques to keep the status quo. ● Primarily used in times of economic decline or market decline. ● Generally requires taking market share from others in the

industry. Cost control:

● Techniques to contain costs or operate more effectively. ● Can work in combination with market growth or market stability.

Market exit:

● Techniques to depart a market when your position is no longer

tenable.

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Section summary You should now understand how to identify environmental factors, consumer priorities, needs and preferences and analyse their effect on the marketing mix. Consider product, pricing, promotional, distribution and service variations and evaluate these against marketing objectives, target market characteristics and desired positioning. Lastly, you should be able to select the marketing mix that best satisfies the target market and ensure it meets organisational strategic and operational marketing objectives.

Further reading ● Braaap, viewed January 2016, . ● Learn Marketing, ‘Marketing environment’, Learn marketing, viewed January 2016,

. ● Small Business Notes, ‘Marketing plan: marketing objectives and strategies’, Small

business notes, viewed January 2016, . ● Know This.com, ‘Identify marketing strategy’, Know This.com, viewed January 2016,

.

Section checklist Before you proceed to the next section, make sure that you are able to:

 identify key characteristics of products or services and estimate their significance to the market

 review pricing policy and analyse pricing variables to determine their effect on demand

 analyse promotional methods to determine their importance to marketing outcomes

 review distribution channels to determine significance to marketing outcomes  identify and analyse level of customer service provision to determine its significance to marketing outcomes

 identify potential customer base and key pressure points for success  analyse and test the effect of the components of marketing mix on each other, and establish their relative importance to customer base.

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Section 3 – Monitor and Adjust the Marketing Mix This section is about monitoring the marketing mix against marketing performance and isolating components for testing. The implications of altering the marketing mix are discussed along with methods to ensure an adjusted marketing mix meets budgetary requirements and continues to meet organisational, strategic and operational marketing objectives and positioning. Scenario: Braaap’s philosophy ‘If you're a dead set racer, a hard core trail rider, want to ride with the whole family, if your freestyling, if this is your first bike or your keen as to get into braaapster riding for the flat out fun of it, you've come to the right place! ‘Mini Motocross has been around for years and it all started when some professional motocross riders in America used mini bikes to fang around for fun with their mates, bang bars and just get back to loving dirt bike riding with limited stress, limited fitness and limited funds. ‘These days every pro rider has a mini to bang around on and a track in their back yard, every pub has been home to some mini motocross bench racing and every kid wants a mini bike and so many people can afford to buy them. Mini motocross has carved its way into the motorcycle industry because of these exact reasons, it’s fun, fast and affordable, it’s for everyone! ‘I started braaap with the goal to bring mini motocross the sport to Australia; it was huge in America and still is today. In the USA they have pro mini race events with prize money over $50,000 for the event, it’s a big deal! ‘When I started braaap I researched to find a bike that myself and all my mates could ride all day, jump and do whatever, I needed a bike that could be rode and jumped with confidence by adults. I had no option but go to China and find a manufacturer that would listen to our needs, follow strict quality control and build the bike myself and the braaap team designed. After five years of research, trials and development we have a mini motocross bike that we consider to be the best of its type in the world. The braaapster! ‘At braaap we live, eat and breathe mini motocross, we work in store through the week and spend our weekends at the local track. This is the reason we are considered the mini motocross specialists, our mechanics are sought after by other companies and their experience on our bike is second to none. We are always testing new products, doing hot ups and making sure we are at the top of our game, heck it's our life! We travel all round Australia to race and support the sport. Braaap riders have finished on the podium at every event we've entered so far, Australia wide, Motard, motocross and supercross! ‘With braaap opening 2 flat tracks, 2 super cross tracks, a motard track and mini motocross events Australia wide. Our goal is looking pretty dam good!!!’

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What skills will you need? In order to work effectively as a marketing manager, you must be able to:

 monitor the marketing mix against marketing performance and isolate components for testing

 evaluate the implications of altering one or more components of the marketing mix in relation to market factors and consumer responses

 adjust components of the marketing mix in response to test results and the evaluation of market responses

 ensure the adjusted marketing mix meets budgetary requirements  ensure the adjusted marketing mix continues to meet organisational, strategic and operational marketing objectives and positioning.

Monitoring the marketing mix Each aspect of the marketing mix should be monitored to determine marketing performance. Results will not always be immediate, but it is important to implement systems to measure if desired outcomes and overall goals are being achieved. These goals can relate to: ● Timelines: Have products reached the market when they were supposed to? Are

current marketing campaigns in step with product development so that they can be released at the same time? Are products being withheld from the market to increase consumer anticipation? ● Costs: Have costs remained within the allocated budget for the overall marketing

campaign? Prior to implementing the devised marketing mix, an analysis and budget should have been detailed within the marketing plan. The marketer needs to track expenditure to ensure that it remains within budget. External environmental changes could have occurred since the budget was last evaluated, that could impact on costs. ● Sales: Your POS system/s should hold a wealth of information on sales, over

whatever period you wish to analyse. You should also have systems in place that allow you to examine the impact of specific marketing campaigns. ● Contacts: You should have gathered a database of customer data which will provide

important information on your customer base and act as a tool to get back in contact with previous customers, encouraging them to buy from you again. This data can be gathered in many ways, online, VIP customer forms at the point of sale, etc. The systems for gathering this contact information should be frequently reviewed to ensure that your database is constantly expanding. ● Relationships: When a consumer purchases a product, this can be the start of a

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Monitoring: Periodically assessing the situation to observe any changes which may occur over time, using a monitoring or measuring process of some sort. An evaluation of the information collected will help to determine if there are problems with an organisation’s processes that need to be improved. Early detection will enable adjustments and improvements to be made before losses to profit or customer base occur. Collected data could include: ● the number of hits on a website ● inventory records to track stock ● invoices to track sales ● recorded queries.

Learning activity: Feedback for evaluation Explain how obtaining feedback on the marketing mix and marketing activities can contribute to their evaluation.

Depending on what is being measured, you will need to implement different tools to measure individual aspects and activities. Collecting information should be a managed process. The types of data you are collecting will depend on what product or service is being marketed and how it is performing against allocated goals and objectives. The control process measures all marketing activity as an ongoing process to constantly monitor results as they are being achieved, along with the review of marketing activities after they have been completed. This enables an organisation to fine-tune the campaign as it advances and review the overall process on two levels: corporate and operational. Sales, costs and profits are relevant to the operational level, ensuring the campaign meets expectations as specified in the marketing plan and to evaluate if the organisation’s financial resources were optimised across the marketing mix. Corporate control is relevant to the strategy, planning and control of marketing activities. Organisations examine each function within the campaign on a profit and loss basis relevant to the area. This management system ensures managers are aware of the financial realities achieved by each activity. BSBMKG502 Establish and adjust the marketing mix © 2016 Innovation and Business Industry Skills Council Ltd

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Collected data provides valuable information enabling an analysis of the impact of the marketing mix. Depending on the information collected it will provide either qualitative or quantitative information. Quantitative data is measurable and can be numerically analysed. Qualitative data is subjective, and relates to how people feel about or react to a campaign. Corrective action can only be taken when we understand the performance level currently being achieved. To measure performance accurately, we will need to refer back to the goals and objectives of our planned marketing activities. As discussed previously, the operational level will require the continual monitoring of sales, cost and profitability to ensure the campaign is on target. Marketing performance ● Did marketing efforts reach the target groups? ● Did the campaign run to schedule? ● Was the target market responsive?

It is also necessary to apply the following steps to the review of the organisation’s marketing performance

Consider the following: ● What are the goals of the reviewed action plan? ● Who is the reviewed action plan for? ● What were the marketing mix activities and what information is required regarding

their implementation? ● How is this information going to be collected and analysed? ● How will this information be used? ● How will the report and findings be presented?

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These review procedures should not exceed their value to the organisation; the benefits must exceed the cost of executing the analysis. However, organisations that do invest in this process are generally fully committed to the marketing process and endeavouring to optimise efficiency at all levels. Learning activity: Monitor and record progress – Braaap Refer to the Braaap scenario, previously discussed at length in the Workbook. Identify and list six ways to record the performance of its marketing campaign relevant to opening its Braaap stores.

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There are numerous methods of obtaining feedback, these all comprise the important, managed process of reviewing and reporting on your marketing campaign. Earlier we touched on quantitative and qualitative data, the feedback you receive contributes to this data. Personnel

Important information regarding the results of marketing activities can come directly from the personnel involved in the process (particularly the sales staff). This can offer you a valuable insight into qualitative information on the demographics and mindset of your customer base.

Target market

Feedback from your target market is essential. Communicating with your target market is the whole objective of the exercise. Feedback during the marketing campaign will assist you with the evaluation process and provide important data.

Management

Management need to know how the marketing team and campaign are performing. Openly communicating with management provides a basis for two way communication to provide and obtain feedback.

Stakeholders

Business and financial managers need to know the status of the budget to ensure appropriate decisions are being made.

The media

Often you can receive coverage from unexpected areas. The way your marketing activities are perceived and reported by the media can have an enormous impact on the overall success of the marketing campaign. Media attention in a marketing campaign can heighten its impact, increase its reach, and even provide free advertising.

Gathering information to measure customer reactions enables us to analyse and gather invaluable information, but it needs to be a managed process. This information can be used to improve the targeting of our marketing activities. There are several ways to collect information that will assist in evaluating the marketing campaign, but it is important that you and your team have clear goals. Learning activity: Processes of evaluation 1 Assume you are the manager of a marketing team and you are devising a process to evaluate marketing campaigns. Answer the following questions: What information needs to be collected?

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How will the information be collected?

Will the chosen methods provide adequate information assess concerns and draw conclusions?

Why is it important to use the same method to collect further information later in the campaign?

Valuable information can be also gathered from periodically assessing customers’ feelings and opinions of the organisation, their products and services and how well their needs are being satisfied. Learning activity: Processes of evaluation 2 Consider and complete the following relevant to Apple, . What evaluative processes would best capture the required information for each of the questions below: What has been the customers’ feedback?

What was our key focus of appeal?

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Did we successfully appeal to our target market?

What suggestions do we have for improvement?

What product features were promoted?

What benefits of the product were promoted?

Learning activity: Braaap online Consider Braaap scenario, Braaap are considering incorporating an online store into the organisations marketing mix. How would this adjustment to the components of the marketing mix impact on target market and sales performance?

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Implications of altering marketing mix components As customers’ requirements change, it is critical to change business practices to maintain business viability. Continued business success when operating in a competitive market relies on an organisation exceeding customer expectations; they need to go that extra mile to do everything a little bit better than the competition. Small changes can make a big difference. Many organisations need to focus more on the small attainable changes that they can make day to day, rather than planning for epic changes that will change the face of the organisation: these opportunities are few and far between. While quality of product is essential, it is also essential to have quality in: ● serving and satisfying customers ● advertising and promotion campaigns ● packaging and design ● engineering ● effective communications ● branding.

Small organisations have the advantage of being able to adapt and change quickly, simply because of their size, while larger organisations may find it difficult to adapt to change quickly. Domino’s Pizza took a small company and built it into a large company by guaranteeing delivery of pizzas within 20 minutes. If the delivery took longer than 20 minutes, it was free. Although Domino’s has since changed this policy, it certainly created an expectation and perception in the minds of customers that they would receive faster than ordinary service. Domino’s continues to enjoy a strong market position generating expected profitability.

Opportunities for change and improvement The monitoring, evaluating and reviewing of all processes of the marketing campaign will highlight opportunities for change and improvement. The forces of competition will help speed up these opportunities. Today, we are faced with global competition and consumers with higher expectations that need to be met and exceeded. Thinking about all of these changes reinforces the dynamics of marketing. To stay in the game you will need to adopt innovative thinking to ensure business survives and thrives. Given the pace at which changes occur any opportunities for improvement must be carefully timed. Use this checklist to see if any of the following improvements can be made.

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Potential improvement How are products and services sold (with what materials)? How and by whom is the order obtained from your customer? How is the order recorded for your company and your customer? How is the order processed within your company? Is there a system to check for any order discounts to customers? How long does it take to process and deliver the order to the customer? Do you have any accuracy checks for the order, with the customer and internally? How is the final product or service delivered to your customer? Have you checked customer relationship "manners" with everyone who has direct contact with your customers? Have you allowed everyone associated with order processing to meet periodically and discuss improvement possibilities? Do you have a customer follow up procedure for orders? Do you review your order and service satisfaction level at least quarterly with each customer?

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Learning activity: The implications of changing the marketing mix Using your own workplace as an example, or a workplace that you are familiar with, how you would evaluate the implications when altering a component of the marketing mix?

Adjusting the components of the marketing mix Monitoring, evaluating and reviewing all aspects of the marketing campaign will highlight opportunities for change and improvement. When adjusting the components of the marketing mix, you need to balance changes with their impact on the return on investment (ROI). This will help to develop reviewed marketing plans, which will optimise results to meet overall goals. For example: ● Volume-based goals may require some marketing elements with lower ROIs. ● Quality-based targets (niche products, etc.) will focus on low volume/high ROI

activities. Each aspect of the marketing plan should be monitored and evaluated. While this is not always easy, and results will not always be immediate, it is imperative to implement systems that measure whether goals are being achieved.

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These goals can relate to: ● timelines

● sales

● resources

● contacts made

● costs

● relationships built.

An evaluation of information and data collected will help to determine if there are problems. Early detection will enable adjustments and improvements to be implemented and contribute to the overall success of the marketing plan. Collected data could include: ● the number of hits on a website ● inventory records to track stock ● invoices to track sales ● recorded queries.

Depending on what is being measured, you will need to implement different tools to measure individual aspects and activities. Collecting information should be a managed process. The types of data you are collecting will depend on what product or service is being marketed and how it is performing against your goals and objectives. Collected data provides valuable information enabling analysis of the impact of the marketing mix. Learning activity: Organisation feedback Speak with the marketing manager at your workplace or a workplace you are familiar with, and ask them to discuss an example of adjusting the components of a marketing mix? You are after information regarding: ● how the need was identified ● how the process was implemented ● the results.

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Ensuring the adjusted marketing mix meets budget requirements In any organisation it is essential to monitor marketing revenue and costs against allocated budgets. This vital information requires any analysis and variations to be recorded. Detailing revenue versus expenses for all marketing decisions should include timelines for accomplishing goals and objectives. The budget should outline spending requirements for each decision and be monitored by: ● breakdowns by month ● breakdowns by year.

Expenses can also be shown by: ● individual product ● geographic area ● distribution network.

An organisation’s financial statements do not include this sort of information; they only illustrate total costs and/or total sales. It is important for a marketing manager to determine how sales vary between specific products and specific regions in order to understand where resources will be allocated. For example, the operating statement of an organisation that has three stores may show that profits and sales are going extremely well. On the surface it might seem as if the marketing campaigns have been very successful. However, a more detailed breakdown of figures might reveal that sales in one store are so strong that they prop up the other two stores on the balance sheet. In fact, sales in this store have increased so much that they are disguising the fact that sales in the other stores are actually going backwards. Obviously the marketing department is doing something right with the one successful store, but its efforts are misdirected in the other stores. It would then be the job of the marketing executive to analyse what is working and what is not working in other stores. Marketing costs must be closely analysed. Marketing managers need to have a comprehensive understanding of: ● how marketing costs are spread ● where the money is being spent – is it on product development, promotion or

customer research? ● standards of how much should be spent on marketing ● how much money needs to be spent on marketing in order for the organisation to

be competitive ● what should be expected to result from the marketing spend.

For example, an organisation deciding to spend an extra $100,000 on advertising should be able to estimate what the expected increase in sales will be and what would have happened if they’d spent the money on product development instead.

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In other words, when marketing money is spent, it is essential for the marketing manager to know how and why money is being spent. It is not simply enough to say ‘let’s spend a million on marketing this year.’ Documenting and reporting a promotional activity allows you to assess the revenue generated compared to the associated costs and analyse the information to ensure the organisation is in a profitable situation. Often the generated revenue will be excellent with all targets and objectives being met. If the associated costs are too high, you will quickly have a situation where the business has not generated enough profit and the organisation will be in a serious situation. Continual budgeting, monitoring, analysing and reporting will keep all parties involved updated and allow for changes to be implemented before a critical situations arise. Learning activity: Your organisation – Marketing revenue Research your own workplace or one that you are familiar with in order to determine answers to the question below. You may need to speak to the marketing manager (or the person responsible for marketing). How is marketing revenue and associated costs tracked through the organisation?

Ensuring the adjusted marketing mix meets objectives and positioning It is crucial to ensure the adjusted marketing mix continues to meet organisational, strategic and operational marketing objectives and desired positioning within designated budgetary requirements. Highlighting the financial impact that the adjusted marketing mix will have on the organisation will fall in line with the financial imperatives outlined in the marketing plan. Detailing revenue versus expenses for all adjusted marketing decisions should include timelines to achieve goals and objectives. The budget should outline spending requirements for each decision and include breakdowns by month and year. Expenses can also be shown by individual product, geographic area and distribution network. The revised implementation schedule will illustrate how the components of the marketing mix will be implemented and by whom. A situational analysis should include a description of the problems and opportunities present in the internal and external environments of the organisation.

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Finally, a reviewed summary of the organisation’s current situation should be compiled. This involves conducting a SWOT analysis to determine the strengths, weaknesses, opportunities, and threats to the organisation. Marketing mix adjustments highlight the dynamic impact of marketing. Organisations will need to adopt innovative thinking to ensure business profitability and survival. For example, Braaap started out by wholesaling to retailers. Their marketing strategy was focused on increasing brand recognition and selling their product at lower prices than their competitors. Braaap monitored, measured and analysed their sales performance, which was not meeting expectations. Braaap went back to their drawing board to decipher what was happening in the marketplace. Braaap knew that: ● the Braaapster product was great ● the price was realistic and attractive to the marketplace ● the target market was correctly identified ● promotional activities were creating brand recognition.

So what was missing? Positioning – by wholesaling to retailers Braaap was just another bike on the showroom floor. This wasn’t working. Braaap reconsidered their overall business strategy. In order to achieve the power within the marketplace that they wanted, Braaap needed to retail the Braaapster themselves – Braaap franchise stores evolved. With Braaap’s new direction it was necessary to adjust the marketing mix to meet reviewed objectives while continuing to meet organisational, strategic and operational marketing objectives and product repositioning within designated budgetary requirements. In accordance with organisational requirements, when recommending improvements for marketing performance, market planning and objectives need to be reviewed and a revised marketing strategy needed to be implemented while continuing to reflect on organisational policies and procedures. Aspects that needed to be considered were: ● the revised implementation schedule

● budgeting

● the updating of marketing mix

● ROI (return on investment)

components

● budgetary targets.

● a situational analysis describing:

○ problems ○ opportunities ○ internal and external environments It was necessary to ensure that the adjusted marketing mix continues to meet organisational, strategic and operational marketing objectives and desired positioning within designated budgetary requirements.

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Learning activity: Monitoring and adjusting the marketing mix Research your own workplace or a workplace that you are familiar with, in order to determine answers to the questions below. You may need to speak to the marketing manager (or the person responsible for marketing). What processes are in place to ensure the adjusted marketing mix continues to meet organisational objectives and requirements?

How are these tracked in relation to budgetary requirements?

Section summary You should now understand how to monitor the marketing mix against marketing performance, isolate the components for testing, and evaluate the implications of altering the components. There should be an understanding of how to adjust the components of the marketing mix in response to tests and ensure that the adjusted marketing mix meets budgetary requirements and continues to meet organisational, strategic and operational marketing objectives and positioning.

Further reading ● Learn Marketing, ‘SMART objectives’, Learn marketing, viewed January 2016,

. ● Learn Marketing, ‘Marketing plans’, Learn marketing, viewed January 2016,

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Section checklist Now that you have completed this final section, make sure that you are able to:

 monitor the marketing mix against marketing performance and isolate components for testing

 evaluate implications of altering one or more components of the marketing mix in relation to market factors and consumer response

 adjust components of the marketing mix in response to test results and an evaluation of market response

 ensure the adjusted marketing mix meets budgetary requirements  ensure the adjusted marketing mix continues to meet organisational, strategic and operational marketing objectives and desired positioning.

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Glossary

Student Workbook

Glossary Term

Definition

Action plan

A documented plan that identifies required tasks, resources and timelines. It defines what needs to be achieved, when and how.

Adjust

Alter or change components of marketing mix.

Distribution

The process of making a product available for use by a consumer or business user.

Evaluate

Perform an analysis to determine worth and significance.

Key characteristics

Significant aspects of products that determine significance.

Marketing activities

Activities to create an awareness of product and brand.

Marketing mix

Several elements the make up the marketing campaign.

Marketing objectives

The purpose of a particular marketing activity, e.g. to create awareness of the product or to increase product market share.

Monitor

Measure product performance over a period of time.

Physical evidence

Elements of the service mix which allows the consumer to make judgements on the organisation.

Positioning

Where products and services are placed within a market.

Price

How much a product or service costs.

Process

A means to achieve an outcome.

Product

A product is a tangible, physical entity.

Promotion

Marketing communication, how the product is promoted in the market place.

Segmenting

The process of dividing a particular market into sections.

SMART

A simple acronym used to set objectives – Specific, Measurable, Achieve, Realistic and Time.

Target market

Prospective users of a products or services that organisations can target.

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