Essential Standard 3.00 Objective 3.01

1. Essential Standard 3.00Objective 3.01 Understand the role marketing in business. Understand principles of marketing.

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

3. What is marketing? • The process of planning & executing the • Conception • Pricing • Promotion and • Distribution • of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

4. Functions of Marketing • What happens during the marketing process? • Businesses are involved in: • Product Origin- Research & Development • Product Pricing • Product Promotion, and • Distribution of products and services

5. Products and services are made available in order to meet the goals of individuals and businesses. Essential Question: Why do businesses spend so much time, money, and effort to market their goods and services? Answer: to meet customer needs and to make a profit

6. Seven Functions of Marketing Marketing Activities happen during the seven functions of marketing • Product/service management • Distribution • Selling • Marketing-information management • Financing • Pricing • Promotion

7. Product/Service Management • Defined: • designing, developing, maintaining, improving, and obtaining products and services • in order to meet the needs of customers.

8. Distribution (Place) • Defined: • Using the best ways for customers to: • locate, • obtain, and • use the products and services of a business.

9. Selling • Defined: Communicating directly with potential customers in order to determine and satisfy their needs and wants.

10. Marketing Information Management • Defined: • Obtaining • Managing • and using information about: • Products & services • Customers • & Competitors • to improve business decision-making and the performance of marketing activities.

11. Financing • Defined: • Budgeting for marketing activities • Securing necessary funds for operations, and • Providing financial assistance to customers.

12. Pricing • Defined: • Determining and communicating the value of products and services.

13. Promotion • Defined: Communicating information such as: • features and • prices • about products and services to potential customers. http://www.rolex.com/en#/home/

14. Marketing Research Why do companies spend money on marketing research? http://www.deere.com/servlet/PIPInquiry?PIN=&Submit=Search http://www.ford.com/innovation/automotive-technology

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

16. Types of Research Studies • Surveys • ASKING OPINIONS OF LARGE GROUPS • Student survey • Focus groups • SMALL GROUP DISCUSSION • Group previews tv ads • Observations • RECORDING ACTIONS OF CONSUMERS • ex: what people buy, return, use • Experiment • PRESENTING TWO ALTERNATIVES TO DETERMINE WHICH HAS BETTER RESULTS • ex: cloroxed socks

17. Examples of Market Research

18. Marketing Research Parts of a product • Basic product • Product features • Options • Brand name • Packaging • Warranty http://www.benjerry.com/

19. Basic Product • Simplest form of a product or service • Not unique • Usually available from several companies • Example: basic tv • Limited # of channels • No pay per view • No HD • No DVR • No playback • Example: basic health insurance • High deductible • Limited coverage • Limited service providers • High co-pays

20. Product Features http://www.chevrolet.com/?seo=goo_|_2008_Chevy_Retention_|_IMG_Chevy_Make_|_Exact_Match_Chevy_Chevrolet_|_chevrolet • Additions and improvements to the product or service • Example: cell phone offers: built-in digital camera, voice dialing, web browser • What are some features of vehicles?

21. Options http://www.chevrolet.com/pages/mds/vehicles/helpMeChooseResult.do?bodyStyle=CARS • Options include choices of the product or service. • Car Choices include: • Models • Engine size • Colors • Manual/automatic • 2-dr, 4-dr, hatchback What options are available on this vehicle?

22. Brand Name • a company’s unique identification for a product or service • Breyer’s ice cream • Ford Mustang • Maxwell House Coffee • Nike shoes • Thomasville furniture

23. Packaging • the protection and security of a product or service before it is used.

24. Warranty • A company’s offer to: • Repair • Replace, or • Provide a refund for a product or service in order to build consumer confidence in the business

25. Similarities of Products & Services • Products vs. Services • Both: • Meet the needs or satisfaction of a target market • Include a mix of the marketing elements (product, price, promotion, and place -distribution)

26. Differences between Products & Services • Products • Tangible • Perishable or non- perishable • Separable • Easier to market • More control over quality • Services • Intangible • Perishable • Inseparable • More difficult to market • Less control over quality

27. Terms • Tangible - items one can see and touch • Intangible - no physical form, more difficult to examine • Inseparable - services are consumed at the same time they are produced. The person or technology producing the service must be available when and where the consumer needs it. Marketers must determine when and where consumers want a service and must be able to provide it at that location and time. • Perishable -cannot be stored for later consumption, services must be available at the same specific time as the demand • If a taxi driver does not have a fare, the service goes unused • If all concert seats are full, no more people can hear performance • Heterogeneous – there will be differences in the type and quality provided. Skill , training, and motivation of the service provider affect quality service.

28. SELLING PRICE • Definition: • Money a customer must pay for a product or service • Price changes as it moves through channels of distribution from producer to consumer. Value is added at each step.

29. Selling Price • What are the components of price? • The Pricing formula Selling price= product costs + operating expenses + profit • Product costs- • Costs to manufacturer of producing the product • Operating expenses- • Costs of doing business: • Salaries, storage, equipment, facilities, utilities, taxes, etc • Profit- • Amount left after all costs and expenses have been paid

30. Use Pricing Formula Example A • Product cost=$67 • Operating expenses = $38 • Required profit= $100 • Using price formula, what is the price? P=67+38+100 P= $215 Example B • Product cost = ? • Op exp = $ 24 • Profit = $45 • Selling Price = $ 169 • Using price formula, what is the product cost?

31. What factors influence the pricing of products and services? Prices will be higher due to these factors: • Supply and demand- limited supply • Uniqueness – few close competitors • Age – new product introduction • Seasonal– used only for a specific period of time • Complexity – very technical or complex • Convenience – people pay for convenience

32. How Companies Set Price 1. Must cover the cost of the product 2. Must cover the operating expenses (cost of running the business) 3. Must allow profit for the business • If PRICE cannot cover 1-2-3, then business cannot survive…but must also • BE COMPETITIVE in the market or will products will not sell!

33. Profit Margin • Selling Price-Product Cost = • Gross margin* *Important factor in pricing • Gross margin represents amount of money on hand to pay for operating expenses of the business

34. Markups & Markdowns Markup • Amount added to the selling price to cover the operating expenses and profit • Usually stated as a percentage of selling price • Selling price = product cost + markup • Example: $35+$14=$49 • $35*40%=$14 • Markdown A reduction from the original selling price.

35. Calculate Markups/ MU % • Selling price = $49 • Markup = $14 • Product cost = $35 • What is Markup % • $35 x MU%=$14 MU %=14/35 MU%= 40% • Selling price = $100 • Markup = $25 • Product Cost = $75 • What is mark up %?

36. Calculate mark downs Example: • Original price $35 • 20% advertised markdown • What is new price? • $35 x .20 = $ markdown • $ markdown= $7 • New price is $28 • Practice: • Price = $140 • Markdown =15% • What is new price?

37. Channels of Distribution • What is channel of distribution? How products and services reach final customers or businesses • Can be classified as • Direct- producer to consumer only • Indirect- one or more businesses in chain between producer and consumer

38. Types of Channels of Distribution Direct Examples • Tonya makes and sells drapes to local customers. • Joe sells fresh peaches from his orchard at a roadside stand. • Harvey uses landscaping equipment to move soil for the foundation of a house being built by Mr. Thomas, his customer. Indirect Examples • RCA sells televisions to Circuit City who resells to customers. • UPS delivers merchandise packages to Ann Taylor retail outlet at the mall to be sold to consumers. • Gant, an ore extractor, sells bauxite to Reynolds for processing into aluminum. NO Intermediary Involved Intermediary Involved

39. How do the needs of producers and consumers differ? • They differ by: • Quantity – a definite amount of anything • Assortment-collection of various kinds of things • Location- a place of activity • Timing – selecting the best time or speed for doing something

40. Producer Needs versus Consumer Needs • Quantity – a definite amount of anything • Businesses produce or sell massive quantities of products and services, where as each consumer needs fewer numbers. • Assortment-collection of various kinds of things • Businesses usually specialize in producing a specific type of products and services, where as consumers usually purchase a variety of products and services. • Location- a place of activity • Businesses may distribute products and services to customers in other countries as well in local communities. Consumers mostly buy local. • Timing – selecting the best time or speed for doing something • There could be a gap in time when businesses produce products and services as to when consumers need them.

41. Channels of Distribution Defined: how products/services reach final customers and the businesses involved • Channel members – businesses that take part in a channel of distribution Allow businesses to adjust : - quantity and assortments - accessible in convenient locations - storage of products for customer’s convenience.

42. Distribution(Place) • The marketing mix element that uses locations and methods to make the product/service available to the target market. • Determining the best methods and procedures to use so customers can find, obtain and use a product or service.

43. CHANNELS OF DISTRIBUTION How does CORN get to your table? FARMER/FARMWORKERS GROW FARMWORKERS HARVEST FOR TEMPORARY STORAGE CORN TRANSPORTED TO SILO STORAGE CORN TRANSFERRED TO TRAIN/TRUCK FOR TRANSFER TRAIN TRANSFERS CORN TO MILL/PROCESSING PLANT MILL/PROCESSOR CHANGES PRODUCT PROCESSOR PACKAGES INTO CANS/FROZEN BAGS ETC CANS FROM MILL TO STORAGE STORAGE TO TRAIN/TRUCK TO WHOLESALER WHOLESALER (GROCERS ASSOCIATION) STORAGE WHOLESALER TO RETAILER (FOOD LION) BY TRUCK RETAILER TO CONSUMERS CONSUMERS EAT CORN FOR DINNER!

44. Who touched that corn? • Without looking back to previous slide- • List as many as you can…groups who had contact with the corn that you eat.

45. Communication & Promotion • Influential messages daily bombard you from: • Businesses • Organizations • Government agencies • Political candidates • Is the promotion always effective? http://www.youtube.com/watch?v=R55e-uHQna0&safety_mode=true&persist_safety_mode=1

46. Promotion Pizza $9.99 • Any form of communication used to inform, persuade, or remind • Used to influence knowledge, beliefs, and actions about products, services and ideas OPEN Clay’s Pizza Business card

47. Effective Communication • Effective communication consists of • an understanding of information between the sender and the receiver. • Sender selects a channel of communication and • Receiver indicates understanding by providing some form of feedback.

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

49. Classification of Promotion Types • Main types of promotion: • Personalized - customized for individual customer • Mass - communicated with many people with a common message • Some types of mass promotion: • Advertisement • Publicity • Public relations • Sales promotion

50. Personal Selling • Direct, individual communication with a potential specific customer • Most expensive type of selling • Face to face contact • Used for complex or expensive products • Can be by phone • Examples: • Car salesmen • Jewelry sales • Cosmetic counters at department stores • Insurance sales • Investment brokers • Realtors