Principles of Business & Finance

3.01 Understand principles

of marketing.

Marketing

The process of developing, promoting, pricing and distributing products in order to satisfy customers’ needs and wants. Marketing involves all the activities necessary in getting a product from the producer to the consumer.

The Seven Functions of Marketing1.Marketing Information Management2.Product/Service Management3.Financing4.Pricing5.Promotion6.Selling7.Distribution

Marketing-Information Management

Obtaining information needed to make sound business decisions. Example: Taste tests and surveys.

Product/Service Management

Concepts and procedures necessary to obtain, develop, maintain, and improve a product or service mix in response to market opportunities.

A. Risk Management: preventing or reducing business loss.

B. Purchasing: Buying goods and services for use in the day-to-day about where a product is sold.

Financing

Obtaining money needed to finance the operation of a business. This includes bank loans and offering

credit to customers.

Pricing

Determining a value to charge for goods and services. It is important to consider competition and what consumers are willing and able to pay.

Promotion

Communication used to inform or remind people about a business’s products. Promotion also involves persuading customers to purchase a product.

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Selling

Determining customer needs and wants through planned, personalized

communication intended to influence purchase decisions and

ensure satisfaction.

Distribution

The transporting, storing and handling of goods on their way from the

manufacturer to the consumer. This includes the decisions about where

to sell a product.

Marketing Research

Marketing research involves customers in order to find solutions to problems through carefully designed studies.

Steps in marketing research:Define the marketing problem. Study the situation. Develop a data collection procedure.Gather and analyze information.Propose a solution.

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Research Studies Types of research studies

Surveys Focus groups Observations Experiment

Surveys The most common type of marketing

research Surveys gather information from

people using a planned set of questions.

Delivered via mail, Internet, or telephone.

Focus Groups A small group of consumers taking

part in a group discussion Focus groups discuses experiences

with products or make suggestions for product improvements.

Observations Collects information by recording the

actions of consumers. Researchers observe how consumers

study and choose products.

Experiment An experiment presents two

carefully controlled products to customers in order to determine which product is preferred.

Examples: Using two different sizes of packages Offering coupons to customers to

determine buying purchases.

Parts of a Product Basic product Product features Options Brand name Packaging Warranty

Parts of a Product Basic product is simplest form of a

product or service. Product features include additions and

improvements to the product or service.

Options include choices of the product or service.

Parts of a Product

Brand name is a company’s unique identification for a product or service.

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

Warranty is an offer to repair, replace, or provide a refund a product or service in order to build the confidence of consumers in a business.

Products v. Services

Similarities: Meet the needs or satisfaction of a

target market Include a mix of the marketing

elements (product, price, promotion, and distribution)

Products v. Services

Differences between products and servicesProducts ServicesTangible IntangibleNon-Perishable PerishableSeparable InseparableEasier to market More difficult to marketMore control over quality Less control over quality

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Factors Influencing Price

Supply and demand Uniqueness Age Season Complexity Convenience

Pricing Formula

Selling Price The price paid by the customer

Product Costs Costs to the manufacturer for producing the

product or paid by the business to buy the product Operating Expenses

All expenses associated with running a business Profit

The amount of money available to the business after all costs and expenses have been paid

Pricing Formula Selling price=product costs+operating

expenses+profit Example: 67+38+100=SP SP=$215

Markup v. Markdowns Markup

The amount added to the cost of a product to set the selling price.

Selling price=product cost+markup Example: $35+$14=$49 $35*40%=$14

MarkdownA reduction from the original selling price.

Channels of Distribution Channel of distribution is how

products and services reach final customers and the businesses involved.

Needs of the Customer

Quantity A small number at a given time.

Assortment A variety of products.

Location All over the world.

Timing May want to purchase products at different

times than producers are willing to make them.

Needs of the Business

Quantity Produce and sell large amounts at one time

Assortment Specialize in a specific type of product

Location Needs to ship products all over the world

Timing Only offer certain products during certain

seasons.

Types of Channels

Direct products move from the producer straight to the

consumer with no other organizations involved

Indirect Includes one ore more other businesses

between the producer and the consumer

Promotion

Promotion is any form of communication used to inform, persuade, or remind.

Effective communication is the exchange of information so there is common understanding by all participants.

Personalized Promotion The most effective and the most

expensive. Personal Selling

Direct communication between the buyer and the seller

Helps to assess the needs of prospective customers

Done face-to-face

Mass Promotion

Directed to many people at the same time

Advertising Publicity Public Relations Sales Promotion

Advertising

Most common types of advertising Television Radio Newspapers Magazines Mass Mailings Outside Displays Internet