‘Types of Distribution Channels Distribution channel: the means by which a product is passed from the manufacturer to the customer - this can often involve an intermediary (ska midale men} Direct channel: no intermediaries; increasingly popular method; + simple; + no intermediary = cheaper to customer; - ‘ot suitable for large products; - expensive to send by post so not cost effective Retailers: more popular when retailer is large or when products are expensive; they deal directly with the customer; + producers sell large quantities to retailers; + reduced distribution costs (bc you're sending large quantities in one go) = ‘more cost effective; - price increases for customer; - producers lose contral over how product is sold ‘Wholesalers: breaking bulk; benefit from economies of scale (the more they buy the cheaper each unit becomes); simplifies process for retailers; + small retailers are able to purchase smaller quantities; + wholesaler saves storage space: - fresh products might not be of good quality as it takes longer for them to reach shops; - producers lose control ‘Agent: have specialist knowledge of that country, so they sell on behalf of the business; they can also be the only intermediary; do not hold stock; operate in tertiary sector; + offer specialist knowledge: knaw about lacal conditions: producers lose control; - consumers pay more Aims of Promotion Promotion: the way in which a business communicates with existing and potential customers to encourage demand Promotion as part of the marketing mix includes: + Advertisements + Sales promotion Aims: + Toincrease sales + Tocreate brand image + To introduce new products to the market + Toimprove the company image + Toinform people about particular issues, often used by government + Tocompete with competitors’ productsPrice Elasticity Price elasticity: 2 measure of the responsiveness of demand to a change in price. Law of demand: as price increases, demand decreases Price elastic (very responsive): small % change in price Price inelastic: (unresponsive): large % change in pric increases, new students will have to buy no matter what) SPLAT! large % change in demand. Eg Pepsi vs Coke smaller % change in demand. Eg Nexus uniform (even if price + Substitutes: no substitutes = inelastic + Proportion of income: takes up small proportion of someone's income = inelastic + Luxury of necessity: essential for living and is needed eg petrol = inelastic + Addictive: products addictive = inelastic + Time to respond: no time to search for cheapest price = inelastic Pricing Methods ‘Cost-plus pricing: the cost of manufacturing the product plus the profit mark up; + easy to calculate; + all costs are covered; + costs = price 1; - competition may not increase prices when you do; less incentive to control costs Example: cost = $50; percentage matk up = 50%; selling price = 15x50 = $75 ‘Competetive pricing: when product is priced in ine with or ust below competitors’ prices; happens when there is a lot of choice Psychological pricing: involves setting a price just below a large number to make it seem cheaper; charging a very high price for a high quality product litle sales revenue is lost Penetration pricing: when the price is set lower than the competitors’ prices in order to be able to enter a new market; tensures that sales are made for new product entering the market; profit per unit sold may be low Price skimming: high price is set for a new product on the market; people will pay because of the novelty factor; can help to establish the product as being good quality; may put off potential customers Promotional pricing: setting a very low price for a short period of time; boost sales throughout: useful for getting rid of unwanted stock; renew customers’ interest; lower sales revenue Price discrimination: firms charge different prices to different consumers for same product; lead to increased revenue and profits but can also add costs (prices constantly changing)Product Packaging Packaging: is the physical container or wrapping for a product. Often used to appeal to consumers. + New packaging can extend the product lifecycle Purposes of packaging: + protects the product + easy to transport + present an appealing image + easy to open and use the product + provide product information inc. barcodes + promotes brand image Secondary Research Internal sources of information: + Sales repartment sales record, pricing data, customer records, sales reports + Opinions of distribution and public relations + Finance department + Customer Service department External sources of information: + Government statistics + Newspapers + Market research agencies + The internetPrimary Research ++5/-s of questionnaires: + + detailed qualitative information + +can be carried online; cheaper and easier to collate/present + = time and money consuming (callating/analysing) + = answiers to questions might not be very accurate -> misleading to business +8/-s of interviews: + + interviewer able to explain the questions to interviewee + + detailed responses from interviewee + = Interviewer could lead the interviewee -> Inaccurate results due to blas + = time-consuming; often also expensive way Sample: a group of people who are selected to respond to a market research Random sample: when people are selected at random for source of information Quota sample: when people are selected on the basis of certain characteristics as a source Focus group: a group of people who are representative of the target market The importance of Market Research + Businesses use market research to help them decide the right mix Market researc! cess of gathering, analysing and interpreting information about a market Product-oriented: business focus mainly on the product itself; produce product first then find market, Market-oriented: business carries out market research fist to find out what consumers want before a product is. developed and produced Why is market research needed? ‘Types of information + Quantitative: numbers and statistics; able to retrieve by close-ended questions + Qualitative: produces information in the form of descriptionsMarket Segmentation Market segment: A group of customers with similar needs and wants ‘Types of segmentation: + Demographic: definining a market by age, gender and family size + Socio-economic: defining a market by income and occupation + Lifestyle: defining a market where customers are located + detining a market by values, opinions, hobbies, interests, personality characteristics + Geographic: defining a market where customers are located Why do businesses segment the market? + To make sure they meet the needséwants of customers more effectively + Tohelp them decide how to market their product/service + Get more customers = make more profits Problems with market segmentation: + Product may appeal to other customers (people that are not targeted may want to use) + Business could pick the wrong target market iif not enough research) Marketing Mix - the 4Ps ‘Marketing mix - Refers to the combination of factors which help a business sel its products. The 4Ps - + Product: applies to the product itself; its design and quality: comparing with competitors’ products. + Price: the price at which the product is sold; comparing with competitors’ products’ price; should cover costs + Place: questioning method of distribution channel + Promotion: how the product is advertised and promoted; questioning methods of promotion that would be ceffective/suitable for the product What makes a product successful? + satisfies existing needs and wants of consumers. + not too expensive to produce + design - performance reliability, quality must be consistent with product's brand image + capable of stimulating new wants from the customer + has something distinctive to make it look different + produce a new product or introduce new changes to original product before its competitors