A Beginner’s Guide to Marketing Basics

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Well, before reading this “marketing basics” article, you might ask what’s in it. In the beginning, I discussed the basic aspects such as what is marketing, marketing orientation and philosophy, what a market is, and marketing objectives. Then, you will find several subtopics on market planning, ranging from marketing mix, marketing plan, marketing segmentation, market positioning, and market research. In the next subheading, I break down the marketing mix: product, price, promotion, place, people, process, and physical evidence. Next, the final section presents international marketing and e-commerce.

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What is marketing?

Marketing is about meeting the consumers’ needs and wants and influencing them to buy certain products over other competing products. It involves decisions about what products consumers like, sell at what prices, how to attract customers to buy, and how to get the goods into the hands of consumers at a minimal cost.

Through marketing, companies identify, anticipate, and profitably satisfy consumer needs. It covers various activities, including research, promotion, sales, pricing, product service management, customer relationship management, and channel management.

Products marketed are broadly divided into two: goods and services. Goods represent tangible items, while services represent intangibles. Thus, marketing both requires decision and focus on different elements.

Companies must think about product, place, price, and promotion for superior customer value when marketing goods. Product elements such as features and appearance are important because goods can be seen physically.

Meanwhile, services are not physically visible. So, to provide superior service, the company focuses on elements such as:

• People like the front line staff appearance, skills, and charm
• Processes such as convenience, accessibility, payment, and after-sales.
• Physical evidence such as cleanliness, design, the atmosphere of the room, and peripheral products.

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Guide to Business and Management

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Marketing orientation

Product-oriented marketing focuses on developing superior products. It is usually applied to high-quality, highly differentiated products or to high-tech products, which will sell well on their own because consumers will demand them.

Market-oriented marketing develops products based on what the market needs. It requires expensive market research but is less risky as the company adapts to market trends such as tastes, habits, needs, and lifestyles of consumers in the target market. In other words, the product better meets the customer’s requirements; therefore, it is more acceptable.

Asset-led marketing focuses on the company’s strengths and assets to produce the product and less on what customers want. The company uses a strong brand name and image to develop and market new products.

Social marketing applies marketing concepts to influence behavior and provide benefits to society. It directs people’s behavior in the desired direction, especially to bring about social change. It also often involves media coverage, movies, or celebrity endorsements.

Commercial marketing satisfies people’s needs profitably by selling the required product or service. It’s more about fulfilling what people want than changing what people want.

Marketing philosophy or concept

Marketing philosophy refers to a fundamental idea guiding companies in meeting customer needs while achieving company goals. It considers three aspects of interest: company, customer, and society.

Production concept emphasizes price and availability. It assumes consumers prefer widely available and inexpensive products. So, the company focused on achieving economies of scale as quickly as possible through standardization and mass production.

Product concept focuses on what the product should look like to satisfy consumers. It pays attention to non-price aspects such as quality, performance, or features. In other words, the company’s focus is to produce the best quality products.

Selling concept emphasizes the need to stimulate consumers to buy. Consumers won’t buy enough products unless the company makes a large-scale selling and promotion effort. Consumers must be persuaded to buy. Companies are also assumed to have effective sales and promotion tools to stimulate more purchases.

Marketing concept emphasizes identifying consumer needs and wants, developing appropriate products, and maintaining long-term relationships with them. To make a profit, companies provide superior products to customers through coordinated marketing activities.

Societal marketing concept emphasizes sustainability by compromising the short-term and long-term interests of consumers. It is a marketing concept, but it is done to maintain or improve the welfare of consumers and society in the short and long term.

Market

A market is where sellers and buyers exchange goods or services. It may be a physical or non-physical location such as e-commerce.

The market may be:

• Consumer markets trade in goods and services for end-use, for example, markets for personal goods such as shoes and clothing.
• Industrial markets trade goods and services needed by businesses, such as markets for raw materials and components. Also known as the business market or factor market.

Market features

Customer base refers to a group of consumers who repeatedly buy from a company’s products. Having a loyal customer base is important as it continues to flow revenue to the company. It’s also cheap because it doesn’t have to bear the costs associated with acquiring new customers. Companies can target new customers or seize competitors’ customers to increase their customer base.

Competition is a condition in which companies beat each other and try to outperform their competitors. It arises because the company or product targets the same consumers for profit. As a result, they replace each other in fulfilling the same need or desire.

Market size represents the total potential demand in the market and at a given time. It is measured by the total sales value or sales volume. It is important to assess whether a particular market is worth working on or not, in addition to other factors such as barriers to entry.

• Potential market – includes individuals in the total population who have a desire to use the product. Some have the ability to pay while others do not.
• Available market – includes individuals who have the desire to use the product plus have the ability to pay. In other words, they have effective demand because they want the product and have the money to buy it.
• Qualified available market – the available market where consumers are allowed to buy and use the product. For example, alcoholic beverages are only sold to a certain age group, although others also want and have the money to buy them.
• Target market – the qualified available market in which the company seeks to serve.
• Penetrated market – consists of individuals who have purchased or used the company’s products.

Market growth refers to changes in market size over time. It may be measured by the total sales value or volume realized by all firms in the market or by a potential measure.

• Growth has implications for many aspects of business, such as competition. For example, when the market is growing negatively, competition is more intense because the company is likely to have to seize customers from competitors to generate high sales.

Market share shows you what percentage of a company’s sales are compared to market size. It is used to measure the market position of the company and the success of its strategy and performance.

Market leader refers to the company with the highest market share. Having a dominant market share is important to achieve better economies of scale. In this way, the company can lower unit costs and earn higher profits. Several ways to increase market share include a brand promotion, developing innovative products, and improving customer service.

In some cases, competitors adapt to the market leader’s strategy and choose to become market followers instead of market challengers.

• Market followers seek to maintain the status quo and current market position without challenging or disturbing the market leader. They adapt to each market leader’s strategic actions; thus, their current market position gap remains unchanged.
• Market challengers seek to replace the market leader, usually having the second largest market share. The company struggles to increase its market share and relies on an aggressive strategy to dominate.

Marketing objectives

Marketing objectives refer to the targets to be achieved by the company through its marketing activities. It can be:

• Market leadership
• Superior customer service
• Strong brand equity
• Innovative products

Marketing ethics are moral principles that guide the behavior of firms when developing a strategy and executing marketing activities. Ethical marketing is increasingly demanded along with increasing attention to social and environmental issues. But, often, what may be an acceptable marketing practice in one place may not be in another.

• Examples of ethical marketing problems are misrepresentation, over-promise, bait and switch, and unsubstantiated claims.

Marketing planning

Marketing planning is about translating a company’s goals into a series of strategic and action plans to achieve marketing objectives. It is important to direct and coordinate marketing efforts. In addition, by examining external opportunities and threats, marketing activities are more relevant to the context in which they are executed and thus more likely to be successful.

Marketing objectives tell you what the company should achieve through its marketing activities. It may be about profit, sales volume, market share, product, or market development. A good marketing goal should be SMART:

• Specific
• Measurable
• Achievable
• Relevant
• Time bounded

Marketing mix

Marketing mix refers to the key aspects of which decisions and efforts should be focused on marketing a product. It includes:

• Product
• Price
• Place
• Promotion
• People
• Process
• Physical evidence

The last three elements are important factors in marketing services. Furthermore, how significant each element is, varies between products, depending on the chosen strategy.

• But, they must be coherent and interrelated. Thus, consumers are not confused by the message conveyed by marketers.

Marketing plan

A marketing plan refers to a formal written document outlining how the business intends to achieve its marketing objectives. It details the marketing program, budget, sales forecast, and strategy. It is structured, taking into account the macro environment, market trends, consumer wants, competitor actions, and internal resources and capabilities.

To develop a marketing plan, companies start with a marketing audit. They conduct market research to review the current marketing situation and predict future trends. It usually involves tools or processes such as:

• PESTEL analysis
• BCG Matrix
• Market segmentation
• Consumer profiling
• Current strategy review
• SWOT analysis

A marketing plan usually contains:

• Marketing objectives, what will be achieved through marketing.
• Market research results such as target market, competition, market size, and consumer profiles.
• Marketing strategy related to the selected marketing mix, tactics, and specific actions.
• Marketing budget for each marketing program to be executed.
• Possible problems and backup plans.
• Monitoring and reviewing if results are not as planned.

Market segmentation

Market segmentation divides the market into subgroups (segments) based on the specified attributes. Consumers within a segment are homogeneous, have similar identities, needs, and preferences. However, they are different (heterogeneous) between groups.

After obtaining several potential segments, the company selects the targeted market segments, builds a customer profile, and develops the appropriate marketing mix.

Several ways to segment the market are:

• Demographic segmentation – based on variables such as age, gender, marital status, income group, social class, education, and profession.
• Psychographic segmentation – based on variables such as values, interests, attitudes, personality, opinions, lifestyle, beliefs, and buying habits.
• Geographic segmentation – based on the variables in which consumers are located: urban, rural, cosmopolitan, lowland or lowland, desert, tropical, or the four seasons

Eligible market segment criteria:

• Differentiated – unique in response to different marketing mix elements
• Actionable – it makes sense and is valuable for the company to address customer needs.
• Measurable – detailed information about the market and customer characteristics, such as market size and consumer purchasing power, is easy to obtain.
• Accessible – can be reached cost-effectively.
• Substantial – big enough to turn a profit.
• Prospective – the market continues to grow and has not yet reached the maturity phase, or even a decline.
• Structurally attractive – related to competition and elements in Porter’s Five Forces model.

Target marketing

Market targeting is about selecting a viable target market from all available markets/market segments. It involves segmenting the market and then determining the targeted market segments to work on.

Target market is the market segment in which the company seeks to serve. Long story short, it is a targeted market segment. It consists of individuals with effective demand. They have the desire to use the product and the ability to pay. Then, they are also legally allowed to buy and use products – for example, some products may not be for sale to certain age groups. The company develops an appropriate marketing mix to meet the needs and preferences of consumers in the market.

• Mass market – a market with homogeneous consumer needs and tastes. Thus, all consumers are considered a single market, and as such, its size is significant. They are considered to need the product and respond to the same marketing mix.
• Niche market – a narrower market with more specific consumer needs than the main market. An example is the organic food market.

Target marketing involves developing a marketing strategy and concentrating the right marketing efforts on the target market. It could be:

• Concentrated marketing – targeting a narrow market with specific customer needs. The company develops highly specialized products to meet their needs and desires. Also known as niche marketing.
• Undifferentiated marketing – ignoring market segments and targeting all consumers in the market to maximize sales volume, assuming their needs and wants are homogeneous. Also known as mass marketing.
• Differentiated marketing – developing a different marketing mix for each selected segment to accommodate their varied needs and wants. Also known as selective marketing.

Market positioning

Market positioning – creating consumer perceptions of the company’s product or brand compared to competing products based on certain attributes.

• Take the iPhone product, for example. Compared to other smartphones, consumers perceive the iPhone as an innovative product at a premium price. In this case, product innovativeness and price are attributes consumers use to rank or classify products in the market.

Building a market position requires several steps, such as identifying the product’s competitive advantages such as brand image, company image, and unique selling proposition, highlighting it to the target market, and using the appropriate marketing mix to implement the desired positioning.

• Corporate image – the consumer’s perception of a company, usually associated with the brand and its own products.
• Unique selling proposition or unique selling point – what makes a product valuable and different from competitors’ products, motivating consumers to buy.

Product positioning

Product positioning – creating a perception of a product or brand in relation to other products in the market. It is similar to market positioning but slightly different. Market positioning may not only be for one company’s product but for all products or for the company’s image, depending on the company’s branding strategy.

• The company usually describes the product’s position vs. competitor’s products in a matrix, called a perception map or position map. It uses two variables like price vs. quality, comfort vs. staying power, or taste vs. health. All products in the market are then plotted into a two-dimensional matrix according to the two selected variables.

Let’s say we use the attributes of quality and price. Products can then be divided into the following four groups:

• Cowboy products: low quality and high price
• Economic products: low quality and low price
• Bargain products: high quality and low price
• Premium products: high quality and high price

Creating a perception map is important to identify gaps in the product portfolio or in the market. Thus, companies can fill it by launching new products or existing products but are currently being marketed to other segments.

Sales forecast

Sales forecast – predicting future sales, which is important for better managing cash flow, production, inventory, and financing. There are various forecasting techniques used:

• Quantitative forecasting techniques – relying on data to predict the future, using time series statistical models such as ARIMA and panel data analysis.
• Qualitative forecasting techniques – rely on personal judgment, such as the Delphi technique, which utilizes the judgment of independent experts.

Both techniques can also be applied to forecast market demand and then use the results to derive sales forecasts. Assume, forecasting results show market demand to increase 10% to USD100 million next year. Meanwhile, management targets the market share to remain unchanged, at around 15%. From the two data, we know that the company’s sales are estimated at USD15 million.

Estimating market demand should be adjusted according to historical data patterns, which could be:

• Seasonal demand – demand varies within a year due to seasonal effects such as demand for hotels in tourism locations.
• Random demand – demand does not form a specific pattern.
• Cyclical demand – demand follows/contradicts the economic cycle.

Market research

Market research systematically investigates a market, perhaps focusing on consumer behavior, demand, or market competition. It is one of the important stages in marketing planning and is useful for reducing risk, predicting future trends, and identifying what the market needs and wants.

Sampling

Sampling is about selecting the target respondent (sample) from the total population studied. That’s cheaper than having to research the entire population. The methods fall into two groups:

• Random sampling – each sample has an equal chance of being selected. It can be simple random sampling, systematic random sampling, stratified random sampling, cluster random sampling, and multi-stage random sampling.
• Non-random sampling – each sample has a different chance of being selected. Examples are quota sampling, judgmental sampling, convenience sampling, and snowball sampling.

Primary research vs. secondary research

Primary research relies on data from original sources directly. Also known as field research.

It is possible via:

• Survey – using a questionnaire to question respondents, either through open-ended questions or closed-ended questions.
• Observation – for example, observing foot traffic, queue times, or buying when visiting a store. It doesn’t involve direct contact with the respondent.
• Focus groups – gather several people to discuss or be asked questions about a particular topic.
• Interview – similar to a survey but without a questionnaire.

Primary research is expensive and time-consuming. However, it is more customizable and can dig deeper into the information.

Secondary research relies on data from non-original sources. In other words, researchers use other people’s data. Also called research on the table (desk research).

Data can come from:

• Research company report
• Company report
• Government publication
• Academic journals of educational or research institutions
• Media articles

Secondary research is cheap and fast. However, it does not allow us to dig deeper into the topic or information. The accuracy of the data may also be questionable (at least depending on where the data comes from, whether it is from a competent institution or not), and it may not be real-time (it takes time between collecting and publishing the data).

Qualitative research vs. quantitative

Qualitative research relies on non-numeric data such as text, video, or audio recordings. It is usually used to understand motivation, behavior, perception through focus groups, expert panels, and in-depth interviews with credible individuals.

Quantitative research relies on numerical data. It usually requires a larger sample size to increase generalization. To draw conclusions, we can apply several statistical techniques.

Product

A product is anything offered and used to satisfy a need or want. It can be:

• Tangible products are called goods. It may be for final use or for further processing. Examples are various consumer goods, raw materials, and capital goods.
• Intangible products are called services. It is an activity related to helping, doing something, or providing a solution to another party. It can be consumer services or business services.

Four service characteristics:

• Intangibility – describes the non-physical nature of the service. You can’t see or feel it. You will find it difficult to judge its benefits using any real evidence.
• Inseparability – services are consumed and produced at the same time. When you buy a plane ticket, you will enjoy the service when you board the plane.
• Heterogeneity – how difficult it is to ensure consistency. The customer experience of the service is unique, where different people will have different experiences for the same service. Therefore, companies must ensure they provide the best for each service provided.
• Perishability – the inability of a service to be stored for future use. The service you receive when you interact with a seller or its offer, either directly or indirectly. You receive health consulting services when discussing with a consultant. The retail service you receive when you visit the store.

The product must have added value, either functional value or emotional value. Functional value is related to its usefulness to satisfy consumer needs and wants. Emotional value represents the attractiveness of emotions such as pride or happiness when using them.

Some terms for product categories:

• Homogeneous products – without unique characteristics. Several homogeneous products satisfy buyers in the same way.
• Mass products – sold to the entire population, assuming customers have the same needs and tastes.
• Standardized products – uniformly manufactured, having similar specifications.
• Differentiated products – made unique where consumers perceive them to have a different value from competing products; this could be due to quality, performance, packaging, or even branding.

Product strategy

Product strategy is a set of decisions and efforts to make a profit from selling a product. It considers the target market and other marketing mixes such as price, place, and promotion.

Ansoff Matrix

The Ansoff matrix lays out alternative strategies for growing a business considering the product and target market. It classifies growth strategies into four:

• Market penetration – concentrating on existing products and markets. The company focuses on improving the market position of existing products, for example, with heavy promotions.
• Product development – making new products available in existing markets. It involves generating new ideas and concepts to design new products or to modify existing products.
• Market development – targeting new markets to market existing products, for example, by selling overseas or targeting other market segments.
• Diversification – releasing new products into new markets. It can target businesses related to existing ones (concentric diversification) or completely different (conglomerate diversification).

Consumer products

Consumer products are sold directly to consumers and for end-use. There are various groups and names for consumer products.

Fast-moving consumer goods (FMCG) – products in which stocks on retail shelves run out quickly. They are usually inexpensive and are used for daily necessities such as soap and shampoo.

Consumer perishables – products with a limited shelf life, and usually, the demand is seasonal. Therefore, they may be sold at a higher price than FMCG.

Consumer non-durable goods – products with short economic benefits, usually less than three years. FMCG and consumer perishables are examples.

Consumer durable goods – have a long economic useful life, more than three years. So, they are relatively expensive and require more consideration when buying.

Convenience products – purchased and consumed regularly and available at wholesale or retail.

• Necessities – to fulfill our basic needs such as food and drink.
• Impulse goods – purchased without prior planning, such as candy on display near the cash register.

Shopping goods – higher priced than convenience goods, purchased less often, require more consideration and budget planning. Examples are clothing and furniture.

Specialty products – are unique, and often, consumers are willing to spend time and effort to acquire them. Examples such as jewelry and luxury cars.

Unsought products – previously unthinkable by consumers to buy. The desire to buy arises, for example, because of fear of significant losses. An example is insurance products.

Low involvement products – take less time to decide on a purchase.

High involvement products – need more time to decide when buying.

White goods – household appliances such as freezers, refrigerators, stoves, and washing machines. In the past, they were white, hence, so named.

Brown goods – relatively light electronic devices such as radios, computers, and digital media players. The naming is similar to the white stuff.

Industrial goods

Industrial goods are purchased by businesses or organizations instead of consumers. They may be for further processing, such as raw materials and semi-finished goods. Or, they are for end-use, such as various office items. Or, they are used to assist the production process. Also known as industrial products or business products.

• Raw materials – natural resources without further processing. Examples are iron ore and crude oil.
• Semi-finished goods – used to produce other goods, not for final consumption. Also called intermediate goods.
• Capital goods – the final product used in the production process. Unlike raw materials and semi-finished goods, they are not part of the output. Examples are machinery and equipment.

Product life cycle

Product life cycle – the phases a product goes through from its development to its disappearance from the market. The phase classification is based on its sales growth over time, which has implications for profitability, competition, and company strategy. Each stage also requires a different marketing mix.

Research and development stage – the initial stage includes ideation, design, prototype development, to product testing before being sold to the market. This phase requires significant resources, both time and money. In the latter part of this phase, a company usually releases alpha and beta products for testing.

Launch or introduction stage – the product is first sold to the market and is usually priced high to cover high development costs. If it is a product invention, competition has not arisen because only one company is producing. However, the company bears heavy marketing costs because it has to educate consumers. Most of them are not aware of or are reluctant to take risks by trying new products.

• First mover – the first company to enter the market with its new product.

Growth stage – sales increase significantly as more people use the product, supported by better awareness and distribution channels. Competitors began to emerge. The company began to earn high profits, for example, thanks to better economies of scale. Competition begins to attract new players into the market

• Second mover – the company after the first mover is present in the market.
• Late mover – can refer to the second mover or the company after it.

Mature or saturation stage – sales are still growing but slower than before. Almost all consumers have used the goods. Thus, growth is mostly supported by demand for replacement. Competition is getting tougher because to grow sales, companies must win customers from competitors.

Decline stage – sales fall as demand changes, new technology, or new models. As a result, the company began to extract as much cash as possible and reinvested it into other products.

Extension strategy

The extension strategy is aimed at extending product life and maximizing cash extracted. It is possible via:

• Product redesign, for example, by adding special features or launching a limited edition.
• Repackaging, for example, new colors, materials, or other physical elements.
• Promotions and lower prices to attract customers to keep buying.

Boston Consulting Group Matrix

The Boston Consulting Group matrix (or BCG matrix) is a marketing planning tool for classifying product portfolios based on market share and market growth. It is useful for managing portfolios, determining resource allocation, and determining the right strategy.

The company’s products are plotted into a matrix that uses market growth and product market share variables. The matrix divides them into four categories:

• Question marks – low market share in high-growth markets. They need more investment to get a higher market share. Companies may choose to invest more money to build their market position. Or, the company pulls them from the market and uses resources to help the star category. Also known as a problem child.
• Stars – high market share in high growth markets. They need support to strengthen or at least maintain their market position until the market reaches maturity. However, the investment in them is not as significant as the question mark. If successful, they become the next cash cow.
• Cash cows – high market share in low growth markets. The company is dominant and difficult to surpass by competitors because the market has matured, where growth has been low. They do not require further investment, although perhaps an extension strategy can be used to delay the decline. Companies extract cash from them, using it to subsidize other product categories, most notably star.
• Dogs -low market share in low growth markets. The market has matured; it is impossible to increase market share and improve market position. They tie up cash (capital); therefore, the company should either withdraw or reposition them.

Brand

Brand – a name, logo, term, sign, symbol or design, or a combination of them to identify a company’s products and act as a differentiator from competitors’ products. They should be easy to remember, recognize, and portray the desired image. In addition, the brand image should generate positive associations with the product because it conveys credibility, quality, and satisfaction.

• Brand name – the letter or word part of a brand – and as such, can be pronounced – to identify a company’s products.
• Trademarks – the exclusive right to use the symbols, designs, and brand names. It is registered with the government, used by manufacturers to identify and differentiate its products from competitors, and protects against unauthorized use.

Branding

Branding is an effort to build consumer perceptions of a company’s brand. Suppose it is successful and the company has a strong brand image. In that case, it becomes a valuable intangible asset to make more money.

Some aspects of branding:

Brand awareness – about the extent to which consumers recognize a brand. Creating brand awareness is the initial key step to building a brand image and to being able to successfully promote a product.

Brand development – the company’s efforts to build and strengthen its brand image. A strong brand is important in the extension strategy because it slows down the decline in demand. It is also important when a company launches a new product, increasing the chances of being accepted by consumers in the market.

Brand preference – the degree to which consumers prefer one brand over others. If the company successfully builds a brand, consumers will tend to prefer it over competing brands.

Brand loyalty – how much consumers like a brand. Loyal customers will buy products with the same brand over and over again.

Brand value – the value added by the brand to the product by increasing its emotional value. It makes customers willing to pay a more premium and loyal price for a well-known brand they prefer than for competing generic products.

Branding strategy:

• Manufacturer’s brand – the company produces its own product, labels it with the brand, and then sells it.
• Own-label brand – the company outsources production to another party but labels it and sells it under its brand. Also known as a private label.
• Product brand – the company assigns a different brand name to each product it owns. Also known as individual brands.
• Family brand – the company uses the same brand name for several related products but serves different needs. Also known as the umbrella brand.
• Corporate brand – the company uses the company name as the brand name for its products. Similar to family brands, but their successes and failures affect the product and company images.

Packaging

Packaging – about using the outer material to protect the product inside. It involves decisions such as material selection, shape design, color, writing used on any wrapper, box, can, or container.

Packaging makes products easier, more efficient, and safer to transport before they reach the final consumer. In addition, it also acts as a differentiation, increasing the appeal and promoting what is inside.

Price

Price represents the monetary value of a product. Pricing decisions are strategic. If it is lower than the consumer’s perceived value, they are dissatisfied and will likely not buy again. Conversely, if it is higher than the perceived value, they are likely to buy again at a later date.

Setting prices takes several considerations into account, including production costs, profit targets, competition, and how much customers are willing to pay.

Pricing strategy

Pricing strategy is about how the company determines the selling price. We can classify them into three groups based on the factors considered.

• Cost-based pricing
• Competition-based pricing
• Market-based pricing

Cost-based pricing

Cost-based pricing uses the variable production costs as the main consideration factor when determining the selling price. The example is:

• Cost-plus pricing – adds a certain percentage (markup) to the average cost per unit. It ensures a product will make a contribution to profits.
• Marginal-cost pricing – uses marginal cost rather than the average cost per unit.

Competition-based pricing

Competition-based pricing uses competition factors or competitor prices as the main consideration in setting the selling price.

• Price leadership – the market leader sets the price, then other companies follow, usually to avoid direct competition with the market leader.
• Predatory pricing – setting very low prices, selling at a loss in the short term to drive out competitors and build barriers to entry. Also known as destroyer pricing.
• Going-rate pricing – setting a price around the average price of other products in the market, usually applied to homogeneous products such as commodities.

Market-based pricing

Market-based pricing uses market demand factors and their characteristics – such as consumer psychology, seasonal trends, and consumer willingness to pay – to set prices.

• Penetration pricing – charging a price to entice people to buy, usually because the company is a newcomer and does not yet have a customer base. So, to generate sales when operating in a new market, they charge low prices.
• Price skimming or market skimming – setting a high price at first, then lowering it. It is usually adopted for new innovative products where there has never been. High prices contribute to covering expensive development and consumer education costs.
• Price discrimination – charging different prices for the same product to different consumers. It is usually based on each customer’s reservation price, the highest price a customer is willing to pay. Or, it is based on how much consumers like the product, indicated by how much they buy.
• Loss leader – sets a low price, at a loss, to encourage consumers to buy other, higher-margin products. This is usually done by retail stores, where prices are low to attract consumers to visit the store, hoping they will buy other, more expensive products.
• Razor-and-blades pricing – similar to a loss leader but applied to two complementary products: shaving handles and shaving blades.
• Psychological pricing – setting a price to make a product look cheaper than it should be. For example, the company charges $2.99, which seems cheaper than $3.
• Promotional pricing – offering discounts, rebates, promotions at certain times to attract more purchases.

Promotion

Promotion is about communicating to a market aimed at selling a product or brand. It serves to inform, persuade, and remind consumers of the company’s products.

• Promotional strategy – a systematic plan of action designed to achieve promotional objectives. It utilizes an optimal promotional mix, including advertising, personal selling, sales promotion, and public relations.

How successful the promotion is can be measured using the AIDA factor. It is a cognitive stage in the buying process.

• Attention: attracting the attention of consumers
• Interest: create interest in the product
• Desire: encourage the desire to buy
• Action: generate action by buying the product

Promotion method

Two categories of promotions:

• Above-the-line promotion – promotion using mass media, for example advertising through radio, television, newspapers, magazines, internet, and outdoor. It reaches a wide audience but is also expensive.
• Below-the-line promotion – non-mass media promotion focused on the target market. For example, through sales promotion, direct selling, public relations, direct mailing, and sponsorship.

Promotion mix

Promotion mix refers to the various methods used to promote a product. It includes:

• Advertising – usually by paying an advertising agency to deliver a message about the product.
• Sales promotion – attempts to encourage customers to buy now rather than later by combining techniques such as free gifts, coupons, samples, buy one get one free, or point of sale display design.
• Personal selling – promotion through salespeople to contact consumers directly and convince them to buy the product.
• Public relations – promotion to build good relations and image with the public, for example, by utilizing press conferences and press releases.
• Merchandising – promotions to influence consumers at the point of sale. It aims to encourage sales of a product and accelerate the rate of inventory turnover.
• Sponsorship – providing support or resources for a specific activity or event, such as a sport.
• Direct mail – uses the conventional postal system to send promotional materials directly to consumers’ home addresses and try to persuade them to buy the products offered.

Guerrilla marketing

Guerrilla marketing is a marketing tactic with unusual but effective interactions to promote a product. This method is cost-effective and low-risk and helps engage in networking with customers and other potential business partners.

• Ambient advertising – placing advertisements on unusual objects or places such as in toilets and on buses.
• Viral marketing – an internet marketing strategy to create a word-of-mouth effect to support marketing efforts and goals. Companies develop messages to encourage consumers to share them with others online, such as through social media, online conversation platforms, and email. Messages can be audio, video, or written information. It spreads dramatically and quickly, creating high interest and sales opportunities for a product or service.

Place

Place is about where to sell the product and how the product gets to the customer. So, it also concerns the decision about the chosen distribution channel. The channel chosen determines how quickly the product reaches the customer, how much control the company has, and its costs.

• Zero-level distribution – the company sells products directly to customers without involving intermediaries. This strategy is more expensive and requires more effort, which may not be a company’s core competency. But, now, e-commerce is making it simpler, more feasible, and cost-effective to reach a wider market.
• One-level distribution – involves producers to retailers and then to consumers. This strategy can reach more markets and is relatively faster because it relies on many retailers. However, because they rely on third parties (retailers), the company has less control over the products it sells.
• Two-level distribution – involves the producer to the wholesaler, then to the retailer, and finally to the consumer. Products take longer to reach consumers because they involve more intermediaries. In addition, the control is also low.

Intermediaries

Intermediaries are those who are involved in getting the product from the producer to the consumer. They include:

• Wholesalers – buy products in bulk from manufacturers, break them down into smaller units and sell them to smaller wholesalers or retailers.
• Agents – independent intermediaries with exclusive rights to sell products in a region.
• Distributors – independent specialist intermediaries who trade products from only a few manufacturers.
• Retailers – those who sell directly to customers. They buy products for resale at a margin for their services.
• Independent retailer – a retailer is owned by a particular party and does not operate as part of a larger retail chain. For example, you open a grocery store to serve local residents.
• Chain stores – various stores owned and operated by one company.
• Supermarkets – offering a wide range of food, drinks, and products; operate on a self-service basis; usually buy products from other manufacturers, cut wholesale.
• Department store – a large retail organization characterized by a broad product mix and organized into separate departments. Each department sells a wide variety of items, from clothing, cosmetics to electronics.
• Hypermarket – combines a grocery store and a department store.

People

People refer to those who work in the company, assisting in carrying out the day-to-day operations. In the service industry, their contribution is significant because they deal directly with customers.

• Customer relation – how a company engages and deals with its customers, which is important for enhancing the customer experience and fostering long-term relationships.

Service businesses need quality people to deal with customers. They can positively affect the company’s image and reputation, encouraging customers to reuse its services in the future. For this reason, companies should recruit and develop employees appropriately.

There are many cases where employees have to deal directly with customers.

• Take, for example, personal selling. Consumers buy when the salesperson demonstrates an attractive attitude, skills, and appearance. They not only persuade consumers to order products, but they also have to be friendly, trying to explore consumer needs and explain how the company’s products can satisfy their needs.
• Another example is customer service. Employees provide expertise and technical support to customers. The way they handle complaints can affect the company’s reputation. If done well, it adds value and builds the customer’s emotional attachment to the company’s services in the future.

Process

A process is a procedure or something done by a company to deliver a product or provide a service to a customer. It is important because it affects the effectiveness and efficiency of the company’s operations.

Providing services requires clear and efficient support processes. That’s to avoid confusion and to deliver consistent service. Business processes such as payment methods, waiting times, customer complaint services, and after-sales services determine whether or not customers are satisfied with the company’s services.

Physical evidence

Physical evidence is a tangible aspect when the company is providing services to customers. It affects the customers’ emotions when they are using the company’s services. Often, potential customers make judgments about a service based on physical evidence before even using it at all.

• For example, when consumers want to choose a restaurant, they look at aspects such as interior design, atmosphere, and other physical environments. If the restaurant is dirty, for example, they are reluctant to come.

Companies must design physical aspects to influence customer perceptions, including those related to the physical environment, atmosphere, layout, consistency, signs, and elements such as color, music, or sound.

International marketing

International marketing means selling and marketing the company’s products abroad. It can take many business models, of which export is the simplest.

Now, the company is facing domestic and foreign competitors, at least from imported products. Globalization makes economies between countries more interconnected. Goods and services easily enter the domestic market because trade barriers are decreasing. In addition, investment is also flowing more freely than before due to lower restrictions, bringing some foreign players to operate in the home market.

• But, on the other hand, globalization also brings many opportunities. Companies can access a much more significant market than the domestic market. In addition, they can also save costs by outsourcing or moving their production facilities to locations closer to raw material sources or countries where wages are lower.

International market entry mode

There are various options for entering the international market, each with varying risks and potential returns.

• Exporting – the company sells directly to overseas buyers. It is relatively inexpensive but vulnerable to changes in trade policies such as tariffs and import quotas. But, now, e-commerce makes it easier to access consumers overseas.
• Direct investment – the company builds an operating facility (greenfield project) or acquires an existing company in a foreign market. This strategy is expensive and vulnerable to business policies in the destination country, but the company has control over its assets.
• Joint ventures – companies cooperate with other companies to invest in new projects abroad. They share risks with each other while sharing profits, resources, and knowledge.
• Strategic alliances – when two or more companies work together, share resources and expertise to achieve common business goals. Such cooperation can be joint ventures, marketing alliances, co-production arrangements, and technology transfers.
• Franchising – a company sells the rights to use its name, reputation, and business systems to foreigners in exchange for royalties or fees.
• Licensing – the company sells the rights to use a manufacturing technology, process, or design to a foreign party.

Strategy to sell goods in the international market

Pan-global strategy – the company markets standard products worldwide. The company considers all consumers to have homogeneous needs and thus treats the worldwide market as a single market. A strong global brand is among the keys to the success of this strategy.

The pan-global strategy allows companies to gain more significant economies of scale. But, the company is at risk, namely a low acceptance for not adapting its offerings to local tastes and cultures.

• Global brand – a brand used by a company to sell its products worldwide. Strong global brands enjoy marketing economies of scale and competitive advantage and easily enter other overseas markets.

Glocalization strategy – stands for global localization. The company markets its products worldwide by adopting different marketing mixes adapted to the conditions in each country. Sometimes called a localization strategy.

This strategy allows for more diversification, is more responsive to local customer tastes and government policies, is more acceptable to customers, and generates more ideas for innovation. However, this strategy is more expensive and more complex.

E-commerce

Electronic commerce, abbreviated as e-commerce, is about doing business and conducting commercial transactions electronically. Also called digital marketing or internet marketing.

E-commerce has a significant impact on doing business, strategy, competition, and marketing mix.

• Higher customization. Companies can dig up more useful information to develop products and meet the specific needs of consumers.
• More intense competition. They find it easier to compare products before shopping without having to visit a specific store. In addition, consumers have more access to products, not only local but also foreign products. These all increase the bargaining position of customers and force companies to compete to deliver superior products.
• More transparent selling price. Consumers can more easily compare product prices. Some sites also provide price comparison services.
• Cutting intermediary costs. Consumers can place an order directly from the company without having to buy products from retailers or agents. Finally, shorter distribution channels reduce operating costs.
• Broader market reach. Companies reach not only local but also global consumers more easily.
• Easier promotion. Companies can promote faster and cheaper through online channels and more interactively through features such as videos.

E-commerce models

Business to Business (B2B) – transactions between businesses and other businesses. It is the marketing of goods and services by one organization to another through the internet medium. As a result, businesses can integrate information technology systems, supply chain purchasing, stock holding, and distribution; they can be managed more efficiently.

Business to Consumer (B2C) – businesses sell directly to customers and possibly, provide other services as needed. When shopping, you can do all the activities on the web, similar to when you come to a retail store. You visit a business website, browse product information pages, select a product, add it to a virtual cart, and make online payments. If you are a new customer, you enter your address details and select one of the shipping options. Then, you just wait for the goods to arrive at your doorstep.

Consumer to Consumer (C2C) – transactions or trades take place between individuals with other individuals. An example is the peers-to-peers lending platform, where you can lend money to other individuals.