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Explain the following: a Production conceptb Product linec Augmented productd Social marketing conceptSome important concepts of marketing are described as following: Production concep
1 Explain the following: (a) Production concept (b) Product line (c) Augmented product (d) Social marketing concept Some important concepts of marketing are described as following: Production concept In economic view: Production is a process of making products and services that meet the social demand In marketing view: Production is activities to create value, benefits for customers and achieve goal of benefit for company Thus, in marketing view, activities which do not bring value and benefits for customers are not production Naturally, production is a process of transferring inputs into outputs in form of products or services Production concept imagines that consumers will prefer using available products that are distributed widely with low price Therefore, marketing management should focus on boosting production as well as distribution This guideline is usually explained by two following reasons: First, when demand of a product exceeds supply, buyers will pay much attention to how they get the product than product quality For example, in developing countries, food demand is very high while supply ability of producers is not enough When that fact happens, producers only focus on increasing production scale to raise the supply and benefits They do not care much about quality Second, when the price of products is high and it needs to be reduced, producers try to raise the quantity to achieve economic effect in scale for expanding the market For instance, in 90s, Vietnamese consumers hardly owned a motorbike although it was made domestically (like Super Dream motorbike); it is because of high price After that, thanks to mass production, the price of motorbike is reduced drastically now and many people can buy it easily 1 Product line Product line is a chain of products which are similar in structure, function, speciality for people to realize This concept means all products are made by one producer This is a group of related products or because they have the same function; they are sold to the same customer group, supplied in the same distribution channels, arranged in the same price, etc For example, sanitary products of Procter & Gamble (P & G) include toothpaste, mouthwash, toothbrush, shampoo, body was, etc with variety kinds Augmented product A product is made in three levels: core product, actual product and augmented product Among them, augmented product impacts positively to purchasing decision of customers owing to extra services and advantages It is the factor to distinguish with products of other competitors Warranty Augmented Service product Actual produc t Core produc t Installation Repairation Values of augmented products include: - Installation: Free support at customer’s house, office… - Repairation: If the product is broken, the company will repair it for customers 2 - Warranty: Supply maintenance in warranty period by repairing or replacing some details of products - Customer service: Supply extra services to support customer demand such as user manual, customer consultant through telephone or website - Product supplement: Increase some product utilities to make main products easy to be used like giving cover with scratch resistant when customers buy Ipad… - Accessibility : Supply products to customers as soon as they have demand by available products, fast delivery, home delivery Social marketing concept Social marketing concept concludes that task of a company is not only to bring customers satisfaction but also to ensure social benefits Social marketing concept requires marketers to balance 3 objects when designing marketing policies: satisfy customers’ demand, contribute to achieve profit goal of the company, ensure social benefits For instance, previously, companies who produce dishwater only focus on products with high detergent, no harm to users’ skin…but now, they pay attention to make biological products which do not cause environmental pollution when dismissing (like biological dishwater of Amway company…) Thus, products will ensure consumers’ profits and social benefits 2 Explain various concepts of marketing with suitable examples INTRODUCE Marketing management is conscious effort to achieve the expected trading result with target market During business, each company may apply different marketing management concepts There are five basic concepts: - Production Concept - Product Concept - Selling Concept - Marketing Concept - Societal Marketing Concept 3 BODY For better understanding, we will analyze the viewpoints of these concepts: Production Concept Product concept advocates focusing on production because customers will have benefits due to availability and wide distribution at low price Therefore, marketing management should focus on boosting production and distribution This concept is often explained by two main reasons: - First, when demand of a product exceeds supply, customers will pay much attention to getting the product to consumers rather than focus on the subtle attributes of product quality Therefore, the company will focus on increasing the scale of production with the desire to increase sales volume and profits - Second, to reduce product price, the company increase the quantity to achieve economic effect in scale and thereby expand the market The disadvantage of this concept is shown clearly when supply is higher than demand At that time, the company will be difficult to sell products; revenue cannot offset the costs Then, the price is low, the ease of shopping will not be the motivation for purchasing decision of customers Product Concept Product concept advocates focusing on products because customers will have the most benefits from the supply of good quality products, unique designs, innovative features Marketing management should focus on effort to get the products improved continuously Positive aspect of this concept is to boost the market to have many good products, but there is a risk of increasing alternative products Therefore, customers will buy alternative products which have better use and benefits For example, Elgin watch company (USA) with product respect concept produced expensive watches with high strength and excellent accuracy However, it failed when consumers changed their mind According to them, watches were just for seeing the time so they did not have to be strong and accurate but the form should be fashionable, convenient and affordable Therefore, they chose watches of other producers Selling Concept 4 It focuses on sales task because consumers will not buy all the products of the company if it lacks the promotion for sales This concept is applied strongly to detect prospective customers by convincing about the benefits of products For example, salesman convinces people to buy unsought goods that people normally do not think of such as insurance, functional food, etc or expensive sought like houses, cars, etc The disadvantage of this concept is making many potential customers be surrounded by too many advertisements, promotions that cause inconvenience and frustrating Marketing Concept Consumers increasingly have had knowledge, experience, understanding, and they have had more choices Besides, thanks to new technologies applied in production, products have increasingly become more diverse Thus, marketing concept was born This concept focuses on the satisfaction of consumers to bring success Therefore, the company only offers products that customers want Marketing concept is based on four main factors which are target markets, customer trends, coordination marketing and profitability Marketing concept imagines that the key to achieve goals of organization is in determining the needs and wants of target markets and distributing satisfaction effectively than competitors This concept quickly becomes the foundation of modern business concept However, its disadvantage is not paying attention to society For example, a company sells chemical insecticides with fast effect that meets customers’ want, but affects environment Social Marketing Concept Previously, companies built marketing decisions based primarily on profits, customer satisfaction but also activities which were detrimental to society such as environmental pollution, depletion of natural resources, influence of consumers’ health, etc This situation required companies to have new viewpoint on marketing Therefore, social marketing concept was born not only to bring customer satisfaction but also to ensure social benefits This is almost a further step than the marketing concept because it is believed that only satisfaction of consumers is not enough, they 5 must focus on protecting the benefits of the whole society also As a result, marketing activities will be significantly better with long-term benefits CONCLUSION In summary, with five marketing concept above, companies can apply to their business activities The choice of a concept depends on factors such as their competitive position, features of products and services, market situation, etc However, the most important thing in modern marketing management trend is to bring the highest satisfaction to customers, profits to companies and social benefits 3 “PLC as a tool for marketing strategy” justify INTRODUCE When selling their products on the market, every company hopes they are sold well and have long-term survival, the sales volumes are always at high level But that is just expectation because in real, markets always change Therefore, the adaptation of products to market demand also varies That fact is reflected in the change of product volume and sales In order to describe this phenomenon, we use the term "Product Life Cycle", abbreviated as PLC BODY Product life cycle is a key concept of marketing It vividly describes four stages in the process of product consumption: Introduction, Growth, Maturity and Decline Product Life Cycle can be illustrated by the following chart: Sales Introduction Growth 6 Decline Time Maturity Companies should be aware of what stage their products are in Since then, they have appropriate marketing plan such as product launches, old product refreshment or simplification and replacement with a new product line PLC is said to be a useful tool to help companies apply much in marketing strategies Specifically as follows: - Introduction Stage : This is the start, products are being put into the market Customers do not know or have much information about the products so the company must spend a lot of money to introduce and advertise products on the market During this stage, if the company builds wrong price strategy, wrong product position, it will create the risk of reducing the value of products Due to small market scale, it cannot have big sales The company must consider strategies if it is not sure about the market Target customers are interested in exploring and experimenting They always want to be the first to use products For example, in the late 90s, Vietnamese motorbike market almost did not know about Chinese motorbike brands When introducing motorbike on Vietnamese market, Chinese companies used "rapid penetration strategy" This strategy used high level of propaganda and low initial price with the aim of penetrating fast and taking market share This strategy was consistent with the market which did not know about the products, was sensitive in price, was potential in competition As a result, Chinese motorbike was successful and achieved large market share on Vietnamese market - Growth Stage : After the success of introduction stage, products come to growth stage Many customers are interested in these products because of the value they bring as well as the effects of marketing activities Products are welcome rapidly by the market When the products prevail and command the market, they will increase profits significantly During this stage, the company can deploy a number of marketing strategies to prolong the rapid growth of the market 7 For instance, after market domination, motorbike production company can implement strategies to improve product quality, enhance new features, new models, or implement penetration strategy into new market segments - Maturity Stage : After growth stage, the demand of products gradually become saturated The number of customers who already have products is at a high level Attractiveness of products is not as big as before Sales is off and begins to reduce gradually over time The appearance of so many competitors may lead to risk of losing market share or the fact that products no longer fit consumers At this stage, companies need to deploy marketing strategies for refreshing products or launching alternative product lines For example: Iphone 4 is saturated, producer deploy Iphone 5 line to replace existing products Sales Iphone 5 Iphone 4 Introduction Growth Maturity Decline Time - Decline Stage : At this time, the products become too familiar and not so attractive Consumers are bored They want new products with more features Purchasing power drops 8 dramatically, cost of sales increases and profits decrease Companies should discount to attract customers at lower segments and achieve revenue in this stage By this stage, companies must decide which marketing strategy they should use: maintenance, dredging harvest or remove CONCLUSION In brief, the selection of appropriate marketing strategy for each stage of product life cycle is to exploit the strength of products and market When launching a product to market, companies need to forecast product life cycle to develop appropriate marketing Try to keep the product not fall into a recession stage through appropriate transition by launching alternative products on time with more advantages which attract target customers the best in order to maximize profits 4 Explain process of selecting the final price: INTRODUCE Price is the only element in the marketing mix to create revenue The price decisions are tied to financial results of a company Price is defined differently: In buyer’s view : Price of a product or service is the amount the buyer must pay to the seller for the right to own, use that product or service In seller’s view : Price of a product or service is the amount of income the seller receive by consuming that product or service It is important to determine the price to make the product or service in the process of circulation on the market can attract customers as well as bring profits or achieve goals For product prices become effective marketing tool in marketing mix, companies have to analyze the impact of factors affecting product pricing After that, they take steps to determine the final price to bring the highest efficiency BODY * Valuation: 9 Companies must establish a price for the first time when developing a new product, introducing into a new distribution channel or geographical area This is usually done as follows: - Identify target market segments for products or services with expectation to achieve and how the products or services approach - Establish the level of price for consumers in the target market segment - Check prices (and costs if possible) of actual or potential competitors - Check price ranges from different levels of quality or product delivery method - Determine profits can be got at each price level - If profits are low, specifications of products need to be changed to reduce the cost and generate the desired profit * The order to set price policies Step 1: Selecting the price objective This is the most important step in setting prices Five major objectives to be the basis for setting the price include: survival of the company, maximum profits, maximum market share, maximum market surfing and product quality assurance The clearer the purpose is, the easier to set prices Companies use price as a strategic tool which will benefit more than companies just let costs or market valuate their products For example, Sony is one of the groups have experience in market surfing They sell at very high price when launching a high technology product to the market for consumer groups which have a lot of money (premium segment) When purchasing power declines in this segment, they will reduce the price to attract buying at lower market segments Step 2: Determining the demand This step is to identify needs Each price level will create different need towards inversely proportional to each other and have different impacts on marketing objectives Most customers are sensitive to the price of essential goods A seller can charge a higher price than competitors and still be able to sell as long as customers can own the lowest cost The process of estimating demand leads to: - Estimate the sensitivity 10 - Estimate and analyse the demand curve - Determine the elasticity of demand under the price Step 3: Estimating Costs Cost of products include: production cost, distribution cost and sales cost This cost depends on each different production levels Step 4: Analyzing competitor’s costs, prices and offers This is an important factor in setting prices This step depends on market demand and the cost of products, the cost of competitors and the available reaction of prices If a product or service is poor, the companies cannot charge as high as competitors On the other hand, they can also change prices to compete with the price of the companies Step 5: Selecting a pricing method There are three valuation methods can be used: + Cost of oriented prices: There are two methods commonly used: - Full cost: Synthesis of the full associated costs; however, this method has weakness that leads to an increase in prices which is opposed to the affordability of potential customers - Direct expense: Only the cost likely to increase as quantity increases helps determine the lowest price to increase profits while reducing prices to increase sales during off-peak hours For example, the power sector discounts electric price in off- peak hours (22:00 to 04: 00) to attract customers to use electricity + Price competitors: - Market valuation: Based largely on price of competitors, a company can calculate equal to, higher or lower than competitors In case of calculating higher price than competitors, a company needs to justify a higher price through delivery schedule or quality of service - Competitive bidding: Buyers will choose the provider with lowest price + Marketing price direction: Price of a product should be set to match the marketing strategy For new products, price depends on location and strategy, while the current products are affected by strategic objectives Step 6: Selecting the final price 11 Be step to narrow the range for company to choose the final price The company should consider additional factors such as psychological price, favorable price and risk, effect of marketing, company policy and the impact of market price For example, the common case is Iphone and Samsung mobile phone Depending on customers’ psychology that they are eager to own the new phones, they sell the actual price higher than initial expectation CONCLUSION In summary, 6 steps above, depending on the specific conditions, companies should have priority for some appropriate steps to achieve their goals in best way Price is only one element of marketing mix that companies use to achieve their marketing goals The process of setting optimum prices will help companies achieve the initial goal, attract target customers of each stage and achieve optimal profits in the long term 5 Explain “direct marketing” and its applicability with examples: INTRODUCE Nowadays, marketing is increasingly focused by companies A product or service can be sold mainly due to marketing activities If products are transported directly from producers to consumers in the past, now a new trend is focused by companies It is a sales technique related to exposuring to potential customers through advertising media such as direct introduction, catalogs, advertising mail, electronic mail, messages, online advertising, etc which we call Direct Marketing BODY According to definition of American Marketing Association, Direct Marketing is interactive marketing system which uses one or more advertising medias to effect a response and be measured everywhere There are two main characteristics to distinguish direct marketing with other types of marketing: - First, it attempts to send messages directly to consumers It uses a form of commercial communication to send customers or companies 12 - The second characteristic is the emphasis on the positive feedback that can be tracked and measured from customers Direct marketers use advertising media to response directly to sell products and learn customers’ information like names and details entered into customer database in order to establish regular relationships For example, airlines, restaurants, hotels, tourism establish close relationships with customers through the form of bonuses for high use frequency They use a database of customers to offer to each customer including existing customers and potential customers Benefits that direct marketing brings to customers is: easy to adapt to an active lifestyle, help save time shopping, know many new items to choose, little obstacles in space, still choose products while moving, etc For companies, direct marketing will be convenient for orders, getting more information of a customer as quickly as possible, aiming for high communication efficiency and low cost Besides, it can ensure the privacy of the company Direct marketing helps using effectively the resources It is suitable with the company has streamlined structure or discrete market segments with specific needs The application of direct marketing: The common forms of marketing: - Direct letter: Send a letter by post to customers in areas or in the list of business management For example, in every year, EVN SPC directly sends letters by post to customers in the list (approximately 10% of total customers) to provide information and receive comments of customers - Email Marketing: Send email to customers… - Door to Door Leaflet Marketing: Used much in Fast Food Industries This way focuses entirely by region - Direct response television marketing : There are two forms of calling: use the screen or the Website Long form is to use a long period of time (about 30 minutes) to describe the product in detail Short form is to use short period of promotional time (about 30 seconds or 1 minute) to clarify the customers’ feedback - Telemarketing: Call by phone directly to communicate with customers as well as help them approach marketers in every distance, time, weather 13 - Couponing: Use print medias to get feedback from readers by cutting out coupons in exchange for the discount For example, restaurants, shops usually attach coupons to magazines and newpapers to invite customers to join the event or buy products which are discounted from 5-10% - Direct selling: Salesmen will meet customers directly For example, life insurance company (Prudential, AIA, etc.) have staffs meet potential customers They advise customers the benefits that insurance products bring; then, they persuade customers to buy products or services For real estate companies, they invite potential customers to visit lands, samples (for project in preparation) or flats (for completed projects) - Online business: Companies establish websites to introduce themselves and sell products online - Integrated Campaigns: This is a combination of all the forms mentioned above to achieve optimum efficiency A company can apply flexibly many forms in an integrated marketing campaign to customers For example, insurance company implements an integrated marketing campaign to Vietnamese customers for introducing to interested customers a new insurance product They combine many forms of marketing on television, in newspapers, on websites for staffs to meet customers directly as well as regularly make phone calls, text messages, send e-mails to customers during the campaign Thereby, they assess the level of customer interest for these products to have appropriate solution CONCLUSION In summary, direct marketing is an effective tool in marketing communication system (marketing communication mix) To succeed in direct marketing, managers must make decisions of goals and target customers, offer strategies, questionnaires of direct marketing elements and measurement of its success Applying marketing tool effectively will contribute to help the company succeed REFERENCE 14 1 Đinh Tiên Minh (2012), Giáo trình Marketing căn bản , Labor Publishing House, Việt Nam 2 Wikipedia library 3 Web : http://www.dankinhte.vn/ 4 Web : http://www.yourarticlelibrary.com/marketing/ 5 Web : http://www.kbmanage.com/concept/direct-marketiing 6 Web : http://www.marketing91.com/pricing/ 15