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Marketing Techniques used by Tesco and Apple
Transcript of Marketing Techniques used by Tesco and Apple
- Kirran Khan -
- Business Studies Unit 3 . 1 -
- March 2014 -
Case Study 1 - Apple Inc.
What is Marketing?
The management process through which goods and services move from concept to the customer. Marketing includes the coordination of four elements called the 4 P's of marketing. These are:
- Product - Place
- Price - Promotion
What are the 4P's of marketing?
"The 4P's of marketing" is a general phrase used to describe the different kinds of choices organisations have to make in the whole process of bringing a product or service to market.
Basically, the 4P's are about putting the right product in the right place, at the right price, at the right time.
What is a product?
A product is a good that is sold to customers or other businesses. Customers buy a product to meet a need. This means the firm must concentrate on making products that best meet customer requirements.
A business needs to choose the function, appearance and cost most likely to make a product appeal to the target market and stand out from the competition. This is called product differentiation.
Methods of Product Differentiation
- Establishing a strong brand image (personality) for a
good or service.
- Making the unique selling point (USP) of a good or service
- Other competitive factors, such as a product having a better location, design, appearance or price than rivals.
A product portfolio is the range of products sold by a company. Examples of this include Apple's iPhone and iPod and Tesco's 'Finest' range of products. A product portfolio can be analysed using The Boston Matrix.
What is a product life cycle?
It describes the stages a product goes through from when it was first thought of until it finally is removed from the market. Not all products reach this final stage. Some continue to grow and others rise and fall.
The product life cycle diagram below shows that four stages exist in the ‘working life’ of most products. These are:
Launch - Growth - Maturity - Decline
For the purpose of this presentation, I have chosen to use Apple Inc and Tesco PLC as case studies.
During this presentation, I will explain what marketing is as well as how it can affect Apple and Tesco so that I can work towards the P1 of Unit 3 in Business Studies which is called 'Marketing'.
Firms think very carefully about the price to charge for their products. There are a number of factors to take into account when reaching a pricing decision:
Customers - Competitors - Costs.
There are times when businesses are willing to set the price of a product below unit cost. They use this loss leader strategy to gain sales and market share.
An example of the 'loss leader' strategy is the 'Bugatti Veyron' supercar. The car is made by the VW group and uses 1000 BHP to reach speeds of up to 253 mph. The car sells for around £1 million. The technology used in the car is so advanced that the VW group spend approxiamately £7.5 million on building just one car netting them an estimated loss of £6.25 million on each car they sell.
Pricing New Products
A business can choose between two pricing tactics when launching a new product:
- Penetration pricing means setting a relatively low price to boost sales. It is often used when a new product is launched, or if the firm’s main objective is growth.
- Price skimming means setting a relatively high price to boost profits. It is often used by well-known businesses launching new, high quality,
What is meant by 'place' in marketing?
Place is the point where products or services are made available to customers. A business has to decide on the most cost-effective way to make their products easily available to customers.
This involves selecting the best channel of distribution. Potential methods include using:
Telesales and mail order.
Internet selling or e-commerce.
What is meant by 'promotion' in marketing?
Promotion refers to the methods used by a business to make customers aware of a specific product or product range. Advertising is just one of the means a business can use to create publicity. Businesses create an overall promotional mix by putting together a combination of the following strategies:
Next, I will describe the effects of the marketing techniques that have just been covered and how they impact on Apple Inc.
Case Study 2 - Tesco PLC
Apple Inc. was established on April 1st, 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne to sell the Apple I personal computer kit in Cupertino, California. In February 2014, Apple was named as the 'most important global company' by Forbes.com and in 2013 Apple Inc. generated $ 171 billion (approx. £102 billion)
Why do millions of people buy Apple's products?
From their humble begginnings in Steve Job's garage, Apple today are worth over £100 billion. This is because they use marketing to their advantage when designing a product. Apple products are all:
- Made to a High Quality - Built well from robust materials
- Designing with a clear house style - They are identifiable because of the logo on the back of all products
- Simple in their design - To appeal to a mass market
- Practical - Apple products are easy to use and very good for working on
Product Life Cycle
Every year since 2007, in September, Apple have released a new version (either a new model or an 'S' model) of their most popular product: the iPhone. They do this because over summer, iPhone sales begin to slightly decrease, so Apple quickly insert a new model into the market to gain an even larger market share and to boost revenue. This same technique is used for every Apple product range from the early Macintosh computers right through to the iPad.
A product life cycle diagram for the Apple iPhone
Product Line and Product Extension
What is a product line? - A product line is a series of products that are designed and made by a company and have a similar house style that is identifiable to a customer. For Apple this would be the iPhone, iPod, and iPad.
What is a product extension? - A new range of products that allow a company to branch out and appeal to a larger market in order to achieve a larger market share and generate more revenue. An example of this would be when Apple bought out Loewe, a Swedish TV company in 2012 so that they could begin production of the Apple Tv range of products.
Product Line: Depth and Width
The depth of a product line is basically the amount of products in a product line so the more extensions made to the product line will result in a larger depth of the product line.
The width of a company is the amount of product lines the company has so if Apple only had one range, for example: the iPhone, they could set up an accessories range for the business and this could be on a different product line.
What are Apple's routes to market?
The term 'routes to market' is used to describe how a company distributes their products to consumers. Apple use four main routes to market. These are:
- Online: through Apple.com
- In Apple stores: there are over 175 apple stores all over Britain
- Through intermeditaries: such as 'Stormfront' in Bury St. Edmunds
- Direct to customers: at technological seminars / trade fairs
How do Apple price their products?
When a new product is released, Apple initially launch it at a high price. Apple price their products very well. They set a high price but instead of this initial high price putting customers off it attracts them as they see it as a luxury to be bought.
Do Apple use techniques such as price skimming?
Price skimming is very prominent in Apple pricing, the have a significantly high price then lower it gradually, then when a new model comes out it lowers even more.
Place: Channels and Distribution
Apple products are available in nearly every country in the world in nearly every shopping format as well.
They not only sell directly to consumers which is a large part of their revenue but also to suppliers such as supermarkets and phone stores such as 'Phones 4 U' and 'car phone warehouse', these are called intermediaries.
How do Apple promote their products?
Every time a new Apple product is launched, the CEO of the company presents the product to the media and to the world
Using celebrity endorsements: In the most recent Apple iPhone advertising campaign promoting and humanizing the phone’s Siri feature, the company decided to recruit the actress Zooey Deschanel and high profiled celebrity, Samuel L. Jackson to showcase Siri’s capabilities. They follow the company’s marketing strategy of depicting “normal people doing amazing things with Apple products”.
Demonstrating how their products are small, light and can fit in someone's pocket.
Next, I will describe the effects of the marketing techniques that were covered at the beginning of this presentation as well as and they impact on the global supermarket chain Tesco.
Tesco was founded in 1919 by Jack Cohen from a market stall in London’s East End. Over the past 95 years their business has grown and they now operate in 12 different countries around the world, employ over 530,000 people and serve tens of millions of customers every week.
Product Life Cycle
Tesco have created two separate ranges of their own products: Tesco Finest and Tesco Everyday Value. Within the ranges there is a wide variety of products. Each product has an individual product life cycle and these fluctuate throughout the year depending on the season. For example: towards Christmas, Tesco sell an increased amount of their own brand mint jelly and mint sauce. After Christmas, if sales don't increase rapidly, Tesco may consider creating a new product to sustain the gap in the market.
Product Line: Depth and Width
Tesco stock over 135,000 different brands of products. However they manufacture 13,000 different products for their Finest and Everyday Value ranges. These products are split up into several categories. Tesco as a business have a very large product 'width' because as they are a global supermarket, they need to stock a vast range of products in order to increase their market share.
What are Tesco's routes to market?
Tesco use a variety of different methods to distribute their massive amount of products to consumers. These include:
Click and Collect Service
How do Tesco price their products?
Tesco price their products by using a combination of the pricing strategies below:
- Value added pricing - Where the price is set in accordance with the customer's perceptions regarding the value of the product. This information could be obtained from the company conducting primary market research in the form of a focus group or questionnaire
- Psychological pricing - Where companies advertise a product as £9.99 as opposed to £10 to entice the consumer in to buy other products. The cpmpany Argos use this techniques to their full advantage by stating that a product that is listed for example at £199.99 is 'under £200'.
Tesco's Channels of Distribution
How do Tesco distribute their products to their millions of customers?
- Tesco have 3,146 stores located in the U.K.
- Their stores are available in 5 different formats:
The Tesco stores are represented on the map by the
How do Tesco promote their products?
How do Tesco advertise?
Advertising is a form of communication used to encourage and increase sales. Tesco use advertising to their advantage because they advertise their 'clubcard' scheme on media platforms such as tv, radio and online . The scheme is advertised so heavily to encourage customers to shop at Tesco as they have a loyalty scheme that uses clubcard points for customers to use as currency for future Tesco purchases.
How do Tesco package their products?
Effective packaging is used by Tesco to:
Present their products in an attractive and desirable way to appeal to the mass market and encourage consumers to purchase them
Explain what the product is / does to allow the customer a more in-depth idea of what they are purchasing
Gain market share - Many shoppers may choose to not shop at large supermarkets like Tesco because of fears of non-recyclable packaging affecting the environment
Thanks for Watching
I will now open up the floor to any questions
Mildenhall College Academy
Presented to Mr Dessent on Thursday 13th March 2014
What is meant by Ansoff's box in marketing?
The Ansoff Growth matrix is another marketing planning tool that helps a business determine its product and market growth strategy.
Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets.
The output from the Ansoff product/market matrix is a series of suggested growth strategies which set the direction for the business strategy.
Tesco's distribution channel is basically a path that products travel through in order to get to customers.
Manufacturer Wholesaler Retailer
Tesco promote their products by advertising to the public with specific reference to major calendar occasions such as:
Mother's Day - Christmas - Easter