BSBMKG501B - Identify and Evaluate Marketing Opportunities

Introduction

At the conclusion of this training, you should be able to: • Confirm the needs of a business • Identify needs of the market • Identify marketing opportunities.

There are activities throughout this workbook. These require the Learners to think about their experience or reactions, or to try and complete some research through reading or accessing the Internet. The activities will also help Learners towards completing the Assessment Task by assisting them to think about issues involved in the Assessment Tasks.

Learners will then be asked to complete an Assessment Pack for this unit of competency. The information contained in this workbook will assist them. These tasks can be completed as they work through the workbook, rather than leaving it all to be completed at the end of their study.

Finally, at the end of this workbook you will find a list of useful resources that you may use for further information. You will need to have access to an Internet terminal.

Throughout the text, there are references to websites for further information and for some activities.

This unit contributes to the attainment of National Certificates.

In 1999, Professor Phillip Kotler stated that marketing is the art of finding, developing, and profiting from opportunities. Whenever there is a need and want, there is a potential marketing opportunity.

Professor Kotler’s book, Marketing Management, is the world’s most widely used graduate level textbook in marketing. His other textbook include Principles of Marketing and Management: An Introduction.

Kotler developed new concepts in marketing including ‘atmospherics’, ‘demarketing’, ‘megamarketing, ‘turbomarketing’, and ‘synchromarketing’. He believes that marketing theory needs to go beyond price theory and incorporate the dynamics of innovation, distribution, and promotion systems into analysing, explaining, and predicting economic outcomes.

When a need is identified as the ‘need’ of a group of sufficient size, a marketing opportunity exists. To ensure that a business can perform profitably by satisfying that need, you must make certain that the market need meets the needs of the business.

You must gain an understanding of the business to compare its performance with its goals. Through strategic planning, you can match the organisation’s resources and abilities to market opportunities.

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Marketing opportunities are developed in relation to the vision, mission, and objectives of the organisation. These shape the marketing philosophy of the organisation. It will take research to acquire a number of facts before being able to discover the available and appropriate opportunities.

Marketing information is required and this is gained through the use of Marketing Information Systems (MkIS). In 2007, Jobber described MkIS as a “system in which marketing data is formally gathered, stored, analysed and distributed to managers in accordance with their informational needs on a regular basis”. Kotler, et al.

(2006) defines it more broadly as “people, equipment, and procedures to gather, sort, analyse, evaluate, and distribute needed, timely, and accurate information to marketing decision makers”.

There are great benefits for organisations employing the use of MkIS. Often they are integrated into the internal computerised systems. Information for such a system is often taken from many of the following areas: • Comparative Market Analysis A Comparative Market Analysis (CMA) or comparables analysis is conducted to check current market value before offers to purchase, or establish a selling price. For example, real estate agents will go to sold property records, and select recently sold properties that are similar to the subject property and in the same area. By comparing these properties, and adjusting for feature differences, an estimate of value is made for the subject property.

A thorough CMA would also include comparison to currently listed similar properties in the area. This would allow an assessment of the current competition and might lead to an increase or decrease in the estimate based on the sold properties.

• Competitors’ Performance These look at methods for examining how well the organisational competition is doing. Businesses do not exist in isolation. They work within a framework of competitors, who all have a significant influence on how you run your business.

So, when establishing the market position, an analysis of the competitors is crucial.

When conducting your marketing planning there are a number of roles that competitive analysis can play. These include: • Providing strategies for achieving competitive advantage for your business • Understanding what your competitors are doing well and where they aren’t doing so well • Looking at what the competitors did in the past, what they are doing now and what they will do in the future.

Examining what the Return On Investment (ROI) in marketing may be based on what the competition is doing.

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The strategic importance of analysing and understanding the competition cannot be underestimated. They provide an excellent snapshot of the market and what can be done to exploit their weaknesses.

To examine your competition, it is important to have a solid understanding of exactly who the competition is, as well as: • Whether they are a major threat to the business?

• What their strengths and weaknesses are?

• What marketing activities they undertake and are they successful?

• What is their profile in the market?

• What are their objectives?

• Is their cost structure similar?

• What are the market shares of the main competitors?

• How are they structured?

• What is their distribution system?

• What is their advertising strategy and position profile?

• How satisfied are their consumers?

• What new products do they have planned?

• How effective are their marketing and promotion?

Information can be gained both qualitatively and quantitatively. The level of the data may vary from competitor to competitor depending on just how active they are in the market and how large the competition organisations actually are.

There are generally two (2) main sources of information that any organisation can obtain about its competitors: Primary and Secondary data.

• Primary Data: This is data that you obtain ‘first hand’. That is, it is data that you have actually gathered yourself. This type of data may include an analysis of your competitor’s pricing structure, anecdotes supplied by staff, and having discussions or conducting research with your suppliers and consumers. It is essentially making data yourself, rather then using data that has already been created. Of course, as you can imagine, this is the most expensive and time consuming form of data gathering, as you are actually going through the entire process yourself.

• Market research commissioned by the organisation • Anecdotal discussions • Analyses conducted by the organisation into price, promotion, and distribution strategies of the competitors.

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• Secondary Data: This is sometimes also referred to as recorded data. It is data and information that is already available in your organisation, or through external sources. Because of this, you do not actually need to create the data yourself; rather you have the data ready for analysis. Information such as industry market reports, annual reports, and company brochures are all good sources of external secondary data. Internally, previous market analyses and previous market research reports may provide the basis for projections in to the future and thus can be considered as internal secondary data sources.

• Annual Reports • Price lists • Advertising • Press releases • Tender documents • Patent applications • Government reports • Industry board reports • Market analysis.

The analysis of your competition is generally more qualitative in nature that an analysis of your organisation as a whole. This is because much of the information that you want to obtain about the competition is best obtained in this manner.

Once you have gathered all the information you need to conduct a competitive analysis, it is important that you spend time summarising the data in order to obtain a complete picture of what is happening in the market and where you can find opportunities for your organisation to thrive and threats which may impact your businesses ability to survive.

• Consumer Requirements These are the performance, features, and general characteristics of a product as defined by a consumer translated into measurable terms, and used in the process to ensure compliance with consumers’ needs.

• Legal and Ethical Requirements Business ethics is a form of applied ethics or professional ethics that examines ethical principles, and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organisations.

The range and quantity of business ethical issues reflects the interaction of profit-maximising behaviour with non-economic concerns. Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today, most major corporations promote their commitment to non-economic values under headings such as ethics codes and social responsibility charters. Governments use laws and regulations to point business behaviour in what they perceive to be beneficial directions. Ethics

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implicitly regulates areas and details of behaviour that lie beyond governmental control. The emergence of large corporations with limited relationships and sensitivity to the communities in which they operate accelerated the development of formal ethics regimes.

• Market Share The percentage of the total sales of a given type of product or service that are attributable to a given company.

• Market Trends And Developments • Market Trends

All businesses operate in a business environment full of change. It is very important to run Strenght, Weakness, Opportunities, and Threats (SWOT) analyses on your market to ensure awareness of the strengths and weaknesses of the organisation, and the opportunities and threats any market trends may have.

• Changes in Technology New machines, software, and hardware are all being introduced at a continual and ever increasing rate, so it is vitally important that trends in changing technology are noted. Know what the next big thing is likely to be and attempt to move towards that first.

• Demographic Trends Look for ways in which the overall market place is likely to change. If females aged 15-19 are being targeted, ask how that market is doing. Is it increasing, or decreasing? Look for the ways in which the demographics of the market are likely to change over time and see how this will impact on the business.

• Changes in Supplier Prices Unfortunately, prices are not as stable as they used to be, and a supplier increasing their prices for $1 a unit may pose a significant risk to your business, therefore it is important to look at how supplier price changes could affect the way that your business is run.

• Ecological and Environmental Trends The most modern of trends is towards protecting the environment, with buzzwords like ‘carbon footprints’ and ‘emissions trading’. How will this impact on the way your business does what it does? Does your environmental performance sit well with your market? What changes do you need to make?

• Economic Trends (Local, Regional, National, and International) At the time of writing, the world seems to be in a recession. This means that there is an economic downward spiral happening. Effective businesses should have contingency plans in place to deal with the effects of such an issue.

• Government Activities Look for trends from the Government. Where are interest rates heading?

Deregulation in the market? How will all of this effect exchange rates? How will the way business is done be affected?

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• Sources Of Data There are also a range of proprietary sources of data such as ACORN, PRIZM and MOSAIC. Each of these sources can pinpoint accurate data for your analyses, however, it should be noted that they can be very expensive, and so are mainly used by larger organisations. For more information, see: • PRIZM - http://www.claritas.com/MyBestSegments/Default.jsp • MOSAIC - http://www.tetrad.com/demographics/usa/ags/agsmosaic.html • New and Emerging Markets Globalisation has reduced trade and investment barriers and has connected disparate countries in integrated global supply chains. The term ‘emerging markets’ was coined by economists at the International Finance Corporation (IFC) in 1981, when the group was promoting the first mutual fund investments in developing countries. Since then, references to emerging markets vary widely.

If you ask a conference room full of business executives how they would distinguish emerging markets from developed economies, variants of three (3) stories will likely arise. Emerging markets such as Brazil, China, India, and Russia, some will certainly say, are emerging by virtue of their recent fast economic growth.

The opening of these large economies to global capital, technology, and talent over the past two (2) decades has fundamentally changed their economic and business environments. As a result, the Gross Domestic Product (GDP) growth rates of these countries have dramatically outpaced those of more developed economies, lifting millions out of poverty and creating new middle classes and creating vast new markets for consumer products and services. Large, lowcost, and increasingly educated labour pools, meanwhile, give these markets tremendous competitive advantage in production, and information technology is enabling companies to exploit labour in these markets in unique ways.

• Profitability Profit is described as the ability of a company to earn a profit. It is a relative measure of success for a business.

To work out profitability, profitability ratios are used. These are measures that indicate how well a firm is performing in terms of its ability to generate profit.

Formulae of some of the common ratios are as follows: 1. Book Value Per share: Total common (ordinary) equity ÷ Number of common (ordinary) shares issued and outstanding.

2. Dividends Per Share: Dividends paid ÷ Number of common (ordinary) shares issued and outstanding.

3. Earnings Per Share: (Net income - preferred stock or preference share interest) ÷ Number of common (ordinary) shares issued and outstanding.

4. Gross Profit Percentage: Total cost of sales in a period x 100 ÷ Total sales revenue for that period.

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5. Net Income Percentage: Net income for a period x 100 ÷ Total sales revenue for that period.

6. Operating Profit Percentage: Earnings before interest and taxes (EBIT) in a period x 100 ÷ Total sales revenue in the same period.

7. Return On Common Equity: (Net income for a period - Dividends) ÷ (Common equity - Preferred stock).

8. Return On Investment: Net income ÷ Total assets.

• Sales Figures

While cash flow and revenue projections are the primary measures to maintaining control of the organisational finances, sales figures are also very important. The sales figures drive many of the other figures. Sales forecasting in particular is a key element in the business plan if changes are being made within an existing business.

Figures are taken from previous years to estimate sales. Sales forecasting needs to be based on research and data. Information on sales figures for a new business can often be obtained through industry associations and other comparable businesses. This research will help to determine revenue potential and pricing.

Using Sales Forecasting A new business with no previous sales is difficult to forecast. Usually, figures will be ‘guesstimated’ by trying to get a feel for what the local marketplace will bear.

This is done by studying the target industry, finding out what people are willing to buy and examining the competition. Check with State and Federal agencies for relevant data. Estimate market share in terms of consumer numbers; calculate how often they will buy per year; and project the average dollar amount of each purchase. Multiply those three (3) numbers to project sales volume for each target market.

Try to develop three (3) different sales projections: 1. Best-case scenario 2. Worst-case scenario 3. The ‘in between’.

These investigations are undertaken to find which area is most likely to provide an advantage for the organisation through entering a new or expanded area of operation in line with the original intentions of the organisation as detailed in the vision, mission, and objectives.

Networking provides a number of useful resources for business opportunities and many can be accessed through the website find outer Australia: •

h t t p : / / w w w. f i n d o u t e r. c o m / O c e a n i a / A u s t r a l i a / B u s i n e s s - a n d - E c o n o m y / Business-Associations

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Information can be more effectively analysed broadly in the early stages of research by entering it in a situational analysis such as SWOT. There is more information about SWOT in Element 2.

Seek the business needs using the strategic business planning documents such as the vision, mission, and goals of the organisation. Align these needs with the marketing opportunities having been revealed and appear complimentary to meeting those stated needs.

Marketing opportunities may include but are not limited to: • Business-To-Business Marketing • Direct Marketing • Ideas Marketing • Marketing of Goods • Public Sector Marketing • Services Marketing • Telemarketing.

Opportunities may be in the form of: • New Concepts These are completely new products that have been developed through innovation and which can sometimes create new markets. This is often in response to consumer feedback.

• Additions to Existing Product Lines This is when new products are created to supplement established product lines. For example, a range of cars may have a newer small model introduced or a line of carbonated drinks may have an additional flavour added. It is intended to serving consumers who require different sizes or flavours.

• Modifications of Existing Products Existing products may be modified to meet consumer needs, such as improved performance.

• New markets may include: • E-commerce • Export markets • Segments of the market not currently penetrated.

However, all ideas must be researched extensively before a final decision is made. Senior executives, marketing professionals, and often stakeholders will gather to consider information and make the decision.

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Researching Potential New Markets Market research used well can be used as insurance or as an effective tool to determine consumer needs and to obtain information on market potential. When used correctly, it can minimise the risk of failure. However, it must be remembered that market research is not an exact science – considerable experience and insight is necessary to interpret data and see the opportunities.

Almost 90% of new product research is focused on modifications to products or services rather than on developing entirely new ones. This may be due to the better acceptance by consumers of ‘improvements’ rather than ‘new’ products. The costs for developing a ‘new’ product are usually higher than ‘improving’ an existing one – another possible reason for using intensive market research to find ways to build on the current products.

It is also noted that innovations or new products are difficult to research given that focus group or interview subjects may say one thing at the interview and then behave differently. Regardless, the underlying needs of the target market must be explored to allow a judgement to be made as to how well a product will meet these needs. It is at this point that the researcher will often make a connection between the unmet needs of the potential buyer and the new product development opportunities.

Research on new products will require both qualitative and quantitative research.

Qualitative research is conducted using detailed, verbal descriptions of characteristics, cases, and settings. Qualitative research typically uses observation, interviewing, and document review to collect data. It is necessary to obtain a deep understanding of issues such as requirements and unmet needs. It allows more freedom in exploration depending on respondents’ areas of interest. Focus groups or depth interviews, which allow questioning and probing far below the skin of the subject, are the main qualitative research tools.

Once the needs have been understood and it is clear that there is a market for a new product, some means is required of measuring the size of demand, usage habits, attitudes to products, and the likelihood of up-take of the new product. Quantitative research asks a specific, narrow question, and collects numerical data from participants to answer the question. A relatively large number of structured interviews are required to provide a robust and statistically valid result. Such quantitative research studies tend to be conducted either by telephone or online.

The questions to be asked in relation to concept testing should include: • Clarity and Purpose Is the purpose of the concept clear and can potential users be persuaded of the product’s benefits?

• Demand Does the product meet a need? What is the specific nature of potential users’ requirements?

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• Behaviour of Buyers How existing products are used, i.e. for how long, how frequently, precisely what for etc?

• Gaps in the Market What challenges do people face in using existing products and what requirements are not being met? To what extent are users of current products satisfied with these products and their suppliers?

• Appropriate Price for the New Product Is the price reasonable in light of the concept’s perceived benefits?

• Purchase Intent How likely are potential users to buy the product?

Market research can cost anything from $20,000 (for a couple of focus groups, for example) to $150,000 or more (for a wide ranging study incorporating focus groups and quantitative research).

Market research can unleash potential opportunities for new products, as well as rejuvenate existing products by incorporating new features or finding new markets.

Because the costs of innovation, research and development, and commercialisation are very high, product development research provides a high return on investment.

Market research examines the product and everything surrounding the product such as packaging, service, brand, and company reputation. Research should encompass the whole consumer value proposition, and improvements to packaging, delivery, or any aspect of service support could have just as big an impact as improvements to the physical product itself.

Market research cannot be expected to give definitive and direct answers to new product questions. It should be used to provide understanding to the needs and unmet needs of the consumer. It is the researcher’s task to use these insights in order to assess the new product’s potential. New product research needs more intuition and judgement from the researcher than any other tool in the market researcher’s tool kit.

Once the data is collected, it must be analysed. That means it must be taken from the raw state and put into a form that can be understood, interpreted, and used for management decisions and reports. This is done by taking the raw material or data which really has no meaning before analysis and turning it into information. Data becomes information (by adding meaning) through synthesising and analysing it.

It becomes knowledge when the information is related back to a situation to explain situations and provide lessons to enable the making of decisions. It is essential to plan not only how you will gather data but also how you will transform the data into valuable knowledge.

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All data and information must be standardised efficiently as a means for capturing key details about issues to properly categorise issues. This is to allow leveraging of information and automation to capture the right data. This includes automated workflow processes and decisions (such as pre-populating fields), setting or limiting the value of one field based on data entered in another, or highlighting fields. The agent is visually guided to capture required elements for the case.

This ensures the agent captures the product’s serial number, expiration date, part number, flight number, employee name(s), restaurant location, etc.—whatever is most critical for the issue at hand. In addition, the system can pop an intelligent survey to the agent, prompting them to ask and answer the right questions, while structuring the data they capture for better reporting.

In summary, there are four (4) steps: 1. Gather Information

Organisation Vision, Mission and Goals, Business Plan, and any other strategic documents related to marketing and development of opportunities. Think about them and summarise the key points.

2. Conduct your Research

Assess the ideas and find the gap between what your marketing strategy is accomplishing and what you want to accomplish.

3. Talk to the Stakeholders

Listen to their ideas and concerns, and prioritise the results.

4. Evaluate the Information and Opinions

Make a decision.

Relevant Legislation, Codes of Practice, and National Standards Your research must also include the impact of current legislation, Codes of Practice and national standards will have on the marketing of your opportunity. A brief outline follows with website references where you can attain further information.

Legislation is the act of making or enacting laws. When people talk about ‘the legislation’, they mean a law or a body of laws. The legislation in a State or Territory are all the laws enacted specifically to control and administer the State or Territory.

Regulations are the way that the legislation is applied. They are generally very specific in nature, and are also referred to as ‘rules’ or ‘administrative law’.

Codes of Practice are sets of guidelines and regulations to be followed by members of some profession, trade, occupation, organisation etc. They are not usually covered by law, but rather by agreement of participants or members. Data in the Codes of Practice database consists of several different types - Codes of Practice (Australian & International), Standards (Australian & International), Australian Design Rules, and ‘Other’.

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Standards are published documents that set out specifications and procedures designed to ensure that materials, products, methods, or services are fit for their purpose and consistently perform the way they were intended to. ‘Other’ requirements are items such as guidelines, specifications, rules, and handbooks that are covered under legislation but do not clearly fit into one of the above categories. Codes of Practice website (http://codes.bli.net.au/) has copies of Codes of Practice available.

• Anti-Discrimination Legislation The Anti-Discrimination Act 1977 addresses discrimination issues related to: • Sex • Race, colour, nationality, ethnic, or ethno-religious background • Physical or intellectual or psychiatric disability, or any organism capable of causing disease • Homosexuality (male or female, actual or presumed) Racial discrimination, harassment, and defamation are all unlawful. People may not be treated unfairly because of their nationality, descent, race, religion, or colour. Any behaviour that is unwelcome, puts someone down, and/or embarrasses them relating to any of the things listed earlier.

Anyone who believes they have been subjected to racial discrimination, harassment, or vilification have the option to seek assistance from the relevant Anti-Discrimination Board and/or the Human Rights and Equal Opportunity Commissioner who will advise them of their rights under the legislation.

The laws protecting individuals from being treated unfairly because of their race, colour, nationality, descent, ethnicity or ethno-religious background are the Federal Racial Discrimination Act (1975), and the Racial Hatred Act (1995). Each state and territory has specific legislation cover in this area (see below for further information).

• www.hreoc.gov.au/info_for_employers/what.html • http://www.eeo.nsw.gov.au/diversity/appendix1.htm b • Australian Capital Territory Discrimination Act 1991 (ACT) • New South Wales Anti-Discrimination Act 1977 (NSW) • Northern Territory Anti-Discrimination Act 1996 (NT) • Queensland Anti-Discrimination Act 1991 (QLD) • South Australia Equal Opportunity Act 1984 (SA) • Tasmania Anti-Discrimination Act 1998 (TAS) • Victoria Equal Opportunity Act 1995 (VIC) • Western Australia Equal Opportunity Act 1984 (WA)

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• Ethical principles are the positions from which guidance can be obtained when making a decision and are important to behave morally, fairly, and equitably.

Ethical theories and principles are the foundations of ethical analysis because they are the viewpoints from which guidance can be obtained along the pathway to a decision. Each theory emphasises different points such as predicting the outcome and following one’s duties to others in order to reach an ethically correct decision. However, in order for an ethical theory to be useful, the theory must be directed towards a common set of goals. Ethical principles are the common goals that each theory tries to achieve in order to be successful. These goals include beneficence, least harm, respect for autonomy, and justice.

• Marketing Codes of Practice and Conduct • Australian Direct Marketing Association (ADMA) The ADMA Code of Practice was developed to set standards of conduct for direct marketers, minimise the risk of breaching legislation, promote a culture of best practice, serve as a benchmark in settling disputes and increase business and consumer confidence in doing business with ADMA members who are bound to the provisions of the Code. http://www.adma.com.au/ • Direct Marketing Code of Practice The Code sets out specific standards of conduct for participants in the direct marketing industry in relation to individuals and consumers and serves as a benchmark in settling disputes. http://www.adma.com.au/ • Free TV Australia Commercial Television Industry Code of Practice The Commercial Television Code of Practice covers matters prescribed in Section 123 of the Broadcasting Services Act and other matters relating to program content that are of concern to the community including: • Program classifications • Accuracy, fairness, and respect for privacy in news and current affairs • Advertising time on television • Placement of commercials and programs promotions • Complaints handling.

The new Code places a number of additional requirements on broadcasters.

From 1 March 2010, broadcasters are required to accept Code complaints made through an electronic lodgement process via the Free TV website.

The new Code also provides increased protection for participants in Reality Television programs and includes amendments to strengthen the consumer advice requirements for MA15+ programs amongst a range of other protections. http://www.freetv.com.au/content_common/pg-code-of-practice.seo

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• Australian E-commerce Best Practice Model The Australian Guidelines for Electronic Commerce seek to enhance further consumer confidence in electronic commerce by providing guidance to businesses on how to deal with consumers when engaged in business to consumer electronic commerce. The guidelines update and replace the Australian E-Commerce Best Practice Model, which was released by the Australian Government in May 2000.

The Checklist for Business-to-consumer E-commerce in Australia seeks to enhance business awareness of key issues to be considered when dealing with consumers through electronic commerce. http://www.treasury.gov.au/contentitem.asp?NavId=014&ContentID=1083 • Privacy Laws Privacy laws regulate the type of information which may be collected and how this information may be used and stored and ensures information is not misused or abused. More detailed information is at www.privacy.gov.au/law/act.

Organisations must not involve unnecessary intrusion on an individual’s privacy.

They must take reasonable steps to maintain data quality and consider the following when using information about others.

There are some things that an organisation can do to make it easier to comply.

Firstly, transacting anonymously with individuals where it is lawful and practicable to do so, can reduce the amount of personal information that is collected.

Secondly, limiting the collection of personal information to the minimum necessary to complete a transaction. Thirdly, making it as easy as possible for individuals to access and correct their own information.

• Competition and Consumer Legislation Competition and Consumer Act 2010 (Cth) applies to contracts for goods or services sold in the course of business up to a maximum value of $40,000. The consumer may be an individual or a company.

The Act provides for protection of consumers and prevents some restrictive trade practices of companies. It is the key competition law in Australia. It is administered by the Australian Competition and Consumer Commission and also gives some rights for private action.

This Act replaces the Trade Practices Act.

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BSBMKG501B Identify and Evaluate Marketing Opportunities Trainer Manual © Precision Group (Australia) Pty Ltd