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Unit 3 Marketing What is marketing?

? It is the management task that links the business to the customer by identifying and meeting the needs of customers profitably it does this by getting the right product at the right price to the right place at the right time What is a market? A place where buyers and sellers meet to engage in exchange Consumer markets and industrial markets Consumer markets: markets for goods and services bought by the final users of them Industrial markets: markets for goods and services bought by businesses to be used in the production process of other products How did we get to marketing? Product concept this is based on economies of scale: companies try to reduce costs as far as possible, as they assume people will choose products based on price Marketing concept based on the idea that organisations can best meet their objectives by concentrating on consumer needs and satisfying those needs better than competitors (much more popular today) Business objectives vs. Marketing objectives Organisations in the private and public sector have business aims and objectives Organisations will also have marketing objectives. These will be different from the business objectives, but they will support the business objectives. Business objectives: they are objectives that concern the business or organization as a whole Marketing objectives: the goals set for the marketing department to help the business achieve its overall objectives. It focuses on the consumer and can help to achieve the more general objectives Marketing strategy: long-term plan established for achieving marketing objectives The objectives of marketing 1. To increase sales revenue and profitability 2. To increase or maintain market share 3. To maintain or improve the image of the products or a business 4. To target a new market or market segment 5. To develop new products or improve existing products Market orientation An outward-looking approach basic product decisions on consumer demand, as established by market research

Product orientation An inward-looking approach that focuses on making products that can be made or have been made for a long time and then trying to sell them Asset-led marketing An approach to marketing that bases strategy on the firms existing strengths and assets instead of purely on what the costumers wants Societal marketing This approach considers not only the demands of consumers but also the effects on all members of the public (society) involved in some way when firms meet these demands Demand and Supply Demand: the quantity of a product that consumers are willing and able to buy at a given price in a time period Supply: the quantity of a product that firms are prepared to supply at a given price in a time period Equilibrium price: the market price that equates the supply and demand for a product Factors that influence the demand curve: 1. Affordability 2. Competition and availability of substitute 3. Level of income 4. Needs and aspirations of consumers 5. Fashion and taste changes 6. Advertising and promotion spending Factors that influence the supply curve: 1. Availability of raw materials 2. Logistics (getting things from A to B) 3. Taxes imposed by government 4. Government support 5. Weather conditions and other natural factors 6. Advances in technology Market Size It is the total level of sales of all producers within a market This can be measured in 2 ways: Volume of sales (units sold) Value of goods sold (revenue) The size of market is important for three reasons: 1. A marketing manager can assess whether a market is worth entering or not 2. Firms can calculate their own market share 3. Growth or decline of the market can be identified Market Growth

It is percentage change in the total size of a market (volume or value) over a period of time Can be measured by: volume or value Market Share The percentage of sales in the total market sold by one business This can be calculated using the following formula: market share (%) = (firms sales in time period/total market sales in time period)*100 Benefits of having high market share: 1. Sales are higher than competitors could lead to high profits 2. Retailers will be keen to stock and promote the best selling brands 3. The fact that an item or brand is market leader can be used in advertising Implications of changes in market share and growth A firms market share can fall even though sales are rising This is because, if total market sales are increasing at a faster rate than one firms sales, the market share will fall A manufacturer will use the measure which reflects best on their own position Adding value Product differentiation: making a product distinctive so that it stands out from competitors products in consumers perception USP (unique selling point): the special feature of a product that differentiates it from competitors products Niche marketing Identifying and exploiting a small segment of a larger market by developing products to suit it Advantages of niche market: 1. Small firms can survive in market dominated by larger firms 2. Niche market can fill unexploited gaps 3. Consumers will pay more often for exclusive products 4. Niche market products can also be used by large markets to create status and image Mass marketing Selling the same products to the whole market with no attempts to target groups within it Advantages of mass market 1. Economies of scale 2. Mass market strategies run fewer risks than niche strategies Market Segmentation Market segment: a sub-group of a whole market in which consumers have similar characteristics Market segmentation: identifying different segments within a market and targeting different products or services to them

Consumer profile: a quantified picture of consumers of a firms products, showing proportions of age groups, income levels, location, gender and social class Why do business segment markets? 1. To focus and specialize 2. So that the market is accessible/manageable 3. To collect information 4. To avoid wasting money Segmenting consumer markets
Consumer segmentation

Behaviours: 1. Benefits sought 2. Purchase occasions 3. Purchase behaviour 4. Usage 5. Perceptions and beliefs

Psychographic: 1. Lifestyle 2. Personality

Profile: 1. Demographic 2. Socio-economic 3. Geographic

Ways of segmenting a market: 1. Geographic urban, rural, region, European, Americans, etc. 2. Demographic (most commonly used) age, sex, income, religion 3. Geodemographic mix of geographic and demographic 4. Psychographic/lifestyle lifestyle, social class, personality 5. Behavioral/use of product buying habits, product usage Socio economic groups A higher managerial, administrative, professional B intermediate managerial, administrative, professional C1 supervisory, clerical, junior management C2 skilled manual workers D semi-skilled and unskilled workers E casual laborers, part-time, unemployed Advantages and disadvantages of market segmentation Advantages Disadvantages Businesses can define their target Research, development and production markets precisely costs high It enables identification of gaps in the Promotional costs high market Production and stock-holding costs Differentiated marketing strategies can might be higher then for the option of be focused on target markets avoids just producing and stocking one wastage of money undifferentiated product

Small firms unable to complete in the whole market are specialized in one or two market segments Price discrimination can be used to increase revenue and profits

By focusing on one or two limited market segments there is a danger that excessive specialization could lead to problems if consumers in those segments change their purchasing habits significantly Extensive market research is needed

Portfolio analysis An analysis of elements of a companys product mix to determine the optimum allocation of its resources High Question Mark Market Growth High Stars

Low

Low

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Cash Cow

Market share

Market Research

This is the process of collecting, recording and analyzing data about the customers, competitors and the market. (1) Market research is the systematic gathering, recording and analysis of data about product/service. (2) The need for market research 1. To reduce the risks associated with new product launches 2. To predict future demand changes 3. To explain patterns in sales of existing products and market trends 4. To asses the most favoured designs, flavours, styles, promotions and packages for a product Primary Research The collection of first-hand data that is directly related to a firms needs Examples of primary research: 1. Observation 2. Questionnaires 3. Interview 4. Focus group (group of people who are asked about their attitude towards a product, service, advertisements or new style of packaging) 5. Consumer panel Advantages and disadvantages: Advantages Disadvantages 1. Up-to-date therefore more useful 1. Costly 2. Relevant collected for a specific 2. Time consuming purpose 3. Doubts over accuracy and validity 3. Confidential no other business has need to use sampling but sampling access to this data is difficult Secondary Research Collection of data from second-hand sources Examples: 1. Company reports + industry report 2. Government 3. Internet 4. Books/newspaper 5. Media (biased) 6. Local libraries or offices 7. Trade organisations 8. Market intelligence reports 9. Internet Advantages and disadvantages: Advantages Disadvantages 1. Cheap to obtain 1. Out-of-date 2. Identifies the nature of the market 2. Originally collected for another and assists with planning of purpose primary research 3. Accuracy and data collection 3. Quick to obtain methods unknown 4. Allows comparison

Qualitative research Research into the in-depth motivations behind consumer buying behavior or opinions Quantitative research Research that leads to numerical results that can be statistically analyzed Sampling and analyzing market research Technique Description Advantages Disadvantages Simple Every member of the target 1. High 1. Not possible random population has an equal chance representative without of being selected if all subjects complete list of participate; population the ideas 2. Potentially uneconomical to achieve 3. Can be disruptive to isolate members from group 4. Time-scale too long 5. Data/sample could change Stratified This draws a sample from a 1. Can ensure 1. More complex specified sub-group or that specific 2. Requires greater segment of the population and groups are effort uses random sampling to select represented, 3. Strata must be appropriate number from each even carefully defined stratum proportionally , in samples (e.g. by gender), by selecting individuals from strata list Quota When the population has been 1. Ensures 1. Not possible to stratified and the interviewer selection of prove that the selects an appropriate number adequate sample is of respondents from each numbers of representative of stratum subjects with designated (characteristics proportional to appropriate population population) characteristics Systematic Every nth item in the target population is selected Cluster Using one or a number of specific groups to draw samples from and not selecting

from the whole population The reliability of data collection 1. Sampling bias 2. Questionnaire bias 3. Respondent lying Open questions Those that invite a wide-ranging or imaginative response the results will be difficult to collate and present numerically Closed questions Questions to which a limited number of pre-set answers is offered Cost effectiveness of market research Market research is not free Technology has made the collection of market research much easier and more cost effective Interpreting research: three methods 1. Average 2. Range 3. Trend