Unit 4: Marketing
4.1 role of marketing
Needs: essential necessities that all humans must have to survive: food, shelter,
warmth and water
Wants: human desires
Marketing exists to address people’s needs and wants
→ making customers want to buy the products of a particular company
→ looks at the reasons behind people’s decision, trying to meet the needs and
wants of customers, aiming to make a profit
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right products are supplied
correct price for target customers
distribute the products conveniently for customers to buy the product
adequate and effective promotion
⇒ Marketing is identifying, anticipating, and satisfying customer requirements
profitably
marketing alone does not ensure success
Operations Management: production department work with marketers to prepare
their production schedules. They work together in researching, developing and
launching products to meet the changing needs of customers
Finance: when setting appropriate budgets → how much can be allocated to
advertisements, and to avoid liquidity problems
Human resources: marketing data can help the HR department to identify staffing
needs. For ex. the introduction of a new product might require hiring extra
production staff and sales personnel → ensure right quantity and quality of
workers through effective workforce planning
Differences in Marketing G+S
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Intangibility: marketers face a challenge to communicate the benefits of
service as the purchase is based on trust
inseparability (not possible to separate the production and consumption of a
service: services are consumed at the time of purchase → marketers strive to
ensure the staff are well trained at providing outstanding service
heterogeneity: service experience is different for different customers
perishability: services cannot be stored → each bus, cinema or airline seat
that is empty = loss in potential revenues to the businesses
Market Orientation vs. Product Orientation
Market Orientation
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outward looking
making products that they can sell, rather than selling products that they can make
focuses on the customer in order to identify, design, develop and supply products that meet their
needs and wants ⇒ info gathered through market research
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if ignored → businesses are likely to become uncompetitive,
Main Advantages:
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Greater flexibility
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respond quickly to changes in the market as they have access to relevant data and information about customers
more able to anticipate changing market trends and hence prepare for such changes.
Lower risk
a.
more confident that their products will sell and be more successful, although without proper market research and analysis,
the cost of marketing a product is much more likely to be a gamble.
Main Disadvantages:
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2.
Market research can be very expensive
Due to the dynamic nature of the business environment and the uncertainty of the future
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→ No guarantee that this approach will work
Market Orientation vs. Product Orientation
Product Orientation
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inward looking
focus on selling products that they make, rather than making products that they can sel
most hi-tech products that are used in daily life
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Say's law ('supply creates its own demand')
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all 'unknown to the mass market during their initial launch
creative and innovative products are launched onto the market and customers will be tempted to buy these
Many product oriented businesses today concentrate on producing high quality products
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belief is that customers are willing to pay a higher price for exclusivity and luxury products
generally supply products that they specialise in, such as Ferrari producing sports cars or Airbus producing
aircraft
Main Advantage: quality can be assured and the firm has more control over its operations
Main Disadvantage: needs of the market are ignored → high failure rate of businesses that use
this marketing approach
⇒ high risk due to frequent changes in fashion and tastes - money spent on R&D of products
without taking the customer into consideration → costly
Commercial Marketing & Social Marketing
Commercial Marketing:
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marketing strategies to meet the needs and wants of customers in a profitable way
value free → ethics play a small role
providing what customers want, when they want it and where they want it
aims for the private benefits to earn increased sale revenues and profits (whether the good is fast
food, soft drinks, tobacco or alcohol)
most marketing are commercial marketing
Social Marketing:
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marketing that bring about social change using concepts from commercial marketing
use of mainstream marketing methods to achieve the benefits of social changes
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ex. informing the dangers of under-age drining
ex. smoking bans in public areas help to reduce air pollution and create less litter for the benefit of everyone
similar to commercial marketing in that all forms of marketing aim of influence action
any activity that seeks to influence social behaviour to benefit the target audience and society as a
whole
focuses on benefits for customers and the business
challenge: getting people to change their customary behaviour
clients: non profit organizations, government organizations, companies that believe in CSR
⇒ market research, process, pricing are important in social marketing
The market
: a place or process whereby customers and suppliers trade
Consumer markets: cater for private individuals
Producer or Industrial Markets: cater for organizations
Managers are interested in the characteristics of the market in which their business
operates
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market size
customer base
barriers to entry
competition
Geographic characteristics
Demographic characteristics
Market growth rate
Seasonal and cyclical characteristics
Market Share
: an organization's portion of the total value of sale revenue within a specific industry
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positive relationship between market share and profits, although the firm with the largest market share is not
necessarily the most profitable
High market share:
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status enjoyed from being a dominant market player
ability to gain a range of economies of scale
⇒ Market Leaders
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have better price-setting ability and less threatened by competition
common objective to increase their market share by:
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promotion of their brands
product development, improvements and innovation
Motivation and training of the workforce for better customer service
establishing property rights - use trademarks, copyrights and patents
use more efficient channels of distribution
Market concentration: measures the degree of competition that exists within a market by calculating the market share
of the largest few firms in the industry → sum of these market share = concentration ratio
ex. industry with a 3-firm concentration ratio of 98% means that the top three firms have a combined market share of
98%
⇒ not be a very competitive industry as all other firms would account for just 2% of the total sales revenue of the
industry.
Marketing objectives
: the specific marketing goals of an organization
marketing objectives of for-profit (profit- seeking) organizations:
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Increased sales revenue
Higher market share
Increased market leadership
Improved product and brand awareness
Developing new products
Enhanced brand perception (product positioning)
Marketing objectives of social marketing for non-profit organizations:
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To build membership (support) and to connect with new donors
To generate awareness of the NPO's cause
To improve brand recognition of the NPO
To create positive attention to the NPOs operations
To demonstrate the value of the NPO to the local community or society in general.
4.2 Marketing Planning
Elements of a marketing plan
Marketing plan is a document outlining a firm's marketing objectives and the marketing strategies to be used to achieve these objectives.. include:
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Marketing objectives that are SMART
Methods of market research to be used to identify target markets.
An assessment of the strengths and weaknesses of competitors in the market.
Outline of the marketing mix - product design, channels of distribution to be used, anticipated price(s) and promotional strategies to employ.
Details of the marketing budget.
Outline of the anticipated difficulties and strategies to deal with these problems.
SWOT / STEEPLE analysis → assess the internal and external factors affecting the business and its marketing objectives.
Marketing Planning: the systematic process of devising marketing objectives and appropriate marketing strategies to achieve these goals… Process:
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Marketing audit - an examination of the current climate in which the business operates. Market research is integral to this investigation.
Marketing objectives - The marketing audit enables the firm to set marketing goals and targets
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Marketing strategies - the plan and use of the marketing mix to achieve marketing objectives.
Monitoring and review - a continual process of checking and monitoring that targets are being met → marketing strategies might need to be adjusted accordingly
Evaluation - an examination of the extent to which the firm has succeeded in achieving its marketing objectives - aids decision making and subsequent rounds of
marketing planning
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e.g. improved price competitiveness or increased market share.
Main Advantage
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it improves a firm's chances of success → the plan does not guarantee success but it can help managers to identify and deal with likely problems
key role of marketing planning is to allow marketing managers to have better control of the organization.
Main disadvantage
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many small firms do not have the time, resources or expertise to plan their marketing in such a systematic way
Even for large firms, managers need to devote appropriate resources to marketing planning
Marketing plans can be inflexible and become outdated quite quickly as they do not allow for sudden changes in market conditions
The 4 Ps of the marketing mix
Marketing Mix: combination of various elements needed to successfully market a
product
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review and develop marketing strategies and is at the heart of marketing
planning
4Ps
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Product - the good or service being marketed to meet the needs and wants of customers.
• Price - how much customers have to pay to buy the product.
• Promotion - methods of informing, reminding and persuading customers to buy the product.
• Place - the distribution channels used to get the product to customers.
Marketing objective
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Market share - This can be achieved through market penetration strategies that allow the business to increase
sales revenue and profits.
Market leadership - The firm strives for the greatest market share in the industry
Product positioning - The business attempts to improve the corporate image and perceptions held by
consumers
Consumer Satisfaction - This can be achieved by ensuring consumers are satisfied with the price, and product
quality and the level of customer service.
High market standing - Market standing refers to the extent to which a firm has a presence in the marketplace.
It is largely based on an organization's image and reputation, which can be maintained or enhanced by
effective marketing strategies
Market development - involves selling existing products in new markets, such as through the use of
international marketing (see Unit 4.7) or e-commerce (see Unit 4.8).
Product development - involves selling new products in existing markets. It is a common marketing strategy for
businesses operating in high-tech industries.
Diversification - involves marketing new products in new markets. This high-risk strategy only tends to be used
by financially stable businesses pursuing growth and evolution.
• Product innovation - refers to the objective of launching an original or new product onto the market. It can help
a firm to gain sl first-mover advantage in establishing itself in the market.
3 additional Ps
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People
Physical environment
process
Target markets and market segments / Targeting, segmentation and consumer profiles
market segment: distinct group of customers with similar characteristics and
similar wants and needs
Targeting: each distinctive market segment having its own specific marketing mix
refers to a distinct group of customers with similar characteristics and similar
wants or needs
Consumer profiles: demographic and psychographic characteristics of consumers
in different markets
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e.g. their age, gender, occupation, income level, religion, marital status
and purchasing habits
Businesses segment their markets for several reasons
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Better understanding of customers
Higher sales
Growth opportunities
Support for product differentiation
Niche and mass markets
Niche marketing targets a specific and well-defined market segment
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businesses that provide high-end speciality goods in niche markets, catering for consumers
interested in exclusive luxury goods
Mass marketing refers to undifferentiated marketing - strategy that ignores targeting individual
market segments
Position (perception) maps
product position map (or perception map) is a visual tool that reveals customer perceptions of a product or brand in
relation to others in the market
• Premium products are of high quality and high price, e.g. Lexus and Mercedes-Benz cars.
• Economy products are of low quality but at appropriate prices, e.g. supermarkets often supply 'no-frills' own-label
branded products to lure price-sensitive customers.
• Bargain products are of high quality but with low prices. This strategy is not sustainable and the approach is only
used as a short-term tactic to boost sales.
• Cowboy products are of poor quality yet highly priced. These products are positioned to deceive customers and are
therefore only used as a short-term tactic to gain revenue.
→ identify any gaps in its product portfolio
→ Information in a perception map can also help businesses to refine their marketing strategies
Advantage:
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simplicity in presenting potentially complex market research findings
quick and easy to interpret
inform management about market opportunities and threats → the business will need to reposition its products
When creating position map, using their own perception of brands and products → the tool is used to gauge the
perceptions of the target market (customers as a whole, rather than opinions of a single person).
USP
: is any aspect of a business, product or brand that makes it stand out from those offered
by competitors
→ explains why customers buy the product over rival ones, such as its distinctive
features or appealing packaging
→ can be a major source of competitive advantage and therefore businesses want to
emphasise their USP to attract customers
examples of USP
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Being the only firm in a local area to supply a certain good or service
Being the first business to provide a certain product (known as a first mover
advantage)
Having a reputation for being the 'best' in the market
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Having a reputation for being the lowest cost provider
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e.g. Apple, Samsung and Toyota are market leaders
e.g. Walmart's claim of 'Always Low Prices' or Tata Motor's $2000 Nano - the world's cheapest car
Having a highly popular business slogan
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eg. 'Just Do It', 'Happy Meal'or 'Because You're Worth It'.
Differentiation
: act of distinguishing a business or its products from rivals in the industry
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tries to create the perception among customers that the firm's product is
different → so adds value compared with the substitute products from rival
businesses
Common methods of differentiation revolve around the 8Ps in the marketing
mix
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product, price, place promotion, people, physical environment, process, packaging
4.3 Sales Forecasting (HL)
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Sales, trends and forecasting (378)
Statistical techniques in sales forecasting (380)
Moving averages (380)
Benefits of sales forecasting (383)
Limitations of sales forecasting (385)
4.4 Market research
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The role of market research (388)
Primary market research (389)
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Secondary research (392)
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surveys
interviews
focus groups
observations
market analysis
academic journals
government publications
media articles
Ethical considerations of market research (395)
Qualitative and quantitative market research (396)
Sampling methods (397)
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quota
random
stratified
cluster
snowballing
convenience
4.5 The four Ps
(product, price, promotion, place)
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Product (404)
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Boston Consulting Group (BCG) matrix on an organization's products (409)
Branding (411)
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cost-plus (mark-up)
penetration
skimming
psychological
loss leader
price discrimination
price leadership and predatory
Promotion (428)
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awareness
development
loyalty
value
importance of branding
importance of packaging
Price (421)
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The product life cycle (405)
Extension strategies (407)
above the line promotion
below the line promotion
promotional mix (435)
changing technology on promotional strategies (439)
Guerrilla marketing (441)
Place (446)
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importance of place
effectiveness of different types of distribution channels
4.6 The extended marketing mix (HL)
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People (456)
Process (457)
Physical evidence (458)
4.7 International marketing (HL)
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Entry into international markets (461)
Opportunities and threats of international marketing (463)
The implications of international marketing (465)
Cultural differences In International marketing (466)
Globalization and international marketing (469)
4.8 E-commerce
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Features of e-commerce (473)
E-commerce and the marketing mix (474)
Types of e-commerce (478)
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Business to business (B2B)
Business to consumer (B2C)
Consumer to consumer (C2C)
The benefits of e-commerce (479)
The costs of e-commerce (481)