BUSINESS AND MANAGEMENT
1) 4.3 MARKET SHARE CALC
By value: parasal değer
By volume: items sold
2) 4.1 MARKET SEGMENTATION
Market segmentation: The process of splitting a market into distinct groups of buyers
in order to better meet their needs.
The main methods of market segmentation are based on demographic, geographic
and psychographic factors.
Advantages
Businesses can define their target market
precisely and design and produce goods
that are specifically aimed at these groups
leading to increased sales.
It helps to identify gaps in the market –
groups of consumers that are not currently
being targeted – and these might then be
successfully exploited.
Limitations
Research and development and production
costs might be high as a result of marketing
several different product variations.
Promotional costs might be high as different
advertisements and promotions might be
needed for different segments – marketing
economies of scale may not be fully exploited.
3) NICHE MARKETING
Niche marketing targets specific and well-defined market segments (i.e., niche
markets).
Concentrating all marketing efforts on a small but specific and well defined segment
of the population.
Niches do not 'exist' but are 'created' by identifying needs, wants, and requirements
that are being addressed poorly or not at all by other firms, and developing and
delivering goods or services to satisfy them.
As a strategy, niche marketing is aimed at being a big fish in a small pond instead of
being a small fish in a big pond.
Mass marketing: Mass marketing is an attempt to appeal to an entire market with
one basic marketing strategy using mass distribution and mass media.
It is also called undifferentiated marketing because this is a strategy that ignores
targeting individual market segments. Different market segments are targeted with
the same blanket approach (for example, a television promotion will reach many
different market segments), usually to maximise sales volume.
Most businesses have various targeting strategies, often combining mas and niche
marketing strategies.
ADVANTAGES AND LIMITATIONS OF NICHE MARKETING
Advantages
ADVANTAGES
I. When a specific market segment is targeted in a
firm’s marketing, the marketing tends to be more
focused and likely to have greater appeal within
the targeted segment.
Mass marketing is not as focussed and as such
tends to focus on the ‘average’ consumer.
II. Businesses can become highly specialised at
finding out the needs and wants of a niche
market they are targeting. With needs and wants
being better met, customer loyalty can ensue.
III. Competitive rivalry within a niche market is less
than that for broader markets. Less competition
can translate into increased pricing power for a
firm’s differentiated products which, in turn, can
DISADVANTAGES
IV. Niche markets, by their definition, are small. The
number of total potential customers in the market
is limited.
Mass markets have a relatively larger customer
base. Niche marketing strategies may miss
potential customers and depress sales revenues.
V. Economies of scale may not be obtained in
niche markets due to their limited size. Thus, the
average cost of bringing the product to market
will be higher, leading to higher prices and or
lower profit margins.
lead to increased profitability.
VI. Profitable niche markets with low barriers to entry
are likely to attract new competitors into the
industry. Niche markets are small and cannot
sustain a relatively high number of competitors.
ADVANTAGES AND LIMITATIONS OF MASS MARKETING
Advantages
ADVANTAGES
Economies of scale may be obtained in mass
markets due to their relatively large size. Thus, the
average cost of bringing the product to market
will be lower and thus, profit margins higher.
i.
Different marketing strategies do not need to be
planned and implemented for different market
segments. One marketing campaign can
successfully target a whole market, facilitating
marketing economies of scale.
ii.
Providing products for a mass market could
enable a successful firm to establish a larger base
of customers. This will generally increase
profitability.
iii.
DISADVANTAGES
iv. There are often high barriers to entry for mass
markets. Often incumbent competition have
invested in capital equipment, large scale
factories, offshore centres, efficient supply chain
management processes, etc. Experienced and
efficient competition can make it extremely
difficult to successfully compete in a mass market
as a new firm.
Competition can be intense. A broader
customer base can sustain a larger number of
competitors. A business will still require a unique
selling point and successful marketing strategies
to support sales. To be competitive, marketing
budgets need to be relatively large.
v.
vi.
Mass marketing tends to be less focussed.
Resources may be used inefficiently by reaching
individuals who are never likely to purchase a
firm’s products.
4) USP
Unique selling point/proposition (USP): Differentiating factor that makes a
company’s product unique, designed to motivate customers to buy.
Unless a business can pinpoint what makes its product unique in a world of
homogeneous competitors, its sales efforts will not be targeted effectively.
Customers are often attracted towards goods or services that offer a distinctive
image, service, feature or performance. Establishing a USP is about
differentiating a company from its competitors.
USPs can be based on any aspect of the marketing mix. For example:
Product: Dyson’s vacuum cleaners offer ‘dual cyclone technology’ that is
unique (and patented) and the company has become the world number two
manufacturer of vacuum cleaners in just 20 years.
Price: ‘Never knowingly undersold’ is the classic advertising slogan for the John
Lewis Partnership’s department stores in the UK. The retailer checks and
matches its high street competitors’ prices regularly, both at national and local
level. The company achieved 10% sales growth in the UK in 2009 despite the
most severe economic recession for 60 years.
Place: Dell became the first computer manufacturer to focus almost exclusively
on internet sales. Keeping its costs down allowed it to offer competitive prices.
Promotion: ‘When it absolutely, positively has to be there overnight’ (FedEx
courier service) is one of the most famous promotional slogans of recent years.
It helped to establish in customers’ minds the unique quality of service that this
company claimed to offer.
DI5FFERENTIATION
5) DIFFERENTIATON
Differentiation: Differentiation is the process of distinguishing a product
or business from competitors in the market or industry.
Product differentiation: Product differentiation is the marketing process
that showcases the differences between products. Differentiation looks
to make a product more attractive by contrasting its unique qualities
with other competing products. Successful product differentiation
creates a competitive advantage for the seller, as customers view
these products as unique or superior.
The process of establishing a differentiated product in the minds of
consumers will see the
firm focus on different elements of the marketing mix:
Product: The design, quality, functions, branding and performance
are all features of a product that can differentiate it from other
competitive rivals.
Price: There are a wide range of pricing strategies that a business
may consider (see
Topic 4.5). Businesses can be the price leader in a product category or
it could use a
premium pricing strategy to match the perceived high quality of the
product or brand.
Place: A wider range of customers can be reached through
differentiated marketing through retailers, wholesalers and distributors.
The internet may prove a good distribution channel for young, busy
families, whereas retail shops would suit youth and
older market segments better.
Promotion: Promotion is often associated with informing potential
customers that a particular product is different in a better way from the
competition, and persuading
customers to purchase (take action) on this basis. A successful
promotional strategy will
create a positive perception around the product, often in relation to its
unique selling
point.
Advantages
Brand recognition and loyalty
Having a successful brand that is instantly
recognisable and has customer loyalty can
be a major source of competitive advantage
for a firm in a particular market. It is why firms
invest heavily in their branding.
A positively differentiated brand will increase
sales and enable the company more pricing
power when it comes to setting a product’s
price. Increases profit margins.
Price advantages
Undifferentiated or homogenous products
enable very limited ability to set and control
prices. A stand product that is similar to that
of the competition will be assessed by the
consumer on its price.
With positive differentiation comes an
increased ability to set prices on terms more
favourable to the firm, as the product is often
perceived as having more inherent value
Distribution advantages
Retail is ruthless. Store and shelf space is
limited. The best-selling brands are often the
ones that are preferentially stocked and
provided with prime store placement.
The best-selling brands are those that have
successful product differentiation.
Disadvantages
Economies of scale
Cost savings cannot be fully exploited if mass
production is not being engaged in. The lower
average cost associated with producing
large numbers of a single product will be
much lower than the costs associated with
producing smaller numbers of a differentiated
product, including the marketing costs.
Economies of scale can be exploited to
provide a lower cost product than that of a
firm’s competitors. Again, a source of
differentiation!
.
Differentiation
Differentiation can be expensive and lead to
higher costs; special promotions and
investment into product research and
innovation increase costs.
Large companies are better suited to
differentiate their products because they
have the financial wherewithal to do so.
Excessive differentiation
If too many products are differentiated
customers can end up confused. Not only
does it strain a company’s resources to
successfully differentiate itself and its
products, consumers can be turned off by too
much choice and not make a purchase
altogether.
MARKETING OBJECTIVES
6) MARKETING OBJECTIVES
The long-term objectives of the company will have a significant impact on both the
marketing objectives and marketing strategy adopted. A business with clear short-
term profit targets will focus on maximising sales at the highest prices possible. In
contrast, a business with longer-term objectives, which
may include both profitability as well as the achievement of goals of social
responsibility, may adopt a social marketing approach.
KEY TERMS
Marketing objectives: the goals set for the marketing department to help the
business achieve its overall objectives.
Marketing strategy: long-term plan established for achieving marketing objectives.
EXAMPLES OF MARKETING OBJECTIVES INCLUDE:
Increasing market share – perhaps to gain market leadership
Increasing brand awareness
Increasing total sales levels – either in terms of volume or sales value
Development of new markets for existing products to spread risks.
TO BE EFFECTIVE, MARKETING OBJECTIVES SHOULD:
Fit in with the overall aims and mission of the business − they should reflect the
aims of the whole organisation and should attempt to aid the achievement of these.
Be determined by senior management − they will determine the markets and
products a business trades in for years to come and these issues must be dealt with
by managers at a very senior level in the company.
Measurable and clearly communicated to all departments in the organisation.IB
Business Management
4.1 The Role of Marketing: Marketing Objectives – Summary Notes
WHY MARKETING OBJECTIVES IMPORTANT:
They provide a sense of direction for the marketing department.
Progress can be monitored against these targets.
They can be broken down into regional and product sales targets to allow for
management by objectives.
They form the basis of marketing strategy. These marketing objectives will have a
crucial impact on the
marketing strategies adopted, as without a clear vision of what the business hopes
to achieve for its products,
it will be pointless discussing how it should market them.
Market Research
Market research: is the process of collecting, analysing, and reporting data related to
a
particular market. This includes data on:
• consumption of goods and services
• competitors’ behaviour.