14. What is Marketing? Flashcards
Define marketing
The management process responsible for identifying, anticipating and satisfying consumer’s wants and needs profitably - by choosing the right mix of the 4P’s
Define marketing objectives
The goals set for the marketing department to help the business achieve its overall objectives. e.g. increasing market share, rebranding product
How can the marketing department and finance department coordinate?
- Finance department use the sales forecasts of the marketing department to help construct cash flow forecasts and other operational budgets
- Finance department will ensure that the necessary capital is available for the marketing budget
How can the marketing department and HR department coordinate?
The sales forecasts will be used by HR to aid workforce planning - number of workers and skills required to ensure that increase in sales will be achieved
How can the marketing department and operation department coordinate?
- Market research data will play a key role in new product development
- The sales forecasts will be used by the operations department to plan for the capacity needed, the purchase of the machines that will be used and the stocks of raw materials required for the new output level
Define demand
The quantity of a product that consumers are willing and able to buy at a given price in a time period
Define supply
The quantity of a product that firms are prepared to supply at a given price in a time period
Factors affecting demand
- Changes in consumer’s incomes
- Changes in the prices of substitute goods and complementary goods
- Changes in the population size and structure
- Fashion and taste changes
- Advertising and promotion spending
Factors affecting supply
- Costs of production e.g. change in labour or raw materials costs
- Taxes imposed on the suppliers by government => raise costs
- Subsidies paid by government to suppliers => reduce costs
- Weather conditions and other natural factors
- Advances in technology to make cost of production lower
Interactions between price and demand
- The quantity demanded rises with a price fall
- The quantity demanded falls with a price increase
Interactions between price and supply
Firms will be more willing to supply a product if the price rises and will supply less if the price falls
What are the different types of markets?
- Consumer/producer markets
- National, regional and international markets
What are the features of a market?
- Location
- Size
- Share
- Growth
Define market size
The total level of sales of all producers within a market
How can market size be measured?
- Volume of sales (units sold)
- Value of goods sold (sales revenue)
Why is the size of the market important?
- A marketing manager can assess whether a market is worth entering or not
- Calculate market share
- Growth or decline of the market can be identified
Define market growth
The percentage change in the total size of a market (volume or value) over a period of time
Factors determining the pace of growth
- Economic growth of the country
- Changes in consumers’ income
- Development of new markets and products (that take sales away from existing ones)
- Changes in taste
- Technology
Define market share
The percentage of sales in the total market sold by one business
Why is market share important?
- Shows how the business is doing compared to its competition
- Judge the effectiveness of any possible revenue generating effort, such as marketing campaigns, branding initiatives
- Allows businesses to quantify the impact of their strategies
Define marketing strategy
Long term plan established for achieving marketing objectives
Problems associated with measuring market share and
market growth
- Different results may be obtained depending whether the growth or share rates are measured in volume or value
- Firm’s market share can fall even though sales are rising
Define market orientation
An outward looking approach basing product decisions on consumer demand, as established by market research
Define 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 try to sell them
Benefits of market orientation
- Chances of newly developed products failing in the market are much reduced
- Constant feedback from consumers
- Customers will experience more satisfaction with the product, which ultimately increases the likelihood of repeat purchases and brand loyalty
- Companies can turn one-time buyers into repeat customers. They’ll buy more frequently in larger volumes => profitability
Disadvantages of market orientation
- Market research can be expensive and time consuming and it requires a systematic approach => planning
- More competition => has to be innovative to stand out
- As there are constantly competitors entering in and out of the market => dynamic changes => requires flexibility and adaptability
Benefits of product orientation
- Allows the business to focus on product quality => it works to specifics
- Allows for a technology to be developed that can then be used for a wider range of products
- Enables the company to create this product efficiently and in mass quantities. More quantities can be made at a lower price, which will increase the number produced (economies of scale)
Disadvantages of product orientation
- Loss of competitive advantage ; may lose customers and market share to competitors who offer a more relevant product to the market
- A company that is not in tune with the marketplace is unlikely to be aware of changing trends => not be able to survive due to inability to keep up with changes
- Focusing on established products and markets may prevent a company from looking at new market opportunities (If product demand in existing markets falls, a company must look for new markets)
- Companies with a product orientation spend their marketing budgets promoting products that may not meet customer needs => no brand loyalty
Define consumer markets
Markets for goods and services bought by the final user of them
Define industrial markets
Markets for goods and services bought by businesses to be used in the production process of other products
Define societal marketing
This approach considers not only the demands of consumers but also the effects on all members of the public
Define equilibrium price
The market price that equates supply and demand for a product
Define niche marketing
Identifying and exploiting a small segment of a larger market by developing products to suit it
Define mass marketing
Selling the same products to the whole market with no attempt to target groups within it
Advantages of niche marketing
- Less competition
- This marketing approach lets business to provide customers with products and services they need and desire => brand loyalty
- More interactive with customers
- Requires less investment (produce less goods as there are less customers)
- If the market has not been exploited yet => able to charge high prices with high profit margins
Disadvantages of niche marketing
- The niche markets may be invaded by large companies
- Less profits are made
- Limited growth because there is a small group of customers to buy products.
- Niche markets involve more risk than mass markets – fewer customer – if their buying
habits change it could mean rapid decline in sales.
Advantages of mass marketing
- Economies of scale => lower average costs of production
- Maximises income and profits
- Mass production greatly improves short term cash flow forecast
- Run fewer risks as niche markets contain relatively small number of consumers => any change to consumer buying habits can lead to rapid decline in sales
Disadvantages of mass marketing
- Competition
- Lack of USP can result in lower profit margins
- Difficult to manage (staff and costs)
- Lack of brand loyalty
- Costs to advertise
Define market segment
A sub-group of a whole market in which consumers have similar characteristics
Define market segmentation
Identifying different segments within a market and targeting different products and services to them
Define consumer profile
A quantified picture of consumers of a firm’s products, showing proportions of age group, income levels, location, gender and social class
Methods of market segmentation
- Geographic differences
- Demographic differences
- Psychographic factors
What are the geographic differences?
Consumers’ tastes change depending on the location. These geographic differences might result from:
- Cultural differences
- Climate
What is demography?
The study of population data and trends
What are the demographic factors that segment the market?
- Age
- Sex
- Ethnicity
- Socio-economic groups
What are the psychographic factors?
These are to do with differences between people’s lifestyles, personalities, values and attitudes
Advantages of market segmentation
- Business can define their target market precisely and design, produce goods that are specifically aimed at these groups, leading to increased sales
- Limits the field of customers and allows a business to direct financial resources into a specific segment => reduce costs and more efficient
- Able to identify groups of consumers that have not been targeted => these might be then successfully exploited
- Can better allocate the total marketing budget
Disadvantages of market segmentation
- Research and development costs might be high
- Promotion and distribution expenditures increase when separate programme are used for different market segments
- When characteristics of a market segment change, investment made already might become useless
