3. Marketing Flashcards
Marketing
Identifying customer wants and satisfying them profitably.
The role of marketing in a business is as follows:
- Identifying customer needs through market research
- Satisfying customer needs by producing and selling goods and services
- Maintaining customer loyalty: building customer relationships through a variety of methods that encourage customers to keep buying one firm’s products instead of their rivals’. For example, loyalty card schemes, discounts for continuous purchases, after-sales services, messages that inform past customers of new products and offers etc.
- Gain information on customers: by understanding why customers buy their products, a firm can develop and sell better products in the future
- Anticipate changes in customer needs: the business will need to keep looking for any changes in customer spending patterns and see if they can produce goods that customers want that are not currently available in the market.
Objectives the marketing department in a firm may have
- Raise awareness of their product(s)
- Increase sales revenue and profits
- Increase or maintain market share
- Enter new markets at home or abroad
- Develop new products or improve existing products.
Why customer spending patterns may change:
- Change in their tastes and preferences
- Change in technology: as new technology becomes available, the old versions of products become outdated and people want more sophisticated features on products
- Change in income: the higher the income, the more expensive goods consumers will buy and vice versa
- Ageing population: in many countries, the proportion of older people is increasing and so demand for products for seniors are increasing (such as anti-ageing creams, medical assistance etc.)
Importance of changing customer needs:
Firms need to always know what their consumers want, by carrying out research, in order to stay ahead of competitors and stay profitable. If they don’t produce and sell what customers want, they will buy competitors’ products and the firm will fail to survive.
Why some markets have become more competitive:
- Globalization: products are being sold in markets all over the world, so there are more competitors in the market
- Improvement in transportation infrastructures: better transport systems means that it is easier and cheaper to distribute and sell products everywhere
- Internet/E-Commerce: customers can now buy products over the internet form anywhere in the world, making the market more competitive
How business can respond to changing spending patterns and increased competition:
A business has to ensure that it maintains its market share and remains competitive in the market, by:
- Maintaining good customer relationships: by ensuring that customers keep buying from their business only, they can keep up their market share. By doing so, they can also get information about their spending patterns and respond to their wants and needs to increase market share
- Keep improving its existing products, so that sales is maintained.
- Introduce new products to keep customers coming back, and drive them away from competitors’ products
- Keep costs low to maintain profitability: low costs means the firm can afford to charge low prices. And low prices generally means more demand and sales, and thus market share.
Niche market
small, usually specialized segment of a much larger market
Advantages and disadvantages of being able to identify and supply a niche market
Advantages:
- Small firms can thrive in niche markets where large forms have not yet been established
- If there are no or very few competitors, firms can sell products at a high price and gain high profit margins because customers will be willing be willing to pay more for exclusive products
- Firms can focus on the needs of just one customer group, thereby giving them an advantage over large firms who only sell to the mass market
Limitations:
- Lack of economies of scale (can’t benefit from the lower costs that arise from a larger operations/market)
- Risk of over-dependence on a single product or market: if the demand for the product falls, the firm won’t have a mass product they can fall back on
- Likely to attract competition if successful
Mass market
Where there is a very large number of sales of a product.
Advantages and disadvantages of selling to a mass market:
Advantages:
- Larger amount of sales when compared to a niche market
- Can benefit from economies of scale: a large volume of products are produced and so the average costs will be low when compared to a niche market
- Risks are spread, unlike in a niche market. If the product isn’t successful in one market, it’s fine as there are several other markets
- More chances for the business to grow since there is a large market. In niche markets, this is difficult as the product is only targeted towards a particular group.
Limitations:
- They will have to face more competition
- Can’t charge a higher price than competition because they’re all selling similar products
Market Segmentation
An identifiable sub-group of a larger market in which consumers have similar characteristics and preferences
It is based on:
Socio-economic groups (income), age, location, gender, lifestyle, use of the product (home/ work/ leisure/ business) etc.
-Each segment will require different methods of promotion and distribution. For example, products aimed towards kids would be distributed through popular retail stores and products for businessmen would be advertised in exclusive business magazines.
Benefits of segmentation to a business
- Makes marketing cost-effective, as it only targets a specific segment and meets their needs.
- The above leads to higher sales and profitability
- Increased opportunities to increase sales
Market research
Process of gathering, analyzing and interpreting information about a market.
Product-orientated business
Business who’s main focus of activity is on the product itself.
