Nature of marketing chapter 17 Flashcards
marketing objectives
the goals set for the marketing department to help the business achieve its overall (corporate) objectives.
marketing
management task of identifying and meeting the needs of customers profitably by getting the right product at the right price to the right place at the right time.
management functions related to marketing
market research. product design and packaging design. pricing, advertising and distribution. customer service.
how can marketing objectives be successful
be linked to corporate objectives and be focused on helping the business achieve those overall targets. be determined by senior management, because the key marketing objectives will impact on the markets and products a business trades in for years to come. be realistic, motivating, achievable, measurable and clearly communicated to other departments.
why are marketing strategies important
They provide a sense of focused direction for the marketing department and help the business to achieve its overall corporate objectives. Business success can be measured against the targets set by the objectives. Marketing objectives can be broken down into regional and product sales targets. Marketing objectives form the basis of marketing strategy. It is necessary to have a clear vision of the business’s objectives in order to discuss how marketing decisions can help to achieve them.
corporate onjectives
well-defined and realistic goals that are set for the whole company.
marketing strategy
plan of action giving details of how a business intends to achieve its marketing objectives by creating competitive advantage.
coordination of marketing with Finance
The finance department will use the sales forecasts of the marketing department to help construct cash flow forecasts and operational budgets. The finance department will have to ensure that the necessary capital is available to pay for the agreed marketing budget for promotional expenditure.
coordination of marketing with Human resources
Sales forecasts will be used by human resources to help prepare a workforce plan. For example, additional workers will be needed in sales teams and production to increase sales. Human resources must ensure the recruitment and selection of qualified and experienced workers.
coordination of marketing with operations
Market research data will play a key role in new product development. The operations department will use sales forecasts to plan the capacity needed, the purchase of the machines that will be used and the raw material inventories required for the higher output level.
equilibrium price
the price level at which demand is equal to supply.
demand
the quantity of a product that consumers are willing and able to buy at a given price in a specific time period.
supply
quantity of a product that firms are prepared to supply at a given price in a specific time period.
Demand and supply
demand varies with prices, For all normal goods, the quantity bought rises with a price fall and falls with a price increase. supply varies with price. Businesses will be more willing to supply more of a product if the price rises and will supply fewer/less of a product as the price falls.
determinants of demand
consumer incomes
prices of substitute goods and complementary goods
population size and structure
fashion and taste
advertising and promotion spending.
determinants of supply
costs of production
government subsidies to suppliers, reducing their costs
weather conditions and other natural factors
advances in technology which lower the cost of production.
how can equilibrium price be determined
If the price is higher than the equilibrium price, there will be unsold inventory-excess supply. Suppliers do not want unsold products. They will lower the price. If the price is lower than the equilibrium price, then inventories will run out, leaving excess demand. Suppliers could make a higher profit by raising the price to the equilibrium level.
market
where buyers and sellers meet to engage in exchange.. The potential market for a product, which is the total population interested in the product. The target market, which is the market segment of the total available market that the business has decided to direct its product towards.
market segment
subgroup of a whole market in which consumers have similar characteristics.
industrial markets
the selling of products by businesses to other businesses, also known as business to business or B2B.
consumer markets
the selling of products by businesses to the final end user, also known as business to consumer or B2C.
Local market
business that just sell in local areas to local customers.
national markets
business in national market sell their products to the whole country. greater potential to increasing sales compared to local markets. relatively few businesses, compared to local markets
international markets
offers greatest sales potential. The rapid rise of multinationals that operate and sell in many different national markets illustrates the sales potential from exploiting international markets. Expanding into foreign markets is a significant strategic decision. Many aspects of marketing will have to change in order to respond to the wide range of tastes, cultures and laws in different countries.
consumer (or market) orientation
an outward-looking approach that bases product decisions on consumer demand, as established by market research. requires market research. will attempt to produce what consumers are willing to buy.
product orientation
inward-looking approach that focuses on making products that can be made have been made for a long time - and then trying sell them.
benefits of consumer orientation
The chances of newly developed products failing in the market are reduced. Effective market research helps to prevent product failures. With the huge cost of developing new products most businesses use the customer-oriented approach to reduce the risk of failure.
Products based on consumers’ needs will have a longer lifespan and be more profitable than those that are sold using a product-led approach.
Market research never ends. Constant feedback from customers will allow the product and the method of marketing it to be adapted to changing tastes before competitors get there first.
benefits of product orientation
Product-oriented businesses invent and develop products as they believe that they will find consumers to purchase them. Pure research into technical innovations without consumer research is rare but still exists. There is still the belief that if a business produces an innovative product of a good enough quality, then it will be purchased.
differences between consumer orientation and product orientation
frequently updating market research for consumer orientation is expensive. if a business tried to respond to every passing consumer trend or market fashion, then it may waste its resources and end up not doing anything particularly well. It is expensive for a business to offer sufficient choice and range to meet every consumer need. In contrast, product orientation, researching and developing a truly innovative product, can lead to high sales and profit, even if there has been no formal market research.
Market size
total value (or quantity) of sales of all producers within a market in a given time period.
why is market size important
It allows a marketing manager to assess whether a market is worth entering or not.
It allows a business to calculate its own share of
the market.
The growth or decline of the market over time can be identified
Market growth
the percentage change in the total size of a market (volume or value) over a period of time. market share nd profit margins may low in rapidly growing market
factors of rate of market growth
country’s rate of economic growth
changes in consumer incomes
development of new markets and products that reduce sales in existing markets and products
changes in consumer tastes
technological change, which can boost market sales following a new innovation
whether the market is saturated because most consumers already own the product.
implications with increased market growth
Sales will increase if the business’s market share remains the same.
It may be possible to increase prices and profit per unit.
Increased sales could lead to cost savings
More businesses might be attracted to the market, increasing the level of competition.
implications with reduced market growth
Sales will increase more slowly even if the business’s market share remains the same.
Competitors might reduce prices to increase sales in a slow-growing (or shrinking) market.
Lower prices might result in lower profit per unit.
Businesses might consider expanding into faster-growing markets (e.g. in other countries).
market share
market share, and increases in it, is an effective way to measure the relative success of one of business’s marketing strategy. If the market share of a business is increasing, then the marketing of its products has been more successful relative to most of its competitors. growth can be measured by volume or value
sales of the business in time period/total market sales in time period x 100
brand leader
brand with the highest share of the market.
implications of an increase in market share
higher profits
retailers will be keen to stock and promote best selling brands
businesses producing the brand leader may be able to reduce discount rate to retailers (more profit with higher sales)
consumers often buy the most popular brands
implications of fall in market share
Sales are likely to fall unless there is rapid market growth.
Retailers will be less keen to stock and promote the product.
Larger discounts to retailers might have to be offered.
The product may no longer be a brand leader, so promotions will not be able to state this.
consumer products
goods or services sold to end users
industrial products
good or services sold to businesses
consumer products classification
convenience products - purchased frequently, often bought on impulse and sold to a large target market
shopping products - usually require some planning and research by consumers before being purchased; consumers do not buy these frequently
specialty products - bought infrequently, often expensive and with strong brand loyalty
classification of industrial products
materials and components - needed for production to take place
capital items - equipment, machinery and vehicles services and supplies - business services and utilities
key differences between selling to businesses rather than consumers
Most industrial products are much more complex than many consumer products so specialist sales employees and support services will be more important
Industrial buyers often have much more market power and are better informed than the average consumer. They need to be sold products by well-trained and experienced sales employees.
Industrial buyers will rarely buy on impulse. They will only purchase after long consideration and detailed analysis of alternative products. A business selling B2B needs to keep in regular contact with industrial customers.
mass media advertising and sales promotion techniques are not used in most industrial markets. Selling can be via direct contact with industrial buyers.
Mass marketing in consumer markets is a common strategy but in most industrial markets there are relatively few buyers. Products may need to be adapted to meet the needs of a particular business buyer.
mass marketing
selling standardized products or ranges of products in the same way to the whole market
niche marketing
identifying and exploiting a small segment of a larger market by developing differentiated products to suit that segment.
advantages of mass marketing
mass market strategy with high sales of a standard product can lead to lower average costs in production
costs advantages can lead to lower prices to consumers which help to reinforce the position of the product in the market.
mass marketing can result in extensive publicity for the business and its product leading to clear brand identity
disadvantages of mass marketing
lack of differentiated products and differentiated marketing does not appeal to many consumers
The focus on low prices does not help to establish a premium brand image for the product.
Technological or other changes could lead to fall in demand for standardized product. Overdependence on this product is therefore a risky strategy.
advantages of niche marketing
By using niche marketing, small businesses can survive and thrive in markets that are dominated by larger firms.
An unexploited niche has no competitors. Selling to this niche offers the chance to sell at high prices and high profit margins until competitors react by entering too. Consumers will often pay more for an exclusive product.
Niche market products and exclusive marketing can be used by large firms to create status and image. Their mass-market products may lack these qualities.
disadvantages of niche marketing
Small market niches do not allow economies of scale to be achieved.
There is limited scope for business growth if the niche market has few customers.
The business is vulnerable to market changes if it only operates in one niche market. This makes it a risky strategy.
If selling in a niche market is profitable, this is likely to attract competitors. This could lead to lower prices and profitability.
market segmentation
the identification of different groups of customers with common needs within a market and the marketing of different products or services to those customer groups. customer focused so is consistent with the concept of customer orientation. sometimes referred to as differentiated marketing. to be successful, business has to research market carefully. allows them to identify specific customer groups that exist within the market
consumer profile
quantified picture of a business’s consumers, showing data about their age groups, income levels, location, gender and social class.
methods of market segmentation
Successful segmentation requires a business to have a clear analysis of the consumers in its target market. The aim is to build a picture of the typical consumer and their key characteristics. This consumer profile helps with market research sampling, and designing, pricing and promoting the product. The main characteristics of consumers in a consumer profile are income levels, age, gender, social class and region. The three commonly used methods of segmentation are geographic, demographic and psychographic.
geographic differences (methods of market segmentation)
customer tastes may differ from different geographical areas. opposite of adopting the same marketing strategy for the whole area. the way in which products are promoted may have to be adjusted for different geographic locations. so detailed market research is necessary
demographic differences (methods of market segmentation)
Demography is the study of population data and trends, and demographic factors, such as age, gender, income, family size, social class and ethnic background, can all be used to segment the market. Income and social class are important demographic factors that identify socioeconomic groups and can be used to segment the market. The jobs people do are one of the main factors influencing their income levels. An individual’s social class and income level may have a great impact on their spending patterns.
psychographic factors (methods of market segmentation)
differences between peoples lifestyles, personalities, values and attitudes. Attitudes towards ethical business practices are very strong among some consumers. lifestyle often relates to people’s opinions, interests and choice of leisure activities. appeal to consumers who share certain personality characteristics.
advantages of market segmentation
Businesses can define their target market precisely, and design and produce goods that are specifically aimed at these groups, leading to increased sales.
It enables identification of gaps in the market and groups of consumers that are not currently being targeted, which might then be successfully exploited.
Differentiated marketing strategies can be focused on different target markets. This avoids wasting money on trying to sell products to the whole market.
Price discrimination between consumer groups can be used to increase revenue and profits
disadvantages of market segmentation
Research and development and production costs might be high as a result of needing to make and market 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.
Production and inventory holding costs will be higher than for producing and selling just one undifferentiated product.
By focusing on one or two limited market segments, excessive specialization could lead to problems if consumers in those segments change their purchasing habits significantly.
Extensive market research is needed to identify market segments and their needs.
customer relationship marketing (CRM)
using marketing activities to build and establish good customer relationships so that the loyalty of existing customers can be maintained. marketing tactics can be adapted to meet customers needs by gaining as much as information possible about existing customers
how can developing effective long term relationships be achieved
Targeted marketing
Customer service and support after- support essential to building customer loyalty.
Communicate regularly with customers - to give frequent updates on new products / special offers / new features/new promotions and support services.
Using social media - some CRM systems use social media sites to track and communicate with customers. Feedback management software platforms combine a company’s internal survey data with trends identified through social media. This allows businesses to make more accurate decisions about which products to supply to satisfy customers’ needs.
Costs of CRM
IT systems and software are needed and employees need to be trained to respond to customer feedback.
Effective CRM campaigns may require the use of an external marketing consultancy at high cost.
CRM needs an existing customer base to be established first before investing in CRM. If this is not done, the costs will not lead to higher sales.
It may be costly to respond to each customer’s feedback, especially if it contains special requests or requirements.
Benefits of CRM
For businesses with an existing customer base, CRM has proved to be cost-effective. Higher sales from effective CRM nearly always exceed its cost. It is a sustainable strategy creating long term customers unlike ‘special price offers’ or similar promotions. Loyal customers often recommend the business to friends and family, providing additional marketing benefit at no cost. It costs less per customer than trying to attract new customers.
