Setting Marketing Objectives Flashcards
Marketing
Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitability.
Chartered Institute of Marketing (CIM) definition
It is about more than just advertising
Marketing involves a range of activities including:
Market research
Setting prices
Designing and using promotion methods, including advertising
Designing the product and packaging
Deciding where to sell the goods/services
Managing distribution channels
Customer service and communicating with customers
The method of selling the good/service
The role of marketing
“The process of identifying, anticipating (predicting) and satisfying customer needs profitably”
Purposes of marketing
As described in the definition, marketing has three main purposes:
Anticipating consumers’ wants – This can be done through carrying out market research to discover what the customer wants and what might make them purchase the good/service. It can also be used to analyse the market the firm intends to enter, including market size, number of rivals, current trends, average prices charged, etc. to know how best to deal with them when designing their strategy.
Satisfying customers’ wants – Once firms understand the market they can design a marketing strategy to attract customers and build a company brand and reputation. The business will use a range of variables known as the marketing mix (the ‘Seven Ps’) to do this.
Meeting the needs of the business – Marketing should help ensure a firm achieves its aims and objectives, such as survival, sales growth, market share gains, profit maximisation, social responsibility and ethics, etc.
Hierarchy of marketing objectives
Corporate : Grow revenues by 15% p.a. in each of the next five years
Marketing Objectives : Increase UK market share to 17%
Grow average customer spend by 5%
Marketing Strategies : Refocus product range on high margin items
Introduce CRM systems into industrial division
Marketing tactics : Improve agreements with key suppliers
Conduct search engine advertising campaign
The value of setting marketing objectives
Businesses must set marketing objectives to determine what they must do in their marketing strategy to help achieve their overall company objectives.
Marketing objectives: The specific goals/targets of the marketing department. They must be in line with the firm’s overall corporate objectives.
Increase sales volume and sales value Brand image and awareness Market and sales growth Increase market share Build brand loyalty
Market size: Sales volume and sales value
Market size: The total volume of sales of a product or the value of the sales of a product
Sales volume measures the number of items sold or produced
for example, 2.26 million vehicles were sold in 2013.
Sales value measures the financial worth of the items sold.
for example, the average car price in 2013 was £27,219 meaning a value of £27,219 x 2.26 million = £61,514,940,000
Firms may set objectives to maximise their sales volume or value or may set targets simply to maintain what they have particularly in difficult times.
Market size can increase by either convincing consumers to buy more goods/services or to pay more for the same amount.
A large market size will attract many competitors so many firms will prefer to operate in smaller niche markets. (For example, Hornby operating in the model railway business rather than other larger mass appeal toy markets)
Other marketing objectives
Increase size – For example, sales revenue, market share, sales volume
Market positioning - Appealing to particular or new market segment
Security/survival – A common objective for new start-up firms, those in difficult financial positions and during a recession
Successfully launch a new product or end unsuccessful products
Increase product awareness
Innovation and developing new products
Differentiation – Creating a unique selling point and making the brand stand out from rivals
Add value to existing products – Methods to ensure consumers are willing to pay a high price for the product/service, such as high quality, strong brand image, excellent customer service, etc.
Market and sales growth
Sales growth: The percentage change in sales (volume or value) over a period of time for a specific brand.
Market growth: The percentage change in sales (volume or value) over a period of time for a whole market.
Sales and market growth is a percentage change which is an essential calculation to know for A-level business. To work out a percentage change between two figures you must use the following calculation:
Percentage change = new figure – original figure x 100
original figure
Therefore sales growth and market growth are calculated the same way: Market growth =
new market size – original market size x 100
original market size
Sales growth = new sales – original sales x 100
original sales
Market and sales growth
Firms will want to enter markets that are growing to maximise sales. However market growth will attract many rivals.
Market growth can be difficult to achieve for one firm so they may set targets to move into new growing markets by targeting new consumers, developing new products or by completely diversifying (new products in new markets)
For example, Microsoft and Lenovo moving into the mobile phone market in recent years
Market Sales Growth
Shareholders for plc businesses often want the business to grow, in terms of sales and value.
Firms do this by expanding product ranges or entering new markets in new countries.
Factors influencing market growth
Economic growth - If a country’s economy is growing, employment, pay levels and therefore consumers’ disposable income will be higher resulting in better sales and market growth, particularly for luxuries such as holidays. The opposite will be true when an economy is in decline although some goods may see sales increase, especially those that focus on low prices such as Primark and supermarket own-brands.
Type of product - Luxury products will grow in sales most when the economy is growing and suffer when people are more worried about their spending.
Social changes – Changes in the general public’s behaviour will see market growth. Examples may include:
Consumers spending more time at home combined with low supermarket drink prices resulting in a decline in pubs but a rise in pay-for-TV services such as Sky & Virgin
An increase in working hours and working households has made consumers cash-rich but time-poor resulting in demand for convenience products like readymade meals and restaurants
The popularity of healthy lifestyles resulting in growth of certain healthy food products and e-cigarettes.
Factors influencing market growth
Demographic changes – The changing make-up of the UK population may see certain types of product markets become more popular. For example the UK has an ageing and increasingly diverse population which has seen the growth in certain trends of products that were previously more niche cultural or age-specific items.
Changes in taste and fashions - for example. trends on television such as cookery, or mobile phone popularity causing app sales growth
Firms can influence what is popular and therefore market growth through their own marketing efforts.
Market share
Market share: The percentage of the total sales of a product or service achieved by one business compared with the total sales in the market.
Market share (%) = sales of one brand / then x 100
total sales in the market
It is a key measure of a company’s success as it compares its sales with those of its rivals
To increase market share a firm must perform better than its rivals to take some of their customers
Firms often may set objectives to become the market leader by having the highest market share, or to maintain their existing market share or even to increase market share in a particular section of the market.
For example, Tesco is currently market leader in the supermarket industry but has seen their market share fall from 30.3 per cent in 2013 to 28.9 per cent with intense competition.
Brand loyalty
Brand: The set of physical attributes of a product or service, together with the beliefs and expectations surrounding it - a unique combination which the name or logo of the product or service should evoke in the mind of the audience. (CIM definition)
A brand is designed to differentiate a company from its rivals and it can be represented by names, logos, slogans, etc.
Brand loyalty: A measure of the degree of attachment that a consumer has for a particular brand. Loyal customers are more likely to make repeat purchases and less likely to switch to rival brands.
There is much debate and research in this area but generally it is considered much cheaper to retain existing customers than attract new ones, so brand loyalty is essential.
Brand loyalty is important for firms because:
It will ensure customers return for repeat purchases
Firms will need to spend less on promotions as consumers are already convinced about the brand
Companies may be able to charge higher prices as it reduces a brand’s price elasticity (The amount demand changes as price changes). As consumers are more committed to the brand they may be willing to pay higher prices even if they change. This means they become less price sensitive.
External and internal influences on marketing objectives and decisions
External factors are those outside the business, often listed under the heading PESTLE, that may impact what objectives a firm sets. They may include:
Political & legal factors - Government policies impact marketing and what firms can do, for example, advertising bans on cigarettes and unhealthy foods during children’s television. Multinational firms need to be aware of foreign legislation and policies. How do government policies impact consumer spending - for example, taxation and spending cuts?
Economic factors - Is the economy in growth or decline? What are disposable income levels? Can a firm compete on price or quality? What is the current level of Interest rates? How does this impact the amount of borrowing and therefore availability of funding for marketing strategies? How does this impact consumer spending, particularly on high price items like cars and homes?
Social factors – What are existing tastes and fashions? How do demographic factors impact the company’s objectives and actions?
