U2 AoS 2 Notes Flashcards
Marketing, establishing a customer base and achieving business objectives
What is marketing?
-Marketing is a total system of interacting activities designed to plan, price, promote and distribute products to present and potential customers.
-At the heart of these activities is the most fundamental question that all businesses should continually ask: ‘What do customers want to buy – now and in the future?’
Marketing, establishing a customer base and achieving business objectives
Establishing a customer base
-It is essential to identify a customer base.
-A customer base is the group of customers who repeatedly purchase the products of a business and are its main source of revenue.
-Need to develop a clear idea of who it is that would be interested in buying the products of services offered.
-One way of doing this is to create a customer profile, which is a basic description of who the ideal customer might be.
Marketing, establishing a customer base and achieving business objectives
the customer profile
-customer behaviours and needs that the business can satisfy
-customer demographics such as age, gender and education level
-customers’ interests, favourite activities, lifestyles, opinions and values.
-customer location and environment
Marketing, establishing a customer base and achieving business objectives
benefits and costs for establishing a customer base
BENEFITS:
- by identifying who it is that would be interested in buying the goods or services offered by the business, the business can ensure that the product offered is likely to be of value to customers, that there is a connection between the product and the target customer, and that targeted customers return for repeat purchases.
- successful establishment of a customer base means that a significant number of those customers should develop a loyalty to the business, and continue to use the business.
-the improved marketability of the business’s products should result in higher levels of sales and improved market share.
COSTS:
- establishing a customer base has financial costs - these costs might include expenses related to market research necessary to determine who the customer might be, as well as the expenses related to the marketing mix.
-the logistics required to establish a customer base can also be time-consuming - for example, to establish a customer base, a business will need to consider external and internal environmental factors, carry out market research, determine who the customer base is and, select and implement marketing strategies that will get these customers through the door initially, but also convert the customers into repeat purchasers.
Marketing, establishing a customer base and achieving business objectives
Marketing and business objectives
The major aim of a business is to make a profit, and the business owner seeks to achieve this through:
Increasing sales – a business will want to use marketing to reach the largest number of consumers who display the characteristics of its customer profile and will therefore represent potential additional member of its customer base.
Increasing market share – the businesses share of the total industry sales for a particular market or product. All marketing plans aim to achieve a specified market share by better understanding of the different target customers.
Expanding the size of the business – expanding the size of the business is likely to result in the customer base growing. This can be done by increasing the product mix (introducing new products) however it is vital that the business understands the customers needs.
Maximising customer service – High levels of customer service will result in improved customer satisfaction. Research has shown that one dissatisfied customer has the potential to tell ten others, who in turn will each tell another five.
Marketing, establishing a customer base and achieving business objectives
Evaluating the effectiveness of marketing in achieving objectives
-Marketing objectives need to be able to contribute to the overall business objectives and it is important to be able to evaluate marketing strategies to ensure they are actually achieving this.
Marketing, establishing a customer base and achieving business objectives
Key Performance Indicators (KPI’s)
-Performance indicators are the means by which a business can measure its performance and evaluate the degree to which it is achieving its objectives.
Three common methods used are:
-Sales Analysis
-Market share analysis
-Marketing profitability analysis
Internal and external environment factors affecting customer base and brand identity
What is brand identity?
-Often referred to as the term ‘brand’ is the message that customers receive about the business and its product.
-These messages may include a name, term, symbol, design or any combination of these that identifies and specific product and distinguishes it from the products competitors.
-In promoting its brand, a business will need to consider factors in both the internal and external environments that could affect that strategy.
Internal and external environment factors affecting customer base and brand identity
The internal environment
-Consists of the people working within the business.
-The different internal environment elements that can affect the establishment of a customer base and brand identity, through a marketing strategy include:
*Owners and managers
*Employees
*Culture and policies
Internal and external environment factors affecting customer base and brand identity
The external operating environment
Stakeholders in the operating environment can both influence the marketing strategy and be influenced by it.
*Customers
*Suppliers
*Competitors
Internal and external environment factors affecting customer base and brand identity
The external macro environment
Any business owner developing a business plan must take into account the macro environment even though they have little or no control.
*Economic factors
*Legal forces
*Technological forces
*Social forces
Market research practices
-The collection and study of statistics and other relevant data help managers understand the needs of potential customers or clients as well as providing information on what business competitors may be doing.
-In order to minimise the risk businesses will undertake market research. By collecting and assessing information about the needs and wants of consumers, a more accurate and responsive marketing plan can be designed and therefore the risk of market failure can be reduced.
-Without adequate, reliable and correct information it could result in their product failing to sell.
Market research practices
-the three steps of the market research process
- DETERMINING INFORMATION NEEDS
-the business will identify exactly what it wants to measure or find out about its target market or customer base. - COLLECTING DATA FROM PRIMARY AND SECONDARY SOURCES
-at this stage, the researchers know the facts that are needed and those that are already available. Plans must be made to collect missing data. This information may be collected first-hand (through surveys). it can also be collected from existing data sources gathered by specialist companies. - ANALYSING AND INTERPRETING DATA
-facts by themselves do not always provide a solution to the marketing problem. They need to be analysed and interpreted to determine what the results mean for the business.
Target market attributes – market dimensions and segments
market segmentation
-A business will divide the total market for its products into distinct market segments.
-For example a business that is marketing motor vehicles won’t direct its marketing efforts to the whole market (anyone who buys a motor vehicle).
-Some people might only want a sports car or a 4 wheel drive.
The business would target a certain part of the market called a ‘segment’.
Target market attributes – market dimensions and segments
market segmentation
-Elements used to segment the market are known as market dimensions including:
DEMOGRAPHIC: this refers to the division of the market according to the general characteristics of a specific population; for example, age, gender, occupation, income, education, religion, family size, and ethnicity.
GEOGRAPHIC: this refers to the decision of the market according to different demographic areas or units; for example, urban, suburban, rural, regional, global, climate, and landform.
PSYCHOGRAPHIC: this refers to the division of the market according to the psychological characteristics and traits of consumers, such as lifestyle, socioeconomic group, values, motives, personality, consumer opinions and interests.
BEHAVIOURAL: this refers to the grouping of consumers according to their knowledge of the product, their attitude and their responses towards it, and the way they use it or benefit from it; for example, regular user, first-time user, brand loyalty, benefits sought, usage rate.
