CIE As Level Business | 3.1 The Nature of Marketing - Marketing

Marketing

The 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*.

Corporate objectives

Well-defined and realistic goals set for the whole company.

Marketing objectives

Clear, measurable targets that guide a business's marketing efforts.

Benefits of marketing objectives

1. *Provides clear direction*

—> Team knows exactly what to aim for, avoiding untargeted campaigns that have little chance of success.

—> ✅: *More organised + effective campaigns.*

2. *Helps measure performance*

—> Objectives allow businesses to compare actual results with targets.

—> ✅: Helps managers *evaluate the success of marketing strategies*.

3. *Motivates employees*

—> Clear goals give staff something to work toward.

—> ✅: This can improve *employee motivation and productivity*.

What are examples of marketing objectives? (name 3)

- Sales *volume*

- Sales *value*

- Sales *growth*

- Market *growth*

- Market *share*

- Brand *loyalty*

Demand

The number of goods or services customers are willing and able to buy at a given price.

There is an ________ relationship between quantity demanded by customers and price.

inverse

As price increases, the quantity demanded by customers...

decreases.

Thus, the supply curve is *positive / negative*.

negative

A change in prices leads to a movement ...

along the demand curve.

A change in any non-price factor will lead to a change in...

the position of the demand curve.

What are the non-price factors affecting demand? (name 3)

1. Change in the *price of substitutes*

—> Increase in price of a good = decrease the demand of its substitute (vise versa)

2. Change in the *price of complementary goods*

—> Increase in demand of a good = increase the demand of its complementary goods.

3. Change in *consumer incomes*

—> As consumer's income rises, demand for *normal + luxury goods* increases / income falls = increased demand for *inferior goods*.

4. *Fashions, tastes* and *preferences*

—> More fashionable = demand increases.

5. *Advertising* and *branding*

—> More money on advertising = consumer awareness + brand loyalty increases.

6. *Demographics*

—> E.g. More babies = demand for baby products increases.

7. *Seasonality*

—> Demand varies at different times of the year.

8. *External shocks*

—> E.g. Covid-19 led to the panic buying of goods.

Supply

The quantity of a product that firms are prepared to supply at a given price in a specific time period.

There is _________ relationship between supply and price.

direct

As price increases, the quantity supplied...

increases.

Thus, the supply curve is *positive / negative*.

positive

What are the non-price factors affecting supply? (name 3)

1. *Change in the costs of production*

—> Higher unit costs = the business will be able to *produce less at a given price*.

2. *New technology*

—> Advances = *lower costs* of production = be able to produce more at a given price.

3. *Indirect tax*

—> *Subsidy* = reduce costs of production = produce more at a given price.

4. *External shocks*

—> An *unexpected event* can change the supply.

Price equilibrium

The price level at which demand is equal to supply.

Market

Where buyers and sellers meet to exchange goods and services.

Consumer markets (B2C)

The selling of products by businesses to the *final end user*.

Industrial markets (B2B)

The selling of products by *businesses* to other *businesses*.

—> Goods are not for final consumption, but are used to help *make other products* or to support *business operations*.

Local market

Where goods and services are bought and sold within a small geographical area, such as a town or city.

National market

Where a business operates and sells its products or services across the entire country.

International market

Where businesses sell their products or services in more than one country.

Product orientation

An inward looking approach that focuses on making products that can be (or have been) made for a long time and trying to sell them.

Benefits of *product orientation*

1. *Focus on quality and innovation*

—> Businesses prioritise improving the product itself.

—> ✅: Higher quality + unique = can justify *higher prices*

2. *Lower marketing costs*

—> Less emphasis on market research and promotion.

—> ✅: Potentially *higher profit margins*

3. *Strong brand reputation (if successful)*

—> Consistent high-quality products increase customer satisfaction.

—> ✅: May lead to *customer loyalty over time*.

Customer (market) orientation

An outward looking approach that bases product decisions on consumer demands.

Benefits of *customer orientation*

1. *Better meets customer needs*

—> Based on market research and consumer preferences.

—> ✅: Leads to *higher customer satisfaction*.

2. *Increased sales and revenue*

—> Products are more likely to be in demand.

—> ✅: Reduces risk of *unsold stock*.

3. *Competitive advantages*

—> Business respond to changes in the market.

—> ✅: Helps them stay *ahead of the competitors*.

Market size

The total value of sales of all producers within a market in a given period of time.

Market share

Sales of a business as a proportion of the total market sales.

Formula for *market share*

( Sales of a business in a time period / total market sales in a time period ) x100

Market growth

The percentage change in the size of a business over time.

Formula *market growth*

[ ( This year's market sales in - Last year's market sales ) / Last year's market sales ] x 100

If the growth rate is *positive*, the market is...

getting bigger.

What are the factors affecting the rate of market growth? (name 3)

1. *Economic conditions*

—> Growth is usually faster when the economy is strong and people have more money to spend.

2. *Consumer trends*

—> Changes in lifestyle, fashion or technology can increase demand for certain products.

3. *Population growth*

—> More people often means more potential customers, leading to a larger market.

4. *Level of competition*

—> In markets with few rivals, businesses may grow quickly; too much competition can slow growth.

5. *Technological innovation*

—> New technology can create demand for new products or services, speeding up market growth.

6. *Government policies*

—> Supportive laws or subsidies can help markets grow, while strict regulations may slow growth.

7. *Availability of substitutes*

—> If there are many alternatives, market growth may be limited as customers have more choice.

What are the implications of an increase in market share?

1. *Strong brand recognition and customer trust*

—> Business gains larger market share = more awareness = easier to attract and keep loyal customers.

2. *Greater power over prices, especially in less competitive markets*

—> Market leader = can charge higher prices w/o losing many customers.

3. *Can benefit from economies of scale*

—> Producing + selling more = reduced cost per unit = the business is more efficient and profitable.

4. *Attracts more investment and partnerships*

—> Market leader = appear more stable and successful = attract more investors + other companies.

5. *More influence over suppliers and retailers*

—> Larger market share = more negotiating power = better deals from suppliers + more shelf space in stores.

What are the implications of a falling market share?

1. *Harder to compete with larger rivals*

—> Loss of market share = struggle to keep up with competitors who have more resources and customer loyalty.

2. *May need to lower prices to attract customers*

—> To win back customers, the business may have to cut prices, which can reduce profit margins.

3. *Lower profits due to fewer sales and higher costs per unit*

—> Fewer products sold / made = costs spread over fewer units + lower revenue due to lack of sales = lower profits overall.

4. *Less visibility in the market*

—> Brand less familiar to consumers, reducing interest and trust in the product.

5. *Might struggle to access good suppliers or distribution channels*

—> Suppliers + retails prioritise businesses with higher sales = those with falling market share may get worse terms / less exposure.

Consumer goods and services

Those that are produced for sale to households and to individuals.

Industrial goods and services

Those that are produced for sale to other businesses.

When it comes to *sales volume and order size*, what are the key marketing differences in B2B and B2C markets?

*B2C:* Customers tend to make *smaller, one-off purchases*.

*B2B:* Customers often buy in *larger volumes* and place *regular, repeat orders*.

When it comes to *buying processes and decision-making*, what are the key marketing differences in B2B and B2C markets?

*B2C:* Quicker and influenced by *emotions, branding*, or *price*.

*B2B:* Involves a more *complex* and *formal* process, often requiring *approval from several people*.

When it comes to *marketing and promotion*, what are the key marketing differences in B2B and B2C markets?

*B2C:* Focuses on *emotional appeal*, *brand image*, and *convenience*.

*B2B:* Focuses on *product features*, *cost-effectiveness*, and *long-term value*.

When it comes to *customer relationships*, what are the key marketing differences in B2B and B2C markets?

*B2C:* Often *short-term* + based on *single purchases*.

*B2B:* Tend to be *long-term*, built on *trust*, and involve *regular communication*.

When it comes to *price sensitivity and customer*, what are the key marketing differences in B2B and B2C markets?

*B2C:* More *sensitive* to price changes and tend to look for *deals* or *discounts*.

*B2B:* More focused on *value for money* and may require *customised pricing* or *contracts* based on volume purchased.

When it comes to *product knowledge and information needs*, what are the key marketing differences in B2B and B2C markets?

*B2C:* Usually need only *basic information* to make a decision.

*B2B:* Often require *detailed product specifications*, *demonstrations*, and *performance data* before making a purchase.

Mass marketing

Selling standardised products or ranges of products in the same way to the whole market.

What are the *advantages* of *mass marketing*?

1. *Larger potential customer base*

—> Selling to a broad audience = there are *more people* who might buy the product.

—> ✅: *Increased market share*

2. *Economies of scale*

—> Producing + selling in *large quantities* = *reduced cost per unit*.

—> ✅: Improved *efficiency* + *profit margins*.

3. *Stronger brand awareness*

—> Mass promotion helps build a *well-known* + *trusted brand* that is recognised by many consumers.

—> ✅: Improved *brand image*.

4. *Simplified marketing*

—> The *same product + message* can be used for all customers.

—> ✅: Reduced *cost* + *complexity*

What are the *disadvantages* of *mass marketing*?

1. *High competition*

—> Mass markets are often *saturated* with competitors.

—> ❌: Makes it harder to *differentiate the product*.

2. *Less customer loyalty*

—> General products may not fully meet *individual needs*, leading to *reduced customer satisfaction*.

—> ❌: Customers may *switch to competitors*.

3. *Expensive marketing campaign*

—> Reaching large audiences through *national TV, billboards* or *online ads* can be very costly.

—> ❌: *Reduced profit margins*.

Pan marketing

Where a business *localises* elements of their marketing message within *each country* to better target customers in each geographical location.

Niche marketing

Identifying and exploring a small segment of a larger market by developing differentiated products to suit the segment.

What are the *advantages* of niche marketing?

1. *Less competition*

—> *Fewer businesses* operate in niche markets, making it easier to *attract + retain customers*.

—> ✅: Higher *market share*.

2. *Meet specific customer needs*

—> Products tailored to a *small, well-defined segment*.

—> ✅: *Increased customer satisfaction + loyalty*

3. *Can charge higher prices*

—> Niche customers are more *willing to pay more* for specialised products as they're *difficult to find*.

—> ✅: *Increased profit per unit*.

4. *More effective marketing*

—> Targeted promotions reduces *wasted advertising*.

—> ✅: *Improved marketing efficiency*.

What are the *disadvantages* of niche marketing?

1. *Limited market size*

—> The number of *potential customers* is small.

—> ❌: Restricted *sales + growth potential*.

2. *Higher unit costs*

—> Smaller production scale reduces *economies of scale*, leading to higher average costs.

—> ❌: *Reduced profit per unit*.

3. *Risk of market changes*

—> If demand in *niche declines*, the business is heavily affected.

—> ❌: Increases *business risk*.

Market segmentation

A subgroup of a whole market in which consumers have similar characteristics.

Geographic segmentation

Involves breaking up a market into groups of customers who live, work or spend their leisure time in defined *locations*.

Behavioural segmentation

Dividing a market based on *consumer knowledge, attitudes, uses*, or *responses to a product*.

Demographic segmentation

Dividing a market based on *similar characteristics*, such as *age, gender* and *family circumstances*.

Psychographics segmentation

What are the *advantages* of *market segmentation*?

1. *Better meets customer needs*

—> Businesses divide the market into groups with similar preference, allowing *products + marketing* to be *tailored*.

—> ✅: *Higher customer satisfaction + repeat purchases*

2. *More effective marketing*

—> Promotion is aimed at a *specific audience*.

—> ✅: *Reduces waste + improves return on marketing spend*.

3. *Competitive advantage*

—> Firms can identify *gaps in the market*.

—> ✅: *Helps differentiate from competitors*.

What are the *disadvantages* of *market segmentation*?

1. *Higher costs*

—> Market *research*, product *variation* and targeted *promotion* are expensive.

—> ❌: Increases *operating costs*.

2. *Complex marketing strategy*

—> Managing multiple segments requires more *planning* and *coordination*.

—> ❌: May reduce *efficiency*.

3. *Risk of incorrect segmentation*

—> If segments are poorly defined, products may not meet needs.

—> ❌: *Low sales* or *wasted resources*.

Customer relationship marketing (CRM)

Using marketing activities to build a *deep understanding* of customers, consistently meeting *customer needs* and developing long-term *customer loyalty*.

What are the 4 areas of CRM?

1. Customer acquisition

2. Customer retention

3. Customer expansion

4. Customer reactivation

Customer acquisition

*Attracting interested consumers* and *converting* them into *customers* to achieve growth, make money and improve chances of business survival.

What are the ways businesses can *acquire customers*? (name 3)

- Building a strong *brand identity*

- Delivering excellent *customer experiences*

- Providing clear *information*

- Offering special *rewards*, such as price promotions.

Customer retention

*Customer retention* involves encouraging customer to *remain loyal to a business* and its brand *over time*.

What are the ways businesses can *retain customers*? (name 3)

- Customer *loyalty schemes*

- Regular *communication* about new products or promotional offers

- Targeted *price promotions* or other *perks* for existing customers.

Customer expansion

The process of encouraging *existing customers* to increase the *value* and *frequency* of their spending.

What are the ways businesses can *expand customers*? (name 3)

- *Upselling* by encouraging customers to upgrade to premium products

- *Cross-selling* by offering customers a related product or service.

- Providing *add-ons* such as insurance policies, extra features or extended warranties.

Customer reactivation

Involves *reaching out* to customers who have *previously expressed interest in* or *purchased a product* but have since become *disengaged*.

What are the ways businesses can *reactivate customers*? (name 3)

- *Social media* engagement

- Targeted *price promotions* for returning customers

- Direct mailings via *post* or *email*

What are the *benefits* of CRM?

1. *Improved customer loyalty*

—> CRM systems store *customer data* and *preferences*, allowing businesses to *personalise services*.

—> ✅: *Repeat purchases* + *long-term relationships*.

2. *Increased sales and revenue*

—> *Targeted promotions* based on customer data are *more effective*.

—> ✅: *Higher conversions* + *sales*.

3. *Better customer service*

—> Employees have access to *customer history*, allowing for faster + more relevant responses.

—> ✅: *Higher customer satisfaction*.

4. *Improved decision-making*

—> Data analysis reveals *trends* in customer behaviour.

—> ✅: *Better marketing* + *product decisions*.

What are the *drawbacks* of CRM?

1. *High setup costs*

—> CRM software, systems, and infrastructure are expensive.

—> ❌: Increases *initial investment* + *financial risk*.

2. *Training costs*

—> Employees need to learn how to use the system.

—> ❌: Adds *time + expense*.

3. *Data protection risks*

—> Storing customer data increases risk of breaches.

—> ❌: May damage *reputation + trust* if data is leaked.

4. *Ongoing maintenance costs*

—> Systems require updates, support, and management.

—> ❌: Increases *long-term operating costs*.