Unit 4 - Business Management SL

Marketing

A management process involved in identifying, anticipating, and satisfying consumer requirements profitably.

Four Main/Generic Objectives of Marketing Departments

• Right products to fulfill needs

• Correct prices

• Distribute products conveniently for purchase

• Adequate + Effective promotion

Importance of Marketing

Understanding Customer Needs - Meeting customers needs with affordable, valuable products that ensure satisfaction for both the business and customer.

How is Marketing an Ongoing Process?

• Changing Customer Needs

• Business Environment Changes

• Competitive Pressure

• Internal Development

Outcomes of Effective Marketing

• Customer Satisfaction

  • Repeated Purchases, recommendation, customer loyalty.

• Other obvious outcomes → more profit, stay competitive, can gain more market share with favor.

Aspects of Marketing

• Exchange process - two-way process where business provides product and receive something (payment)

• Mutual benefit - both customers and business benefit

• Consumer Trends - understanding current and future needs.

• Delighting Customers - exceed expectations → build customers loyalty.

Purpose of Marketing

To align business strengths with market needs through market research, product development, packaging, promotion, and pricing. Effective marketing creates value for customers and drives business profitability.

Key Areas Influence On Marketing

• Product Nature (design, quality)

• Quantity Produced (guide production)

• Product Variety

• Pricing

Marketing Collaboration with other Functions

• Operations - discuss production capacity, product benefit, managing cost.

• Finance - Negotiate budget for development, launch, production

• HR - staffing needs and skill requirement.

Success in Coordination

Effective marketing requires collaborating with other functions to ensure resource availability and meet demand, leading to business success.

Product Orientation

A marketing approach that is inward-looking, focusing on creating an innovation that creates needs for it rather than looking at existing needs.

Market Orientation

A marketing approach that is outward-looking. Market orientation uses market research to focus on the customer in order to identify, design, develop, and supply products that meet their needs and wants.

Factors to Choose Market vs. Product Orientation

• The market - Hi-tech products (smartphones) tend to start off as product oriented. Mass consumer markets typically have more market oriented.

• Organizational structure - Business that puts customer as key stakeholders are more market oriented.

• Barriers to entry - Less competition → less customer-focused. Such firms has market power in pricing, distribution, so more product oriented.

Market

A place or process where customers and supplies trade. A market exists where there is a demand for a particular product.

Market Characteristics that are researched

• Market size

• Customer base

• Barriers to entry

• Competition

Market Share

Percentage of 1 firm’s share of the total sales in the market. Can be measured in the volume of goods sold or the value of those goods.

Market Leader

An individual or company that owns the largest market share or highest profitability margin in a given market for goods and services.

Market Concentration

Measures the degree of competition that exists within a market by calculating the market share of the largest few firms in the industry.

Market Size

The magnitude of industry, usually measured in terms of the value of sales revenue from all the businesses in a particular market, per time period.

Marketing Strategy

Medium to long-term plan to achieve a firm's marketing objectives. Combines all marketing goals into a comprehensive plan. A good marketing strategy comes from market research, maximizing profitability and business sustainability.

Marketing Objective

The specific marketing goals of an organization.

Marketing Objectives of Profit Seeking Organizations

• Increase sales revenue

• Higher market share

• Increased market leadership

• Improved product/brand awareness

Marketing Objectives of NPO

• Build membership + support

• Generate awareness for NPO cause

• Improve brand recognition of NPO

• Positive attention to NPO operations

Why do market strategies change?

• Changing consumer tastes

• Shorter product life cycles

• Internet and mobile technologies

• Competitive Rivalry

• Globalization

Needs

The essential necessities that humans must have for survival

Wants

Human desires that are not essential for survival

Marketing Plan

A document that includes marketing strategies, strategy, budget to achieve marketing objectives (7Ps). Planning allows for efficiency, organization, streamline business activities, maximize cost.

Marketing Audit

Inspection of existing marketing. This is to identify current weakness in marketing mix to make improvements.

Process of Marketing Planning

1. Marketing Audit

2. Marketing Objectives

3. Marketing Strategies

4. Marketing Mix

Key Insights from Market Research

• Market size (sales volume or value)

• Market growth potential

• Competitor positioning and customer perceptions

• Customer views on the brand

Marketing Planning

The systematic process of assessing marketing opportunities, resources, defining marketing objectives, marketing strategies, and establishing guidelines for implementation and control of the marketing program.

4Ps

• Product

• Price

• Place (channels of distribution)

• Promotion

7Ps

• Product

• Price

• Place (channels of distribution)

• Promotion

• People

• Process

• Physical evidence

People (in Marketing Mix)

Individuals involved in the sales process such as shop assistants.

Process

The process that involves when customer buy the product (contracts, forms to make a purchase)

Physical Evidence

Refers to anything the customer can perceive when encountering the business. (e.g environment of stores where product is purchased).

Marketing Mix

The combination of various elements is needed to successfully market a product. E.g. The 7Ps.

Differentiation

The act of distinguishing a business or its products from rivals in the industry. Basically, you’re trying really hard to be different.

Market Segmentation

The process of categorizing customers into distinct groups of people with similar characteristics (such as age or gender), and similar wants or needs for research and targeting purposes.

Three Main Category of Marketing Segmentation

• Demographic

• Geographic

• Psychographic

Demographic Factors - Segmentation

• Age

• Gender

• Race

• Religion

• Income

Geographic Factors - Segmentation

• Demographics is largely influenced by geographic location (culture, language, social attitude)

• Climate → weather’s condition can impact business activity.

Psychological Factors

• Hobbies and Interest

• Values (companies can ethically appeal to customers)

• Religion

• Culture

Targeting

Aiming your product at a specific segment and making sure it’s built based on that segment’s needs. After segmenting its market, the business now decides on a target market.

Mass Marketing

Refers to marketing to all people. Basically, a strategy that ignores targeting individual market segments. (Coca Cola)

Differentiated Marketing

Market to many segments (Toyota)

Niche Marketing

Marketing that targets a specific and well-defined market.

Positioning Map

A product position map (or perception map) is a two-dimensional visual tool that reveals customer perceptions of a product or brand in relation to others in the market.

Repositioning

A marketing strategy that involves changing the customer’s perception of a firm's product or brand in comparison to rival firms.

Unique Selling Point (USP)

Refers to any aspect of a product that differentiates it from its competitors. 

e.g pioneer of a product, reputation for being superior, only firm to provide it (monopoly)

Product Differentiation

The act of distinguishing a product or service from rivals in the industry, creating a perception among consumers that they are different and unique.

Purpose of Market Research

Successful business conduct market research continuously to keep up with trends and stay competitive. Market research is vital in maximizing sales and understanding your target market.

Primary Research

New and original data is collected for a specific purpose (also known as field research or bespoke research).

Secondary Research

Using a collection of second-hand data and information that already exists (also known as desk research).

Ethics in Market Research

• Deceptive Practices

• Invasion of Privacy

• Breaches of Confidentiality

• Objectivity

5Ds of Unethical Market Research

• Damage

• Deceitful

• Deceptive

• Disclosure

• Detachment

Sampling

The practice of taking a small group of people or a particular market and estimating the results for the rest of the population.

Types of Sampling (Examples)

• Quota sampling

• Convenient sampling

• Random Sampling

• Snowball Sampling

• Cluster Sampling

Product

Any good or service that serves to satisfy the needs or wants of customer.

Product Lifecycle

Stages a product goes through from its introduction to the market until it is removed from sale. It starts from development, introduction, growth, maturity, and then decline.

Market Research

A systematic process that involves gathering, organizing, and interpreting information and data about the market and current trends.

Extension Strategies

Refer to strategies that lengthen the maturity phase of the product life cycle, still creating demand for the product to be purchased, reducing decline.

Extension Strategies Examples

• Introducing the product to new markets

• New uses for the product

• Change packaging

• Target different market segments

• Promotions

Differentiation Strategies

Changing parts of the product to create demand.

• Size

• Color

• Design

• Packaging

Boston Matrix

A tool/framework that helps companies decide the prioritization of their different products/businesses by how profitable they are.

Branding

A form of differentiating the firm from competitors. A brand refers to a name that is identifiable with a product or a particular business. Things such as signs, symbols, and designs can create a brand.

Aspects of Branding

• Brand Awareness

• Brand Development

• Brand Loyalty

• Brand Value

Brand Awareness

Extent to which people can recognize a particular brand.

Brand Loyalty

When customers repeatedly buy the same brand of product again.

Brand Value

Refers to the ‘premium’ that customers are willing to pay for a brand name over and above the value of the product itself.

Importance of Branding

• Legal Instrument (legal ownership)

• Risk Reducer

• Image Enhancer (charging premium prices for brand)

• Revenue Earner

Importance of Packaging

• Physical Protection

• Convenience

• Information

• Security Risks

• Aids promotion

Factors that affect pricing (some)

• The type of product

• The cost of producing a unit

• The demand for a product

• Competitors

Price Higher if the Product …

• Has unique selling point

• Perceived as exclusive

• High in demand

• Sold exclusively

Cost-Plus (Mark-Up) Pricing

A pricing method where a fixed percentage is added to the cost of production to determine the selling price.

Penetration Pricing

Setting a low initial price to attract customers and gain market share before gradually increasing the price.

Price Skimming

Setting high prices at first for the richest, then, after the demand dwindles, decreasing the price for the next layer of the customer (uniquely linked to technological innovation).

The Loss Leader

Selling a product at a price below cost to attract customers, with the expectation that they will buy the other profitable complementary products.

Predatory Pricing

Temporarily reducing price to attempt to force out rivals (destroyer pricing). This is a huge gamble.

Premium Pricing

It is easily perceived as more price meaning more quality, and based on the brand reputation, they can charge higher prices.

Objectives of Promotion

• Inform

• Persuade

• Remind

Above the Line Promotion

Mass promotion and appeals to a large number of audiences rather than targeting specific customer groups.

Below the Line Promotion

The use of non-mass media promotional activities, with the business having more control. Involves promotional techniques which aim to reach consumers more directly that the organization can control.

Through the Line Promotion

Combining both below and above the line promotion.

The Promotional Mix

• Direct Marketing

• Advertising

• Personal Selling

• Public Relations

• Sales Promotions

Direct Marketing

Involves communicating directly with targeted customers through channels like phone calls, social media, or direct mail to promote products or services rather than being face-to-face.

Personal Selling

Involves direct, face-to-face interaction between a salesperson and a potential customer to persuade them to purchase a product or service.

Public Relations

Marketing activities aimed at establishing and protecting the desired image of an organization. PR is about getting positive media coverage, usually without directly paying for it.

Sales Promotion

Short-term incentives designed to encourage the purchase of a product or service, such as discounts, coupons, or contests.

Guerilla Marketing

A marketing form that uses ‘untraditional’ activities to help companies weaken their rivals and stay successful on the market, even with limited resources. 

Importance of Place

• Location of Business + Customers

• Effective distribution strategies

• Make use of intermediaries

• Online channels streamline distribution

Types of Distribution Channels

• Zero Level Channel

• One Level Channel

• Two Level Channel

Zero Level Channel

Direct selling, no intermediaries. This means the business produce directly to the customers.

One Level Channel

There is only one intermediary between the producer and customer. Usually this is for consumer goods and the intermediary is the retailer.

Two Level Channel

Two intermediaries involved between manufacturer and consumer. This usually refers to a wholesaler and a retailer in the process.

Wholesalers

Businesses that purchase large quantities of products from a manufacturer and then separates or ‘break’ the bulk-purchases into smaller units for resale to mainly retailers

Distributors

Independent and specialist businesses that trade in the products of only a few manufacturers. For example, car distributors typically sell the products of one manufacturer, such as Honda or BMW, to the consumer.

Agents

Negotiators who act on behalf of buyers and sellers of a product. They are not usually employed by the producer but are used as an intermediary to help sell the vendor’s products.

Retailers

Sellers of products to the final customers e.g. shops, supermarkets, department stores.

Indirect Way to Distribute Products Without Retailers

• Telemarketing

• E-Commerce

• Vending Machines

• Mail and Direct mail