1.3.1: Marketing objectives and strategy

marketing objectives

• increase market share

• increase revenue

• build a brand

increase market share

• gives a business a competitive edge

• businesses can exploit economies of sale as output increases as a result of growing market share

• better prices from suppliers

• influences prices charged in the market

• businesses may have to invest in an advertising campaign or adjust pricing strategy

increase revenue

• higher revenue = higher profit

• investing in marketing activities helps increase revenue

build a brand

• businesses wanting to establish the name of their company or products

• gives products brand names that can be easily recognised

• strong brands generate huge returns

• important for highly competitive markets

• exploits USP and invests heavily in marketing

product life cycle

shows the different stages a product passes through over time and the expected sales

six stages of the product life cycle

1. development

2. introduction

3. growth

4. maturity

5. decline

development

• product is researched and designed

• ideas are investigated

• prototypes are made

• large number of products never progress beyond this stage

• businesses are reluctant to take risks associated with new products

• business spends largely to develop the product

• no sales, high costs

introduction

• product is launched

• slow initial sales

• incurred costs upon product launch

• firm has to meet promotion and distribution costs of building a new production of line or plant

• businesses spend on promotion to attract customers

• product still isn’t profitable

• high prices to cover promotion costs or low prices to break into the market

• few outlets stock products

• length varies based on product

growth

• new customers + repeat purchases

• unit costs fall as production increases

• product becomes profitable

• competitors may launch their own versions leading to a slowdown of the rise in sales

• businesses should consider prices and promotion over time

maturity and saturation

• product is established with a stable market share

• sales reach highest point

• competitors entered the market to take advantage

• market becomes saturated as firms enter

• businesses are forced out of the market because of competition

• businesses use extension strategies to extend product life

decline

• sales decline due to change

  • consumer taste, technology, new products

• product loses appeal

• may be withdrawn or sold to another business

• profit can still be made at a high price and low cost

extension strategies

prolong life of a product before decline and help generate more cash

2 extension strategies

• product adjustments: prolongs product life by ‘freshening’ it up

• promotion: focuses on campaigns to boost sales

product adjustments

• product is updated commonly for technical products and consumer durables

• add value to products by making improvements

• product range is extended

• modified packaging gives the impression that the product has been changed

promotion

• finding new uses

• finding new markets

• investing in advertising campaigns

• encourages frequent use of product

effect of extension strategies on the product life cycle

• when the market becomes saturated and sales begin to fall, decline in sales is delayed when the strategy is used

• some firms use extension strategies at the maturity stage before the decline as they can forecast the falling sales in the market

product portfolio

• made up of product lines

• constant launch of new products = business can make sure gaps aren’t created

• i.e. 3 products in a line released at regular intervals means there isn’t a gap in the line

• profit from mature products subsidises launch of new products which would be costly at first

boston matrix

• difficult for firms to tell what stage of the life cycle a product is at

• useful for forms to analyse product portfolios

criterias the products are categorised in in the boston matrix

• market growth

• relative market share

4 categories on the boston matrix

1. stars: high market growth, high market share

   • valuable

   • strong position

   • fast-growing market can be exploited

   • business wil need to invest to come in the growing market i.e. new facilities, promotion

   • nearly zero net cash flow

   • high profit, high investment

2. cash cows: low market growth, high market share

   • well positioned

   • profitable

   • little chance of increasing sales and profit

   • little need for investment

   • slow growth in sales

   • little need for new premises

   • strong positive net cash flow

3. question marks: high market growth, low market share

   • ‘wildcat’ products

   • fast growing market - potential to turn into a star

   • problematic as the business won’t know what to do with the products

   • weak products aren’t profitable

   • zero or negative net cash flow

   • investment may be needed to cope with growing sales

4. dogs: low market share, low market growth

   • poor prospects for future sales and profit

   • may generate positive cash flow

   • need little investment

balancing product lines

• there mustn’t be too many items within each category in the boston matrix

• products on top - early stages of product, growing markets, unrecovered cost of development and promotion using up resources

• positive net cash flow from cash cows in a product line can support products in a growing market

taking appropriate decisions

• stars have great future potential as cash cows and the business should build the brand of these products to increase sales and fight off competition

• cash cows can be milked for cash to develop other products or used as holding

• question marks can turn into a star by building the brand and harvesting the product to increase profit or divest the product by withdrawing it

• dogs may be divested or harvested

marketing mix

elements of a firm's marketing strategy that are designed to meet the needs of its customers

4 elements of the marketing mix (4 P’s)

1. product

2. price

3. promotion

4. place

product

• how consumers use a product

• appearance of product

• financial factors - price, value for money, after sales service

• product life cycle

• USP - competitive edge

price

• pricing policy is a reflection of market

• prices will not always be set at the level which will maximise sales or profit

promotion

• businesses choose from a wide range of different promotional methods

• i.e. advertising, sponsorship, coupons, free gifts, competition

place

• convenient locations for customers to buy

• decisions about physical distributions

• e-commerce

marketing strategy

set of plans aiming to achieve a marketing objective

strategies for mass markets

relevant to huge, global markets with millions of potential customers

mass market - product

most successful businessesa re likely to be those that can differentiate their product in some way - developing a USP or relying on the marketing mix

mass market - price

• prices charged in a mass market are similar

• businesses fear a price war as the revenue is reduced for every competitor

• businesses are happy to charge the ‘going rate’ in the market

• price leadership is common for a dominant business in the market

mass market - promotion

• invest heavily in ads and promotion

• marketing plays a major role in the mass market

• occurs in absence of price competition

mass market - place

• businesses use multiple channels to distribute their goods

• some manufacturers pay sellers to display their goods in prominent places

• internet and e-commerce allowed small business to have access to mass markets

• online banking, delivery, click and collect

strategies for niche markets

have very particular needs which are sometimes neglected by larger firms, therefore creating a gap in the market for a business to satisfy a small customer group

niche markets - product

• products are significantly different than that of rivals

• i.e. restaurants with michelin stars cater to very specific needs

• designed carefully to meet the specific needs of the customer group

niche markets - price

• flexible pricing

• less competition

• higher prices can be charged without losing out on market share

• if needs are being met, customers may be willing to pay extra

niche markets - promotion

• targeted advertising

• smaller markets don’t use as much national media

• businesses should be well aware of customer profile to ensure advertising and expenditure isn’t wasted

• adverts placed in specialised publications/channels

niche markets - place

• more selective choosing distribution channels

• use exclusive distributors or handle it privately

• may also use the internet

B2B

business-to-business

B2B marketing strategies

• business supplying goods and services to other businesses

  1. outbound marketing strategies

  2. inbound marketing strategies

  3. hybrid strategies

B2B - outbound marketing strategies

• involves direct marketing material at potential customers

• i.e. direct mail, email, telephone, sponsorship, targeted ads

• drawbacks:

  • ignored adverts

  • annoyance at being contacted by phone

  • repeated approach may ruin brand image

  • potential customers obtained usually don’t lead to sales

B2B - inbound marketing strategies

• involves attracting potential customers to websites when they’re looking for suppliers or solutions

• common techniques:

  • blogging - providing content on company blogs

  • social media marketing - developing a following on any social media

  • search engine optimisation - increasing website traffic by getting a high-rank placement in searches

  • free e-books - offering useful information for visitors to download

  • video marketing - producing short and informative video clips for visitors

  • targeted email marketing - sending personalised emails targeted to people

• challenges:

  • requires effort and resources

  • recruitment of experienced marketers is difficult

  • tricky to keep up strategy with rapid trends

B2B - hybrid strategies

• combination of outbound and inbound methods

• helps reduce costs and creates sustainable growth in market share

how do businesses develop customer loyalty

• communication

• customer service

• customer incentives

• personalisation

• preferential treatment

loyalty - communication

• mass market: national advertising campaigns

• reassuring adverts

• regular newsletters

loyalty - customer service

• high quality customer service

• employees who interact must be professional, reliable and conduct themselves honestly

• improved by dealing with matters promptly

• involves providing a more effective after-sales service

• ‘pleasant’ purchasing experience

loyalty - customer incentives

• loyalty/reward cards upon returning

• value of rewards linked to amount spent by customers

• loyalty programme makes customers want to spend more

loyalty - personalisation

• personal level

• customisation

• addressing customers by name

• dealing with customers at this level is easier for smaller businesses

loyalty - preferential treatment

• vip lounges/etc.

• if a business can provide customers with preferential treatment they return for more