Business Management HL: Unit 4 - Marketing

Marketing

Marketing

links the business to the customer by identifying/meeting the needs of customer’s profitability. It does this by promoting the right product at the right time to the right customers.

Market Orientation

Outward looking approach; establishing consumer demand through market research before producing and selling a product. This ensures that the product will sell well because the business know it is what their customers want.

Product Orientation

Inward looking approach; focusing on making the product first before attempting to sell it. Businesses usually do this when they believe that people need their product.

Market share

the percentage of sales in the total market sold by one business
Firms sales in a given time period x100
Total market sales in time period

Market growth

percentage change in the total size of a market (volume or value) over a period of time
market size(2nd year)-market size(1st year)
market size 1st year

Market leadership

a firm with the largest market share in a given market

Importance of market share

provides useful insights into the firm’s revenues, growth and profit margins

Role of market planning

document outlining the firm’s marketing strategies to be used in order to achieve these objectives. usually developed after the conduct of a marketing audit

Segmentation

a distinct group of customers with similar characteristics such as age, gender and similar wants or needs

targeting

means that each distinctive market segment can have its own marketing mix

positioning

analysing consumer perceptions of current brands

niche market

a narrow, smaller or more specific market segment

mass market

a large or broad market that ignores specific market segments

Importance of having a USP

Helps establish a firm’s competitive advantage, builds customer loyalty, improves revenue and makes the product/service easy to sell

How can organisations differentiate themselves and their products from competitors

• Product differentiation

• Service differentiation

• Price differentiation

• Distribution differentiation

• Relationship differentiation

• Image/reputation differentiation

sales forecasting

uses quantitative methods to try predict a firms future sales

advantages of sales forecasting

• accurately predicting sales reduces uncertainty

• helps manage stock and cash flow

• aids in the decision making process

disadvantages of sales forecasting

• time consuming

• ignores qualitative external factors (political, social, economic)

• the entry of competitors into a market may be unforeseen

• may be based on present technology which can be rendered obsolete due to technological processes

why organisations carry out market research

• To identify consumer’s needs and wants

• To assist a business in predicting what is likely to happen in the future

• To reduce risk of product failure

• To measure effectiveness of a marketing strategy

• To provide latest information on activities happening in the market

how organisations carry out market research

Primary and secondary market research

surveys

questionnaires sent to specific target audiences to gather first-hand information

interviews

bringing in a selection of people to interview in order to gain information. They can be conducted one-on-one, telephone or online

focus groups

small groups brought together to discuss a product or idea

observations

getting information by carefully watching a trying to understand certain things or people’s behaviour

market analyses

commercial publications or market intelligence reports that gather data about particular markets. highly detailed reports usually conducted by specialist market research agents

academic journals

publications of scholarly articles written by experts. Experts usually include professors, graduate students or others with first-hand experience

government publications

documents produced by the government that provide an official record of government activities and cover a wide variety of topics. issued locally, regionally or nationally.

media articles

texts written and submitted for publication. e.g. newspapers & magazines

online content

gathering information from the internet or websites

qualitative research

information that relies on non-numerical data such as quality, opinion and characteristics

quantitative research

information that relies on numerical and/or measurable data

quota sampling

segmenting a given population into a number of groups that share certain characteristics

random sampling

every member in the population has an equal chance of being selected, since the sample in chosen randomly

convenience sampling

research groups are selected based on their easy access and proximity to the researcher.

7 Ps of marketing

• Product

• Price

• People

• Place

• Physical Evidence

• Promotion

• Processes

Product (7 Ps)

a good or service that is offered in a market. Can be tangible or intangible and aims to satisfy the needs and wants of consumers

Product life cycle

Different stages that a product is likely to go through from its initial design and launch to its decline

product portfolio

includes all the products or services provided by an organisation

marketing mix

set of controllable variables that a company uses to influence and meet the needs of its target customers in the most effective and efficient way possible.

Extension strategies

attempt by firms to stop sales from falling by lengthening or extending the product’s life cycle

Extension strategies include…

• selling existing products into new markets

• finding new uses for the product

• changing the product’s packaging

• targeting different market segments

• developing new promotional strategies

investment

the act of buying an asset to make a profit from its use

profit

the money you have left after paying for business expenses

cash flow

a measurement of the amount of cash that comes into and out of your business in a particular period of time

branding awareness

the ability of customers to recognise the existence and availability of a firm’s good or service

branding development

any plan to improve or strengthen the image of a product in the market.

brand loyalty

when customers become committed to a firm’s brand and are willing to make repeat purchases over time.

brand value

how much a brand is worth based on its reputation, potential income and market value. it is the extra money a business can make from its products because of its brand name

the importance of branding

gives customers a clear image with which they can associate the business

Price (7 Ps)

the only P concerned with profit. the money customers pay for having or using a good or service.

Cost-plus (mark-up) pricing

adding a mark-up to the average cost of producing a product

Penetration pricing

setting a low initial pricing and increasing over time. aim is to get a large number of customers quickly

Loss leader

company sells at below their average costs with the aim to attract customers so they will buy something else

premium pricing

sustained substantially higher prices than competitors to give the impression of superiority

predatory pricing

eliminates any opposition by putting your prices lower than your competitors average costs to drive them out of business (illegal)

Dynamic pricing

firms change pricing on an on-going basis in response to an on-going supply and demand

Competitive pricing

taking into account what your competitors are doing

Contribution pricing

calculating the variable cost per unit and setting the price above that

Price elasticity of demand

measures how much demand for a product changes when there is a change in price.

Change in quantity = new q - original q
original q

Change in price = new p - original p
original p
PED >±1 = price elastic
PED <±1 = price inelastic
PED =±1 = unit elasticity

Promotion (7 Ps)

Doing what competitors do but bigger, better, faster, cheaper, etc.

Above the line promotion

paid for communication that uses mass media. the control or responsibility is passed onto another organisation.
e.g. TV, radio, internet

Below the line promotion

direct control over the promotional activities. focuses on promotional activities to a specific group of customers.
e.g. personal selling, public relations, sales promotion

Through the line promotion

mixture of above and below the line. aim is to gain greater brand awareness & visibility.
e.g. TV advert released followed by magazine adverts

social media marketing as a promotional strategy

uses social networking websites to market a firm’s product. incorporates the use of technological concepts and techniques with the aim of growing a business through different media.

Place (7 Ps)

how the product reaches the intended user. it is concerned with how the product is distributed to make it available to consumers

Channel of distribution

the path taken by a product from the producer or manufacturer to the final consumer

Zero intermediary channel

when a product is sold directly from the producer to the consumer.
e.g. airline ticket booking

One intermediary channel

involves the use of one intermediary (such as a retailer or agent) to sell the products from the producer to the consumer. usually working on a large scale or with expensive products.
e.g. selling jewellery through retailers

Two intermediaries channel

when two intermediaries (usually wholesaler and retailers) are used by producers to sell the product to the consumer. particularly useful when selling goods over large geographical distances.

One intermediary channel advantages & disadvantages

Advantages:
- Promotion and customer service are done by the retailer
- The cost of holding stock is incurred by the retailer
- Retailer assists in selling the product at convenient places to consumers

Disadvantages:
- Retailers profit mark-up is included in selling price, so product may be expensive for consumers
- The producer may not be aware of the promotional strategy used by the retailer

Zero intermediary channel advantages & disadvantages

Advantages:
- Cheap
- Fast
- Ideal for perishable products
- Producer is key decision-maker

Disadvantages:
- Promotion is done by producer, which can be time-consuming and expensive
- Producer incurs all storage and delivery costs

Two intermediary channel advantages & disadvantages

Advantages:
- Wholesaler incurs storage costs which reduces costs for producer
- Wholesaler breaks the bulk for retailer by providing large quantities in smaller batches
- Appropriate when selling over long distances

Disadvantages:
- Two profit mark-ups could lead to a more expensive product offered to consumers
- This channel further reduces the producer’s responsibility for promoting products

People (7 Ps)

selecting, recruiting, hiring and retaining the correct staff with the right skills and abilities for the production and sale of a good/service

importance of employee-customer relationships in marketing a service

they are the face of the company which makes their relationship vital for maintaining a good image. often purchasing experiences can be effected often by the people we purchase from

Processes

procedures & policies dealing with how an organisations product is provided and delivered.

Direct processes

add value at the customer interface as the customer experiences the service

Indirect processes

support the service before, during and after it has been consumed

Physical evidence

the tangible or visible touch points that are observable to customers.

importance of tangible physical evidence in marketing a service

many customers like to touch, smell, see, etc products before they purchase since it can act as a point of differentiation.

Benefits of a 7 Ps marketing mix model

• brings together marketing ideas and concepts in a simple manner, making it easier to market a good/service

• assists businesses in strategy formulation all the way to strategy implementation

• allows business to vary its marketing activities based on customer needs, resource availability and market conditions

Drawbacks of a 7 Ps marketing mix model

• misses out on addressing issues related to business productivity

• can become complicated when adding the extra 3 Ps (people, processes, physical evidence)

Opportunities of entering and operating internationally

• larger market (greater reach & expands customer base)

• diversification (spreads risks by investing in other countries)

• enhanced brand image (makes business seem more “successful”)

• gaining economies of scale (reduces average cost of production and makes business more competitive)

• forms business relationships (may offer better prices for inputs)

Threats of entering and operating internationally

• economic challenges (fluctuating exchange & interest rates)

• political challenges (governments easily change regulations)

• legal challenges (consumer protection laws and intellectual property rights)

• social challenges (disparities in countries)

• technological challenges (LEDCs lack infrastructure, internet and communication systems)