4.2 marketing planning

market segmentation

• dividing a broad market into various consumer groups according to psycho-socio demographics

• segments are made up of consumers with similar needs and tastes → respond to trends and market forces in similar ways.

• types

  • geographic

  • demographic

  • psychographic

market segmentation advantages

• target specific market → increased sales

• identify gaps in market → exploit

• differentiated promotion strategies → avoid promoting to consumers with no intention of buying

• specialisaton → smaller firms able to compete

market segmentation disadvantages

• differentiated promotion strategies → no marketing EOS → promotional costs high

• different products → R&D and production costs high

• many products → production and stock-holding costs high

• excessive specialisation if only focus on a few market segments → will be affected if consumer tastes change

product positioning

• the process of designing the products and image to occupy a distinctive place in the perceptions of consumers in the target market

• analyses how brand will relate to competitors, illustrated by perception map

perception map

• diagram that analyses consumer perceptions of competing brands with respect to two product characteristics

• allows businesses to identify how competitors are positioned relative to its own products (how saturated/diverse)

• identifies gaps in market

  • position in gaps → differentiate

  • position with other products → lower risk, less profitable

• allows business to be aware of key features that should be promoted heavily

• can see if need to reposition existing product → using new promotional campaigns etc

niche market

• small part of a larger market. customers have very specialised needs or wants that are different from the larger market

• products sold in niche markets are more expensive than in mass markets, not suitable for mass production and sale.

mass market

• A market for goods that are standardised and produced in very large quantities.

• Less expensive due to economies of scale

niche marketing

• identifying and exploiting a small segment of a larger market by developing products to suit it

• not yet exploited by competitors

niche marketing advantages

• small business → can survive

• large business → can create status and image which mass-market products lack

• if unexploited by competitor, exclusive → can use premium pricing for high profit margin

niche marketing disadvantages

• cannot exploit EOS → higher unit cost of production

• high risk: small no. of consumers so if buying change will cause rapid decline in sales → therefore need diversify

mass marketing

• selling the same products to the whole market with no attempt to target groups within it

• due to more competitors in the market and increased consumer choice, use mass marketing to expand range of products and number of potential customers

mass marketing advantages

• can exploit EOS → lower unit cost of production

• lower risk: large no. of consumers so unlikely for sudden change in buying habits

mass marketing disadvantages

• small businesses → cannot survive

• large businesses → unable to create status and image using mass products

• since many competitors, not exclusive → cannot charge premium pricing

marketing planning

• process of developing appropriate strategies and preparing marketing activities to meet marketing objectives

• market plan is a formal document which outlines how the business intends to achieve marketing objectives derived from business objectives.

elements of a marketing plan

• SMART objectives

• budget → finance

• sales forecast → to monitor progress

• startegies

• tactics → action plan

purpose of a marketing plan

• provide focus → roadmap of strategies

• link strategies and tactics to SMART objectives → increase chances of success

• plan budget in advance

• integrates different business departments in the plan

• ensures marketing mix is appropriate and aligned and fully integrated

limitations of a marketing plan

• outdated if not revised → changing internal/external conditions

• needs to be based on up to date market research

• constant process, final outcome must be judged against original objectives → to aid future decision-making

target market

• particular group of customers or potential customers that a company is trying to reach

• helps to shape marketing strategies, well-targeted product needs less advertising and promotional support since it meets needs

consumer profile

• quantified picture of consumers of a business’ products, showing proportions of psycho-socio demographics

competitive advantage

• an edge a business has over its rivals gained by offering customers greater value. Leads to customer loyalty. → in contrast to first-mover advantage: just the first, value doesn’t matter

• either by low prices or by providing greater benefits and service to justify higher price

unique selling point

• special feature of a PRODUCT that differentiates it from competitors and attracts customers. can be based on any aspect of marketing mix.

• Leads to competitive advantage → leads to customer loyalty.

• types

  • low prices

  • trust

  • ethical stance

  • purchase convenience

  • innovation

adv/disadv of USP: low prices

• advantages

  • consumer limited spending power, high proportion attracted

• disadvantages

  • lower profit margin → total profit falls

  • brand may be perceived as poor quality

  • may not integrate well with rest of marketing mix

  • difficult to differentiate: globalisation → more low-cost countries producing

adv/disadv of USP: trust

• advantages

  • customers careful with spending → do research to make safe decisions

  • if successfully build consumer relations → high loyalty

• disadvantages

  • new businesses → difficult to gain

  • can be lost → difficult to regain

adv/disadv of USP: ethical stance

• advantages

  • consumers share values, will be loyal even if prices are high

• disadvantages

  • consumers prioritise cost over ethical stance

  • false show of ethics, not genuine → loss of trust

adv/disadv of USP: purchase convenience

• advantage: consumers lack time/dislike experience of shopping

• disadvantage: difficult to differentiate since methods are widespread

adv/disadv of USP: innovation

• advantages

  • if patented, competitors cannot copy

  • brand image → command premium prices

• disadvantages

  • R&D expensive and time-consuming

  • R&D success not guaranteed

  • need constant R&D to stay competitive → continuous investment

porter’s generic strategies [HL ONLY]

• how to gain long-term competitive advantage over rivals

• relate to scope of market (mass/niche) and competitive advantage (unique product/cost of production)

• cost leadership: mass market, low cost of production

• differentiation: mass market, unique product (due to quality/brand image)

• cost focus: niche market, low cost of production

• differentiation focus: niche market, unique product

BCG matrix

• analysing product portfolio of a business in terms of market share and market growth. size of circles represents total revenue earned by the product.

• helps decide marketing strategies to take

• quadrants

  • star: high market share, high market growth

  • question mark: low market share, high market growth

  • cash cow: high market share, low market growth

  • dog: low market share, low market growth

cash cow

• well-established product in mature market → high consumer awareness so low promotional costs → promote to remind customers

• high sales, high profit

• milk: take positive cash flow and invest in question marks

question marks

• consumes resources but low sales and profit

• high promotion costs → promote to gain awareness

• has potential since growing market

• build: support with more promotion and distribution outlets. financed by milking cash cows.

stars

• performing well in growing market

• high promotion costs to differentiate product and reinforce brand image → promote to gain new customers

• high sales, high profit

• hold: continue support, freshen appearance to sustain growth

dogs

• withdraw from market, reposition into faster-growing markets

• divest: stop production

  • impacts workforce

  • spare capacity should be invested into other quadrant