3. Decision Making to Improve Marketing Performance

Marketing Objectives

  • Definition: A specific goal or target related to marketing activities and business performance.

  • Main Types:

    • Sales Volume

    • Sales Value (Revenues)

    • Sales Growth (%)

    • Market Share (%)

    • Brand Loyalty/Awareness

  • Value of Setting Objectives:

    • Aligns marketing with corporate objectives.

    • Focuses marketing priorities and resource allocation.

    • Enables measurement of marketing performance.

  • Potential Problems:

    • Fast-Changing External Environment:

      • Examples: Legislation changes, new competitors.

    • Conflict Between Objectives:

      • Example: Increasing market share via price cuts damaging brand perception.

    • Overly Ambitious Objectives:

      • Example: Growing market share without adequate resources.

Internal and External Influences on Marketing Objectives

  • Internal Influences:

    • Corporate Objectives: Marketing objectives should align with overarching corporate goals.

    • Finance: Profitability, cash flow, and liquidity impact marketing activities.

    • Human Resources: Workforce quality and capacity affect service businesses significantly.

    • Operational Influences: Operations enable cost and quality competitiveness.

    • Organisational Culture: A marketing-oriented culture focuses on customer needs.

  • External Influences:

    • Economic Environment: Economic growth rate impacts demand; exchange rates affect international marketing.

    • Competitor Actions: Objectives must account for potential competitor responses.

    • Market Size Growth and Segmentation: Slower growth reduces the likelihood of revenue growth or new product development.

    • Technological Change: Rapid technological advancements shorten product life cycles and create innovation opportunities.

    • Social and Political Change: Changes to legislation and societal attitudes impact marketing.

Market Research

Primary Research

  • Definition: Data collected first-hand for a specific purpose.
    *Examples: Focus groups, interviews, surveys, mystery shoppers, product testing and trials.

  • Advantages:

    • Directly focused on research objectives.

    • Tends to be up-to-date.

    • More detailed insights into customer views.

  • Drawbacks:

    • Time-consuming and often costly.

    • Risk of survey bias; samples may not be representative.

Secondary Research

  • Definition: Data that already exists, collected for a different purpose.
    *Examples: Market reports, trade and industry associations, sales transactions, big data, analytics.

  • Advantages:

    • Often free and easy to obtain.

    • Good source of market insights.

    • Quick to access and use.

  • Drawbacks:

    • Can quickly become out of date.

    • Not always tailored to specific research needs.

    • Specialist reports can be expensive.

Quantitative and Qualitative Research

Quantitative Research

  • Focus: Data (e.g., How many?, How often?, Who?, When?, and Where?).

  • Sample Size: Often larger, more statistically valid samples.

  • Methods: Surveys (telephone, postal, face-to-face, online).

  • Benefits:

    • Data is relatively easy to analyse.

    • Numerical data provides trend insights.

    • Comparable with other sources.

  • Drawbacks:

    • Focuses on data, not explanations.

    • May lack reliability if the sample size is invalid.

Qualitative Research

  • Focus: Opinions, attitudes, beliefs, and intentions (e.g., Why?, Would?, or How?).

  • Goal: Understand customer behaviour and responses.

  • Methods: Focus groups and interviews.

    • Focus Group: A group asked about their perceptions, opinions, beliefs, and attitudes towards a thing.

  • Benefits:

    • Essential for new product development.

    • Focuses on understanding customer needs.

    • Can highlight issues needing addressing (e.g., why customers don’t buy).

    • Effective for testing marketing mix elements.

  • Drawbacks:

    • Expensive to collect and analyse.

    • Risk of unrepresentative samples.

    • Subject to bias.

Sampling in Market Research

  • Definition: Gathering data from a sample of respondents representative of the target market.

  • Benefits:

    • Small sample sizes can provide useful insights if they are representative.

    • Reduces risk and costs before marketing decisions.

    • Flexible and relatively quick.

  • Drawbacks:

    • Risk of unrepresentative samples leading to incorrect conclusions.

    • Risk of bias in research questions.

    • Less useful in rapidly changing market segments.

Market Growth

  • Definition: The percentage growth of the overall market size (value or volume) over time.

  • Significance: Key indicator for existing and potential market entrants.

  • Calculation:

    • \text{{Market Growth Percentage}} = (\frac{\text{{Market size this period}}}{\text{{Market size last period}}} - 1) \times 100

Market Share

  • Definition: The percentage share of the overall market held by a product, brand, or business.

  • Significance: Indicates competitive advantage; key to monitor significant changes.

  • Calculation:

    • \text{{Market Share Percentage}} = \frac{\text{{Business Sales}}}{\text{{Market Sales}}} \times 100

Correlation

  • Definition: Strength of a relationship between two variables.

  • Variables:

    • Independent Variable: Factor causing change in the dependent variable.

    • Dependent Variable: Variable influenced by the independent variable.

  • Scatter Charts: Used to measure correlation by plotting data points. Dependent variable on the y-axis, independent variable on the x-axis.

  • Types of Correlation:

    • Positive Correlation: Both variables increase together.

    • Negative Correlation: One variable increases as the other decreases.

    • No Correlation: No discernible relationship.

  • Strength of Correlation: Indicated by the 'line of best fit' (regression line).

    • Strong Correlation: Data points close to the line of best fit.

    • Weak Correlation: Data points widely spread from the line of best fit.

Confidence Intervals

  • Definition: Percentage probability that an estimated range includes the actual value.

  • Value in Business: Helps evaluate the reliability of estimates.

  • Examples:

    • Quality management: Machine reliability, quality control issue detection.

    • Market research: Sales forecasting reliability, customer survey data.

    • Risk management: Sales forecast risks, competitor action scenarios.

    • Budgeting and forecasting: Revenue and cost ranges, new product sales forecasts.

Price Elasticity of Demand (PED)

  • Definition: Measures the responsiveness of demand to a change in price.

  • Equation:

    • PED = \frac{\% \text{{ Change in Quantity Demanded}}}{\% \text{{ Change in Price}}}

  • Significance:

    • If PED > 1 (Price elastic): Revenue increases with a price cut; revenue falls with a price increase.

    • If PED < 1 (Price inelastic): The opposite occurs.

  • Factors Influencing PED:

    • Brand strength: Strong brands tend to be inelastic.

    • Necessity: Necessary products are more inelastic.

    • Habit: Habitual products tend to be price-inelastic.

    • Availability of substitutes: Products with alternatives are price-elastic.

    • Time: Short-run price changes have less impact than long-term changes.

Income Elasticity of Demand (YED)

  • Definition: Measures the responsiveness of demand to a change in income.

  • Equation:

    • YED = \frac{\% \text{{ Change in Quantity Demanded}}}{\% \text{{ Change in Income}}}

  • Income Elasticity of Luxury Items:

    • YED > 1

    • As income grows, proportionally more is spent on luxuries (e.g., consumer goods, expensive holidays).

  • Income Elasticity of Necessities:

    • 0 < YED < 1

    • As income grows, proportionally less is spent on necessities (e.g., staple groceries).

  • Interpreting Income Elasticity:

    • Normal Products: A rise in income results in a rise in demand; a fall in income results in a fall in demand.

  • Inferior Goods (Negative Income Elasticity):

    • YED < 0

    • As income rises, demand falls because consumers switch to better alternatives.

Extended Marketing Mix (7Ps)

  • Definition: Combination of marketing elements used to meet customer needs.

  • Rationale: Elements should work together for the desired effect.

  • Traditional 4Ps:

    • Product: What the customer buys.

    • Price: How much the customer pays.

    • Place: How the product is distributed.

    • Promotion: How the customer is persuaded to buy.

  • New 3Ps:

    • People: Those in contact with customers.

    • Process: Systems delivering the product.

    • Physical Environment: Elements experienced by the customer.

  • Influences on Marketing Mix:

    • Finance: Cash flow, discounts, marketing budget.

    • Technology: Advanced products, databases, online selling, social media.

    • Market research: Competition, substitutes, consumer opinions, market segment.

  • Other Influences:

    • Power of buyers and suppliers.

    • Quality of promotion.

    • Price elasticity of demand.

    • Reputation of the business.

    • Convenience of location.

  • Effects of Changes in the Elements:

    • Product: Features appealing to the target market.

    • Price: Affects volume and profitability.

    • Promotion: Increases sales if cost-effective.

    • Place: Availability in many places vs. matching a certain image.

    • People: Knowledgeable, enthusiastic, and well-trained staff.

    • Process: Efficient processes to satisfy customer needs.

    • Physical Environment: Favourable impression to encourage purchases.

Product Decisions

  • Industrial Marketing:

    • Larger transactions

    • Specialist buyers and sellers

    • Emphasis on quality, informative advertising, pricing, and buyer-seller relationships

  • Consumer Marketing:

    • Convenience Products:

      • Consumed and purchased regularly and by a very large population. Purchased by habit.
        Augmented qualities impact shopping.

      • Low price - need to sell in large volumes.

      • Impulse buys, placed near the tills in shops.

    • Shopping Products:

      • Consumed and purchased quite often, but less regularly than convenience products.

      • Displayed less prominently in stores and are likely to be available in fewer stores.

      • Augmented qualities, such as a fashionable brand.
        For sellers, there is more scope for higher prices and greater added value than for convenience products.

    • Speciality Products:

      • Unique characteristics

      • Consumers are more selective. Image and brand matter.
        People travel some distance to purchase.

      • Price is not a key consideration, so high profit margins can be gained.

Product Features and Design

  • Reliability

  • Functions and compatibility with other devices

  • Size and weight

  • Convenience of use

  • Fashion

  • Aesthetic qualities

  • Durability

  • Value for money

Technology and Marketing Decision Making

  • Technology has revolutionised most aspects of marketing decision-making

    • Identify the most important technologies for their marketing strategy and activities.

    • Decide which technological solutions are most appropriate for their business, based on factors such as:

      • Pricing (most marketing technology is sold as "software as a service" with per-user pricing

      • Ease of use (for those employees tasked with implementing the technology

      • Compliance (e.g. with fast-changing regulations about data protection

  • Examples of Technology and Marketing Decision-Making:

    • Analytics and customer insights

    • Dynamic pricing

    • Audience reach and segmentation

    • Customer relationship management (CRM)

    • Campaign testing

    • Competitor analysis

Market Mapping

  • Definition: Illustrates the range of ‘positions’ that a product can take in a market based on two dimensions important to customers.

  • Advantages:

    • Helps spot gaps in the market.

    • Useful for analysing competitors.

    • Encourages use of market research.

  • Disadvantages:

    • A ‘gap’ doesn’t guarantee demand.

    • Not a guarantee of success.

    • How reliable is the market research?

Market Segmentation

  • Process:

    1. Choose which customers to serve.

      • Market segmentation (parts of a market)

      • Targeting (segments to enter)

    2. Decide how to serve those customers.

      • Product differentiation (what makes it different)

      • Market positioning (how customers perceive the product)

  • Definition: Dividing a market into parts reflecting different customer needs.

  • Main Categories:

    • Demographic Segments

    • Geographic Segments

    • Income segments

    • Behavioural Segments

  • Benefits:

    • Focuses resources on successful market parts.

    • Grows market shares in fast-growing segments.

    • Helps new product development.

    • Makes the marketing mix more effective.

  • Drawbacks:

    • Imprecise science with unreliable data.

    • Identifying a segment doesn’t guarantee reaching customers.

    • Markets are dynamic and fast-changing; so too are the segments.

Target Market

  • Definition: The set of customers sharing common needs and wants that a business decides to target.

  • Three Main Strategies:

    • Mass Marketing (undifferentiated):

      • Targets the whole market, ignoring segments.
        Products focus on common needs.

    • Segmented (differentiation):

      • Targets several market segments.
        Products designed for each segment.

      • Requires separate marketing plans.

    • Concentrated (niche):

      • Focuses narrowly on smaller segments.

      • Aims for a strong market position within niches.

Market Positioning

  • Definition: The place a product occupies in customers’ minds relative to competing products.

  • Positioning and Competitive Advantage:

    • Customers choose products based on the value proposition.

    • Superior value provides competitive advantage.

  • Possible Positioning Strategies:

    • Offer more for less.

    • Offer more for more.

    • Offer more for the same.

    • Offer less for much less.

Niche and Mass Markets

  • Mass Market:

    • The largest part of the market where many similar products are offered by competitors and customers

    • Customer needs and wants are more