CHAPTER 17 - MARKETING

Chapter 17

The Nature of Marketing (with Advantages & Disadvantages)

Definition of Marketing

Marketing = Identifying, anticipating, and satisfying customer needs profitably. It involves activities like research, product design, pricing, promotion, distribution, and customer service.

Marketing Objectives & Corporate Objectives

• Corporate Objectives: Overall business goals (e.g., growth, profit maximization, brand leadership).

• Marketing Objectives: Specific targets derived from corporate objectives (e.g., market share, sales volume, customer loyalty, brand identity).

  • Advantages:

    • Provide clear direction and focus.

    • Allow for performance measurement.

    • Serve as a basis for strategic decisions (e.g., market penetration, diversification).

  • Disadvantages:

    • Unrealistic targets can demotivate staff.

    • External factors (e.g., competition, economic downturns) may render them unachievable.

    • Potential for conflict with objectives of other departments.

Demand, Supply & Equilibrium

• Demand: The quantity consumers are willing and able to buy at a given price.

  • Influenced by factors such as disposable income, prices of substitutes/complements, population size, consumer tastes, and advertising.

• Supply: The quantity firms are willing and able to sell at a given price.

  • Influenced by factors such as production costs, taxes, subsidies, weather conditions, and technology.

• Equilibrium: The price point where market demand precisely matches supply.

  • Advantages:

    • Provides a clear model to explain price changes.

    • Helps businesses set competitive pricing strategies.

  • Disadvantages:

    • Real markets may not always be perfectly competitive.

    • External shocks (e.g., government policies, global crises) can distort supply and demand dynamics.

Markets

• Consumer (B2C): Selling directly to end-users.

• Industrial (B2B): Selling to other businesses.

• Local, National, International: Defines the scale of the market.

  • Advantages (B2C):

    • Broad customer base.

    • Potential for mass demand.

  • Disadvantages (B2C):

    • High competition.

    • Customer brand switching.

  • Advantages (B2B):

    • Stable long-term contracts.

    • Larger order sizes.

  • Disadvantages (B2B):

    • Limited buyer pool leads to higher dependency.

    • Often involves a longer and more complex decision-making process.

Customer Orientation vs Product Orientation

• Customer Orientation: Focuses on understanding and meeting customer needs, typically research-based.

  • Advantages:

    • Reduces the risk of product failure.

    • Adapts effectively to market trends.

    • Potentially leads to a longer product life cycle.

  • Disadvantages:

    • Can be expensive due to extensive research.

    • Risk of overreacting to short-term fads.

    • Offers no guarantee of success.

• Product Orientation: Primary focus on product quality and innovation first.

  • Advantages:

    • Encourages innovation and technological breakthroughs.

    • Facilitates strong quality control.

    • Can lead to significant market breakthroughs.

  • Disadvantages:

    • High risk of market rejection if customer needs are ignored.

    • May disregard changing consumer tastes and preferences.

Market Share & Market Growth

• Market Size: Total sales revenue or volume within a specific market.

• Market Growth: The percentage change in market size over a period.

• Market Share Formula: \frac{\text{Firm's sales}}{\text{Total market sales}} \times 100

  • Advantages of high market share:

    • Typically leads to higher profits.

    • Stronger retailer support and influence.

    • Enhanced brand recognition and loyalty.

  • Disadvantages of low/falling market share:

    • Lower sales volumes.

    • Often requires higher discounts to compete.

    • Weakens brand image and market position.

Consumer vs Industrial Products

• Consumer Products (B2C):

  • Convenience: Frequent, often impulse buys (e.g., sweets, newspapers).

  • Shopping: Planned, less frequent purchases where consumers compare options (e.g., appliances, clothing).

  • Speciality: Expensive, unique items with strong brand loyalty (e.g., luxury cars, designer clothing).

  • Advantages (B2C):

    • High turnover rates.

    • Mass advertising is often effective.

  • Disadvantages (B2C):

    • Frequent brand switching among consumers.

    • High price sensitivity.

• Industrial Products (B2B):

  • Materials/components: Raw inputs used in production.

  • Capital items: Large equipment and machinery for production.

  • Services/supplies: Utilities, IT support, maintenance, etc.

  • Advantages (B2B):

    • Tend to involve long-term contracts.

    • Opportunities for tailored solutions.

  • Disadvantages (B2B):

    • Complex and longer sales processes.

    • Smaller buyer base.

Mass vs Niche Marketing

• Mass Marketing: Standardised products aimed at the entire market.

  • Advantages:

    • Achieves economies of scale in production and distribution.

    • Potential for very high sales volumes.

    • Generally lower unit costs.

  • Disadvantages:

    • Faces intense competition.

    • Can lead to lower customer loyalty.

    • Differentiation can be challenging.

• Niche Marketing: Targets a small, specialised market segment.

  • Advantages:

    • Fosters loyal customer base.

    • Less competition within the segment.

    • Ability to charge premium prices.

  • Disadvantages:

    • Limited market size.

    • Significant risk if the niche market disappears or changes drastically.

    • Potentially higher production or marketing costs per unit.

Market Segmentation

• The process of splitting a market into distinct groups of consumers with common needs.

• Methods:

  • Geographic: Based on location (e.g., region, city).

  • Demographic: Based on characteristics (e.g., age, income, gender).

  • Psychographic: Based on lifestyle, personality, values.

  • Advantages:

    • Leads to better targeting, resulting in higher sales.

    • Improves customer loyalty and satisfaction.

    • More efficient use of marketing resources.

  • Disadvantages:

    • Requires expensive research needed to identify segments.

    • Risk of focusing on the wrong segment.

    • May inadvertently ignore a potential wider audience.

Customer Relationship Marketing (CRM)

• Strategies focused on building long-term relationships with customers to increase loyalty.

• Methods include: personalised offers, robust after-sales service, consistent communication, and strategic use of social media.

  • Advantages:

    • Boosts customer loyalty and repeat sales