3: Marketing

• The role of marketing:

  1. To identify customer needs
  2. To satisfy consumer needs
  3. To maintain customer loyalty
  4. Building customer relationships
• Market- All customers and consumers who are interested in buying a product and have the financial resources to do so
• Consumer market- Markets for goods and services bought by the final consumer
• Industrial markets- markets for goods and services bought by other businesses to use in their production process
• Consumer spending patterns change due to the PRICE OF THE PRODUCT:

  • The higher the price of a product the lower the quantity sold, the lower the price the greater the quantity sold.
• Consumer spending patterns change due to THE PRICE OF COMPETITORS' PRODUCTS:

  • If products of a business and competitors are very similar, consumers are likely to buy the product that has the lowest price.
• Consumer spending patterns change due to CHANGES IN CONSUMER INCOME:

  • Consumers only buy products if they have money to do so. If consumer income falls then they will have less money to spend
  • When consumers have less money to spend they will buy what they need for a living like food, water and shelter and will spend less money on what is considered a luxury
• Consumer spending patterns change due to CHANGES IN POPULATION SIZE AND STRUCTURE:

  • If a country's population grows in size then this increases the size of the market
  • This could increase business sales
• Consumer spending patterns change due to CHANGES IN TASTES AND FASHION:

  • Some other products become less popular with changes in consumer tastes, fashion and vice versa.
  • Businesses change their products accordingly.
• Consumer spending patterns change due to SPENDING ON ADVERTISING AND OTHER PROMOTIONAL ACTIVITIES:

  • Consumers will often pay more for a product simply because of the brand name, even though there are similar much cheaper products on the market
  • Businesses spend money on advertising to create a brand image and persuade consumers to buy their products instead of competitior products.
• CHANGING CONSUMER NEEDS is important because:

  • If a business is to survive in the long run, it has to respond to any change in consumer needs
• Markets become more competitive because of LEGAL CONTROLS that prevent individual firms from dominating the market.(government intervention)
• Markets become more competitive because of PRIVATISATION:(government intervention)

  • This is selling off public sector organisations to the private sector
• Markets become more competitive because of DEREGULATION (government intervention)

  • This is the removal of government controls from an industry
• Markets become more competitive because of providing financial and other assistance to new and small to medium-sized businesses (government intervention)
• Markets become more competitive because of GROWTH OF FREE TRADE BETWEEN COUNTRIES:

  • Free trade is when no barriers exist that might prevent trade between different countries
  • Regional free trade agreements remove or reduce barriers to trade between countries.
• Markets become more competitive because of the DEVELOPMENT OF E-COMMERCE AND SOCIAL NETWORKS:

  • Businesses have developed their own websites and use these to sell their goods to customers in other regions of their own country and other parts of the world
  • This has increased the size of a business's market by increasing consumer choice as they have more information, but also greatly increases the level of competition in the market
• Businesses respond to changing spending patterns and increased competition by PRODUCT DEVELOPMENT:

  • Market research will identify how the needs and wants of consumers are changing
  • This information can be used to satisfy the changing needs and wants of consumers.
  • Developing new products can help a business remain competitive
• Businesses respond to changing spending patterns and increased competition by IMPROVING EFFICIENCY:

  • The efficient use of resources will help a business to reduce average costs.
  • If average costs are reduced then a business will be able to reduce the prices of its products, increasing competitiveness
• Businesses respond to changing spending patterns and increased competition by INCREASING PROMOTION:

  • Businesses often respond to changing spending patterns and increased competition by increasing advertising to persuade consumers to buy their products rather than competitors'.
  • e.g buy-one-get-one-free and money-off coupons
• Businesses respond to changing spending patterns and increased competition by LOOKING FOR NEW MARKETS:

  • When the level of competition in a market is too much, the best idea is for a business to look for new markets for their products where there is less competition and consumers are more likely to buy the product
• Niche Marketing is developing products for a small segment of the market.

  • Businesses in a niche market often sell high priced and high status goods like Rolex watches and Rolls Royce cars
  • However, some businesses may target niche markets where the product may not be high status or high priced e.g wedding cakes
• A benefit of NICHE MARKETING is:

  • Small firms are able to survive and earn profit even in markets that are dominated by larger firms
• A benefit of NICHE MARKETING is:

  • There is less competition in these markets so firms do not waste scarce resources responding to competitor actions.
• A benefit of NICHE MARKETING is:

  • Consumers will usually pay more for a high status, exclusive product
  • This offers firms the opportunity to charge high prices and earn high profit margins
• A limitation of NICHE MARKETING is:

  • The opportunity to earn high profits might attract competitors and this will reduce prices and future profits.
• A limitation of NICHE MARKETING is:

  • The small size of the market means that economies of scale are unlikely to be achieved.
  • This means unit costs are higher than they would be if the product was sold to a mass market
• A limitation of NICHE MARKETING is:

  • Small changes in consumer spending patterns could have a very significant impact on firms operating in niche markets.
• MASS MARKETING is when a business sells the same product to the whole market.

  • Most businesses now see the benefits of dividing the market and providing a slightly different product to each segment. This recognises that consumers do not want all the same product.
  • Dividing the market so that products better meet the needs of different types of consumers helps increase sales, revenue and profits.
• a benefit of MASS MARKETING IS:

  • Mass marketing requires large scale production
  • Larger firms often benefit from economies of scale which reduces unit costs
• a benefit of MASS MARKETING IS:

  • A much larger market has the potential for high sales and profits
• a benefit of MASS MARKETING IS:

  • Changes in consumer spending patterns might have less effect on firms selling to a mass market.
  • This reduces the risk of firms who operate in a mass market.
• a limitation of MASS MARKETING IS:

  • There is much more competition in the market which lowers prices and profit margins.
• a limitation of MASS MARKETING IS:

  • Not all markets are large enough to support a mass marketing approach
• a limitation of MASS MARKETING IS:

  • Consumers today are often looking for something slightly different from that offered by the same product mass marketing.
  • This has led to a greater division of the whole market and reduced the scope for mass marketing.
• Market segment- A part of the whole market in which consumers have specific characteristics
• Market segmentation- Dividing the whole market into segments by consumer characteristics and then targeting different products to each segment.
• Geographic segmentation- dividing consumers in the market by geographic area, such as

  • Different regions within the same country
  • Different regions of the world
  • Different countries of the world

  The geographical differences may be due to cultural reasons, religious beliefs or even different climates.
• Demographic segmentation- dividing consumers in the market by factors such as age, gender, income, ethnic background and social class.
• a BENEFIT of SEGMENTATION to BUSINESS is:

  • Goods and services can be designed to meet the specific needs of consumers in each segment.
  • This is likely to increase sales