3.1 NATURE OF MARKETING

• Marketing


  The management task of identifying and meeting the needs of customers profitably by getting the right product at the right price to the right place at the right time
• Marketing includes


  • Market research
  • Product design
  • Packaging design
  • Pricing
  • Advertising
  • Distribution
  • Customer service
• Marketing objectives


  The goals set for the marketing department to help the business achieve its overall objectives

  
• Marketing objectives


  • Increase market shares (to gain market leadership)
  • Rebranding a product to give it fresh appeal
  • Increase total sales levels
  • Market development – selling existing products in new markets
• Effective marketing objectives


  • Linked to corporate objectives and focused on helping the business achieve those overall targets
  • Determined by senior management
  • Realistic, motivating, achievable, measurable and clearly communicated to other departments

  
• Why marketing objectives are important

  • They provide a sense of direction for the marketing department
  • Progress can be monitored against these objectives
  • They can be broken down into regional and product sales targets to allow for management by objectives
  • They are the basic of marketing strategy (long-term action plan to achieve market objectives)

  
• Marketing strategy


  A plan of action giving details of how a business intends to achieve its marketing objectives by creating competitive advantage

  
• Marketing coordination with finance

  • Sales forecast from marketing helps finance construct cash flow forecast and budgets
  • Finance ensures enough capital for marketing budget
• Marketing coordination with HR

  • Sales forecast from marketing used by HR to prepare workforce plan
  • HR ensures sufficient qualified workers to produce and sell based on sales forecast
• Marketing coordination with operations

  • Market research from marketing helps with product development
  • Sales forecast used by operations to plan capacity and machinery

  
• Demand


  The amount or quantity of a product that a consumer is willing and able to buy at various prices per period of time, ceteris paribus
• Relationship between demand and price

  • Price of good rises, quantity demanded will fall
  • Price of good falls, quantity demanded will rise
• Desire, want and demand

  Desire is an unspecified wish, want is a desire for a specific product, demand is a want backed by the ability and willingness to pay
• The demand curve slopes downwards from left to right (a negative slope) indicating an inverse relationship between price and the quantity demanded
• The demand curve


  • At $2.00 per bottle, 60,000 bottles are demanded
  • When the price is $4.00 per bottle, 40,000 bottles are demanded
• Movements along the demand curve

  • Price increase moves us leftward along demand curve
  • Price decrease moves us rightward along demand curve
• Other factors influencing demand

  • Tastes
  • Number and price of substitute goods
  • Number and price of complementary goods
  • Income
  • Changes in population
  • Expectations of future price changes
• Shift in the demand curve


  Changes in any of the factors affecting demand other than price cause the entire demand curve to shift to the left (less demanded at each price) or to the right (more demanded at each price)
• Demand increase


  Reflected by a rightward shift in the demand curve
• Demand decrease


  Reflected by a leftward shift in the demand curve
• Supply


  The quantities of a product that suppliers are willing and able to sell at various prices per period of time, ceteris paribus
• Relationship between supply and price

  • Price of good rises, quantity supplied also rises
  • Price of good falls, quantity supplied will also fall
• The supply curve slopes upwards from left to right indicating a positive relationship between supply and price
• The supply curve


  • At $4.00 per bottle, quantity supplied is 60,000 bottles
  • When the price is $2.00 per bottle, 40,000 bottles are supplied
• Movements along the supply curve

  • Price increase moves us rightward along supply curve
  • Price decrease moves us leftward along supply curve
• Other factors influencing supply

  • Costs of production
  • Profitability of alternative products
  • Profitability of goods in joint supply
  • Nature and other random shocks
  • Aims of producers
  • Expectations of producers
• Shift in the supply curve

  Changes in any of the factors affecting supply other than price will cause the entire supply curve to shift. A shift to the left results in a lower supply at each price; a shift to the right indicates a greater supply at each price
• Supply increase


  Reflected by a rightward shift in the supply curve
• Supply decrease


  Reflected by a leftward shift in the supply curve
• Equilibrium price


  The amount that buyers wish to purchase and is exactly equal to the amount that suppliers are willing to sell
• The intersection between the demand and supply curves determines the equilibrium price for the product
• Changes in equilibrium price

  Caused by changes in demand and supply due to external factors such as fluctuations in consumer tastes, changes in technology, resource prices, or taxes
• When a market is in equilibrium, both the price of the good and the quantity bought and sold have settled into a state of rest
• Shortage (excess demand)


  At a given price, the excess of quantity demanded over quantity supplied. This causes the price to rise as buyers compete for the limited supply
• Surplus (excess supply)


  At a given price, the excess of quantity supplied over quantity demanded. This causes the price to fall as sellers compete to sell more than buyers want
• Changes in demand and supply lead to changes in price and quantity, with the market moving towards a new equilibrium
• 50,000 bottles
• Surplus (Excess Supply)


  At a given price, the excess of quantity supplied over quantity demanded. Surplus (S > D). Price of the good will fall as sellers compete with each other to sell more of the good than buyers want
• Market Equilibrium Summary


  • Changes in Demand and Supply
  • Change in price = ∆ in QD / QS
  • Movement along D or S curve
  • Change in any other determinant of demand / supply = ∆ in D or S
  • shift in D or S curve
  • increase in demand / supply ↑ : rightward shift →
  • decrease in demand / supply ↓ : leftward shift ←
• Market


  • A physical place where buyers and sellers meet to engage in exchange of their goods and services
  • The group of consumers that is interested in a product, has the resources to purchase the product and is permitted by law to purchase it