3.3

• Marketing

  1. Identifying customer needs through market research

  2. Satisfying customer needs through the marketing mix

  3. Doing so profitably
• Marketing mix

  The integration of the 7Ps (product, price, place, promotion, process, people, physical environment) to achieve marketing objectives
• Product


  • Can be tangible goods or intangible services
  • Challenges include standing out among competitor brands, differentiation/USP, staying ahead of competitors through new product development
• Product development


  1. Changing aspects of goods and services to meet changing needs of customers or target different markets

  2. Stages: idea generation, screening/shortening, prototype, testing, launch
• Influences on product design


  • Entrepreneurial skills of owners/managers
  • Competition
  • Technological advances
  • Product life cycle
  • Saturation
  • Extension
• Product life cycle


  Starts with development, then growth, maturity, and decline in sales volume over time
• Market segmentation


  The process of dividing the market into subgroups of similar customers
• Market segment


  Subgroup of people that share similar characteristics which can be used for more efficient seller/buyer relationships
• Target market


  Subgroup of people that presents the greatest opportunity for targeting
• Benefits of segmentation


  • Define markets more precisely
  • Devise effective strategies and tactics
  • Analyse main competitors
  • Respond to segment changes quickly
  • Allocate resources effectively
  • Identify gaps in the market
• Targeting


  Deciding which segments to operate in
• Targeting strategies


  • Undifferentiated marketing (scattergun approach)
  • Differentiated marketing (focused on one segment)
  • Niche marketing (focused on a small market)
• Niche marketing


  • Firm focuses on a small market which major competitors are not concerned about
  • Advantages: ability to focus on individual customer needs, high returns on marketing expenditure, little competition, premium prices
  • Disadvantages: market can change rapidly, successful niche markets may attract big players, sales levels can be low
• Mass marketing


  • Firm aims a product or service at all or most of the segments in a market
  • Advantages: many customers, high sales volume, economies of scale
  • Disadvantages: very competitive, price elastic, diseconomies of scale, high initial set up costs
• The marketing mix is the integration of the 7Ps (product, price, place, promotion, process, people, physical environment) to achieve marketing objectives
• Quantitative market research uses closed questions and surveys, while qualitative market research uses open questions and methods like in-depth interviews and focus groups
• Sampling techniques include random, quota, and stratified sampling
• Correlation


  Occurs when there appears to be a link between two factors
• Types of correlation


  • Positive correlation (direct link)
  • Negative correlation (inverse relationship)
  • No correlation (no link)
• Extrapolation


  Using past data to predict future trends by identifying past patterns
• Confidence intervals


  Used to assess the reliability of sampled data when forecasting, to account for the fact that samples are only a cross-section and may not accurately reflect the population
• Price elasticity of demand


  Measures the extent to which demand will change in response to a change in price
• Income elasticity of demand


  Measures the extent to which demand will change in response to a change in income
• Pricing strategy for new products


  • Skimming: Start price high as new and high tech, then lower price as tech gets older and competitors increase
  • Penetration: Start price low to capture market, then increase as product gets older and competitors increase
• Price strategies for existing products


  • Price leader: Businesses dominate the market and can decide the price for products
  • Price taker: Businesses have to charge the going market price and cannot influence it
  • Loss leader: Sold for less than it costs to make in order to attract customers
  • Psychological pricing: Prices seem to be lower than other products e.g. less than £1000
  • Promotional: Discount or sales price for a short period of time
  • Dynamic: Change different prices for same product or service to different segments
  • Destroyer: Price cut so low that competition are forced out of market because they can't afford to go that low, but can be illegal
• Marketing mix


  • Product, price, place, promotion, people, process, physical environment
• Place


  Refers to distribution channels - the ways producers pass their products to consumers
• Distribution channels in B2C markets

  • Producer -> Wholesaler -> Retailer -> Consumer
  • Producer -> Retailer -> Consumer
  • Producer -> Agent -> Consumer
• Distribution channels in B2B markets

  • Producer -> Distributor -> Customer
  • Producer -> Customer
• Intermediaries


  • Middlemen between producer and consumer
• Move from bricks and mortar to clicks + bricks


  Producers deal directly with customers making retailer's redundant
• Positive aspects of direct distribution


  • Accessibility
  • Convenience
  • Lower waste, fewer staff, fixed costs & lower cost-direct marketing e.g. social media
  • Build relationships with customers-personalized
  • Increase market share + customer base
  • Recommendations
  • Target specific segments
  • 2-way communication with customers
• Factors influencing choice of distribution channel


  • Competitors e.g. Amazon
  • Target market/technology
  • Market coverage-local, national, global
  • Control- if high control sell in own shops
  • Volume of sales
  • Multi-channel distribution
• Promotional mix


  • Advertising
  • Sales promotion
  • Public relations
  • Personal selling
  • Direct marketing/digital
• Objectives and other parts of marketing mix


  Affect choice of promotional mix e.g. ethical-PR, increase sales revenue-SP
• Nature of product/market


  Affects choice of promotional mix e.g. B2C-advertising, SP B2B-direct marketing
• Budget


  Affects choice of promotional mix e.g. advertising - expensive, direct - cheaper
• Product life cycle


  Affects choice of promotional mix e.g. intro-advertising, growth-SP
• Advertising standards authority sets the laws of advertising
• All advertising should be: legal, decent, honest and truthful