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Summary AS Section 3: Marketing
AS summary of Section 3: Marketing
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Unit 3: MarketingChapter 17: The Nature of Marketing
Marketing= the management task of identifying and meeting the needs of customers profitability by
getting the right product at the right price to the right place at the right time. Links business with
customers.
This involves:
1. Market research. 3. Pricing, advertising & distribution.
2. Product design & packaging design. 4. Customer service.
Marketing Objectives= the goals set for the marketing department to help the business achieve its
overall (corporate) objectives.
Examples include measurable increases in:
1. Market share. 5. Percentage of customers who return.
2. Total sales. 6. Number of new customers.
3. Average number of items purchased 7. Customer satisfaction.
per customer visit. 8. Brand identity.
4. Frequency of shopping.
To be effective, they should:
1. Linked to corporate objectives & helping business achieve overall targets.
2. Determined by senior management.
3. Realistic, motivating, achievable, measurable & communicated to departments.
Corporate Objectives= well-defined and realistic goals that are set for the whole company.
Why are marketing objectives so important?:
1. Provide sense of focused direction.
2. Success measured against targets.
3. Can be broken down into regional & product sales targets.
4. Form basis of marketing strategy.
Marketing Strategy= a plan of action giving details of how a business intends to achieve its marketing
objectives by creating competitive advantage. Examples:
- Penetrating existing markets fully by selling more to existing & new customers.
- Entering new markets abroad.
- Developing new or updating existing products.
Coordination of Marketing with Other Departments:
Finance:
- Sales forecasts of marketing department to help construct cash flow forecasts & operating
budgets.
- Ensure necessary capital available to pay for agreed marketing budget for promotional
expenditure.
Human Resources:
- Sales forecast used to help prepare a workforce plan.
- Ensure recruitment and selection of qualified and experienced workers.
Operations:
- Market research data will help product development.
- Sales forecast to plan capacity needed, machine purchase & raw material inventories
required.
Demand= the quantity of a product that consumers are willing and able to buy at a given price in a
specific time period.
1. Varies with price: rises with price falls and falls with price increases.
2. Varies as a result of a change of the following factors, Determinants of Demand:
- consumer incomes. - advertising & promotion
- population size & structure. spending.
- fashion & taste.
1
, - prices of substitute goods &
complementary goods.
3. These changes result in a new demand curve.
Supply= the quantity of a product that firms are prepared to supply at a given price in a specific time
period.
1. Varies with price: businesses willing to supply more product if the price rises & supply less of
product if the price falls.
2. Varies due to change in the following factors, Determinants of Supply:
- Costs of production (increased labour costs)
- Government taxes imposed on suppliers, raising their costs.
- Government subsidies to suppliers, reducing their costs.
- Weather conditions and other natural factors.
- Advantages in technology, lowering costs of production.
3. These changes result in a new supply curve.
Equilibrium Price= the price level at which demand is equal to supply. In free markets, the EP is
determined when demand = supply.
- Price higher than equilibrium price = unsold inventories (excess supply). They will lower their
price.
- Price lower than equilibrium price = run out inventories. To make a higher profit they will raise
the price to match the equilibrium level.
Market= group of consumers that are willing & able to buy a product.
Target Market= the segment of the available market that the business has decided to serve by
directing its products towards this group of people.
Market Segment= a subgroup of a whole market in which consumers have similar characteristics.
Industrial Markets= the selling of products by businesses to other businesses, also known as
business to business or B2B.
Industrial Products= goods or services sold to businesses.
- Classified into:
1. Materials and Components: needed for production.
2. Capital Items: equipment, machinery and vehicles.
3. Services and Supplies: services and utilities.
Consumer Markets= the selling of products by businesses to the final end user, also known as
business to consumer or B2C.
Consumer Products= goods or services sold to end users.
- Classified into:
1. Convenience Products: purchased frequently, on impulse & sold to large target
market.
2. Shopping Products: require planning & research, not bought frequently.
3. Specialty Products: bought infrequently, expensive & with strong brand loyalty.
Key differences Between Selling to Businesses Rather than Consumers:
1. More complex products require specialist sales employees & support services.
2. Industrial buyers have more market power.
3. Rarely buy on impulse, only after detailed analysis & long consideration.
4. Mass marketing common in consumer markets, but industrial markets have few buyers.
5. Traditional mass market advertising & sales promotion techniques not used in industrial
markets.
Local, National and International Markets:
- Some businesses sell in local areas, only operating in local markets.
- Some businesses sell throughout the country, granting greater potential to increase.
- Some businesses sell their products or services abroad, having to change many aspects of
marketing to respond to a wide range of tastes, cultures & laws in different countries.
2
, Customer (or Market) Orientation= an outward-looking approach that bases product decisions on
consumer demand, as established by market research.
- Not all consumer-orientated businesses will succeed.
Benefits:
1. Reduced chances of newly developed products failing.
2. Longer lifespan & more profitable.
3. Market research never ends.
Product Orientation= an inward-looking approach that focuses on making products that can be
made – or have been made for a long time – and then trying to sell them:
1. Invent & develop products, believe they will find consumers to purchase them.
2. Concentrate their efforts on efficiently producing high-quality goods.
Market Size= the total value (or quantity) of sales of all producers within a market in a given time
period.
Important because:
1. Identification of growth or decline of market.
2. Businesses calculate own share of market.
3. Assess whether a market is worth entering or not.
Market Growth= the percentage change in the total size of a market (volume or value) over a period of
time.
- Manufacturers will use measures that reflect better on their own position, difficult to compare
changes in market share for different firms.
Rate depends on:
1. Rate of economic growth.
2. Changes in consumer incomes.
3. Development of new markets & products, reducing sales in existing markets & products.
4. Changes in consumer tastes.
5. Technological changes.
6. Saturated markets due to consumers already owning the product.
Increased Market Growth: Reduced Market Growth:
Increase in sales. Slow increase of sales.
Possible to increase prices and profit per unit. In a slow-growing market, competitors might reduce prices to increase sales.
Cost savings from increased sales. Lower prices resulting in lower profits per unit.
Increased level of competition. Businesses considering expanding into faster-growing markets.
Market Share= sales of the business as a proportion of total market sales.
Market Share = sales of the business in time period x100
total market sales in time period
Brand Leader= the brand with the highest share of the market.
Increased Market Share Reduced Market Share
Faster rising sales. Fall in sales.
Retailers keen to stock and promote best selling brands. Retailers less keen to stock and promote product.
Brand leaders able to reduce the discount rate to retailers. Larger discounts to retailers offered.
Fact of being the brand dealer used in promotional material. If no longer brand leader, promotion not be able to state this.
Mass Marketing= selling standardised products or ranges of products in the same way to the whole
market.
- High sales level allowing high levels of - Low prices.
production. - Undifferentiated product.
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