Marketing
What is marketing?
- It is an exchange process – that is, it is two way. The firm offers the consumer something (normally goods or service) and in return receives something, usually payment.
- It is mutually beneficial because both sides should gain from the exchange. Customers should be satisfied and firms should make a profit (assuming the firm is a profit-making organisation).
- It aims to identify and anticipate customer needs. It is not always enough to just identify customer’ needs: the customers may not know themselves what they want. In some markets such as fashion and film, firms have to anticipate what customers will want in the future. They have to predict trends even before most customers know what these trends will be.
- It aims to delight customers. Nowadays satisfying customers may not be enough, most other firms are doing this as well! Much better is to delight the customer.
The purpose of marketing is to match the abilities and strengths of the firm to the needs of the market. A business aims to supply goods and services that customers want and which will generate suitable rewards for the organisation.
Marketing involves:
- Market research – This involves gathering and analysing information to make better marketing decisions.
- Market analysis – This is an examination of market conditions to identify new opportunities.
- Marketing strategy – This involves developing a plan detailing how and where to compete.
- The marketing mix – This covers the decisions all businesses have to make regarding selling prices, how and where the product is sold, the image of the product and the precise nature of the product itself.
Effective marketing means that the organisation understands its customers and prices them with what they want, when they want. At the same time it ensures the firm itself benefits from this transaction. Marketing involves a whole range of activates, including researching the market, developing new products, packaging and printing the products, and setting the price. All these activities are aimed at providing goods and services which will satisfy the customer (so he or she will buy it), and at making a profit for the firm. The better the marketing, the better the product or service which is provided for the customer and the more money the business should be able to make.
Markets
All businesses trade in markets. These can be small, local markets with a specified location. Other markets are national or international with no single location. For example, the world market for oil is a global market in which buyers and sellers are linked by telephones, faxes and the internet, and trading takes place in many locations.
- Company orientation
Market Orientation
A market oriented (or market-led) firm is one that bases its decisions on the customers needs. It continually monitors its environment to find out what customers want, what competitors are offering and what changes are occurring in the market. By being market orientated, a firm should be able to ensure that the product or service it provides matches its customers needs.
Product orientation
By comparison, a product oriented (or product led) firm focuses more on what it can produce and hopes that this will fit with customer requirements. This is a very risky approach because the firm may end up producing something the customer does not want. Although being production oriented is less likely to succeed than being market oriented, it can work if the customer has limited choice ( for example, in the past in Eastern Europe the government only allowed a few firms to produce particular products).
If it is lucky, the firm may happen to produce a product that people want.
Asset led marketing
A wise firm may adopt an approach which looks for market opportunities and marches these to the firms own strengths. This is known as ‘asset-led marketing’. Rather than basing its activities just on what the market wants, this approach focuses on the most appropriate opportunities, given the firm’s assets. These assets might include the firm’s brand name, its access to markets, its marketing expertise or its product range. For example, IBM used the knowledge and expertise it gained from selling computers to move into the consultancy business.
Adding value
The value of something depends on the benefits it offers, compared to the price. The more benefits something offers in relation to the price, the better value it is. This means a product does not have to be cheap to be good value. It has to be cheap in relation to the benefits it provides. You may spend quite a lot of money on a pair of trainers for example, but if they are just what you wanted, you may think they are a good value for money.
To be competitive, a firm must at least match the value offered by its competitors. Wherever possible, it must offer better value to keep its own customers and win some from the competition.
Adding value can often be achieved by relatively small amendments to products – just think how useful it is to have batteries which show you how much energy is left, although some major brands are doing something similar. And what about keys cut out of different coloured metal so you can tell them apart.
To summarise, the aim of a firm is to provide benefits which customers are willing to pay for. To do this, it will need a detailed insight into customer needs. It will also have to monitor these needs, because they will change over time and because competitors are also trying to offer new, attractive products and services. The first bank to offer telephone banking provided its customers which an additional benefits; it was not along before others followed and the firm bank had to think about what else it could do to offer more benefits than the competition. Internet banking followed swiftly.
More marketing techniques
A marketing objective is a target set by the marketing function. It sets out what the firm wants to achieve in terms of its marketing activities.
Like any good objective, a marketing objective should be SMART (specific, measurable, agreed, realistic, time specific).
For example, a marketing objective might be ‘to increase sales by 10% by March 2008).
Marketing objectives often focus on sales. In most cases, firms want to increase their overall sales, but they may also set objectives for particular products or regions. For example, a firm might be very eager to promote some of its products to a greater extent in the North or it may want to boost sales of its latest brand in particular. A firm might want to smooth out sales over the year (if its existing sales are very seasonal). It may even want to reduce sales, if It knows it cannot meet the orders and that to accept them might lead to long waiting lists and dissatisfied customers.
Marketing strategy and targets
As we have seen, a strategy is the means of achieving an objective. A marketing strategy is, therefore, a way of achieving a marketing objective. This means it is the long term plan the firm has to ensure it meets its marketing target. A marketing strategy involves analysing markets, choosing which markets to operate in and which products to offer. The strategy involves analysing markets, choosing which markets to operate in and which products to offer. The strategy is implemented through marketing tactics. These tactics involve detailed decisions and about factors such as the price and the way they product is distributed.
- A firms marketing objective might be to increase sales by 30% over the next 6 years.
- Its marketing strategy might be to launch some of its products abroad.
- The marketing tactics used might include launching the products at a low price in France and Germany first and gradually extending this to other countries.
Types of marketing strategy
There are many types of marketing strategies. These include nice marketing and mass marketing.
Niche marketing
This occurs when a firm focuses on a specific segment of the market with which the major competitors are not concerned. For example, a radio station may concentrate on playing a type of music which is not featured much on other radio stations. Classic FM may be an example of a radio station using this type of marketing strategy. A fashion company may focus on a particular item of clothing which most other firms do not, such as cufflinks or socks.
There are a number of advantages of operating in a niche market:
- A firm may be able to survive because it is offering a product or service that the larger firms are not bothered about supplying. If a small firm tried to compete in the mass market, the existing competitors might react aggressively.
- The firm may be able to operate on a small scale. Many niche markets are relatively small and specialised. Small organisations are, therefore, able to meet the demand in this market, whereas they might lack the resources to meet demand in a mass market.
However, firms producing and selling in niche markets also face disadvantages:
- If the business earns high profits, other firms might enter the market, making it more competitive. In some cases, the niche producer will struggle to survive if larger, more powerful firms enter the market and sell at lower prices.
- The market as a whole may be quite small which may limit the overall returns a firm can achieve.
- The market may consist of a small number of customers. This may mean that the firm is vulnerable to the loss of one or two customers. In the mass market this is less of a problem: if one customer is lost there are normally plenty more!
Mass marketing
This takes place when a firm aims a product or service at more of the market. ITV is a mass-market TV channel because it tries to cater for a majority of tastes. The Ford escort is aimed at the average car user, and therefore sells in a mass market.
To operate in a mass market, a firm must be able to produce goods on a large scale. This may require a heavy investment in equipment and in the recruitment of staff. The danger of mass marketing is that if demand does fall the firm may need left with unused resources. Machines may sit idle and there may not be enough work for employees. Before investing in the large scale resources essential for a mass marketing strategy, a business must be sure that demand will be sustained.
The advantage of mass marketing is that the firm can produce large numbers of relatively standardised products this means the production process is relatively repetitive and the cost per unit should be low. However, even though the firm will be producing many thousands of the same items it still needs to differentiate itself from the competition. Ariel, Daz, and surf all compete in the same market but try to make themselves from each other – trough the product itself or the price. This is product differentiation.
- Market development – this entails a firm selling its existing products in the new market. This may either be a new segment of the market or a new market geographically. For example, Johnson and Johnson’s talcum powder, originally marketed for babies has been sold to adults as well. Companies such as Unilever have been trying to sell much more of their products (such as Persil) in Asia in recent years as this is a very fast growing market.
- New product development – Firms pursuing this strategy develop new products to sell to existing customers. This may either be a modification of an existing product or a completely new one. For example, Sony developed the disk man, gradually replaced by the walkman.
- Diversification – This strategy occurs when a firm offers a new product in a new market. This does not mean this product or market didn’t exist before, but simply that this firm had not been involved before. For example, CAT is a producer of industrial equipment but has used its brand to move into the clothes market. Diversification is quite a high risk strategy because it means the managers of a business are becoming involved in an area in which they do not have any expertise.
Hopefully you have learnt the basics and a little more advanced topics involved in product marketing. Good luck !
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