Marketing (AS)

Marketing is the management process that identifies, anticipates and satisfies customer needs profitably. It links the business to its market.

3.1 The nature of marketing

Marketing objectives and market orientation

A market-orientated business finds out what customers want and then produces it. A product-orientated business makes what it can and tries to sell it. Market orientation reduces the risk of failure but depends on good research.

Marketing objectives support corporate objectives: increase sales or market share, launch a new product, build the brand, enter a new market.

Types of market

• Mass market: large volumes of standardised products at lower prices.
• Niche market: a small, specialised segment with specific needs, often at higher prices.

Market measures

Example: if market sales rise from $80m to $92m, growth is $12m ÷ $80m × 100 = 15%. If the firm sells $23m, its share is $23m ÷ $92m × 100 = 25%.

Demand and its causes

Demand depends on price, income, consumer tastes, prices of substitutes and complements, population and advertising. Price elasticity of demand (PED) measures how far quantity demanded changes when price changes.

Factors affecting PED: availability of substitutes, whether the product is a necessity or luxury, the time available to adjust, the proportion of income spent and brand loyalty.

Consumer and industrial marketing

Consumer (B2C) marketing sells to individuals: mass markets, emotional appeals, brands, advertising and retail. Industrial (B2B) marketing sells to other businesses: fewer, larger buyers, technical information, personal selling, long-term relationships and negotiated prices. Products may be classified as consumer goods (durable, non-durable) or industrial goods (machinery, components).

Mass and niche markets

A mass market has large sales of a standard product to many customers (lower prices, economies of scale, but strong competition); a niche market serves a small, specialised segment (higher prices and less competition, but limited size and risk if the niche shrinks).

Customer relationship marketing (CRM)

CRM builds long-term relationships with customers using data about their preferences, to increase loyalty and repeat purchases. Costs: systems, data collection and staff training. Benefits: higher retention, better-targeted offers and more customer lifetime value.

Market segmentation

Market segmentation divides a market into groups of customers with similar characteristics, so marketing can be targeted. The main methods are:

Demand, supply and types of market

The demand for a firm's product depends on price, income, tastes, advertising, prices of substitutes and complements, and population; supply depends on costs, technology, the number of firms and the price offered. Where they meet sets the market price; a rise in demand or fall in supply raises price. Markets can be consumer or industrial, and local, national or international.

3.2 Market research

Market research is the process of gathering, recording and analysing data about customers and the market to reduce risk and guide decisions.

Quantitative data are numerical (how many, how much); qualitative data are opinions and attitudes (why).

Sampling

A sample is a small group chosen to represent the target market. Larger samples are more reliable but cost more.

The reliability of research depends on sample size, sampling method and the quality of questions; a biased sample gives misleading results.

Purposes and use of market research

Research aims to find the main features of a market: its size, growth rate and competitors, and the characteristics, profiles, wants and needs of customers. Primary data is useful because it is specific and up to date; secondary data is cheap and fast but may be out of date or not specific. Sampling is needed because asking everyone costs too much; its limit is that a small or biased sample can mislead. Interpreting tables, charts and graphs means finding trends, comparing groups and noting averages; the reliability of conclusions depends on sample size and question design.

3.3 The marketing mix

The marketing mix is the combination of product, price, promotion and place (the 4Ps) used to meet customers' needs. The mix must be consistent and suited to the target market.

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The four Ps of the marketing mix around the target market

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Product

Design, quality, features, branding, packaging, after-sales service. A brand is a name, logo or design that identifies a product and gives recognition and loyalty, allowing higher prices.

Product life cycle: development → introduction → growth → maturity → decline. Extension strategies (new packaging, new markets, new uses, price changes, adding features) prolong the maturity stage. The Boston Matrix (see Chapter 8) analyses a portfolio of products.

Product development can be a new product or an improvement: it costs research and development (R&D) and carries risk but can bring competitive advantage.

Price

Pricing depends on costs, competition, demand and elasticity, brand strength, objectives and the stage in the life cycle.

Promotion

Choice depends on the budget, target market, product, competitors and whether the aim is to inform, persuade or remind.

Place

Place is how the product reaches the customer through distribution channels: producer → customer (direct, including online and e-commerce), producer → retailer → customer, or producer → wholesaler → retailer → customer. Shorter channels give more control and profit but need more resources; longer channels give wider reach and cost less to manage but share the profit.

Integrating the mix

The mix must fit together and fit the target market: a luxury product needs high price, premium distribution and image-based promotion. Effective marketing is coherent across the 4Ps and adapts as the product life cycle moves on.

More on the mix

Goods are tangible (can be touched, stored) and services are intangible (cannot be owned, produced and consumed together, vary by provider). Tangible attributes are features and design; intangible attributes are brand image and reputation.

Further pricing methods: dynamic pricing (prices change frequently with demand, as in airline and ride-hailing prices), cost-based pricing (cost-plus), and psychological pricing such as $9.99-style endings. Promotion: advertising (paid, mass media), sales promotion (short-term offers), direct promotion (to individuals by email, mail or telephone), digital promotion (search, social media, influencers, apps), plus packaging (protects and attracts the buyer, shows the brand) and branding (builds recognition and loyalty). Place may use physical channels (shops, wholesalers) and digital channels (own website, marketplaces), or both.