Organizational Structures and Product Differentiation

Mass Market

• A large group of consumers with similar needs and preferences for a product or service.
• Consumers are willing and able to purchase at an affordable price.

Niche Market

• A small, specialized group of consumers with unique, specific needs and preferences.
• A smaller segment of a larger market.

Mass Markets: Benefits and Drawbacks

• Benefits:
  • Economies of scale, leading to lower costs per unit.
  • Wider customer base, increasing sales and revenue.
• Drawbacks:
  • Intense competition and price wars.
  • High advertising and marketing expenses to reach a large, diverse customer base.

Niche Markets: Benefits and Drawbacks

• Benefits:
  • Less competition than mass markets.
  • Easier to target specific customer needs.
• Drawbacks:
  • Higher unit costs due to lack of economies of scale.
  • Riskier as demand may not be constant.

Market Size

• The total number of potential customers or sales revenue available for a specific product or service in a particular market.

Market Growth Calculation

• Example: If a market size is $10 million at the start of a year and increases to $12 million at the end of the year, the growth is calculated as follows: [($12 million - $10 million) / $10 million] x 100 = 20%.

Market Share

• The percentage of total sales revenue/customers of a specific product or service generated by a particular company.
• Example: If a company sells $10 million worth of smartphones in a market with $50 million total sales, their market share is: ($10 million / $50 million) x 100 = 20%.

Brand Definition

• A name, logo, or symbol that distinguishes a product or service from competitors.

Strong Brand Benefits

• Increased customer recognition and loyalty, leading to higher sales and revenue.
• Ability to charge a premium price, improving profit margins.

Online Retailing

• The process of selling products or services through a website or online platform to reach a wider customer base.

Online Retailing: Benefits and Drawbacks

• Benefits:
  • Increased accessibility and convenience for customers, leading to higher sales and reduced costs.
  • Ability to reach a global audience.
• Drawbacks:
  • Increased competition from other online retailers.
  • Potential for technical issues and security concerns regarding online transactions.

Product Innovation

• The development or creation of products not previously available.

Product Innovation: Benefits and Drawbacks

• Benefits:
  • Increased customer satisfaction and loyalty, leading to higher sales and market share.
  • Ability to charge a premium price for unique and innovative products.
• Drawbacks:
  • High costs and risks associated with research and development.
  • Potential for failure if the product does not meet customer needs or gain market acceptance.

Dynamic Market

• Markets characterized by frequent changes in consumer preferences, technological advancements, and competitive forces.
• These changes create both challenges and opportunities for businesses.

Business Response to Market Changes

• Flexibility
• Market research
• Niche development

Risk vs. Uncertainty

• Risk: The possibility of a lower than expected profit or a loss.
• Uncertainty: The inability to predict external shocks or future events.

Market Research Definition

• The process of collecting and analyzing data about consumer preferences, market trends, and competitive forces.
• This data informs business decisions and strategies.

Primary vs. Secondary Research

• Primary Research: Collecting new, original data directly from consumers or the market.
• Secondary Research: Analyzing existing data from published sources or databases.

Quantitative Market Research

• Using numerical data collection and analysis to measure and quantify consumer behavior and preferences.

Qualitative Market Research

• Collecting and analyzing non-numerical data (e.g., focus groups, interviews, observation).
• Aims to understand consumer attitudes, perceptions, and motivations.

Methods of Primary Research

• Surveys/questionnaires
• Focus groups/consumer panels
• Face-to-face/telephone interviews
• Product trials/test marketing

Methods of Secondary Research

• Websites/social media
• Newspapers/TV/Radio reports
• Databases

Sampling Methods

• Random
• Quota
• Stratified

Random Sampling

• Selecting individuals from a group completely randomly, giving everyone an equal chance of being chosen.

Quota Sampling

• Selecting a specific number of people from different groups to ensure each group is fairly represented in the sample.

Stratified Random Sampling

• Dividing a population into groups based on certain characteristics and randomly selecting people from each group to create a well-rounded sample.

Market Positioning

• Identifying a company’s product or service on a graph compared to the competitor's products or services to see if there is a gap in the market.
• An approach where businesses concentrate on understanding and satisfying customer needs, aligning strategies and activities accordingly.

Market Orientation

• Approach where businesses center on understanding and meeting customer needs and wants.
• Aligning their activities with these to be responsive.

Product Orientation

• Businesses focusing on improving products and production without considering customer needs directly.
• Emphasis is placed on product development and improvement.

Benefits of Product Orientation

• Low cost, avoided market research.
• High quality, innovative products achievable.
• Easier to achieve economies of scale through efficient manufacturing processes

Drawbacks of Product Orientation and other approaches

• Ignored customer preferences and needs, leading to products not being demanded.
• Possibility of being outcomped by rivals who are more customer-centric.
• Market mapping difficulties mean the process is not always accurate, and data can be hard to come by in certain sectors.
• Difficulty of making decisions and changes swiftly.
• Increased costs.

Market Segmentation

• Dividing a market into smaller groups of consumers with similar needs or characteristics.

Benefits of Market Segmentation

• Targeted marketing strategies tailored to specific customer groups.
• Increased customer satisfaction.
• Identification of niche markets and opportunities for profit maximization.

Drawbacks of Market Segmentation

• Expensive and time-consuming to conduct.
• Narrow focus can limit potential audience.

Methods of Market Segmentation

• Demographic
• Psychographic (lifestyle)
• Geographic
• Behavioural

Demographic

• Using factors such as age, gender, income, education, occupation, and family size.

Psychographic

• Using personality traits, values, interests, opinions, and lifestyles.

Geographic

• Dividing the market based on location, climate, and cultural differences

Behavioural

• Dividing the market based on consumer behavior, such as purchasing habits, usage rate, loyalty, and attitude towards the product

Marketing Mix in Exam

• Understand the objectives: Business objectives are to maximize profit, increase revenue or market share, or build a brand.
• How market research supports objectives: Use the case studies and show how market research is used to analyze the price, place, promotion, product (the 4 Ps) to determine the marketing mix.
• The four Ps (product, price, place, promotion): Analyze how each is important in a particular market.
• The importance of segmentation: Use case studies to show how different segments of the market impact each of the 4 Ps (product, price, place, promotion)
• How market positioning is crucial for determining pricing strategies, places, advertising.

Competitive Advantage

• Ways companies gain a competitive edge in the marketplace.
• Examples: Price, added value, innovation, reliability, quality, reputation/branding, advertising/marketing, convenience, and customer service.

Product Differentiation

• Setting products apart from rivals to appeal to a unique segment (or segments) of the market.
• A way to gain a competitive advantage

Adding Value

• This is the difference between the price charged and the total cost of inputs to create the product.
• Ways to add value include packaging; customer service; and frequent buyer offers..

Definitions from other sections in the notes

• Demand: Willingness and ability of consumers to purchase a good or service at a particular price over a given period.

• Supply: Willingness and ability of producers to sell goods and services at a particular price over a given period.

• Market equilibrium price: The price at which supply equals demand.

• Price elasticity of demand (PED): Measures the responsiveness of quantity demanded to a change in price.

• How much quantity demanded changes when price changes

• Income elasticity of demand (YED): Measures the responsiveness of quantity demanded to a change in income.

• How much quantity demanded changes when income changes

• Normal Goods: Goods that increase in demand when income increases.

• Luxury Goods: Goods that have a high YED, demand increases significantly when income increases.

• Inferior Goods: Goods that decrease in demand when income increases.

• Product Life Cycle (PLC): The stages a product goes through over its life, from development to decline. Phases include: development, introduction, growth, maturity, decline. • Product portfolio: A range of products that a company sells. • Boston Matrix: A management tool that helps a company to analyze its range of products based on market share and market growth. • Customer loyalty: Continued and repeat purchase of goods and services from a specific seller.

• Marketing Mix: (The 4 Ps) Product, Price, Place, Promotion.

• Delegation: Transferring authority and responsibility for tasks from managers to employees.

• Consultation: Seeking input from employees in decision-making.

• Job Enrichment: Adding tasks, responsibilities, or challenges to an employee's role.

• Job Enlargement: Expanding an employee's role by adding more tasks.

• Team Working: Employees working collaboratively toward common goals.

• Flexible Working: Employees adjusting their work schedule or location.

• Leading: Inspiring, guiding, and influencing individuals or groups towards achieving goals.

• Managing: Overseeing processes, coordinating resources, ensuring operational efficiency to achieve specific objectives.

• Entrepreneur: A person who sets up a business and takes risks to make a profit.

• Intrapreneur: An employee who thinks entrepreneurially and initiates ideas and innovation within a company.

• Barriers to entrepreneurship: include lack of idea capacity, access to finance, training/know how, fear of failure, lack of confidence, trade-offs.