Understanding Markets and Marketing

• A market encompasses all buyers and sellers of a specific good.

What is Marketing?

• Marketing involves the management process of identifying, anticipating, and profitably satisfying consumer needs.

The Role of Marketing

• Identify customer needs through market research.
• Satisfy customer needs by producing and selling goods and services.
• Maintain customer loyalty by building relationships, such as through loyalty programs, discounts, after-sales service, and updates on new products and offers.
• Obtain information on customers to develop and sell improved products in the future.
• Anticipate changes in customer needs by monitoring spending patterns and identifying unmet market demands.

Marketing Department Objectives

• Increase product awareness.
• Boost sales revenue and profits.
• Increase or maintain market share, calculated as (company sales / total market sales) * 100.
• Enter new markets, both domestic and international.
• Develop new products or enhance existing ones.

Market Changes

• Customer spending patterns change due to tastes, technology, income, and demographics.
• Changes in tastes and preferences influence consumer choices.
• Technological advancements make older products obsolete, driving demand for more sophisticated features.
• Higher income leads to more expensive purchases, while lower income reduces spending.
• An aging population increases demand for products tailored to seniors, like anti-aging creams and medical assistance.

Changing Customer Needs

• Businesses need to understand what their customers want in order to stay ahead of competitors and remain profitable.
• If businesses fail to meet customer needs, consumers will switch to competitors' products.

Increased Market Competition

• Globalization leads to more competitors in the market as products are sold worldwide.
• Transportation improvements reduce distribution costs, making it easier to sell products globally.
• E-commerce enables customers to buy products from anywhere, intensifying market competition.

Business Responses

• Businesses can respond to changing spending patterns and increased competition by maintaining market share and staying competitive.
• They can maintain customer relationships: they can ensure customers continue buying from them, and can help gather info on their spending habits.
• Continuously improve existing products to sustain sales.
• Introduce new products to retain customers and differentiate from competitors.
• Keep costs low to enable competitive pricing, which boosts demand, sales, and market share.

Niche Marketing

• Niche marketing involves targeting a small segment within a larger market.
• Products are tailored to suit specific sub-group needs
• Versace and Clique perfumes cater to wealthy, high-status consumers.

Advantages of Niche Marketing

• Smaller firms can succeed where larger firms haven't established themselves.
• Firms can sell products at a premium to their niche markets, and gain high profit margins.
• Focus on one group of customers, which makes them more competitive than firms that perform mass marketing.

Limitations of Niche Marketing

• Difficult to achieve economies of scale due to smaller operations and markets.
• Relies too much on a singular product or market.
• Attracts competition if successful.

Mass Marketing

• Mass marketing involves selling the same product to the entire market without targeting specific groups.
• The iPhone design, for example, is uniform across all locations and income segments.

Advantages of Mass Marketing

• Achieve higher sales volumes in comparison to niche marketing.
• Can benefit from economies of scale, making average costs lower.
• Risks are spread across different markets.
• Can increase business growth due to the large market.

Limitations of Mass Marketing

• High level of competition.
• Difficult to charge higher prices because of other competitors selling similar products.

Market Segmentation

• Market segment: A sub-group of consumers within a larger market with similar characteristics and preferences.
• Market segmentation: is dividing potential customers into groups based on traits.
• PepsiCo has marketed Diet Coke to the health-conscious.

Bases for Market Segmentation

• Socio-economic groups (income)
• Age
• Location
• Gender
• Lifestyle
• Product use (home/work/leisure/business)
• Different distribution and promotion methods must be tailored to each segment.

Advantages of Market Segmentation

• Cost-effective as it targets a specific segment and addresses their needs.
• A higher level of focus usually leads to higher sales and profitability as products are more targeted.
• Creates opportunities to increase sales.

Product-Oriented Business

• These businesses produce the product and then try to find a market
• They focus on the product's quality and price.
• Firms producing electrical and digital goods are examples (refrigerators and computers)

Market-Oriented Businesses

• These businesses conduct market research to determine consumer wants and then satisfy them.
• They will set a marketing budget and undertake different methods of researching consumer tastes, spending patterns, and market conditions.
• Example: mobile phone markets.

Market Research

• Market research is the process of collecting, analyzing, and interpreting information about a product.
• Market research helps firms produce goods and services that will sell successfully and generate profits.
• Without it, firms could lose a lot of money and fail to survive.
• Market research answers questions prior to product development, such as: Will customers be willing to buy this product? What influences buying preferences (price or quality)? What is the competition like?
• Market research data can be quantitative (numerical) or qualitative (opinion/judgment).

Market Research Methods

• Market research methods can be categorized into primary and secondary market research

Primary Market Research (Field Research)

• This involves the collection of original data directly from existing or potential customers.
• First-hand data is collected by people who want to use the data (i.e. the firm).
• Examples include questionnaires, focus groups, interviews, observation, and online surveys.

The Process of Primary Research

• Establish the purpose of the market research
• Decide on the most suitable market research method
• Decide the size of the sample and identify the sample
• Carry out the research
• Collate and analyze the data
• Produce a report of the findings

Sample

• A sample is a subset of a population that is used to represent the entire group.
• Selecting a sample is called sampling.
• Random sampling occurs when people are selected at random for research.
• Quota sampling is when people are selected based on certain characteristics (age, gender, location, etc.).

Methods of Primary Research

Questionnaires

• Can be done face-to-face, through telephone, post, or the internet.
• Online surveys involve emailing sample members to fill out a questionnaire on a website.
• Questions need to be unbiased, clear, and easy to answer.

Advantages of Questionnaires

• Detailed information can be collected.
• Customer’s opinions about the product can be obtained.
• Online surveys are cheaper and easier to collate and analyze.
• Can be linked to prize draws and prize draw websites to encourage participation.

Disadvantages of Questionnaires

• Unreliable answers if questions are unclear or misleading.
• Time-consuming and expensive to carry out research, collate, and analyze.

Interviews

• Interviewer has ready-made questions for the interviewee.

Advantages of Interviews

• Interviewer can explain questions and ask follow-up questions.
• Can gather detailed responses and interpret body language.

Disadvantages of Interviews

• Interviewer could lead and influence the interviewee.
• Time-consuming and expensive to interview everyone in the sample.

Focus Groups

• A group of people representative of the target market agree to provide information about a particular product or general spending patterns over time.
• They can also test the company’s products and give opinions on them.

Advantages of Focus Groups

• They can provide detailed information about the consumer’s opinions

Disadvantages of Focus Groups

• Time-consuming
• Expensive
• Opinions could be influenced by others in the group.

Observation

• This can take the form of recording, watching, auditing.

Advantages of Observation

• Inexpensive

Disadvantages of Observation

• Only gives basic figures. Does not tell the firm why consumer buys them.

Secondary Market Research (Desk Research)

• The collection of information that has already been made available by others.
• Second-hand data about consumers and markets is collected from already published sources.

Internal Sources of Information

• Sales department’s sales records, pricing data, customer records, sales reports.
• Opinions of distributors and public relations officers.
• Finance department.
• Customer Services department.

External Sources of Information

• Government statistics: information about populations and age structures.
• Newspapers: articles about economic conditions and forecast spending patterns.
• Trade associations: reports on specific industry markets.
• Market research agencies: detailed reports from research carried out on behalf of the company.
• Internet: wide range of articles about companies, government statistics, newspapers, and blogs.

Accuracy of Market Research Data

• The reliability and accuracy of market research depends upon a large number of factors.
• How carefully the sample was drawn up, its size, the types of people selected etc.
• How questions were phrased in questionnaires and surveys
• Who carried out the research: secondary research is likely to be less reliable since it was drawn up by others for different purpose at an earlier time.

Presentation of Data from Market Research

• Different data handling methods can be used to present data from market research.

Tally Tables

• Used to record data in its original form.
• Good for gathering initial raw data

Charts

• Show the total figures for each piece of data (bar/ column charts) or the proportion of each piece of data in terms of the total number (pie charts).
• Good for showing each data group against the total data

Graphs

• Used to show the relationship between two sets of data.
• Good for showing relationships between two variables