As Business Buss2 Revision

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Marketing and the competitive environment

Effective marketing

MARKETING= 'the process of identifying, anticipating and satisfying customer needs efficiently and profitably.'

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The purposes of marketing:

-Anticipate customers' wants. The first stage of marketing is to conduct market research in order to discover the wants of customers.

-Satisfy those requirements in a way that delights customers- the approach used by organisations to achieve this aim is the marketing mix.

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The marketing mix (4P's)

An organisation will plan a suitable product, charge an attractive price, put the product into the right location or place and use promotion to make customers aware of the product.

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-Meet the needs of the organisation. Ultimately marketing is intended to enable a business to meet its aims and objectives, such as earning profit.

Niche or mass marketing

-Should the firm aim its product at a particular market segment (niche marketing), or at the whole market (mass marketing)?

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Both niche and mass marketing strategies can meet most of an organisation's marketing objectives.

-Attracting a mass market can increase sales and thus provide security.

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-Finding the right niche ensures market positioning, and innovative products will reach new segments.

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WHAT is market positioning?

The marketing department creates an image for the product based on its intended audience. This is created through using the four Ps.

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Advantages of niche marketing:

-Fewer competitors, as large companies are not attracted to a relatively small market.

-Small firms can compete more effectively in a niche market as large firms will be less able to produce goods at low unit costs if demand is limited.

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-The limited demand may suit a small firm that would lack the resources to produce on a large scale. A sole trader would only be able to produce enough products for a small market niche.

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-A firm can adapt its product to meet the specific needs of the niche market, instead of compromising between the needs of many different groups of consumers.

-It can be easier for firms to target customers and promote their products effectively when they are only selling to a certain type of customer.

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The content of advertisements can be designed to appeal to the specific market segment being targeted.

Disadvantages of niche marketing:

-The small scale of the market limits the chances of high profit.

-Small firms in niche markets can be vulnerable to changes in demand as they may have no

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alternative products to fall back on.

-An increase in popularity may attract larger, more efficient firms into the market.

Advantages of mass marketing:

-Large-scale production is possible, helping to lower unit costs through factors like bulk-buying.

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-The high number of customers allows companies to earn huge revenues

-Mass marketing allows firms to use the most expensive (and usually the most effective) marketing.

-Mass markets help firms to fund the research and development costs needed to introduce new products.

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-Mass marketing increases brand awareness , which can help to sell a range of products.

Disadvantages of mass marketing:

-High fixed capital costs are incurred, like the purchase of large factories, preventing some firms from operating in the mass market.

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-Firms in mass markets may be less flexible to change, such as a sudden reduction in popularity of a product.

-It can be hard to appeal directly to each individual customer because mass market products have to be designed to suit all customers.

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-There is less scope for adding value. High income customers may prefer high priced, unique products. Consumer marketing Vs business-to-business marketing.

-Not all marketing involves individual customers.

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-Companies such as manufacturers buy raw materials from other companies.

-Retailers will buy their products directly from manufacturers.

-These activities are business-to-business transactions.

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-Persuading a business to buy products requires different approaches to those needed when targeting individual customers.

-This is business to business marketing.

The main features of business-to-business marketing include:

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-Transactions are much larger

-Buyers and sellers have more specialist knowledge

-The buyer's reputation often depends on the quality of the product purchased from the seller, so there may be more emphasis on this aspect

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-Promotions and advertisements tend to be more informative than persuasive, as buyers base their decisions on factual information.

-Customer service is vital because poor service tends to become well known more quickly than in consumer marketing.

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Business-to business marketing involves meeting the needs of other businesses, but the demand stems from consumers. Businesses buy products with the ultimate aim of adding value in order that they can move the products down the chain until they reach the public.

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-B2B Markets have a more complex decision-making unit, B2B Buyers are more rational, B2B products are often more complex, limited number of buying units in B2B marketing, B2B Buyers are longer-term buyers, B2B marketing drive innovation less than consumer markets.

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-Consumer markets rely far more on packaging, B2B buyers are more demanding, personal relationships are more important in B2B marketing

-B2B markets have fewer behavioural and needs-based segments, needs based segments refer to: a price-focused segment, a quality and brand focused segment

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-A service-focused segment

-A partnership-focused segment

Designing an effective marketing mix: the success of the marketing mix depends upon making sure that all elements come together and are fully integrated. These factors influence the elements of the mix:

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-Market research results may determine the price a business charges for its products/services and the places where these are sold.

-Availability of finance may influence the amount of money spent on promotion and product development.

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-New technology may influence how often the product needs to be updated or whether it is made available for sale over the internet. TIP LOOK for ways to integrate the different elements of the four Ps.

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The marketing mix must be integrated, look at the text in the examination to see how the different Ps need to work together. The mix will be influenced by the market segment (s) being targeted and the actions of competitors.

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Using the marketing mix: product

-Product is the central feature of the marketing mix.

Key elements to be understood:

-Design of a product

-New product Development

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Design of a product:

To the consumer this means reliability, safety, convenience of use and whether it is fashionable, aesthetic and durable. To the organisation, the key elements are whether the product satisfies consumer tastes, the financial viability,

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its effect on reputation and whether the company can produce it without hassle. New product development: You need to know the stages involved in introducing a new product (from initial screening to the final launch).

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Link new product development to the product life cycle, Boston Matrix, mind showering (also known as brain storming), market research and R AND D (research and development). These will be the sources of new product ideas.

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Organisations must be prepared to respond to actions of competitors by developing new products and/or adapting existing products through the use of extension strategies, ensuring that they will maintain market share.

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Factors influencing new product development:

-Technology, new technology can allow new products to be developed that are considered superior to existing products.

Technology can lead to the development of totally new product.

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-Production technology has advanced considerably, allowing organisations to produce goods and services that are more advanced and cheaper to produce.

Businesses can more easily produce goods and services that are made to the individual specifications of the consumer.

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-Technology is now allowing companies to be aware of consumer tastes

Competitors' actions:

-The introduction of a new product by a competitor may remove market share, forcing a business to respond.

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-New products from competitors can give ideas for new products to a business

NEW TOPIC Entrepreneurial skills of managers and owners.

-If an entrepreneur can be the first to spot a gap in a market OR think of a potentially successful idea, their business can gain 'first mover' +ve.

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Other aspects of product

USP/propositions

-Marketing can add value by creating a USP. If a firm can improve customer awareness and goodwill through making its product different from rival products, it can increase its sales volume and price.

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-Customers are more likely to be loyal and keep on buying the firm's product.

Product portfolio analysis:
The aim is to create a balance of products with widespread appeal. The Boston Matrix shows this strategy

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The Boston Matrix:

-Market growth

-Market share

STARS: HIGH Market Share and HIGH Market Growth.

Problem Children: LOW Market Share and HIGH Market Growth

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Cash Cows: HIGH Market Share and LOW Market Growth.

Dogs: LOW Market Share and LOW Market Growth.

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Firms aim to produce products with a high market share ('cash cows' if market growth is low, 'stars' if the market is growing quickly.)