Marketing

Definition of terms

Marketing

 Marketing is the management process responsible for identifying, anticipating, and

satisfying consumers’ requirements profitably.
 It is the management task that links the business to the customer by identifying and
meeting the needs of customers profitably. This is achieved by getting the right
product at the right price to the right place at the right time.
 It is the process of introducing a product or service into the market and encourages
sales

E-marketing

 It is the process of marketing a product or service offering using the internet to reach
the target audience on smartphones, devices, social media etc
 Can be referred to as internet marketing, online marketing, digital marketing
 The benefits of e-marketing include the following:
1. Reduction in marketing costs
2. A company can reach its customers faster and cheaper
3. It helps in increasing revenue

Market
 It is place or mechanism where buyers and sellers meet to engage in exchange e.g.
shopping centres, auctions etc.
 A market is a place or system that enables producers of a good or service to meet
potential buyers and exchange these produces for money.
 It refers to the group of consumers that is interested in a product, has the resources to
purchase the product and is permitted by law to purchase it.

Marketing objectives
These are goals set for the marketing department to help the business achieve its overall
objectives. Examples of marketing objectives:
 market share – perhaps to gain market leadership
 more sales (value or volume – or both)
 average number of items purchased per customer visit
 percentage of customers who are returning customers
 number of new customers
 customer satisfaction
 brand identity.

The relationship between marketing and other functional departments in a

company

The links between the marketing department and other functional departments – such as
finance, operations (production) and human resources are an essential component of a
successful marketing strategy. As most business decisions will be focused around achieving
the central marketing objectives, such as increasing sales and profits, it is inevitable that the
marketing department will have a central role in coordinating the work of other departments
to help achieve these marketing objectives.

Marketing vs finance

 The finance department will use the sales forecasts of the marketing department to
help construct cash-flow forecasts and operational budgets.
 The finance department will have to ensure that the necessary capital is available to
pay for the agreed marketing budget, for example for promotion expenditure.

Marketing vs human resources

 Sales forecasts will be used by human resources to help prepare a workforce plan. For
example, additional workers will be needed in sales teams and production to increase
sales.
 Human resources must ensure the recruitment and selection of qualified and
experienced workers.
  There must be sufficient workers to produce and sell the increased number of
products planned by the marketing department.

Marketing vs production and operations

 Market research data will play a key role in new product development.
 The operations department will use sales forecasts to plan the capacity needed, the
purchase of the machines that will be used and the raw material inventories required
for the higher output level.

Market analysis

 It refers to a thorough assessment of a market within a specific industry

 It looks into the size of a market both in volume and in value, the buying patterns, the
competition etc
 A market can be analysed using the following features:

1. Market size

 It refers to the total level of sales of all producers within a market.

 Th is can be measured in two ways: volume of sales (units sold) or value of goods
sold (revenue).
 A market size is important for the following reasons:
1. A marketing manager can assess whether a market is worth entering or not.
2. Firms can calculate their own market share.
3. Growth or decline of the market can be identified.

2. Market growth

 It refers to the percentage change in the total size of a market (volume or value) over a
period of time.
 It is better to be operating in a rapidly growing market in many cases. However, there
might be many competitors entering the market at the same time so profits might not
be high.
  The pace of growth will depend on several factors such as:
1. general economic growth
2. changes in consumer incomes
3. development of new markets and products that take sales away from existing ones,
4. changes in consumer tastes and factors, such as technological change, which can
boost market sales when an innovation becomes available.

3. Market share

 It refers to the percentage of sales in the total market sold by one business. It is
calculated by the following formula:

'
fir m ssales∈time period
Market share = × 100
total market sales∈time period
 Firm’s sales’ and ‘total market sales’ can be measured in either units (volume) or
sales value in this market.
 If a firm’s market share is increasing, then the marketing of its products has been
relatively more successful than most of its competitors.
 The benefits of high market share (being a brand leader include the following:
1. Sales are higher than those of any competing business in the same market and this
could lead to higher profits too.
2. Retailers will be keen to stock and promote the best-selling brands. They may be
given the most prominent position in shops.

4. Competition

 Businesses compete in many ways. One of the most obvious ways is over price. For
example, sports shoe sellers on the internet compete to supply the same shoe brand at
the cheapest price to customers.
 There are also different forms of non-price competition, e.g. customer service –
giving the best personal attention to the needs of customers; location – being at the
most convenient place for customers to buy the product.
  Businesses also face indirect competition. For example, in the bus transport industry,
a bus operator experiences indirect competition from other providers of public
transport such as taxi firms and rail companies

5. Location

 A business can operate locally – they sell products to consumers in the area where the
business is located e.g., laundries, florist shops, hairdressers and bicycle-repair shops.
 Some businesses also offer goods or services to the whole nation market e.g., banking
firms, supermarket chains and large clothing retailers.
 There are also international markets that offer the greatest sales potential. Expanding
into foreign markets is a very big strategic step as many aspects of marketing will
have to change in order to respond to differences in tastes, cultures and laws between
different countries.

Market segmentation

 Market segmentation is a marketing term that refers to aggregating prospective buyers

into groups or segments with common needs and who respond similarly to a
marketing action.
 A market segment refers to a sub-group of a whole market in which consumers have
similar characteristics.
 Market segmentation enables companies to target different categories of consumers
who perceive the full value of certain products and services differently from one
another.

Bases of market segmentation

1. Geographic differences
 It involves grouping customers by physical location, assuming that people within a
given geographical area may have similar needs.
 It divides the market based on location, climate, population density
 This strategy is more useful for larger companies seeking to expand into different
branches, offices, or locations.
  These geographical differences might result from cultural differences – for example
alcohol cannot be promoted in Arab Muslim countries. A heating and refrigeration
business will need to market different products to Malaysia compared with Finland.

2. Demographic differences
 It involves breaking the market into customer demographics as age, income, gender,
race, education, or occupation.
 It assumes that individuals with similar demographics will have similar needs.
 Gender-specific segmentation is popular too. It gives businesses the opportunity to
sell their products and services in areas where there may be more of a male or female-
specific demand.
3. Psychographic segmentation

 This process segments groups based on the customers’ lifestyle, political opinions,
personal values, aspirations, and psychological characteristics. Data for this
segmentation can be hard to identify; however, it produces excellent results.
 Example: A fitness apparel company may target individuals based on their interest in
playing or watching a variety of sports.

4. Behavioural segmentation

 Behavioural segmentation relies heavily on market data, consumer actions, and

decision-making patterns of customers. This approach groups consumers based on
how they have previously interacted with markets and products.
 This approach assumes that consumers prior spending habits are an indicator of what
they may buy in the future, though spending habits may change over time or in
response to global events.
 Buying on occasion is one of the most obvious forms of behavioural segmentation i.e.
Christmas, Easter, birthdays, festivals and so forth.

Advantages of market segmentation

  Higher rate of success for the company – Market segmentation means to study a
market. It helps to divide a bigger market into smaller modules and lets the marketers
know the potential of the market/consumers which reduces the risk of loss
 It increases the profitability of the company – it helps the business to target
particular segments of the market and thus helps to find better business opportunities
pertaining to that particular market segment. This technique lets the companies focus
on one particular segment rather than the whole market which in return gives
increased profit.
 It creates and provides market opportunities –The market segments where the
consumers are less satisfied with the other brands are the opportunity areas for the
company to focus and to establish their brand. The companies can work in these
segments and provide a better product to the consumers than the already existing ones
in the market
 It ensures effective marketing campaign – As the business knows the consumers
and their needs, the marketing team can customize or personalize their marketing
campaign accordingly and organize their strategies as per the need of the market
which is directly proportional to the success of the business.
 Wise and efficient use of resources – Market segmentation helps to save
unnecessary time and effort engaged in the marketing campaign by identifying the
potential areas of the market. Thus it helps to use the company resources and money
in a more streamlined and efficient manner.
 It enables identification of gaps in the market – groups of consumers that are not
currently being targeted – and these might then be successfully exploited.
 Small firms unable to compete in the whole market are able to specialise in one or two
market segments.

Disadvantages of market segmentation

 By focusing on one or two limited market segments there is a danger that excessive
specialisation could lead to problems if consumers in those segments change their
purchasing habits significantly.
 Promotional costs might be high as different advertisements and promotions might be
needed for different segments – marketing economies of scale may not be fully
exploited.
  Extensive market research is needed.

Mass marketing

 It refers to selling the same products to the whole market with no attempt to target
groups within it.
 Is an approach where a business sells into the largest part of the market, where there
are many similar products on offer
 Can be referred to as undifferentiated marketing
 It is an undifferentiated marketing strategy that aims to attract as many customers as
possible while ignoring niche demographic differences.
 Mass marketing strategy hopes to capture a distinct set of buyers who are really price
sensitive (Heterogeneous buyers).
 A business use the same product, price, distribution and promotion to reach every
consumer in the market.
 Examples of media channels that can be used in mass marketing include:
1. Email marketing
2. Magazines
3. Newspaper
4. Radio and Television
5. Social media
6. Billboards
 Examples of companies that use mass marketing include telecommunication
companies, FMCG companies etc

Advantages of mass marketing

 Increased brand awareness – when a company market a product on such a far-

reaching scale, its brand becomes more recognizable by necessity. Mass marketing
aims This increase sales volume and return on investment (ROI).
 Lower costs – The lack of customization necessary for mass marketing makes it more
cost-effective, resulting in both lower prices for consumers and production costs for
manufacturers.
  Wide customer reach – This type of marketing allows a company to reach the
biggest possible group of people it can. This leads to high sales with far less market
research than would be necessary if the business took a more targeted approach. This
can be achieved using mass marketing media such as billboards, newspapers etc.
 Increased sales – Because mass marketing appeals to the total population in the
market, companies that use this strategy may experience a high number of sales.
Because large companies usually pay less for mass marketing advertisements
compared to other promotion techniques, they can experience higher profits when
spending less on campaigns.

Disadvantages of mass marketing

 Low profit margins – Companies usually rely on low prices to attract as many
customers as possible. Also, the product is not unique, so the market perceives it to be
of low value.
 Low adaptability to consumers – The company does not adapt products according to
consumer tastes and special requirements. Thus, for quality-conscious consumers,
products are not attractive.
 Low switching costs to consumers – Consumers have no other reason to be loyal to
the product, except for price reasons. Therefore, their loyalty tends to be low, which
implies low switching costs. If the company raises the price, the product is no longer
attractive and not available, and consumers will switch to competitor products.
 High competitive pressure – The mass market is likely to attract more players.
Standard products, low switching costs, and low loyalty make rivalry between
companies more intense.
 Inefficient and not suitable for small businesses – Mass marketing may be an
inefficient strategy for small businesses. While it's a cost-effective option for large
companies, mass marketing can be expensive for small businesses. Small businesses
that sell unique products or services may find more success with customized
advertisements that appeal to specific audiences.

Niche marketing
  It refers to identifying and exploiting a small segment of a larger market by
developing products to suit it.
 It is a strategy where a business targets a smaller segment of a larger market, where
customers have specific needs and wants
 Is suitable for a relatively low competitive market
 It appeals to homogeneous buyers (set of buyers who remains committed to a product
for a long time)

Advantages of niche marketing

 Less competition – The company will target specific market segments, which large
companies are less interested in entering. Large companies do not want to enter
because the potential profit rate may be low relative to their business size. Hence, this
segment has a loose level of competition and allows companies to set premium prices.
 High profit margins – Low competitive pressure allows companies to sell at high
prices and earn high-profit margins. They offer exclusive products, making consumers
willing to pay higher prices.
 High consumer loyalty – Companies have a higher chance of satisfying customers.
They specialize in satisfying the specific needs and wants of consumers. The success
of exploiting the market brings a stronger relationship between customers and the
company and brand.
 It is suitable for small businesses – Niche marketing is beneficial for companies
with relatively limited resources. They can survive and thrive in the market and do not
have to compete directly with large companies in the mass market.

Disadvantages

 Low economies of scale – The market has few customers because of more specific
demands and needs. Therefore, it is difficult for firms to catch up to lower average
costs by increasing sales and production volumes.
 Low barriers to entry – Entry requirements are relatively low because they do not
rely on significant capital investment. Therefore, in some markets, firms face a high
risk of new players entering into the market, increasing direct competition.
 Higher return on investment is not guaranteed – As opposed to what is discussed
above, serving a smaller target market can sometimes make it harder to earn good
profits. Serving a niche means fewer customers, which can be quite risky.
 Less growth opportunity – It can be hard to grow and improve without any
competition.