WHAT IS MARKETING?
CHAPTER NO- 16
Consumer & Customer
A typical example to differentiate
For example, say you go to a grocery store and buy
a week’s worth of groceries for your family. You are
the customer, purchasing goods from the grocery
store. You go home and feed your family the
groceries. Everyone in your family is a consumer of
the products you purchased. However, you are the
only customer, since you did the buying.
HUMAN NEED AND WANT
Value and satisfaction
Value of a product/ service is the amount of benefits which
customers get from purchasing products and services.
It is commonly used in the phrase – value for money by
customers
Value is not always in monetary terms- it may be in terms of
benefits that the consumer has experienced.
HIGHER THE VALUE- HIGHER IS THE SATISFACTION
Marketers need to offer products/services which gives value
to the customers and in turn help in achieving customer
satisfaction.
Marketing Objectives
Inorder to achieve an OBJECTIVE, a STRATEGY is
needed, similarly to achieve a MARKETING
OBJECTIVE , a business needs to develop
MARKETING STRATEGIES.
Ifa business has SHORT TERM PROFITS- as an
objective, STRATEGY- maximizing sales with
highest price possible.
Some examples of Marketing objectives
To increase brand loyalty
To increase and retain customer satisfaction
To increase number of new customers
To increase market share
Toincrease the number of visits of a loyal
customer
WHY & HOW – MARKETING OBJECTIIVES
WHY – MARKETING HOW- MARKETING OBJECTIVES
OBJECTIVES IMPORTANT? CAN BE EFFECTIVE?
Provide sense of direction Should fit with the overall aim and
objectives of the business
Progress can be monitored against
pre-set standards Should be determined by senior
management
They can be broken down through
MBO (Management by Objectives) Should be SMART
Crucial impact on the marketing
strategy
Co-ordination of Marketing with other Departments
Market Orientation
Businesses today describe themselves as ‘market-led’ .
The business will attempt to PRODUCE what consumers want rather than try to
sell them a product they may not really want to buy.
BENEFIT:
a) After careful research and development, introduce a new product based on the
needs and wants of the consumer- this eliminates the failure of new products
b) If consumer needs and wants are met, such products may live for a longer
period of time- make higher profits.
c) Since the approach is focused on consumers- continuous feedback from them
through market research gives businesses to adapt to changing tastes,
environment etc.
Product Orientation
Though product led marketing still exist it is fast disappearing.
BENEFIT:
a) Such businesses believe that if an innovative product is produced of high
quality, then it will be purchased.
b) They also value quality as they have concentrated high amount of effort in
producing them.
e.g. crash helmets
Asset-led Marketing
An approach in which businesses will produce products keeping in
mind their people, asset, brand image, strengths etc rather than
customer wants.
E.g. BMW will not enter into commercial vehicle or motor caravan
market but it tends to stay in its own zone of luxurious vehicle.
Societal Marketing
This approaches focuses on stakeholders, environment, social responsibility etc.
E.g. THE BODY SHOP- promises not to support animal testing of its products and
purchases its resources from sustainable resources produced in non-environment
friendly damaging ways.
SM has the following implications:
a. It attempts to balance 3 concerns- profits, customer wants, society interest
b. SM considers long- term welfare
c. SM can give business a competitive advantage
d. If SM becomes successful, business gets the space to charge a higher price.
DEMAND, SUPPLY & PRICE
DEMAND
Demand of a product is the quantity that consumers are prepared to purchase
at the existing price in a certain period of time.
Demand and price have inverse relationship i.e. (As the price rice of a
product rises, quantity demanded decreases and vice versa)
Apart from change in price- The quantity demanded can change due to any of
the following determinants of demand.
• Change in consumer’s incomes
• Change in prices of substitute goods and complementary goods
• Fashion and taste changes
• Advertising and promotion spending
Above changes, can lead to a new demand curve.
SUPPLY
Supply is the quantity of a product that firms are prepared to supply in a
given period of time.
Supply and price have direct relationship i.e. a firm will be willing to supply a
product if the prices rises and will supply less as the price falls.
Apart from change in price- The quantity demanded can change due to any of
the following determinants of supply.
• Cost of production – e.g. change in labour law
• Weather conditions and natural factors
Above changes, can lead to a new supply curve.
EQUILIBRIUM PRICE
When demand and supply are combines, the equilibrium price will be
determined. At this point demand=supply.
If the price is higher than the equilibrium price then there would be
unsold stocks- excess supply.
If the price is lower than the equilibrium price then the stocks will
run out – leaving excess demand.
Therefore, it is important to understand the importance of
equilibrium pricing.
FEATURES OF
THE MARKET
Features of the Market
Successful marketing requires firm’s to understand which market they are operating in and
various other features of the market.
1. Market Location: (Local, Regional, International)
2. Market Size: This can be measured in terms of volume of sale (units sold) or
value of goods sold (revenue). Market size is the total level of sales of all producers
within a market.
The size of market is important because:
Marketing manager can assess whether it is worth entering into the market or no.
Firms can calculate their own market share.
Growth or decline of the market can be identified.
3. Market Growth – Assessing the economic growth of the country, changes in consumers
incomes and development of new markets, technological changes can speak about the
market growth potential.
4. Market share- The percentage of sales in the total market sold by one business. This is
calculated by the following formula:
Firm’s sales in time period x 100
Total market in time period
Benefits of a high market share-
Sales are higher than those of the competitors- leading to
higher profit margin
Retailers will be willing to stock and promote the best and
fast selling brands- making the product in more prominent
position in shops
The market leader position can be used in marketing
communication – advertising, promotions – inducing the
consumer to buy ‘the most popular’ brand
Market growth can be measured in two forms:
By volume – the market share has risen from 24 million to 26
million units – an increase of 8.33%
By value – the revenue has risen from $768 million to $936
million, an increase of 21.88%.
Competitors
Businesses compete in many ways:
1. Non-price competition- customer service, location etc.
2. Direct competition- same product/service sold with slight differentiation
In order to differentiate amongst each other- businesses create added value:
Create an exclusive retail environment- making the customers feel very
important and enhance the buying experience. This will have a psychological
effect that higher the price better is the quality. This approach is generally
used by perfume and cosmetic retailers
Use high quality packaging- luxury chocolate boxes
Promote and brand the brand as a ‘must-have’ product making it a premium
product and encouraging customers to pay a premium price for it.
Create a USP (Unique Selling Point) that differentiates a product from the
competitors, while a product differentiation – making a product distinctive si
that it stands out from competitor’s product in consumer’s perception
Mass Marketing
Mass marketing: Mass marketing is a market strategy in which a firm
decides to ignore market segment differences and appeal the whole
market with one offer or one strategy, which supports the idea of
broadcasting a message that will reach the largest number of people
possible.
It runs under the concept of ‘ one product for the whole market’
1. Telecom operators generally use mass marketing because
telecommunications is a service used by many.
2. It commonly uses Mass media but the message used is also not
differentiated (unlike in differentiated marketing where mass media
is used with a targeted message)
3. The objective is of a scattergun approach – hit as many people as you
can to get some returns (differentiated marketing is a sniper type
approach – hit the target only).
Niche Marketing
Niche marketing: Niche Marketing is identifying and
exploiting a small segment of a larger market by developing
products to suit it. Niche market can be a small section of
the whole market and may be one that not yet been
identified and filled by competitors.
Advantages of Niche Marketing:
1. Small firms are often able to survive by exploiting niche
markets.
2. Unexploited niche markets may allow higher prices to be
charged to the business that enters them first.
3. Niche products can also be used by large firms to create
status and image- their mass-market products may lack
these qualities.
Market segmentation
Market segmentation- identifying different segments within a market
and targeting different products or services to them.
Market segment- a sub-group o a whole market in which consumer
have similar characteristics (similar consumer profile)
Consumer Profile- a quantified picture of consumers of a firm’s
products showing age groups, income levels, gender and social class.
Geographic segmentation
Geographic segmentation is a process of grouping
customers based on where they live. Companies segment
their target market geographically when needed to focus
on a specific area.
A business may want to operate in one or more
geographical locations but it must pay attention to the
geographical differences needs and wants.
E.g. McDonald's serve corn soup in Japan, pasta salads in
Rome, Wine in Paris etc.
Demographic segmentation
Demographic segmentation is a process of dividing the market into segments
based on variables such as age, gender, income, occupation.
Most popular and common form of segmentation- income and gender
Income group classification in the UK are as follows:
A- upper middle class – high managerial, administrative and professional
B – middle class – managerial staff including professions such as teachers
C1- lower middle class – supervisory, clerical or junior managerial
C2- skilled manual workers
D- working class- semi and unskilled manual workers
E- causal, part-time workers and unemployed.
Some demographic grouping of consumers
• DINKY- Double Income No Kids Yet
• NILK- No Income Lots Of Kids
Psychographic segmentation
Psychographic segmentation is one which uses peoples
lifestyle, their activities, interests as well as opinions to
define a market segment. It relates to lifestyle, values,
attitudes.
Attitudes- certain consumers have interests towards
societal marketing- organic food demand has increased
Lifestyle- With higher number of working women-
supermarkets offering cut vegetables or Ready to Eat food
packs are in demand
Personality characteristics- holiday trek packages are
aimed at more to outgoing adventurous people
Advantages and limitation of market segmentation
Advantages Disadvantages
Helps to define their target market Segmentation increases costs-
aimed at different groups leading research and development cost
to focused sales. Promotion and distribution
Helps to identify gaps in the expenditures increase when
market- groups of consumers that separate programme are used for
are not currently bring targeted. different market segments.
Avoids wastage of money on trying When characteristics of a market
to sell products to the whole segment change, investment made
market. already might become useless.
It can help to have focused,
appropriate better communication
with the target market
