Markets and Marketing
Marketing involves a range of activities that help a business sell its products. Marketing is not just about selling, it involves other aspects such as;
- Identifying the needs and wants of a customer
- Designing products that meet these needs
- Understanding the threats from competitors
- Telling customers about your products
- Charging the right price
- Persuading customers to buy products
- Making products available in convenient locations
The characteristics of mass markets and niche mark
Some businesses sell their products to mass markets.
This is when a business sells the same products to all consumers and markets them in the same way. They are often fast-moving consumer goods such as Coca-Cola and crisps.
Advertising Age reported that the Coca-Cola company spent around $3.3billion on global advertising in 2013.
A niche market is a small market segment that caters to the needs of a small consumer group, often with specific needs (for example; those who are lactose intolerant and require Soya Milk).
Advantages & Disadvantages of the Mass Markets
- The number of consumers in the mass market is huge- and quite possibly billions if the products are globally sold.
- Therefore, businesses can produce large quantities at a lower cost p/unit which can result in higher sales and a higher profit.
- However, there is often a lot of competition in the mass market and therefore businesses may spend more on advertising their specific product. Advertising Age reported that Coca-Cola Company spent $3.3billion on global advertising in 2013 in an attempt to beat the other companies providing cheaper alternatives to Coca-Cola.
Advantages & Disadvantages of the Niche Markets
- They provide the segment of the market that has been untouched by other companies. Small firms can often survive by providing niche market products and they may also avoid competition.
- It is a lot easier to focus on the needs of the customer in a niche market, and as there may be no competition it may be possible for the company to charge premium prices.
- However, if a business successfully exploits a niche market then it may still attract competition.
- Niche markets are, by their nature, very small and unable to support many competing firms.
- As a result of this, if leading brands take over their niche market ideas, they may be knocked out of the market and the bigger brands can overrun a smaller rival.
- Businesses that rely on a niche market products may be at higher risk as if they are overrun then they are not able to have a back up plan or product to support their company.
Value: This is the total amount spent by customers buying products.
It was estimated that the value of fast food markets in 2014 was just over £24.9 billion.
Volume: The physical quantity of products which are produced and sold.
The global crude steel production in 2014 was 1661 million tonnes.
Market Share (also called Market Penetration) is the term used to describe the proportiong of a particular market that is held by a business, a product, a brand or a number of businesses or products.
Market Share is always shown as a percentage. It can be calculated as:
Sales of a business / Total sales in market x100
Many businesses try to establish themselves in markets by giving their products a brand name. The products are given brand names to distinguish them from other products in the market. Branding is particularly improtant in mass markets where lots of products are competing for a share of the market.
Branding can be used for:
- Differentiate the product from those of rivals
- Create customer loyalty
- Help product recognition
- Develop an image
- Charge a premium price when the brand becomes strong.
Most markets do not remain the same over time- they tend to be dynamic, which means they are likely to change. They could potentially grow, shrink, fragment, emerge or completely dissapear.
EG: the demand in the market for cassette tapes in the UK is no longer existent as most people now buy DVDs or download music from the internet.
Businesses may be required to adapt to change in the market in order to prevent their business from disintegrating and becoming non existent in the market.
One of the biggest changes to occur in the marketing of products has been the development of online retailing or e-tailing. This is a popular branch of e-commerce.
It has developed along with the development of the internet. It involves shoppers ordering their goods online and taking delivery at home. Specialist e-tailers such as Amazon are classed as "retail giants" that sell a huge range of goods online.
5 Advantages of Online Retailing
- Retailers can market their goods to people who prefer to shop from home or who find it difficult to get to traditional shops. Eg ; People with conditions or disabilities that make physical shopping difficult.
- It is easier for companies to gather personal information from customers so that they can be targeted with other products and offers in the future.
- Selling costs such as sales staff, rent and other stroe overheads can be avoided. The saving mgiht be enormous and allow online retailers to charge lower prices.
- An online retailer is open 24/7. There are not mant stores that can match this level of service.
- Distance is no object with online retailing. Customers can buy products from anywhere in the world.
How do markets change?
The size of markets: The size of some markets can remain quite stable for long periods of time, for example- in the UK, the milk market probably hasnt changed immensely as it is holds a farily constant demand.
However, the majority of markets are likely to grow. EG: The Future of Global Packaging to 2018 reports that the global packaging market stood at $799 billion in 2012, increasing by 1% over 2011 with sales predicted to increase to increase by 3%.
In contrast, some markets are in decline. In the UK, the market for coal has fallen sharply since 1970. Markets often decrease due to substitutes and the need for the product ceases to exist. Other fuels that are able to replace the need for coal are oil, gas, nuclear and renewable sources such as; Solar Panels.
How do markets change?
The Nature of Markets:The structure and nature of the market is subject to constant change. In many markets, products are constantly updated, modified and relaunched - the choice available has increased enormously over time. This is the result of new companies and entrants to the market and with existing firms widening their ranges and extending lines.
The restaraunt market in the UK was worth around £40 billion in 2014 and has seen many changes. In the 1960s, the industry was dominated by fish and chip shops, Chinese restaraunts, cafes and hotel restaraunts. Today the sector is large and diverse, including top-end fine-dining establishments to the quick takeaway service outlets. UK highstreets tend to be dominated by chains such as Nandos, Costa Coffee and Dominoes Pizza and other ethnic restaraunts which include; Thai, Indian and Chinese.
How do markets change?
New Markets: while it is possible for some markets to completely dissapear, new markets are always developing.
New markets appear when completely new products are introduced.
In the 1970s, nobody had a mobile phone.
In the 1980s nobody had a smartphone.
In the 1990s, nobody had a flat-screen television.
In the 2000s few people had e-books.
These are all examples of brand-new markets.
Innovation and Market Growth
Economic Growth- Global living standards tend to rise over time, and therefore the worlds population has more money to spend. As people get wealthier, they tend to demand different types of goods. EG: Holidays, Cars, Electronic Goods, Air Travel etc.
Innovation- Businesses can grow their markets through the process of innovation. A lot of innovation tends to emerge through technological development and research that create brand-new markets. Businesses can use innovation to supply their products in new locations - EG: supermarkets offering click & collect in London Tube Stations.
Social Change- Changes in society can have a big impact on the markets. For example; the decline in number of marriages, increase in the proportion of working women and the growht in the number of one-parent families have increased the market size for childcare and housing.
Changes in legislation- New laws can affect markets. EG: a ban for advertising tobacco may have reduced the market size for cigarettes.
Demographic Changes- In most countries, the population is aging. There may be an increase in the markets for specialist holidays for the elderly, healthcare, carehomes and mobility aids.
Adapting to change
If businesses do not adapt to market changes, then they are likely to lose market share. At worst, they could collapse.
What might help a business to adapt to market changes?
Flexibility-Businesses need to be prepared for change. One way is to develop a culture of flexibility within an organisation. Staff may need to be trained in a certain way with a variety of skills in order to be prepared to change ot suit the market. EG: if consumers want the business to be open on a night, then they may need to organise work shifts.
Market Research- Businesses must keep in touch with the developments in the market by undertaking regular market research. This could be aimed at current or potential customers and so firms need to be aware of any changes in customer preferences.
Investment- The businesses that invest in new product development are likely to survive for longer in the market. Although this research and development can be expensive, a unique new version of a product or model could rejuvenate sales and help win a larger share of the market.
How does competition affect the market?
Competition is the rivalry that exists between businesses under some pressure. It would be rare for a business to operate in the market with absolutely no competition. The existence of competition will have an impact on both the business and the consumers in the market.
Businesses: Competition puts businesses under some pressure. It means they have to encourage consumers to buy their product as opposed to the other substitutes in the market. The methods to do this could include:
- Lowering prices
- Making their products appear differently to those of the rivals [more appealing]
- Offer better quality products
- Use more powerful or attractive advertising or promotions
- Offering 'extras' such as high-quality customer service
All of these methods cost money but they are a neccessity in order to survive in the market. It is often larger companies that can use competition in this way to overrun other buisnesses.
How does competition affect the market?
Consumers: Consumers will benefit from competition in the markets. In the markets where there are lots of buisnesses competing with eachother tends to be where there will be more choice. Consumers enjoy having more choice as it enable them to choose price over quality or vice versa and provides them with a more interesting experience.