Business Unit 2 Marketing

Definition of Marketing

• an exchange process where firm offers and gains something and customers needs are identified and anticipated

Purpose of Marketing

• to match the abilities and the strengths of the firm to the needs of the market

Consumer Marketing

• markets for products that are bought by individuals for their own or family use

Industrial Marketing

• involve the sale of goods between businesses. these are goods that aren't aimed directly at consumers

Niche Marketing

• where a business targets a smaller segment of a larger market, where customers have specific needs and wants
  • + less competition, clear focus, specialist skill and knowledge, scope to charge more, loyal customers
  • - lack of economies of scale, risk of dependence on one or few products, likely to attract competition if successful, vulnerable to market changes

Mass Marketing

• where a business sells into the largest part of the market,where there are many similar products on offer
  • + needs and wants are more general and less specific, higher production output and capacity (economies of scale)
  • - customers form the majority in the market, success ussually associated with low-cost operation, heavy promotion, widespread distribution or market leading brands

Influences on Marketing Mix

• the marketing mix covers the decisions made about selling prices, how and where the product is sold, andthe products image and nature (product, price, place, promotion)

The Importance of an Integrated Marketing Mix

• an integrated marketing mix means that all the different elements of the mix work together and complement each other. in the well managed mix, the elements fit together and enhance the over all value provided to the customer

Influences of New Goods or Services

• a successful product will be designed to meet customer requirements. a well-designed product can save on costs, can be made easily to a consistant quality and meets the needs of customers very precisely

Unique Selling Points

• something that sets the product or service apart from the competitors. the usp should single the product out from competitors and will appeal to consumers

Product Portfolio Analysis

• most firms have more than one product. the range of products and services a firm has is known as its product portfolio
• the boston matrix analyses the position of a firms products in terms of their market share and growth of the market.
• cash cows are products that have a high market share and operate in a slow growing market
• question marks are products that have a small market share and operate in a fast growing market
• stars have a large share in a fast growing market
• dogs have a low market share in a slow growing market

Product Life Cycle

• traces the sales of a product over it life, a longer life cycle is preferable
• to increase the life cycle a firm may increase the use of the product, reduce price, adapt product to changing market, or change the image of the product

Influence on Price Decisions

• cost of producing
• competitors or level of demand
• firms objectives
• stage in its life cycle

Pricing Strategies for Product Launch

• penetration pricing - use low price to enter market and gain market share
• price skimming - high price to enter market, people are eager to try new product
• competitive pricing - set price at same level as competitors

Pricing Strategies for Existing Products

• price leadership - firm dominates market and competitors follow
• price taking - firms that accept the price that dominates the market
• predator pricing - firm sets out to destroy competition with low prices

Pricing Methods

• cost plus pricing - considers total cost per unit, then adds % for final price
• contribution pricing - the difference between the selling price and the variable cost per unit. it is often used when a firm considers accepting a special offer
• price discrimination - when different prices are charged for the same product. when demands vary

Pricing Tactics

• loss leaders - product sold at a loss to generate sales in other products. it may increase people using business to boost sales of other products
• psychological pricing - intended to make customers think they are buying something at a bargain eg. £9.99 or "was £60, now £49.99"

Price Elasticity of Demand

• = % change in demand of product
• % change in price of product
• if ped is greater than one, the product is price elastic, demand is responsive to a change in price. eg. 15% fall in price leads to a 30% rise in demand, the price elasticity is 2.0
• if pedis less than one, the product is price inelastic, demand isn't very responsive to change in price. eg. 20% increase in price leads to a 5% fall in demand, the price elasticity is 0.25
• if ped is equal to one, the product has unit elasticity, the percentage change in demand is equal to the percentage change in price. demand changes proportionatley to price change
• if the ped is equal to zero, the product is perfectly inelastic. the change in price will have no affect to the change in demand
• if the ped is infinity, the product is perfectly elastic. any change in price will see demand fall to zero

Choosing Appropriate Distributors

• cost - it may be cheaper to sell the product directly to the consumer
• market coverage - to get a wide coverage of the market, it may be necessary to use intermediaries. it may not be possible to sell to each consumer
• control - the more intermediaries a firm uses, the less control is has over the way it is sold; intermediaries may choose to promote, price or display the product as they wish

Types of Distribution Channels

• zero level channel - the product is passed directly to the consumer
• one level channel - one intermediary eg. manufacturer to retailer to consumer
• two level channel - two intermediaries eg. manufacturer to wholesaler to retailer to consumer

Elements of Promotional Mix

• advertising - paying for communications through media
• personal selling - face to face contact with consumer
• direct mail - sending mailshots to consumers
• public relations - contact with media to send a particular message about its firm
• sales promotion - attempts to boost sales offering % discounts or bogof offers

Influences on the Choice of Promotion

• stage in the life cycle
• nature of the product
• marketing budget

Possible Impacts of Market Conditions and Degree of Competition

Determinants of Competitiveness

Methods of Improving Competitiveness