👋 Welcome to the World of Marketing!
Hello! This chapter is incredibly important because it's where the business meets the customer. If production is about making the product, Marketing is about making sure people want it, know about it, and buy it.
Think of your favorite brand. Why did you choose it over a competitor? That's marketing in action! In these notes, we'll learn how businesses find out what customers want and how they keep them coming back. Let’s dive in!
1. The Purpose of Marketing and Understanding Needs
What is Marketing?
Marketing is the process of identifying, anticipating, and satisfying customer needs and wants profitably.
- Identifying: Figuring out what people need right now (e.g., faster phone charging).
- Anticipating: Predicting what they might need in the future (e.g., self-driving cars).
- Satisfying: Providing the right product or service efficiently.
The Customer-Centred Approach
Successful businesses are market-oriented. This means they focus on researching customer needs first, and *then* developing the product.
Contrast this with being product-oriented, where a business develops a product first and then tries to convince people to buy it (which is riskier!).
Key Takeaway: Marketing isn't just selling; it's about making sure your business concept aligns perfectly with what customers genuinely want.
2. Market Research: The Business Detective
Before a business spends money on production, they need answers. This detective work is called Market Research.
What Market Research Aims to Discover
- The size of the potential market (how many customers are there?).
- The target market (who exactly are we selling to?).
- Competitor activities (what prices are they charging? What features do they offer?).
- Customer preferences (what colour, size, or flavour do they prefer?).
Primary Research (Field Research)
This is research collected first-hand for a specific purpose. You gather the data yourself.
Analogy: Going out and interviewing witnesses to solve a new case.
Methods of Primary Research
- Surveys/Questionnaires: Asking customers specific questions (in person, online, or by phone).
- Focus Groups: Bringing a small group of target customers together to discuss the product/idea in depth.
- Observations: Watching how customers behave (e.g., monitoring how shoppers walk around a store).
- Test Marketing: Launching a product in a small, limited area to see how it performs before a full launch.
Advantages and Disadvantages of Primary Research
- + Advantages: Data is up-to-date, relevant, and specific to the company's needs.
- - Disadvantages: It is often expensive and time-consuming to collect.
Secondary Research (Desk Research)
This is research that has already been collected by someone else for a different purpose, but which is useful to your business now.
Sources of Secondary Research
- Internal Data: Existing sales records, customer databases, past reports.
- External Data: Government census data, commercial market research reports (like Nielsen), newspaper articles, and competitor websites.
Advantages and Disadvantages of Secondary Research
- + Advantages: It is generally cheap (or free) and quick to obtain.
- - Disadvantages: It might be outdated, not specific enough, or published by an unreliable source.
Remember the difference by the letter 'P': Primary = Perfect (specific data), but Pricey.
Secondary = Quick (Seconds), but possibly Stale (outdated).
Key Takeaway: Good market research reduces risk. Businesses often use both primary and secondary methods to get a complete picture.
3. Understanding the Customer and Segmentation
No business can satisfy everyone. Imagine a shoe company trying to sell high heels, football boots, and baby shoes all at once! This is why businesses must focus on a specific group: the Target Market.
Market Segmentation
Market Segmentation is the process of dividing the total market into smaller groups (segments) of customers who have similar characteristics, needs, or behaviour.
Example: A car manufacturer doesn't just sell "cars"; they sell sports cars to wealthy singles, SUVs to families, and small economy cars to students. Each is a segment.
Why Segment the Market?
- It allows businesses to focus resources effectively.
- They can design and market products that are perfectly tailored to that group.
- It helps them gain a competitive advantage in that specific segment.
Methods of Segmentation
There are three main ways to divide a market. Let’s use the mnemonic DGP:
1. Demographic Segmentation (The 'Who')
Dividing the market based on measurable characteristics of the population.
- Age (e.g., toys for children vs. anti-aging creams for seniors).
- Gender (e.g., clothing, perfumes).
- Income/Social Class (e.g., budget supermarkets vs. luxury retailers).
- Family size (e.g., large-capacity washing machines for big families).
2. Geographic Segmentation (The 'Where')
Dividing the market based on location. Needs often change based on where people live.
- Country or region (e.g., different menu items for McDonald’s in India vs. the USA).
- Climate (e.g., selling heavy coats in colder regions, swimwear in tropical regions).
- Urban vs. Rural density.
3. Psychographic Segmentation (The 'Why')
Dividing the market based on lifestyle, values, attitudes, and personality traits.
- Lifestyle (e.g., products for fitness fanatics vs. homebodies).
- Interests (e.g., products marketed to gamers, hikers, or musicians).
- Values (e.g., organic, cruelty-free, or ethical products for environmentally conscious consumers).
Key Takeaway: Segmentation allows for highly efficient marketing. Instead of shouting your message into the void, you whisper it directly into the ear of your ideal customer.
4. Competition and Customer Loyalty
Competition is vital in any market. It affects the choices customers have and forces businesses to work harder.
The Impact of Competition on the Business
When competition is high, businesses face pressure, which affects their marketing strategy:
- Pricing Pressure: Businesses might have to lower prices or offer discounts, reducing profit margins.
- Need for Innovation: Businesses must constantly improve product quality or introduce new features (e.g., phone companies constantly releasing new models).
- Increased Marketing Spend: They must spend more on advertising to ensure their product stands out (differentiation).
- Focus on Customer Service: Excellent service becomes a key way to differentiate from rivals.
Competition is great for the consumer! It leads to lower prices, higher quality products, and much more choice and variety.
The Importance of Customer Retention
It is widely accepted that it costs far less to keep an existing customer than it does to find a new one (acquisition cost). This makes customer retention (keeping existing customers loyal) a key marketing goal.
Methods of Retaining Customers
Loyal customers provide stable revenue and often recommend the business to others (word-of-mouth marketing).
- Effective Customer Service: Training staff to be helpful, knowledgeable, and polite. Quickly and efficiently handling complaints.
- Loyalty Rewards Schemes: Offering points, discounts, or exclusive access to customers who purchase repeatedly (e.g., airline miles, coffee shop loyalty cards).
- Personalised Communication: Sending customers offers or information based on their past buying habits.
- Continuous Improvement: Regularly seeking feedback (via surveys, focus groups) and acting on it to improve products and services.
Measuring Customer Satisfaction and Retention
How does a business know if customers are happy?
- Sales figures: Are customers making repeat purchases?
- Number of Complaints: A low number is usually good, but a business needs to track how quickly complaints are resolved.
- Mystery Shoppers: People hired to pretend to be customers and evaluate the service quality objectively.
- Focus Groups/Surveys: Direct feedback asking customers how satisfied they are.
Key Takeaway: In a competitive market, a great product is only half the battle. Exceptional customer service and strong loyalty programmes are essential for long-term survival and growth.