Business (9625) | Marketing

👋 Welcome to the Marketing Study Zone!

Hello future business leader! This chapter is all about Marketing—the heartbeat of any successful business. Marketing isn't just about selling things; it's about understanding what customers want and delivering it better than the competition.

In this section, we connect Marketing (Section 3.1.2) back to the core concept of Business and Markets (Section 3.1) by focusing on how marketing strategies directly influence a business’s competitiveness and profitability in the real world.

Get ready to dive into objectives, research, the famous 7Ps, and how businesses find their perfect customer!

3.1.2.1 Marketing Objectives and Plans

Why Marketing is Essential

Marketing is critical because it ensures the business is focused on the customer, which is the key to long-term success.

• Competitiveness: Good marketing decisions (like setting the right price or having a superior product) directly improve a firm's ability to compete and gain an edge over rivals.
• Interrelationship with other functions: Marketing decisions cannot be made in isolation.
  • Example: If Marketing promises a new product launch date (tactic), Operations must ensure they can manufacture it (resources), and Finance must provide the budget.
• Global Business Impact: Globalisation opens up massive opportunities but also challenges. Marketing teams need to adapt their strategies for different cultures and legal environments (e.g., promotional campaigns that work in one country might fail spectacularly in another).

Setting Clear Marketing Objectives

Marketing objectives are specific, measurable goals the business wants to achieve through its marketing activities. They should always be SMART (Specific, Measurable, Achievable, Relevant, Time-bound).

Key Marketing Objectives include:

• Sales Volume and Sales Value:
  • Volume: The physical number of units sold (e.g., 10,000 laptops).
  • Value: The total money earned from those sales (e.g., $5,000,000 in revenue).
• Market Share: The percentage of the total market sales held by the business.
  Formula interpretation: High market share often means higher recognition, more bargaining power, and scale benefits.
• Customer Retention and Repeat Sales: Keeping existing customers happy so they buy again. It is often much cheaper to keep an old customer than to find a new one!
• Sales per Product/Employee/Region/Store/Customer: These are key performance indicators (KPIs) used to measure efficiency and effectiveness in specific areas.
  • Example: Comparing Sales per Employee helps management see which team members or stores are performing best.

The Marketing Plan

The Marketing Plan is the detailed document that sets out how the business will achieve its marketing objectives.

The plan typically includes:

1. Marketing Objectives: What do we want to achieve? (e.g., Increase market share by 5%).
2. Strategy: The long-term, overall approach to achieving the objectives. (e.g., We will target the premium segment).
3. Tactics: The specific, short-term actions used to implement the strategy. (e.g., Launching a social media campaign and offering 20% discount this month).
4. Budget: The money allocated to carry out the tactics.

Influences on Marketing Planning

The plan must be flexible and react to external and internal forces:

• Internal Influences (Resources): The available funds, skilled staff, and production capacity. If the budget is small, aggressive advertising is not a viable tactic.
• Technological Developments:
  • Digital Marketing & Social Media: Allows for highly targeted and cheaper promotion.
  • E-commerce & M-commerce: Selling products directly online (e-commerce) or via mobile devices (m-commerce) changes the 'Place' element of the mix.
  • Dynamic Pricing: Adjusting prices constantly based on real-time supply and demand (like how airline ticket prices change minute-by-minute).
  • Relationship Marketing: Using technology (like customer databases) to build long-term, individual relationships with customers, focusing on retention.
• Ethical Influences: Decisions about truth in advertising, responsible sourcing, or marketing products to children can dramatically affect reputation and planning.
• Competition & Market Conditions: If a major rival launches a huge price cut, the firm may have to adapt its pricing tactics instantly.

3.1.2.2 Marketing Data (Marketing Research)

The Value of Marketing Research

Marketing research is vital for reducing risk when making decisions. It helps a business understand its market size, growth potential, and competitors.

Primary (Field) vs. Secondary (Desk) Research

• Primary Research: Data collected first-hand for a specific purpose (e.g., surveys, focus groups). It is highly relevant but expensive and time-consuming.
• Secondary Research: Data that already exists (e.g., government statistics, industry reports). It is cheap and quick to access but may be outdated or not perfectly tailored to the business's needs.

Qualitative vs. Quantitative Data

• Quantitative Data: Numerical data, focusing on "how many" or "how much" (e.g., 80% of customers preferred product A). Easy to analyze statistically.
• Qualitative Data: Non-numerical data, focusing on opinions, feelings, and reasons ("why") (e.g., feedback on why a customer found the packaging frustrating). Provides depth and insight.

Tools of Marketing Research

• Market Mapping: A visual tool that plots competing products or brands based on two key features (e.g., high price vs. low price, luxury vs. necessity). It helps identify gaps in the market.
• Sales Forecasts: Estimating future sales volume or value.
  • Importance: Essential for Operations (planning production levels) and Finance (cash flow forecasts).
  • Difficulties: Forecasting is hard! It relies on assumptions about the economy, competitor actions, and consumer trends, which can be inaccurate.

Sampling (Getting a Reliable Subset)

Since a business can't survey every potential customer, they use a sample. The value of sampling is that it provides reliable data at a much lower cost and time investment than surveying the entire population.

Common Sample Types:

1. Random: Everyone has an equal chance of being selected (like drawing names from a hat). Best for reducing bias, but can be geographically spread out and costly.
2. Stratified: The population is divided into groups (strata) based on characteristics (e.g., age, income). Then, people are randomly selected from each group proportionally. Ensures key groups are represented accurately.
3. Quota: Interviewers are told to find a specific number (quota) of people with certain characteristics (e.g., "Find 10 males under 25 who drink coffee"). Cheaper and faster than stratified, but relies heavily on the interviewer's judgment.

Interpreting Marketing Data

Correlation

Correlation shows the relationship between two variables.

• Positive Correlation: As one variable increases, the other increases (e.g., as advertising spending increases, sales revenue increases).
• Negative Correlation: As one variable increases, the other decreases (e.g., as price increases, quantity demanded decreases).
• Understanding the strength of the relationship is important—a strong correlation means the change in one variable is a very reliable predictor of the change in the other.

Common Mistake to Avoid: Correlation does not equal Causation! Just because two things happen together doesn't mean one caused the other. (Example: Ice cream sales increase in summer, and crime rates increase in summer. Ice cream doesn't *cause* crime, but both are correlated with the external factor of hot weather.)

Confidence Levels and Big Data

• Confidence Levels and Intervals: Research findings are never 100% certain. A 95% confidence level means that if the research was repeated many times, 95% of the results would fall within the stated confidence interval (the margin of error).
• Big Data and Data Mining:
  • Big Data: The huge volumes of complex data generated daily (e.g., from social media, online transactions, sensors).
  • Data Mining: The process of analyzing this Big Data to find hidden patterns and relationships (e.g., seeing that customers who buy product A also usually buy product B).

3.1.2.3 Segmentation, Targeting, and Positioning (STP)

The STP Process

The STP process is fundamental to marketing strategy. It helps businesses focus their limited resources on the customers who are most likely to buy their product.

1. Segmentation: Dividing the entire market into smaller groups of consumers with similar needs or characteristics.
2. Targeting: Deciding which specific segment(s) the business will focus its efforts on.
3. Positioning: Creating a clear, distinctive image of the product in the minds of the target consumer compared to competitors.

Value of STP: Allows for personalized marketing, better resource allocation, and ultimately, higher profitability because the business is meeting specific needs.

Segmentation Methods

Businesses use various criteria to break the market down:

• Demographic: Based on measurable population characteristics (Age, Gender, Family size, Education, Occupation). Example: Targeting teenagers with mobile gaming ads.
• Geographic: Based on location (Country, Region, City size, Climate). Example: Selling heavy-duty winter coats only in cold climates.
• Income (Socio-economic): Based on wealth and social class. Example: Luxury cars targeting high-income earners.
• Behavioural: Based on how customers use or respond to a product (Loyalty, usage rate, benefits sought, purchase occasion). Example: Loyalty cards targeting frequent shoppers.
• Psychographic: Based on lifestyle, personality, values, and attitudes. Often the hardest to measure. Example: Targeting environmentally conscious consumers with sustainable products.

Memory Aid: Remember the key methods as DG-IBP.

Targeting: Niche vs. Mass

• Mass Marketing (Undifferentiated): Targeting the entire market with one single product and marketing mix. Assumes most customers have similar needs. (Example: Coca-Cola, basic household cleaning products).
• Niche Marketing (Differentiated): Targeting a small, specific segment of the market with unique needs. (Example: A shop selling only vintage vinyl records).
  • Benefit of Niche: Less competition, potential for premium pricing, high customer loyalty.
  • Difficulty of Niche: Limited market size, vulnerable if a major competitor enters.

Positioning

Positioning is about answering the question: "What makes us different, and why should the target market choose us?" This is often achieved through the Marketing Mix (price, quality, distribution method, etc.).

Example: A cheap airline is positioned as "no-frills, low price." A luxury airline is positioned as "exclusive, high service."

International Markets

Targeting international markets offers huge growth potential, but comes with challenges:

• Benefits: Access to larger market size, spreading risk across different economies, potential for high growth in emerging markets.
• Difficulties: Need to adapt the marketing mix (e.g., language, packaging), differences in laws and ethical expectations, exchange rate risk, and high costs of logistics and distribution.

3.1.2.4 The Marketing Mix (7Ps)

The Elements of the Marketing Mix (7Ps)

The Marketing Mix is the set of tactical marketing tools that a business uses to implement its strategy and achieve its marketing objectives. For goods, we use the 4Ps, but for services (which are intangible), we use the 7Ps.

The 7Ps are:

1. Product (or Service)
2. Price
3. Promotion
4. Place (Distribution)
5. People
6. Process
7. Physical Environment

A successful strategy requires an integrated marketing mix—all 7Ps must work together to create a consistent message and experience for the customer.

We must consider these elements in various contexts: for goods/services, B2B (business-to-business) vs. B2C (business-to-consumer), national/international, and e-commerce.

1. Product

The product is the item or service that satisfies the customer's needs.

New Product Development (NPD)

The value of NPD is that it allows the business to maintain a competitive edge, satisfy changing customer needs, and increase sales value as older products decline. However, NPD is costly and risky.

Product Life Cycle (PLC)

The PLC shows the stages a product goes through, typically Introduction, Growth, Maturity, and Decline.

• Extension Strategies: Actions taken during the Maturity stage to prevent or delay the Decline phase (e.g., rebranding, finding new uses for the product, or reducing the price).

Boston Matrix (Growth-Share Matrix)

A portfolio analysis tool that manages a company's product range based on Market Growth Rate and Market Share.

• Stars: High Market Growth, High Market Share. Needs heavy investment to maintain growth. (Future Cash Cows).
• Cash Cows: Low Market Growth, High Market Share. Generates high profits with little investment. Used to fund Stars and Problem Children.
• Problem Children (Question Marks): High Market Growth, Low Market Share. High risk, uncertain future. Management must decide whether to invest heavily (turning them into Stars) or divest.
• Dogs: Low Market Growth, Low Market Share. Generates low profits, potentially negative cash flow. Often discontinued unless there's a strategic reason to keep them.

Branding

A brand is a name, term, sign, symbol, or design intended to identify the goods or services of one seller and differentiate them from competitors.

• Value of Branding: Allows premium pricing, increases customer loyalty, makes product differentiation easier.
• Own Label Brands: Products sold under a retailer's own brand name (e.g., a supermarket's "Value" range). This gives the retailer more control over pricing and profit margins.

2. Pricing

The amount of money paid by the customer for the product. Price is a critical factor influencing customer demand and business revenue.

Pricing Strategies

• Price Skimming: Setting a high initial price when a new, innovative product is launched. Targets consumers willing to pay a premium (e.g., the newest iPhone model). Price is lowered over time.
• Price Penetration: Setting a low initial price to quickly gain market share and encourage trial purchases. Best for mass markets where competition is high. Price may be raised later.
• Price Discrimination: Charging different prices to different groups of customers for the same product, where the price difference is not based on cost (e.g., cheaper movie tickets for students/seniors).

Price Elasticity of Demand (PED)

PED measures the responsiveness of quantity demanded to a change in price.

The formula is: \[ \text{PED} = \frac{\text{\% Change in Quantity Demanded}}{\text{\% Change in Price}} \]

• Elastic Demand (|PED| > 1): A percentage change in price leads to a larger percentage change in quantity demanded. Demand is highly responsive to price changes.
  • Impact on Revenue: If demand is elastic, raising the price will decrease total revenue. Lowering the price will increase total revenue.
• Inelastic Demand (|PED| < 1): A percentage change in price leads to a smaller percentage change in quantity demanded. Demand is not very responsive to price changes.
  • Impact on Revenue: If demand is inelastic, raising the price will increase total revenue. Lowering the price will decrease total revenue.

Value of PED: It allows businesses to assess the impact of pricing decisions on revenue. If you know your product is inelastic (like petrol or essential medicine), you know you can safely raise the price to increase revenue.

3. Promotion

Communication used to inform and persuade customers about the product.

The Promotional Mix includes:

• Advertising: Paid communication through media (TV, social media, print).
• Sales Promotions: Short-term incentives to encourage purchases (e.g., BOGO - Buy One Get One Free, discounts, coupons).
• The Sales Force: Personal selling through staff interaction.
• Public Relations (PR): Managing the relationship between the public and the business (e.g., press releases, sponsorships).
• Exhibitions: Displaying products at trade shows to generate B2B sales leads.

4. Distribution (Place)

How the product gets from the producer to the customer.

• Channels of Distribution: The route a product takes. This could be direct (Producer to Consumer, common in e-commerce) or indirect (Producer to Wholesaler to Retailer to Consumer).
• Multi-channel Distribution: Using several different channels simultaneously (e.g., selling via your own website, through major retailers, and having your own physical stores).
• Influences: The nature of the product (perishables need fast channels), geographic spread of customers, and desired level of control.

The Other 3Ps (Important for Services)

Since services are consumed at the point of production and often rely on interaction, these 3Ps are vital:

• 5. People: The employees who deliver the service (e.g., bank tellers, restaurant staff). Their attitude, skills, and appearance heavily influence the customer experience.
• 6. Process: The systems and procedures used to deliver the service (e.g., how quickly a complaint is handled, the efficiency of an online booking system). A smooth process reduces customer friction.
• 7. Physical Environment (Physical Evidence): The tangible elements customers see and interact with (e.g., the cleanliness of a hotel lobby, the design of a hospital, the look of a website). This helps reassure customers about the quality of the intangible service.