10 – Marketing, Competition and the

Customer
A market consists of all buyers and sellers of a particular good.

What is marketing?

By definition, marketing is the management process responsible for identifying, anticipating

and satisfying consumers’ requirements profitably.

The role of marketing in a business is as follows:

● Identifying customer needs through market research

● Satisfying customer needs by producing and selling goods and services
● Maintaining customer loyalty: building customer relationships through a variety of
methods that encourage customers to keep buying one firm’s products instead of
their rivals’. For example, loyalty card schemes, discounts for continuous purchases,
after-sales services, messages that inform past customers of new products and
offers etc.
● Gain information on customers: by understanding why customers buy their
products, a firm can develop and sell better products in the future
● Anticipate changes in customer needs: the business will need to keep looking for
any changes in customer spending patterns and see if they can produce goods that
customers want that are not currently available in the market.

Some objectives the marketing department in a firm may have:

● Raise awareness of their product(s)

● Increase sales revenue and profits
● Increase or maintain market share (this is the proportion of sales a company has in
the overall market sales. For example, if in a market, $1 million worth of toys were
sold in a year and company A’s total sales was $30,000 in that year, company A’s
market share for the year is ($300,000/ $1000000) *100 = 30%)
● Enter new markets at home or abroad
● Develop new products or improve existing products.

Market Changes

Why customer spending patterns may change:

● change in their tastes and preferences

● change in technology: as new technology becomes available, the old versions of
products become outdated and people want more sophisticated features on products
● change in income: the higher the income, the more expensive goods consumers will
buy and vice versa
● ageing population: in many countries, the proportion of older people is increasing
and so demand for products for seniors are increasing (such as anti-ageing creams,
medical assistance etc.)

The power and importance of changing customer needs:

Firms need to always know what their consumers want (and they will need to undertake lots
of research and development to do so) in order to stay ahead of competitors and stay
profitable. If they don’t produce and sell what customers want, they will buy competitors’
products and the firm will fail to survive.

Why some markets have become more competitive:

● Globalization: products are being sold in markets all over the world, so there are
more competitors in the market
● Improvement in transportation infrastructures: better transport systems means
that it is easier and cheaper to distribute and sell products everywhere
● Internet/E-Commerce: customers can now buy products over the internet form
anywhere in the world, making the market more competitive

How business can respond to changing spending patterns and increased

competition:

A business has to ensure that it maintains its market share and remains competitive in the
market. It can ensure this by:

● maintaining good customer relationships: by ensuring that customers keep

buying from their business only, they can keep up their market share. By doing so,
they can also get information about their spending patterns and respond to their
wants and needs to increase market share
● keep improving its existing products, so that sales is maintained.
● introduce new products to keep customers coming back, and drive them away from
competitors’ products
● keep costs low to maintain profitability: low costs means the firm can afford to
charge low prices. And low prices generally means more demand and sales, and
thus market share.

Niche & Mass Marketing

Niche Marketing: identifying and exploiting a small segment of a larger market by

developing products to suit it. For example, Versace designs and Clique perfumes have
niche markets- the rich, high-status consumer group.

Advantages:

● Small firms can thrive in niche markets where large forms have not yet been
established
● If there are no or very few competitors, firms can sell products at a high price and
gain high profit margins because customers will be willing be willing to pay more for
exclusive products
● Firms can focus on the needs of just one customer group, thereby giving them an
advantage over large firms who only sell to the mass market

Limitations:

● Lack of economies of scale (can’t benefit from the lower costs that arise from a
larger operations/market)
● Risk of over-dependence on a single product or market: if the demand for the
product falls, the firm won’t have a mass product they can fall back on
● Likely to attract competition if successful
 Mass Marketing: selling the same product to the whole market with no attempt to target
groups with in it. For example, the iPhone sold is the same everywhere, there are no
variations in design over location or income.

Advantages:

● Larger amount of sales when compared to a niche market

● Can benefit from economies of scale: a large volume of products are produced and
so the average costs will be low when compared to a niche market
● Risks are spread, unlike in a niche market. If the product isn’t successful in one
market, it’s fine as there are several other markets
● More chances for the business to grow since there is a large market. In niche
markets, this is difficult as the product is only targeted towards a particular group.

Limitations:

● They will have to face more competition

● Can’t charge a higher price than competition because they’re all selling similar
products

Market Segmentation

A market segment is an identifiable sub-group of a larger market in which consumers have

similar characteristics and preferences

Market segmentation is the process of dividing a market of potential customers into groups,
or segments, based on different characteristics. For example, PepsiCo identified the health-
conscious market segment and targeted/marketed the Diet Coke towards them.

Markets can be segmented on the basis of socio-economic groups (income), age,

location, gender, lifestyle, use of the product (home/ work/ leisure/ business) etc.
Each segment will require different methods of promotion and distribution. For example,
products aimed towards kids would be distributed through popular retail stores and products
for businessmen would be advertised in exclusive business magazines.

Advantages:

● Makes marketing cost-effective, as it only targets a specific segment and meets their
needs.
● The above leads to higher sales and profitability
● Increased opportunities to increase sales

11 – Market Research
Product-oriented business: such firms produce the product first and then tries to find a
market for it. Their concentration is on the product – its quality and price. Firms producing
electrical and digital goods such as refrigerators and computers are examples of product-
oriented businesses.

Market-oriented businesses: such firms will conduct market research to see what
consumers want and then produce goods and services to satisfy them. They will set a
marketing budget and undertake the different methods of researching consumer tastes and
spending patterns, as well as market conditions. Example, mobile phone markets.

Market research is the process of collecting, analysing and interpreting information about a
product.

Why is market research important/needed?

Firms need to conduct market research in order to ensure that they are producing goods
and services that will sell successfully in the market and generate profits. If they don’t, they
could lose a lot of money and fail to survive. Market research will answer a lot of the
business’s questions prior to product development such as ‘will customers be willing to buy
this product?’, ‘what is the biggest factor that influences customers’ buying preferences-
price or quality?’, ‘what is the competition in the market like?’ and so on.

Market research data can be quantitative (numerical-what percentage of teenagers in the

city have internet access) or qualitative (opinion/ judgement- why do more women buy the
company’s product than men?)

Market research methods can be categorized into two: primary and secondary market
research.

Primary Market Research (Field Research)

The collection of original data. It involves directly collecting information from existing or
potential customers. First-hand data is collected by people who want to use the data (i.e. the
firm). Examples of primary market research methods include questionnaires, focus groups,
interviews, observation, and online surveys and so on.

The process of primary research:

1. Establish the purpose of the market research

2. Decide on the most suitable market research method
3. Decide the size of the sample (customers to conduct research on) and identify the
sample
4. Carry out the research
5. Collate and analyse the data
6. Produce a report of the findings

Sample is a subset of a population that is used to represent the entire group as a whole.
When doing research, it is often impractical to survey every member of a particular
population because the number of people is simply too large. Selecting a sample is called
sampling. A random sampling occurs when people are selected at random for research,
while quota sampling is when people are selected on the basis of certain characteristics
(age, gender, location etc.) for research.

Methods of primary research

● Questionnaires: Can be done face-to-face, through telephone, post or the internet.

Online surveys can also be conducted whereby researchers will email the sample
members to go onto a particular website and fill out a questionnaire posted there.
These questions need to be unbiased, clear and easy to answer to ensure that
reliable and accurate answers are logged in. (The first part of this wikiHow article will
give you the basic idea of how a questionnaire should be prepared.)

Advantages:
 ○ Detailed information can be collected
○ Customer’s opinions about the product can be obtained
○ Online surveys will be cheaper and easier to collate and analyse
○ Can be linked to prize draws and prize draw websites to encourage
customers to fill out surveys

Disadvantages:

○ If questions are not clear or are misleading, then unreliable answers will be
given
○ Time-consuming and expensive to carry out research, collate and analyse
them.
● Interviews: interviewer will have ready-made questions for the interviewee.

Advantages:

○ Interviewer is able to explain questions that the interviewee doesn’t

understand and can also ask follow-up questions
○ Can gather detailed responses and interpret body-language, allowing
interviewer to come to accurate conclusions about the customer’s opinions.

Disadvantages:

○ The interviewer could lead and influence the interviewee to answer a certain
way. For example, by rephrasing a question such as ‘Would you buy this
product’ to ‘But, you would definitely buy this product, right?’ to which the
customer in order to appear polite would say yes when in actuality they
wouldn’t buy the product.
○ Time-consuming and expensive to interview everyone in the sample
● Focus Groups: A group of people representative of the target market (a focus
group) agree to provide information about a particular product or general spending
patterns over time. They can also test the company’s products and give opinions on
them.

Advantage:

○ They can provide detailed information about the consumer’s opinions

Disadvantages:

○ Time-consuming
○ Expensive
○ Opinions could be influenced by others in the group.
● Observation: This can take the form of recording (eg: meters fitted to TV screens to
see what channels are being watched), watching (eg: counting how many people
enter a shop), auditing (e.g.: counting of stock in shops to see which products sold
well).

Advantage:

○ Inexpensive

Disadvantage:

○ Only gives basic figures. Does not tell the firm why consumer buys them.
Secondary Market Research (Desk Research)

The collection of information that has already been made available by others. Second-hand
data about consumers and markets is collected from already published sources.

Internal sources of information:

● Sales department’s sales records, pricing data, customer records, sales reports
● Opinions of distributors and public relations officers
● Finance department
● Customer Services department

External sources of information:

● Government statistics: will have information about populations and age structures
in the economy.
● Newspapers: articles about economic conditions and forecast spending patterns.
● Trade associations: if there is a trade association for a particular industry, it will
have several reports on that industry’s markets.
● Market research agencies: these agencies carry out market research on behalf of
the company and provide detailed reports.
● Internet: will have a wide range of articles about companies, government statistics,
newspapers and blogs.

Accuracy of Market Research Data

The reliability and accuracy of market research depends upon a large number of factors:

● How carefully the sample was drawn up, its size, the types of people selected etc.
● How questions were phrased in questionnaires and surveys
● Who carried out the research: secondary research is likely to be less reliable since it
was drawn up by others for different purpose at an earlier time.
● Bias: newspaper articles are often biased and may leave out crucial information
deliberately.
● Age of information: researched data shouldn’t be too outdated. Customer tastes,
fashions, economic conditions, technology all move fast and the old data will be of no
use now.

Presentation of Data from Market Research

Different data handling methods can be used to present data from market research. This will
include:

● Tally Tables: used to record data in its original form. The tally table below shows the
number and type of vehicles passing by a shop at different times of the day:
● Charts: show the total figures for each piece of data (bar/ column charts) or the
proportion of each piece of data in terms of the total number (pie charts). For
example the above tally table data can be recorded in a bar chart as shown below:

The pie chart above could show a company’s market share in different countries.
● Graphs: used to show the relationship between two sets of data. For example how
average temperature varied across the year.
12 – Marketing Mix
Marketing mix refers to the different elements involved in the marketing of a good or
service- the 4 P’s- Product, Price, Promotion and Place.

Product
Product is the good or service being produced and sold in the market. This includes all
the features of the product as well as its final packaging.

Types of products include: consumer goods, consumer services, producer goods, producer
services.

What makes a successful product?

● It satisfies existing needs and wants of the customers

● It is able to stimulate new wants from the consumers
● Its design – performance, reliability, quality etc. should all be consistent with the
product’s brand image
● It is distinctive from its competitors and stands out
● It is not too expensive to produce, and the price will be able to cover the costs

New Product Development: development of a new product by a business. The process:

1. Generate ideas: the firm brainstorms new product concepts, using customer
suggestions, competitors’ products, employees’ ideas, sales department data and the
information provided by the research and development department
2. Select the best ideas for further research: the firm decides which ideas to
abandon and which to research further. If the product is too costly or may not sell
well, it will be abandoned
3. Decide if the firm will be able to sell enough units for the product to be a
success: this research includes looking into forecast sales, size of market share,
cost-benefit analysis etc. for each product idea, undertaken by the marketing
department
 4. Develop a prototype: by making a prototype of the new product, the operations
department can see how the product can be manufactured, any problems arising
from it and how to fix them. Computer simulations are usually used to produce 3D
prototypes on screen
5. Test launch: the developed product is sold to one section of the market to see how
well it sells, before producing more, and to identify what changes need to be made to
increase sales. Today a lot of digital products like apps and software run beta
versions, which is basically a market test
6. Full launch of the product: the product is launched to the entire market

Advantages:

● Can create a Unique Selling Point (USP) by developing a new innovative product
for the first time in the market. This USP can be used to charge a high price for the
product as well as be used in advertising.
● Charge higher prices for new products (price skimming as explained later)
● Increase potential sales, revenue and profit
● Helps spreads risks because having more products mean that even if one fails, the
other will keep generating a profit for the company

Disadvantages:

● Market research is expensive and time consuming

● Investment can be very expensive

Why is brand image important?

Brand image is an identity given to a product that differentiates it from competitors’ products.
Brand loyalty is the tendency of customers to keep buying the same brand continuously
instead of switching over to competitors’ products.

● Consumers recognize the firm’s product more easily when looking at similar
products- helps differentiate the company’s product from another.
● Their product can be charged higher than less well-known brands – if there is an
established high brand image, then it is easier to charge high prices because
customers will buy it nonetheless.
● Easier to launch new products into the market if the brand image is already
established. Apple is one such company- their brand image is so reputed that new
products that they launch now become an immediate success.

Why is packaging important?

● It protects the product

● It provide information about the product (its ingredients, price, manufacturing and
expiry dates etc.)
● To help consumers recognize the product (the brand name and logo on the
packaging will help identify what product it is)
● It keeps the product fresh

Product Life Cycle (PLC)

The product life cycle refers to the stages a product goes through from it’s introduction to it’s
retirement in terms of sales.
At these different stages, the product will need different marketing decisions/strategies in
terms of the 4Ps.

Extension strategies: marketing techniques used to extend the maturity stage of a product
(to keep the product in the market):

● Finding new markets for the product

● Finding new uses for the product
 ● Redesigning the product or the packaging to improve its appeal to consumers
● Increasing advertising and other promotional activities

The effect on the PLC of a product of a successful extension strategy: