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Chapter 10: Marketing, competition and the customer

The marketing department
The marketing department is concerned with doing research for new products, promotion
distribution, pricing and sales.

It may have many sections in it like:

1. Sales department: is responsible for the sales of the product.

2. The market research department: is responsible for finding out customers’ needs,
market changes and the impact of competitors’ actions. This information will be used to
make decisions about development of new products, pricing levels, sales strategies and
promotion strategies.
3. The promotion department: organizes the advertising for products and decides on the
types of promotions that will be included in campaigns. It will be constrained with a
marketing budget that cannot be exceeded and thus has to choose the most effective
types of advertising media.
4. The distribution department: transports the products to the market.

The role of marketing (what is marketing department doing?)

The central role of marketing is to:

1. Identify customer needs

2. Satisfy customer needs
3. Maintain customer loyalty
4. Gain information about customers
5. Anticipate changes in customer needs

The objectives of the marketing department (why does the marketing

department do so?)
1. raise customer awareness of a product or service of the business
2. increase sales revenue and profitability
3. increase or maintain market share
market share: is the percentage of total market sales held by one brand or
business
market share = (sales of brand or business / total market sales) x 100
4. maintain or improve the image of products or a business

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5. target a new market or market segment

6. enter new markets at home or abroad
7. develop new products or improve existing products

Understanding market changes

Sales of some goods change at a rapid (ex, technology) pace and sales of others stay (ex,
cereals) the same

Why customer spending patterns change

1. changes in consumer tastes and fashion

2. changes in technology
3. change in incomes
4. ageing populations

The power and importance of changing customer needs

If the businesses fail to respond to customer needs then they are likely to fail

Why have some markets become more competitive?

1. Globalization of markets
2. Transportation improvements
3. Internet/e-commerce

How can businesses respond to changing spending patterns and increased competition?

A business will have to take action to maintain its market share and convince the customers
that the problem has been corrected:

 Whenever there is growth amongst competitors.

 If the image of business has been harmed by bad publicity in media

In order to remain successful a business may need to:

1. Maintain good customer relationships

2. Keep improving its existing
3. Bring out new products to keep customers’ interested
4. Keep costs low to maintain competitiveness

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What is meant by a market?

A market is made up of the total number of customers and potential customers as well as
sellers for that particular good or service.

It is measured by total number of sales or by value of sales for that good or service by all
suppliers to that particular good or service.

Mass market: is where there are a very large number of sales of a product. Products are
designed and advertised to appeal to the whole market.

Advantages of selling to a mass market Disadvantages of selling to a mass market

The sales to these markets are very large High level of competition between firms

The firm can benefit from economies of scale High costs of advertising

Risks can be spread due to selling variations of
products to the masses and if one variety of the
product fails the the other products may still sell well
Opportunities for growth of the business due to large
potential sales
may not meet the specific needs of all customers or
potential customers as only standardized products are
produced, therefore leading to lost sales

Niche marketing: is a small, usually specialized segment of a much larger market. The
products are sold to small number of customers and thus quite often sold by small firms.

Advantages of selling to a niche market Disadvantages of selling to a niche market

Small firms are able to sell to a niche market
and avoid competition from larger firms
Small firms will have advantage over larger
firms as they focus on the specialized needs of
consumers rather than the needs of the
masses
Niche markets are small and thus have a
limited number of sales which limits the
expansion of the business
Niche market will specialize in just one
product and thus doesn’t spread the risk of
the business (demand falls = failure of
business)

Market segments
Market segments: is an identifiable sub-group of a whole market in which consumers have
similar characteristics or preferences.

Market segmentation: is when a market is broken down into sub-groups which share similar
characteristics.

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Benefits of segmenting the market:

 Make marketing expenditure cost effective by producing a product which closely meets
the needs of these customers and only targeting its marketing efforts on this segment.
 Enjoy higher sales and profits for the business because of the cost effective marketing
 Identify a market gap and therefore offer opportunity to increase sales.
 Sell more products as the business makes different brands of a product and then aiming
each brand at a different market segment.

Ways of segmenting a market:

 By socio-economic group: defining income groups according to how much they are
paid. Thus products will be priced differently to target certain income groups.
 By age: different age groups will buy different products.
 By region/location: people buy different products due to living in different parts of the
country.
 By gender: some products may only be bought by women and some others by men.
 By use of the product: some goods like cars can be used by consumers for domestic use
or for business use.
 By lifestyle: people with different lifestyles will buy different products.

Decide the best place to advertise to increase sales:

Once the segments have been identified, this will influence how the product are packaged and
advertised. It will also affect the choice of shops the products are sold in, in order to get
maximum sales.