4.

1 The role of marketing

Marketing and its relationship with other business functions

1. Finance
Finance department ensures that adequate finance is available
Hence marketing department can increase spending on marketing

2. Human Resources
If marketing is successful, additional employees are needed
(for operations, administration, finance etc.)
Must have appropriate skills; recruited in time
HR department decides on this

3. Operations
Market research used by operations to determine preferences of consumers
for the future product mix (hence operations may changes made to output,
inventories, supplies)

Market Characteristics

1. Market Size
Allows manager to assess if a market is worth entering
Businesses can calculate own market share
Growth/decline of market can be identified

2. Market Growth
Rate of growth depends on several factors: economic growth, changes in
consumer incomes and tastes, market saturation etc.

3. Competitors and Ease of Entry

Need to be aware of number, size of competitors and how easily they can join
the market
More competitors + easy to join market = more price competition

4. Differentiated or Homogenous Products

Differentiation
Allow high prices despite many competitors
Homogenous
Hard for product stand out from rivals in terms of quality
Hard to charge different prices from standard price of the product

5. Segmentation
Helps to target different groups of consumers (who perceive the value of
certain products / services to be different from each other)
Target marketing
Recognises diversity of customers
Does not try to satisfy them all with the same good / service
Differences between marketing goods and marketing services

Differences between services and goods

Services Goods
Consumed immediately (cannot be stored) Can be stored
Cannot take back to repair / replace Can be repaired / replaced
Service quality must be right first time
If not, consumer may not return
Difficult for consumers to compare service quality Easy to compare
Promotion must be informative about range and
quality of services
Employees important in marketing services successfully

Characteristics of Services

1. Deliverability
Need to build trust with customers, convince customers that quality results
can be delivered within a given time frame
Have testimonials from satisfied clients to prove that business can fulfil the
promises made in the promotional materials

2. Time intensive
Services must be provided within a certain time frame
Need accurate time estimates and time management (allows customers to be
provided with high quality services)

3. Rely on long term relationships

Provides a longterm sources of revenue as well as greater chance of
positive feedback via social media

4. Perceived value
Instil high perceived value of service in customers mind
Eg. price level (High end service providers do not compete on price)

Market Approaches

Market Orientated
Consumer is put first
Needs market research analysis to indicate present, future consumer demand
Advantage in fast changing volatile consumer markets

Benefits

1. Failure rate of new products is reduced (if there is effective market research)
Huge cost of developing new products (eg. cars, computers)

2. Products likely to survive longer, make higher profits than in product oriented
approaches as consumer needs are met with appropriate products

3. Constant feedback from customers

a. Allows the product and its marketing to be adapted to changing tastes quickly
Product Oriented
Assume that there will be a market for products made

Benefits

1. If an innovative product of high enough quality is produced, it will be purchased

Exists in pharmaceutical and electronic industries

2. Concentrates on efficiently producing high quality goods

Prevalent in product areas where quality or safety is important
E.g. bottled water, crash helmets

Evaluation

Market oriented approach is more common but there are limitations

o Responding to every consumer trend can cause a business to overstretch its
resources and not do anything well
o Offering choice and range to meet every consumer need is expensive
Researching and developing an innovative product can also be successful

Social Marketing

Attempt to balance company profits, consumer wants and societys interests

Considers long term welfare
Can give businesses a significant competitive advantage
o Some consumers prefer to purchase from socially responsible businesses
Benefiting society becomes a unique selling point
o Can charge higher prices

Commercial vs Social Marketing

Commercial Social
Purpose Businesses aim to identify consumers Businesses still aim to identify
needs and wants and satisfy these consumers needs and wants and satisfy
more efficiently than competitors these more efficiently than competitors

For profits In a way that enhances consumer and

societys welfare

Importance of Market Share and Market Leadership

1. Market leadership can be stated in advertising material

Being the most popular product in the market convinces consumers to buy it

2. Result in strong bargaining position with suppliers and retailers:

Retailers: Lower costs and longer credit periods
o Retailers keen to stock the market leading product
o not having the product in stores will disappoint customers
Suppliers: Higher selling prices to and shorter payment periods from
o Suppliers will continue with long term contracts due to:
1. High sales of their components / services
2. Providing for the company benefits their status and good name
 3. Easier to recruit better employees
a. They would work for successful businesses than for unsuccessful ones

4. Able to obtain sources of finance more easily

a. Being the market leader (with the highest market share) convinces investors
and banks of the stability and the profit potential of the business

Disadvantages of being the Market Leader

Puts pressure on business and key staff to continue to do well

Too much emphasis on market share could reduce profitability
o Due to price cuts and lower profit margins that increase market share

Marketing Objectives

For profit organisations

Increase market share (to gain market leadership)
Increase total sales (value of volume or both)
Average number of items purchased per customer visit
Customer loyalty
Increase customer base

Nonprofit organisations
Maximise revenue from trading activities
Increase recognition of the organisation by society
Promote the work and aims of the organisation to a wide audience

Marketing Strategies

How marketing strategies evolve in response to changes in consumer preferences

Marketing department should anticipate, research on and react to changes in
consumer preferences
If not, the business will lose sales and market share
Some businesses may do this and promote that their products and production
methods remain largely unchanged

How various factors influence marketing practices and strategies of organisations

Innovation
Major innovations in recent years
o Guerrilla marketing
o Internet marketing
Increasing growth of social media networks encourages businesses to
spend more of their budget on this form of communication with
customers rather than traditional forms (newspaper, TV advertising)

Ethical Considerations
Elaborate from Chapter 1.3

Cultural Differences
Failing to respond to cultural differences leads to bad publicity
Responding encourages consumers to accept a new brand as being designed for
their needs