Topic 8 Markets and Customers PDF

Topic
8 Markets & Customers.notebook August 23, 2016
Topic 8 Markets & Customers
Defining marketing
Marketing is the management process of identifying and understanding
customer needs and wants; anticipating their future needs and wants,
satisfying these profitably and maintaining customer loyalty.
1. The purpose and benefits of marketing
The purpose and benefits to the business, of marketing
Increasing customer awareness of the enterprise
Increasing customer awareness of the product
Establishing and maintaining brand loyalty
Increasing or maintaining/defending market share
Increasing profits
N.B.The benefits derived from marketing activities MUST be
greater than the costs thereof in order for marketing to be
successful.
The benefits to the customer, of marketing
Increased knowledge
The ability to make informed decisions
Timesaving
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Topic 8 Markets & Customers.notebook August 23, 2016
2. Customer needs and wants & ways of researching potential customers
A need ‐ something a person must have to survive ‐ food, shelter,
clothing.
A want ‐ something a person does not have to have to survive, but
which improves his/her standard of living.
Wants are unlimited.
Resources are limited (land, labour, capital, enterprise)
‐ A business can not satisfy all of each customers' needs and wants,
thus it must decide what to produce, how, and for whom, with the
resources it has.
‐ Customers must decide what to spend their limited resources on ‐
choices must be made.
Successful marketing convinces customers to buy the business' product
when making these choices, and to continue to buy these products.
Very successful marketing changes consumers perceptions from wants
into needs.
2
Existing and potential customers
• Existing customers are those that already buy an enterprise's
products.
• It is important that an enterprise retains these customers by keeping
them satisfied and building relationships with them to avoid them
switching to competitors.
• Potential customers are those that may buy the product, i.e. they fall
into the target market of the enterprise, but don't yet buy from
them.
• An enterprise can grow its' market share by engaging in marketing
activities that leads to potential customers buying from this
business.
• Market research can be conducted to find out who these customers
are, and why they don't buy from the business.
3
Understanding market changes
Sales change on a yearly or monthly basis depending on the industry.
It is important that businesses respond to these changes as the
'customer is king'. Ideally, a business should be able to anticipate
changes. Market research is crucial to understanding the market.
Why customer spending patterns change
• Changes in tastes & fashion.
• Changes in technology ‐ 'obsoletion' occurs.
• Changes in incomes ‐ due to economic changes such as levels of
employment; economic development; tax rate changes.
• Changes in the age structure of the population.
• Changes in net migration.
4
Why some markets have become more competitive Weds Wk 6
• Globalisation ‐ some products are now sold world‐over, increasing
competition for local firms.
• Improvement in transport networks and methods.
• Internet (e‐commerce) ‐ increases knowledge of international
products, comparison between local and international products, and
facilitates purchase of these products from international firms.
Business response to market changes
To maintain market share a business may:
• Develop new products to retain customer interest (e.g. Microsoft,
KFC).
• Regularly improve the existing product (e.g. Apple).
• Keep costs low to remain price competitive (e.g. Bon Marche).
• Build and maintain good customer relationships (it is often cheaper
to keep existing customers happy than to find new ones). (e.g. STAR
Alliance)
5
Market research
Without proper research, a business could lose a lot of money or
even go bankrupt if there is insufficient demand for the product,
particularly given the growth of globalisation ‐ the increase in
international competition.
It is important to identify and understand changing needs in a
changing and competitive environment, in order to survive and
succeed.
It can be used to discover who potential customers are, and how to
get them to buy from an enterprise.
Market research is used to find answers to the following questions:
• What price would • Where would they
they be willing to expect to buy the
pay? product?
• Would people be
willing to buy the • What is the
Market research questions competition
product?
like?
• What type of
customers would be • What type of promotion
willing and able to buy would best suit these
the product? potential customers?
• What features/s of the product
do customers like/dislike?
6
Types of information
Quantitative Numbers or percentages
Qualitative Opinions, views or judgements
Types of research
Primary The collection & collation of original data via direct

(Field Research) contact with existing or potential customers.
Secondary Information already collected and available for use by

(Desk Research) others.
Usually conducted first as is easier, quicker & cheaper
than primary research.
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Types of primary research
1. Surveys: a.) Questionnaires
b.) Interviews
c.) Consumer panels / focus groups
2. Observation
1a.) Questionnaires
• Face to face, telephonic or postal
When designing a questionnaire, you must be clear as to:
‐ What you want to find out
‐ Who you should ask (age group, gender, income group, occupations)
‐ Where you should carry out the research
‐ When you should carry out the research
When writing the questions, you must:
‐ Ask no more than 12 questions (or respondent may get bored & give
inaccurate answers)
‐ Keep questions short & clear
‐ Provide yes/no tick‐boxes where possible
‐ Not ask ages ‐ rather put category tick‐boxes in (to avoid offense)
‐ Avoid open‐ended questions unless opinions are sought. Provide a
range of possible answers to tick with one marked 'other' with space for
a brief explanation
‐ Avoid leading questions (people may respond with what they think will
please you so as not to cause offense ‐ this will lead to inaccurate
data)
‐ Put your questions in a logical order
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When carrying out the questionnaire, you must:
‐ Have a grid on which responses can be recorded.
‐ Know who you are asking, and how many.
‐ Know the best time of day to ask. This may impact on who is around
to answer.
‐ Know where to carry out the research. This may affect who you ask.
Advantages & disadvantages of Questionnaires
+'s ‐'s
Detailed qualitative information can be Time consuming & costly to plan, carry out,
gained collate & analyse
Data is collected exclusively for your Bias* can arise from poor question
purpose; you know how it has been preparation or if face to face, from the
collected, from and by whom thus you interviewer's body language (interviewer
could anticipate potential bias*. bias)
* Bias is inaccurate / untrue data received which leads to incorrect
results
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1b.) Interviews
• Pre‐prepared questions are asked of the interviewee by the
interviewer.
• Can be carried out on an individual or group basis.
+'s ‐'s
Questions can be explained if unclear Very time consuming & costly
Detailed qualitative information can be Interviewer bias can arise; and if group
gained interviews are held, members can be
influenced by one another (respondent bias)
1c.) Consumer panels / Focus groups
• Groups of people agree to provide information about a product or
spending patterns over a period of time.
• May test new products & discuss opinions about them.
+ ‐
Time consuming, expensive, & bias through peer
Detailed opinions provided
persuasion can occur
2. Observation
• Recording e.g. TV viewing meters
• Watching / counting e.g no. of people buying a certain item / cars
passing a billboard
• Audits ‐ counting no. of stock in shops
+ ‐
Fairly inexpensive Gives figures only, not reasons for
consumer decisions
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Secondary research (desk research)
• Information previously collected & available for use by others.
• Sources: Details page 147 Borrington
Internal External
Sales department records re sales, pricing,
Internet
customers
Finance department data Trade & employer associations
Customer service department data Specialist journals
Public relations personnel's opinions Research reports
Distribution departments observations &
Newspapers
opinions
Government reports & statistics
Media reports
Reports from market research
agencies*
* Specialists in market research who carry out research on behalf of
other businesses. As they are specialised they may be more efficient & get
more accurate results; also it avoids taking up the time of members of the
marketing department.
11
Secondary research (desk research)
+ ‐
Quick, inexpensive Sample; purpose of research; potential bias may not be known
Provides good initial overview Data may be outdated
Factors affecting accuracy of research
• Care in preparation & phrasing ‐ doing a 'test run' can help
• Type of sample ‐ Quota samples likely to be more accurate than random
samples
• Sample size ‐ Larger samples likely to be more accurate than smaller
samples
• Bias from primary & secondary research (see above re secondary)
• Old data may be irrelevant.
• Source of data ‐ particularly with secondary data as the respondents, and the
purpose of the research, are unknown.
* All information (whether from primary or secondary sources) should be
used with care without assuming that it is necessarily true *
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Identifying potential customers
Essentially this refers to understanding and anticipating customers'
needs and wants.
Potential customers thus are those for whom the business can satisfy
their needs and wants by generating the 'right product at the right
place at the right price', bearing in mind that customer satisfaction
hinges largely on the perception of 'value for money'.
Thus a business can use research results to consider which
customers it can viably satisfy in this manner, whilst still making a
reasonable profit.
These potential customers then need to both informed about the
product, and persuaded to buy it ‐ marketing activity aims to do
both.
Attention may be needed on attracting customers away from rival
brands ‐ this would be highlighted by market research ‐ and the
business would need to investigate what it is that currently draws
customers to that business, and away from their own business, and
seek to address these issues.
13
Retaining existing customers
• It is important that an enterprise retains these customers by keeping
them satisfied and building relationships with them to avoid them
switching to competitors. It allows for repeat‐business which is
cheaper to attain in terms of marketing expenditure.
• Customer satisfaction
• The experience a customer has when dealing with a business is known
as customer service. It includes:
• Product quality
• Staff knowledge and training
• Greetings and dealings with the customer
• After‐sales service
• Convenience
• Speed of service
• Accuracy of order processing
• Prompt complaint‐handling
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• Customer satisfaction
• Customers are only likely to be satisfied if they believe they have
received value for money and good customer service that is better than,
or at least equal to, that provided by rival businesses.
• Satisfied customers give positive 'word‐of‐mouth' advertising for
business, which is free marketing!
• Measuring customer satisfaction
• The following can be quantifiably measured to gauge customer
satisfaction:
• ‐ Volume of customers
• ‐ Change in market share
• ‐ Number of returns
• ‐ Number of complaints received
• Qualitative feedback to measure customer satisfaction can be gathered
through:
• ‐ consumer surveys
• ‐ focus groups
• ‐ interviews
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• Complaint‐handling
• Systems should be in place in terms of how complaints are received and
how they are dealt with.
• Remember 'the customer is king' as competition in most industries is
great!
• 1. Customers should have easy facilities whereby they can lodge
complaints e.g. a complaints‐desk; call‐centre / hotline number.
• 2. Complaints should be dealt with immediately.
• 3. Specialist staff should ideally be employed who are trained in
assertiveness rather than aggression and defensiveness; who know the
legal requirements and the business' policy regarding all nature of
complaints. They need to be empowered to make decisions to help the
customer fast.
• 4. Legal requirements must be met e.g. refunds or replacements for
defective products.
• 5. Should the staff member not be able to make the decision, he/she
must immediately pass the complaint on to a senior employee to solve
the issue promptly.
• 6. Many businesses go 'the extra mile' e.g. giving a complimentary gift of
apology to the customer. While this costs money, it may cost less than
the damage to the business' reputation if the customer is dissatisfied.
16
Product Promotion
Customer solution
Communication with
customer
• The marketing mix
Price Place
Cost to customer Convenience to customer
Successful combination of these 4 "P's" or 4 "C's", relevant to the
enterprise's target market, goes a long way toward generating
customer satisfaction.
Each element must reflect the other in order for the marketing mix to
work.
17
• Communicating with the market
• Promotion is the means by which a business gives the market
information about the product ‐ what it is, how much it costs, where it
can be found.
• Promotion must be in line with all other aspects of the marketing
mix.
• Promotion is more than just advertising ‐ it involves all activities that
create awareness of, or interest in, a product.
• The promotional mix consists of:
1. Advertising ‐ 'above‐the‐line' promotion whereby a third party is
paid for the product to be advertised.
2. Sales promotion ‐ 'below‐the‐line' promotion whereby the
business promotes the product itself by means of money‐off
coupons, free gifts etc.
(More on each to follow)
The aims of promotion
To:
1. Inform 2. Introduce 3. Compete 4. Improve corporate image

5. Increase sales 6. Create a brand image
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• The AIDA principle
*
In communicating with customers, promotional activity aims to
generate in customers, the following:
Awareness
Interest
Desire
Action
This is a process, and marketing activities should encourage
customers' progress through the process by starting off with
informing and moving on to persuading the customer to buy the
product.
19
• Methods of communicating with customers
1. Advertising
Advertising may be either
Informative Persuasive
• Details of the product • Used to persuade
specifications, price, location customers that they need
are given. the product.
• Most often used in the late • Benefits of the product
R&D and introductory phases are implied.
of the PLC.
• Quality and status
• Suitable for technological benefits are reinforced.
products and sales to
• Used in the mid‐growth
producer markets.
through to saturation
phases of the PLC.
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Methods of advertising
Television
Sound and moving images brought directly into the viewers' homes can
be very powerful and can reach millions of people.
In most countries, it can be regional or national, and with satellite TV,
interest specific channels are available. Thus TV is suited to firms with
either regional or national audiences, or a particular interest.
It is one of the most expensive forms of advertising, however,
particularly at 'prime times', when many viewers tune in.
Marketers should choose the channels and time slots for airing very
carefully.
Generally it is used for products with a broad target market, e.g
consumer durables, food, household goods and general clothing as TV
tends to have a broad target audience ‐ people who are potential
buyers of a product or service.
Radio
Programmes are aired to smaller, more specific markets and thus can
be used by firms with less broad target markets.
It is significantly cheaper than TV thus can be used by even local firms
but is vocal only, brief, and there's no permanent reminder.
Radio is common in rural areas and is thus valuable for use by those
with such markets and by government for announcements.
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Newspapers & magazines
Longer lasting and can be kept for future reference.
More detail can be included.
May be national, regional or local or special interest (hobby, sports,
trade, professional).
Trade & professional publications are very useful for producers of
producer goods.
Reasonably cheap compared to TV advertising although advertising in
some glossy magazines can be quite expensive, and newspapers are in
black and white ‐ not very eye‐catching.
Many magazines are only published monthly.
Posters & billboards
Image must be simple and convey the message at a glance, thus these
are useful for persuasive advertising, to reinforce a message or serve as a
reminder.
Relatively inexpensive.
May be seen multiple times thus good exposure value; however, it is
impossible to know whether the target market has been reached. Many
people ignore posters and billboards.
Electronic signs are less likely to go unnoticed and can be seen at night
too, but are more expensive.
22
Cinema
Sound and moving images capture attention, however the audience may
be different according to the film showing and is localised to the area in
which the cinema is situated.
Thus it is suited to local firms or those with a broad target market e.g.
banks.
DVD & Blu‐ray
Sound and moving images capture attention, however it is limited to the
audience who buys that disk.
Thus it is suited to products with a broad market base.
Leaflets
These can be available to be picked up at retail outlets, doctors or vets
surgeries etc, handed out, or sent via post ('junk mail').
May be a single sheet or booklet; informative and/or persuasive.
Can be kept for future reference.
May be targeted or generally distributed.
They are often thrown away, however.
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Internet
Own website on Internet
Having a website which customers can access is a form of inbound
marketing.
A large amount of information can be posted, contacts given, and facilities
to order online are available. An attractive website can be seen as
persuasive.
24/7 global accessibility by customers increases a firm's potential
customer base dramatically but the business must ensure customer
security and in some countries, internet access is limited. Competition
from other websites can be intense.
Advertising space on the site paid for by other businesses reduces the cost
of the website.
Having a website reduces the business's administrative and physical space
costs.
It is useful for the search logorithms to be advantageous i.e. that key
search words yield the firm's site early in the list of results. Where there
is much competition, this may be difficult and the site visibility may be
poor.
Suits services which customers may wish to book, and common items
such as CD's, books and clothing.
Web site links
Placing ads strategically on sites potential customers may visit, possibly
with links to the firm's own site.
Reasonably inexpensive means of reaching potential customers.
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Brochures and catalogues
These are glossy publications describing the business and its
products.
Expensive to produce but project a positive image and serve as a
permanent reference for customers.
Non‐traditional means
Moving (Vehicles), Bag, Mobile, Public conveniences. Social media
Useful as reminder‐advertising, although mobile is growing as a
complete AIDA mechanism. But may not be seen by the target
market.
Product placement
Branded products are featured in movies, TV programmes, music
videos).
Associates the product with the show and can target fairly specific
audiences.
But it can be very expensive and may 'backfire' if the show is
unpopular.
Which advertising methods will you use and why?
25
2. Sales promotions
• Seeks to increase sales in the short‐term.
• Is considered 'below‐the‐line ' marketing.
Methods:
‐ Price reductions.
‐ Gifts ‐ e.g. toys in cereal packets; cosmetics bag with magazine.
‐ Special offers e.g. BOGOF; 25% free.
‐ Games & competitions.
Thurs Week 7
‐ Point‐of‐sale displays of material and demonstrations regarding the
product; the product itself or samples at the place where customers would
purchase the product. Free samples at point of sale are common. "Dump
bins" may be used for stock clearance at point of sale.
‐ After‐sales service including: complaints desk, service technician facility,
refund & replacement or exchange policy, query help line / 24 hour hotline.
After‐sales service helps to establish and build a relationship with the
customer based on trust, reliability and value for money.
‐ Free samples ‐ May tempt customers into trying something they otherwise
may not have in the hope that they'll thereafter purchase the product.
‐ Loyalty reward programmes.
Advantages of sales promotion
• Increases sales in off‐seasons
• Can encourage new customers to try the product.
• Can encourage customers to try a new product.
• Can increase frequency and/or quantity bought.
• Can encourage 'switching' from other brands.
Which sales promotion methods might you use and why?
26
3. Public relations (PR)
This refers to activities undertaken by a business to improve its
corporate image with its 'public' i.e. its stakeholders ‐ both internal and
external.
PR opportunites include:
• press releases about achievements, events or charitable acts.
• sponsorship.
• celebrity endorsements.
• assistance to charities.
• in‐house newsletters to employees and customers.
• open days
• visitor centres
Word‐of‐mouth
Satisfied customers tell others about their positive experience. This
costs the enterprise nothing and can be very persuasive.
27
The influence of technology on the marketing mix Fri
Week
7
Technological advancements are changing all 4 elements of the
marketing mix as well as how products are made.
Product ‐ manufacturers need to respond to changes and new
expectations that customers have.
Price ‐ customers can more easily compare prices.
‐ businesses can gain better understanding of customers and
therefore produce products at different prices to suit different
customers' needs.
Promotion ‐ more opportunities are available e.g. social networking
sites like Facebook and Twitter; sponsored links and advertisements
on other websites, as well as the benefits to be gained from own
websites (see previous notes).
Place ‐ e‐commerce (electronic trading) allows for a broader
customer base.
28
Advantages & disadvantages of social networking sites and own
websites
Advantages Disadvantages
• A specific target market can be • Annoyance factor can put customers
targeted and guarantees this market off the product.
will see the ad.when they log in. • If using pop‐ups, will need to pay.
Social networking • Information can be updated often and • Competitors may do the same thus
sites fast. reducing the impact.
• Cheap. • Ad. may be changed by others and
• May be able to reach groups that are used for other purposes which may
otherwise hard to reach. generate negative publicity.
• May not be seen due to high number
• Control of other advertising and use of
of search results.
own ads.
• Design costs may be high.
Own websites • Changes can be made very quickly.
• Relies on customers finding the
• Powerful interactive ads can be used.
website through their search terms,
• A lot of information can be posted.
so no guarantee of it being seen.
NOTE:
Different enterprises will choose different combinations of
communication with customers depending on:
• Who their customers are and where they are located
• Budget for promotional activity
• Whether the product is new or existing
• Competitor activity
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* Branding
• The strategy of creating and maintaining an image of a product,
range or business that is clearly differentiated from competitors.
• Aims to:
‐ Improve consumer recognition.
‐ Associate a 'personality' or image to the product, range or
business.
• Specialist agencies advise as to whether the name already exists;
whether it translates badly into other languages and surveys
potential customers to gauge reaction to the name.
• Benefits of branding: Weds
Wk 8
‐ Increase customer recall and selection when faced with choice.
‐ Benefit other products in the range through 'family' brand.
‐ Reduce PED.
‐ Increase customer loyalty and reduce switching.
• Retailers' 'own brands' have increased recently ‐ retailers have a
good quality product, purchased in bulk thus gaining e.o.s., over
which they have full marketing control. Manufacturers can utilise
excess capacity and gain significant bulk orders from retailers even
though the retailers now compete with their products.
30
* Logo
A symbol that identifies the brand, makes it recognisable and
distinguishes it from other brands.
* Slogan
A "catch phrase" that makes the product "stick" in the customer's memory.
This aids recall and can impact positively on customer's purchasing
decision.
The logo and slogan must link with the product and corporate image.
Consider options for your logo and slogan
Select one
Why have you selected this one? What image does it convey? How might it impact on sales of your
product?
Design your advertising including your logo and slogan.
31
Packaging
*
• Quality, design, colour must be considered.
• Functions of packaging:
Contain & protect the product.
Give info contents/ingredients, instructions etc
Support image
Aid recognition
• Wastefulness should be avoided both in terms of cost & as it may
generate negative customer perception. Recycling is becoming more
popular and may be a source of competitive advantage.
Consider your packaging in terms of the above.
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1. Inform 2. Introduce 3. Compete 4. Improve corporate image

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