17 The Nature of Marketing ASCN

Book-2 Chapter 17 | What is Marketing 103
The Nature of Marketing Chapter 17

( 17.1 ) Role of Marketing
Most people think of marketing as just being about advertising and selling of products.
Marketing contains much more than just telling people about a product and selling it to
them. Marketing involves a number of related management functions. These include:
 Market Research;  Distribution;

 Product Design;  Customer Sale and Service;
 Pricing the Products;  Packaging;
 Advertising and Promoting Products;  Research & Development.
One shortest definition of marketing is ─ Marketing is the management process responsible for
identifying, anticipating and satisfying consumers’ requirements profitability.
Marketing
Marketing is the management process that links the business to the

KEY customer by identifying and meeting the needs and wants of customers
DEF profitably ─ it does this by getting the right product at the right price to the
right place at the right time.
Market research is needed to identify and analyze customer demands, with this information;
strategic decisions must then be taken about product design, packaging, pricing, promotion
and distribution.
Marketing Objectives & Corporate Objectives
K Marketing Objectives are the goals set by the marketing department to help to
E achieve the corporate objectives of the firm.
Y
D Marketing Strategy is the long-term plan of activities established for achieving

E marketing objectives. The strategic plan therefore is the detailed planning involving
F marketing research, and developing a marketing mix for the targeted customers.
Business Quick Revision Book, As-Level

Marketing objectives are the aims which organisation is trying to achieve through its
marketing activities during a specified period, closely linked with corporate objectives.
o Achieving a higher market share; (Objective)

o Maximizing sales and profitability of the firm. (Objective)
o Market penetration ─ increasing sales in existing markets; (Objective)
o Market development ─ selling existing products or introducing innovative ones ─ to
new markets; (Objective)
o Increase product awareness among the target audience though advertisement and
offering promotion deals; (Strategy)
o Offering a huge product portfolio in order to provide the greater choice to consumers.
(Strategy)
Marketing objectives should be specific, measurable, relevant, and achievable completed

within a given time frame. (SMART Marketing Objectives)
Why are Marketing Objectives so Important?
o They provide a sense of purpose and direction for the marketing department.
o Progress can be assessed against these targets. It is clear that, if there is likely to be an
underachievement, then corrective action required.
o They can be broken down into limited short-term targets and also divided between
different product and geographical regions of the firm.
o The objectives will be used as the starting point for the businesses marketing strategy –
the plan for action that it must adopt.

Co-ordination of Marketing Department

with other Departments
The links between the marketing department and other functional departments — such as
finance, operations and human resource are an essential component of a successful marketing
strategy.
Marketing  Finance
o The finance department will use the sales forecasts of the marketing department to help
construct cash flow forecasts and budgets and ensure that the required capital is
available.
Marketing  Human Resource
o The sales forecasts will be used by human resource to help devise a workforce plan and
ensure that the qualified and experienced staff is recruited to achieve the
organisational objectives.
Marketing  Operations
o Market research data will play a key role in new product development and the sales
forecasts will be used to plan for the production, capacity needed, the purchase of
raw materials and machines required for the output.

( 17.2 ) Demand & Consumer Behavior
Demand for a product is the quantity that consumers are willing and able
DEF
to buy at a given price in a particular time period.
Successful businesses need to be aware of the factors that determine consumer demand. If the
business can produce the product at this market price, it should be profitable. In free markets
the equilibrium price is determined when demand equals supply.
Demand
(1) This varies with price ─ for all normal goods the quantity bought rises with a price fall
and the quantity bought falls with a price increase.
(2) Factors other than Price:
o Changes in incomes caused by rising wage levels;

o Increasing population size or an increase in the size of the population in the age
range at which the product is targeted;
o An increase in the prices of substitute goods, for example an increase in the price of
minidisks could increase the demand for CDs;
o A reduction in the price of complementary goods, for example a fall in the price of
CD players could again raise the level of demand for CD’s;
o An effective advertising or promotion campaign might lead to increased numbers of
consumers trying the product.
(3) All these factors lead to a new demand curve.

Supply
Supply is the quantity of a product that firms are prepared to supply at a

DEF
given price in a particular time period.
(1) This varies with price ▬ firms

will be more willing to supply a
product if the price rises and will
supply less as the price falls. This
is shown in figure:
(2) Apart from changes in price ▬ which cause a new position on the supply curve ─ the level
of supply of a product can vary due to a change in any of these determinants of supply::
o Costs of production, change in labour or raw material costs;
o Taxes imposed on the suppliers by government, which raises costs;
o Subsidies paid by government to suppliers, which reduce their costs;
o Weather condition and other natural factors;
o Advances in technology to make costs of production lower.
(3) All of these changes lead to a new supply curve.
Determining the Equilibrium Price
Equilibrium Price is the market price that equates supply and demand for a
DEF
product.
Market equilibrium is the situation where demand is equal to supply, and there is no
shortage or surplus in the market. This is called equilibrium point, and the price and quantity
at that level is called equilibrium price. When demand and supply are combined, the equilibrium
price will be detrained. This will be at the point where Demand = Supply.
If the price were higher than this, there will be unsold

stocks ─ excess supply. Suppliers do not want this, so
will lower the price.
If the price lowers than the equilibrium, then stocks will

run out ─ leaving excess demand. Suppliers could
make a higher profit by raising the price.

( 17.3 ) Market
The term market has two different meanings:
The first and most obvious meaning of market is the ‘place or mechanism’ where buyers and
sellers meet to engage in exchange’. Such as shopping centers, high street retail stores.
Secondly the term market also refers to the group of consumers that is interested in a
product, has the resources to purchase the goods and services offered and are permitted by law
to purchase it.
Industrial & Consumer Markets
Industrial Markets ▬ the selling of products by businesses to other businesses, also known as
B2B need promotion.
The intended purchaser of industrial goods is much more likely to refer to specialist magazines,
journals and websites and advertising in these is going to be clearly focused to the target
audience such as producers of other industries.
Trade promotions will be used instead of consumer sales promotions, and these could take the
form of financing deals to aid firms with the purchase of expensive equipment. Trade
exhibitions and trade magazines are the most useful way of promoting industrial products.
Consumer Market ▬ the selling of products by businesses to the final user, also known as
business to consumer or B2C. These include mobile phones, holidays and fashion clothing.
Local, National & International Markets
Local Businesses ▬
Some businesses just operate locally – they sell products to consumers in a short
geographical area where the business is located. Firms that just sell in these local markets
include laundries, florist shops, hairdressers and car repairing workshop.
National Markets ▬
Local markets have limited sales potential. This process might then extend to national
markets and try to sell to the whole national market. Common examples include: banking firms,
supermarket chains and large clothing retailers. Habib Bank with 1650 branches all over the
country in Pakistan.

International Market ▬
Offer the greatest sales potential. The rapid rise of multinationals that operate and sell in
many different national markets illustrates the sales potential from exploiting international
markets in different tastes, cultures and laws. KFC, HSBC, Nestle, Toyota.
Market Orientation / Customer Orientation
Market-Orientated businesses having an outward-looking approach which

KEY carries out market research to find out consumer wants before a product
DEF is developed and produced, and tries to satisfy and develop the long-term
relationship with customers.
Most businesses would today describe themselves as being ‘market oriented’ or ‘market led’.
This means that the firm focuses on consumer needs and wants and devotes production and
marketing resources to satisfying them. Market orientation refers to the actual implementation
of the marketing concept.
This approach requires market research and analysis to indicate present and future
consumer demand. The consumer is put first and the business will attempt to produce what
consumer want rather than try to sell them a product they may not really want to buy.
Examples:
Fast Food, Clothes.
The benefits of market orientation are:
o The chances of newly developed products failing in the market are much reduced ─ but
not eliminated.
o If consumer needs are being met with appropriate products then they are likely to
survive longer and make higher profits.
o Constant feedback from consumers ─ market research never actually ends ─ keep
regular contact with the customers, and adapted the changing tastes before it is too
late and before competitors ‘get there first’.

Product Orientation
Product Orientation is an inward-looking approach that focuses on

KEY
developing products using Research & Development techniques ─ and
DEF
then trying to market them.
Product-oriented businesses invent and develop products in the belief that they will find
consumers to purchase them. The development of the Hybrid car is driven more by technical
innovation than by consumer needs ─ consumers were not aware that such versatile products
were likely to be made available until the basic concept had been invented and developed into an
innovative new product.
Production-oriented businesses concentrate their efforts on efficiently producing high-

quality products. They consider that if the product is of high quality then it will be purchased
by consumers who value this feature above market fashion. Such quality-driven firms do still
exist, especially in product areas where quality or safety is of great importance.
Examples:
Memory Cards, Hybrid Cars, Iphone, Wifi Internet, 3D LED’s.
Market Size
Market Size is the total number of buyers and sellers of a product in a

DEF
particular market.
This is especially important for companies that wish to launch a new product or service, since
small markets are less likely to be able to support a high volume of goods. Large markets could
bring in more competition, for example total number of cars sold in one year. Total number of
SIMS issued by all cellular companies.
Benefits of measuring market size:
o It allows a marketing manager to assess whether a market is worth entering or not.

o It allows a business to calculate its own share of the market.

Market Share
Market Share ▬ The market share of a business is the proportion which

KEY
its sales represent of total market size. It shows how successful the business
DEF
is in relation to its competitions.
Sales of the Business

Market Share = × 100
Total Market Sales
‘Firm’s sales’ and ‘total markets sales’ can be measured in either units (volume) or sales
value (revenue) in this market. Market share, and increases in it, is often the most effective
way to measure the relative success of one business’s marketing strategy against that of its
competitors. If a firm’s market share is increasing, then the marketing of its products has been
relatively more successful than most of its competitors.
The benefits of high market share:
o Sales are rising faster than those of any competing business in the same market, that
considered to be the market leader.
o Retailers will be keen to stock and promote the best selling brands.
The fact that an item or brand is the market leader can be used in advertising and other
promotional material.
Market Growth
Market Growth means the rate at which total sale in the market are
DEF
rising each year ─ or falling if growth is negative called market shrinking.
Different markets grow at different annual rates. Market growth is the percentage increases in
the size of the whole market it. Market growth can be measured in two ways::
o By Volume ─ the market has risen form 23 to 26 million units, an increase of

12.5%.
o By Value ─ the revenue has risen from $768 million to $936 million,
an increase of 21.87%.

Consumer Marketing (B2C) &

( 17.4 )
Industrial Marketing (B2B)
Consumer Products ▬ Consumer products are made and marketed for

KEY
use by the customer for personal use. They are purchased by customers for
DEF
purposes like hygiene, entertainment, or home maintenance.
Industrial Products ▬
KEY Industrial products are materials and services used to operate a business.
DEF This can include everyday equipment for the operation of a business, like
machines to manufacture products meant for ultimate use by the consumer.
Consumer products are often classified into:
o Convenience Products  purchased frequently, often bought on impulse and sold to

a large target market, such as milk drinks, chocolates.
o Shopping Products  usually require some planning and research by consumers
before being purchased; consumers do not buy these frequently, such as washing
machines.
o Specialty Products  bought infrequently, often expensive with strong brand loyalty,
such as cars, furniture, designer clothes.
Industrial products are often classified into:
o Materials & Components  needed for production to take place such as cotton, steel,
electric motor for machines.
o Capital Items  equipments, machinery, computers, and vehicles.
o Services & Supplies  business services and utilities such as IT support, electricity,
gas, machine maintenance services.
The key differences between selling to businesses rather than consumers are:
 Most industrial products are much more complex than many consumer products so
specialist sales employees and support services will be more important with B2B selling.
 Industrial buyers often have much more market power and are better informed than the
average consumer. They need to be sold products by well-trained and experienced sales
employees.

( 17.5 ) Mass Marketing & Niche Marketing

Mass Marketing
Mass Marketing involves selling a very large number of the same

KEY
standardized products to the whole market with not attempt to target
DEF
groups within it and there is no market segmentation carries out.
Examples include Coca-Cola and household products such as soap, shampoo, olive oil, grocery
products.
Mass marketing is exact opposite. ‘One product for the whole market’ such as household
products.
Advantages of Mass Marketing:
o A mass-market strategy with high sales of a standard product can lead to lower average
costs of production.
o Mass market strategies run fewer risks and cost advantages can lead to lower prices to
consumers which help to reinforce the position of the product in the market.
o Mass marketing can result in extensive publicity for the business and its product
leading to clear brand identity.
Disadvantages of Mass Marketing:
o Lack of differentiated products and differentiated marketing does not appeal to many
consumers.
The focus on low prices does not help to establish a premium brand image for the
product.

Niche Marketing
Niche Marketing involves identifying and exploiting a segment of a larger

KEY
market, which is not previously identified by any other competitor; it
DEF
involves offering unique products to customers.
Niche segment can be a very small section of the whole market and may be one that has not
yet been identified and filled by competitors.
Example: Mercedes-Benz, Toyota Perius Hybrid, Sony Xperia Waterproof Mobile Phone.
Advantages of Niche Marketing:
o By offering Niche products, small firms may be able to survive easily in markets that
are dominated by larger firms.
o Filling a niche can offer the chance to sell at high prices and high profit margins ─
until the competitors copy the niche feature.
o Consumers will often pay more for an exclusive product.
o Niche market products can also be used by large firms to create status and image ─
their mass market products may lack these qualities.
Disadvantages of Niche Marketing:
o Small market niches do not allow economies of scale to be achieved.

o There is limited scope for business growth if the niche market has few customers.
o If selling in a niche market is profitable, this is likely to attract competitors. This could
lead to lower prices and profitability.
( 17.6 ) Marketing Segmentation
Market Segment ▬
K
A market segment is a sub-group of a whole market in which consumers have similar
E
characteristics. Each market segment is unique and marketing managers decide on
Y
various criteria to create their target markets.
D
Market Segmentation ▬
E
Identifying these different groups and marketing different products to them is
F
called market segmentation. This helps the business to select the right customers.

The process of splitting customers, in a market into different segments, within which customers
share a similar level of interest. Sometimes segmentation is referred to as differentiated
marketing, instead of trying to sell just one product to the whole market; different products are
targeted and offered to different segments. To be effective, firms must analyze the total
market size carefully to identify the specific consumer groups that exist within it.
Example  HP produce PCs for office and home users, but also make laptop models for
business people who travel. Coca-Cola also producing Diet Coke for weight-conscious consumers.
Market Segmentation ─ Identifying Different Consumer Groups
Successful segmentation requires a business to have a very clear picture of the consumers in
the target market it is aiming to sell in. A ‘picture’ of the typical consumer needs to be built up
to help with market research sampling, designing the product, pricing and promoting the
product. This is called the consumer profile. The main characteristics of consumers contained
in a consumer profile are income levels, age, gender, social class and region.
Advantages of Market Segmentation
o Businesses can define their market precisely and design products goods that are
specifically focused on target groups of consumers.
o Marketing strategies can be focused on the target market groups and this avoids
wasting resources on trying to sell products to the whole market.
o Small firms, that may not be able to compete in the whole market, are able to specialize
in one or two market segments; it is a valuable tool for increasing profits.
Disadvantages of Market Segmentation
o Production and stock holding costs may be higher than for the option of just producing
and stocking one undifferentiated product.
o Promotional costs may also be higher as different strategies will be required for
different segments.
o Research and development and production costs could be high in order to produce
several different product variations.

Methods of Segmentation
(1) Demographic Differences
In demographic segmentation, the market is divided into groups on the basis of different
variables. Demography is the study of population data and trends, and demographic factors,
such as age, gender, income, family size and ethic background, all factors be used to
separate markets. Some demographic segmentation variables include:
(1) By Age (2) By Gender (3) By Income

(4) By Family Size (5) By Family Life Style (6) By Religion & Culture
(2) Geographic Differences
Geographic segmentation is dividing the market into different geographical units such as
nations, states, regions, countries, cities and offer products according to local variations.
Consumer tastes may vary between different geographic areas and it may be appropriate to
offer different products and market them in ‘location-specific’ ways.
Geographical difference might result from cultural differences ─ for example alcohol cannot be
promoted in Arab Muslim countries. McDonald’s geographically segment their market according
to the taste, culture and religious constraints.
Geographic Segmentation:
The following are some examples of geographic variables.
o Region  By continent, country, state, or even neighborhood.

o Size of metropolitan area  Segmented according to size of population.
o Climate  According to weather patterns common to certain geographic regions.
(3) Psychographic Segmentation
Psychographic Segmentation performs according to people’s lifestyles, personalities, values and

attitudes. Attitudes are set of feelings, beliefs, and behaviors. Lifestyle is a very broad term
which often related to activities undertakes interests and opinions rather than personality.
Personality characteristics are consists of different purchasing patterns, aggressiveness of
the people and consumption decisions.

( 17.6 ) Customer Relationship Marketing (CRM)
CRM  Using marketing activities to build and establish good customer

DEF
relationships so that the loyalty of the customers can be maintained.
At the heart of CRM is communication with the customer to gain information. This includes
income, product preferences, and buying habits. Using this information, marketing tactics
can then be adapted to meet the customer’s needs. This is virtually segmenting each customer
and is the complete opposite of mass marketing.
o Targeted marketing  giving each customer the products and services they have
indicated, from records of past purchases that they most need.
o Customer service and support  after-sales service and effective call centres are
good examples of the support essential to building customer loyalty.
o Communicate regularly with customers  to give frequent updates on new products

/ special offers / new features / new promotions and support services.
o Using social media 

CRM systems use social media sites to track and communicate with customers.
Costs of Customer Relationship Marketing:
o IT systems and software are needed and employees need to be trained to respond to
customer feedback.
o It may be costly to respond to each customer’s feedback, especially if it contains special
requests or requirements.
Benefits of Customer Relationship Marketing:
o For businesses with an existing customer base, CRM has proved to be cost-effective.
o It is a sustainable strategy creating long-term customers unlike short term sales
promotions.
o Loyal customers often recommend the business to friends and family, providing
additional marketing benefit at no cost.
o It costs less per customer than trying to attract new customers.

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Book-2 Chapter 17 | What is Marketing 103

The Nature of Marketing Chapter 17

 Market Research;  Distribution;

Marketing is the management process that links the business to the

Marketing Objectives & Corporate Objectives

D Marketing Strategy is the long-term plan of activities established for achieving

Business Quick Revision Book, As-Level

o Achieving a higher market share; (Objective)

Marketing objectives should be specific, measurable, relevant, and achievable completed

Why are Marketing Objectives so Important?

Business Quick Revision Book, As-Level

Co-ordination of Marketing Department

Marketing  Human Resource

Business Quick Revision Book, As-Level

( 17.2 ) Demand & Consumer Behavior

(2) Factors other than Price:

o Changes in incomes caused by rising wage levels;

(3) All these factors lead to a new demand curve.

Business Quick Revision Book, As-Level

Supply is the quantity of a product that firms are prepared to supply at a

(1) This varies with price ▬ firms

Determining the Equilibrium Price

If the price were higher than this, there will be unsold

If the price lowers than the equilibrium, then stocks will

Business Quick Revision Book, As-Level

The term market has two different meanings:

Industrial & Consumer Markets

Local, National & International Markets

Business Quick Revision Book, As-Level

Market Orientation / Customer Orientation

Market-Orientated businesses having an outward-looking approach which

The benefits of market orientation are:

Business Quick Revision Book, As-Level

Product Orientation is an inward-looking approach that focuses on

Production-oriented businesses concentrate their efforts on efficiently producing high-

Market Size is the total number of buyers and sellers of a product in a

Benefits of measuring market size:

o It allows a marketing manager to assess whether a market is worth entering or not.

Business Quick Revision Book, As-Level

Market Share ▬ The market share of a business is the proportion which

Sales of the Business

The benefits of high market share:

o By Volume ─ the market has risen form 23 to 26 million units, an increase of

Business Quick Revision Book, As-Level

Consumer Marketing (B2C) &

Consumer Products ▬ Consumer products are made and marketed for

Consumer products are often classified into:

o Convenience Products  purchased frequently, often bought on impulse and sold to

Industrial products are often classified into:

Business Quick Revision Book, As-Level

( 17.5 ) Mass Marketing & Niche Marketing

Mass Marketing involves selling a very large number of the same

Advantages of Mass Marketing:

Disadvantages of Mass Marketing:

Business Quick Revision Book, As-Level

Niche Marketing involves identifying and exploiting a segment of a larger

Advantages of Niche Marketing:

Disadvantages of Niche Marketing: