Marketing Note 1

106, S.D.
S Jayasinghe Mw,
Kohuwela. Nugegoda A/S & A/L Cambridge
337/1 Negombo Road, Wattala
“Marketing is the management process responsible for identifying, anticipating and satisfying
consumer requirements profitably”.
In other words marketing is the management task of getting the right product at the right price
at the right place at the right time.
Market - Market has two meanings.
1) This is the place or mechanism through which the buyers and sellers meet for
exchange. E.g.: a weekly vegetable market, supermarket, eBay, mobile marketing etc.
A market need not be a physical place. For instance the internet is a market because
buyers and sellers can meet online without any physical meeting place and engage in
exchange.
2) Market may also refer to the consumer for a product. That means, those that are
interested in the product have the resources to purchase the product and have the
ability to buy the product.
Human needs and wants.
Needs are goods and services essential for a living and they are limited. E.g.: food, shelter,
clothing.
Wants are goods and services which are not essential for living instead they are desires of
humans and are unlimited. E.g.: burgers, Coke, I phone, etc.
Value and satisfaction.
Good value refers to a product that provides satisfaction for which is thought to be a
reasonable price e.g.: an expensive car that is bought for claimed performance may not
provide satisfaction to the user if it performs below expectation. He may feel that it is too
expensive for what it offers. Therefore this car does not provide good value as there is no
long term customer satisfaction. However a good that is cheap provides satisfaction in
relation to its price can be considered to be of value.
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Sameer Anis
CIMA Passed Finalist, Post Graduate Diploma (University of West London)
106, S.D.S Jayasinghe Mw,
Consumer markets and industrial markets
Consumer market refers to the market for goods and services bought by the final user of those
products. E.g.: goods bought by people for their general use can be called consumer goods.
The market for such goods is known as consumer market.
Industrial market on the other hand is the market for goods and services bought by businesses
to be used in the production of other products.
For industrial market a different marketing strategy will be used than that of consumer
markets. For instance computers, a business manufacturing computers may sell their products
to consumers through retail stores but may have to use personal selling where the benefits of
the product are explained when selling in industrial markets.
The marketing department therefore has to use different marketing strategies for the two
markets.
Marketing objectives.
These are the objectives of marketing dept that help to business to achieve its overall
objectives.
Examples:
• Increase market share – the business may want to increase market share and become
the market leader.
• Rebranding of a product – this will give a fresh appeal to the product.
• To find new markets for the product.
• To see if the new product can be introduced into the market.
The marketing objectives help to achieve the overall corporate objectives of the business.
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Factors that would make marketing objectives effective.
1) Marketing objectives should be in line with the overall aim and mission of the
business.
2) The senior management should determine market objectives because objectives are
long term in nature and would reflect the entire organisations objectives.
3) The marketing objective should be realistic and should be communicated to all levels
and departments of the organisation.
Why are marketing objectives important
• They provide a sense of direction for the marketing department.

• Progress can be monitored against these targets
• They can allow management by objectives to take place.
• They help in formulating marketing strategy.
Co-ordination of marketing with other department
The marketing objectives need to be communicated to other departments and they should
coordinate with the marketing dept to achieve these. Example:
To increase total sales – objective of marketing department
Production department – can increase production, which will increase sales
Reduce avg cost reduce price increase more sales.
Finance department – give finance for advertising and promotion increase sales.
To increase sales you need more workers.
HR dept - allocate more workers to increase production.
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Market orientation and product orientation.
Market oriented business carry out an outward looking approach basing their products on
consumer demand established through market research. These businesses put the customer
first and then attempt to produce what they want.
Advantages of Market Orientation.
1) When introducing a new product the chances of failure are reduced if proper market
research has been undertaken first.
2) If consumer needs are being met with appropriate products, then they are likely to
survive longer and make higher profits than those that are being sold following a
product orientation strategy.
3) Since market research is constantly carried out in market orientation it will always
allow the product to be adapted to changing consumer tastes before competitors and
this gives a company a competitive edge over others.
Product orientation refers to an inward looking approach that focuses on the product itself
and once it is made trying to sell it to customer. Product oriented businesses assume that there
will always be a market for the product they make. But, these types of businesses have
reduced overtime and more market oriented approaches have been adopted.
However there are very successful businesses that are still product oriented. E.g.: businesses
such as Microsoft and Apple are product oriented but are very successful.
Reasons as to why businesses remain product oriented.
1) Product oriented businesses develop new product through technical innovation rather
than by consumer needs. This is because consumers are not aware that such an
innovative product could be made available until the basic concept had been invented
and developed into a new product.
2) If the product is of a very high quality then the business would believe that people
would value quality more than market trends. E.g.: Safety helmet.
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Demand
Demand is the desire to buy goods and services at a given price. In economics, demand is
defined as the willingness and ability to purchase a given quantity of goods or services at a
given price over a given period of time.
Demand can be analysed using a demand schedule or a curve.
Other factors affecting demand
1. Income: when income increases, demand for luxury products will increase and the
demand for inferior products will fall.
2. Interest rate: when interest rates are lower, consumers will burrow more, resulting in
a higher demand.
3. Population: if mkt size increases, it will increase demand.
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4. Related goods: a) substitute (increase in price of tea will increase the
demand for coffee.
b) Complement goods (increase in price of petrol will decrease the
demand for vehicle)
5. Advertising: advertising will result in an increase in demand.
6. Seasonal factors – a business usually experiences different demand patterns during a
particular year. Eg: businesses such as ice cream, sea side hotels and soft drinks boom
in summer and fall in winter.
7. Competitor’s actions – if the competitor does a brilliant marketing campaign then
the demand of the business can reduce.
8. Fashion/taste – when an item becomes out of fashion then the demand can reduce.
Eg: conventional phones such as Nokia lost sales because they were not cool and
fashionable anymore.
9. The state of economy – if the country is heading towards a recession then people
start spending less and this reduces the demand for products.
When the above factors change it will result in a shift in the demand curve
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Supply
Supply is the quantity of goods and services offered by a firm to the market at a particular
price and at a given point in time.
Supply can be depicted using a supply schedule or a curve
It could be depicted from the above diagram that,
• When price increase, the quantity increases (extension) and

• When price decrease, the quantity falls (contraction)
• Here we assume that other factors affecting supply remains constant.
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Causes of Changes in Market Supply
The four main causes of changes in the amount supplied to a market are:
• Costs of Production
• External Shocks
• New Technology
• Taxation & Subsidies
Let’s look briefly at each of these
Supply and Costs of Production
It stands to reason that the costs of producing output will influence how much a business is
able to supply:
• Lower unit costs mean that a business can supply more at each price – for example
through higher productivity
• Higher unit costs cause an inward shift of supply e.g. a rise in wage rates or an
increase in energy prices / other raw materials
For example, consider businesses that makes food products that contain a substantial amount
of wheat. Falling wheat prices will cause a reduction in the resource costs for food
manufacturers such as cereal producers. If other factors remain constant, producers who use
wheat will be able to supply more for the same cost.
Supply and External Shocks
Significant and often unexpected changes in the external business environment usually
impact on market supply.
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For example, the sharp and sustained economic downturn between 2008-2012
across the world’s developed economies led to many firms cutting back the scale of their
operations, including cutting production capacity.
The chart below shows how in 2009 (during the global economic recession) demand for
sports shoes declined and Adidas responded by cutting output.
Supply and New Technology
Technological change encourages new entrants to a market (increasing supply) and can also
enable existing suppliers to become more efficient, thereby increasing their potential to
supply.
A good example is the 3D printing industry where the rapid development of additive
manufacturing techniques has led to an explosion in supply of and demand for 3D printers.
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Supply and Taxation
Changes in taxation can affect both supply and demand.
For example, the provision of subsidies to households and businesses installing solar panels
in recent years encouraged a substantial increase in supply to the market.
When the above factors change, it will result in a shift of the supply curve.
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Market equilibrium
A market is said to be in equilibrium when where is a balance between demand and supply.
If something happens to disrupt that equilibrium (e.g. an increase in demand or a decrease in
supply) then the forces of demand and supply respond (and price changes) until a new
equilibrium is established.
In some markets, the equilibrium point is changing many times per second as demand and
supply try to reach a point of balance (e.g. share prices). In other markets there is much less
volatility and price changes are less frequent.
Let's look briefly at how the market equilibrium point is established using basic supply and
demand analysis.
Basic Market Equilibrium
Consider the data in the table below. A football club has a fixed stadium capacity of 8,000
seats and has estimated the level of demand at different ticket prices as follows:
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The equilibrium price for the football club is £16 where quantity demanded and supplied =
8,000 tickets. Supply & demand are in balance.
This can be illustrated using demand and supply curves as follows.
What Happens When Demand Increases?
Here's another example to illustrate what happens to the market equilibrium when demand
increases.
The demand for and supply of fresh fish in a local market is shown in the table below. The
original equilibrium price is £6 per kg.
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If market demand rises by 80 kg at each and every price, then the new equilibrium price will
be £8 with 300kg bought and sold.
This change in market equilibrium - from an increase in demand - is illustrated below.
What Happens When Supply Increases?
Here's another example to illustrate what happens to the market equilibrium when supply
increases.
The demand for and supply of cocoa beans in a local market is shown in the table below. The
original equilibrium price is $30.
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If market supply increases by 900 tonnes at each price, then the new equilibrium price will be
£25 with 3,500 tonnes bought & sold
Putting it all together: Equilibrium prices change when conditions of demand/supply alter
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Consumer markets Vs industrial markets
The differences between selling to consumers and selling to other businesses start with the
type of products.
Consumers products are often classifies into
• Convenience products – purchased frequently as they are bought on impulse e.g soft
drinks
• Shopping products – these are not bought frequently hence consumers will do some
research before buying e.g washing machine, TV
• Speciality products – bought on rare occasions as they are often expensive e.g: cars
and designer clothing
Industrial products are often classified into
• Materials and components – e.g steel and electric motor for washing machine
• Capital items – equipment, machinery and vehicles
• Services and supplies – business services e.g IT support, maintenance etc.
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The key difference between selling to businesses rather than consumers are.
• Most industrial products are much more complex than many consumer products
• Industrial buyers have much higher bargaining power and are well informed therefore
well trained and experienced sales team is needed to sell to them.
• Industrial buyers rarely buy on impulse
• TV advertisements and other B2C methods are not suitable for industrial markets.
• In B2C the same product can be sold to all eg: Coke but in B2B products may need to
be adopted to meet the needs of a particular business buyer.
Features of markets: location, size, growth, share and competitors
Market Location
The market for certain businesses can operate locally. This means the business sells products
to consumers in the area where the business is located. Usually such business include local
hair dressers, bicycle repair shops etc.
Regional markets cater to a larger geographical area and these are usually successful local
businesses that have expanded into the region or district.
National markets operate in the entire country and include businesses such as national
banks, large supermarket retailers etc.
International markets are those that have expanded into other countries. Businesses would
now be exporting to other countries or would be located as multinationals in foreign
countries.
Market Size
This refers to the total level of sales of all producers within a market. The sales can be
measured by volume (no of units) and by value (revenue).
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Why is it important to know market size?
a) A marketing manager can find out whether the market is worth entering or not.
b) A firm can calculate its own market share if it knows the market size.
c) The business can see whether the market is growing or declining.
Market Growth
This refers to the % change in the total size of a market (by value or volume) over a period of
time. The market can grow or decline depending on many factors, for instance the market for
conventional phones is rapidly declining while Smartphone’s are growing. The factors that
affect growth include:
• Economic conditions.
• Changes in consumer incomes.
• Creation of new markets and products.
• Changes in tastes and fashion.
• Technological change.
The rate of growth also depends on whether the market is saturated or not. E.g.: almost every
household in US has a personal computer or laptop therefore the market cannot grow further.
Market share
This is the % of sales in the total market sold by one business.
Market Share =
Benefits of high market share
1) A high market share means sales are higher than other competitors; therefore business
could have high profits as well.
2) Retailers would give prominence to bestselling brands having high market share.
Therefore they would give such products the most prominent place in their shop.
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3) Being the market leader can be used as a promotion strategy as consumers
prefer to buy the most popular brands.
Competitors
Businesses operate in competitive environment and fight competition in many ways either in
terms of price of non-price factors such as differentiation. Most businesses have direct
competitors (i.e. businesses that provide the same or very similar good) or indirect
competition e.g.: a taxi driver has indirect competition such as railway, bus etc.
Marketing Concepts.
1) Added Value (Selling price – cost of inputs) – this concept refers to the difference
between selling price and cost of inputs and people must be willing to pay a price for
that far exceeds the cost of the basic raw materials. In order to add value the business
can:
a. Create a luxurious and exclusive retail environment to make consumers feel
that the product is of a higher quality and that they are valued.
b. Create a differentiated packaging of a high quality to distinguish it from other
brands.
c. Promote the product so that it becomes a must have brand and consumers are
prepared to pay a high price.
d. Create a USP, this is a unique feature in the product that differentiates it from
others, people are willing to pay a higher price.
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2) Mass Marketing and niche marketing

a) Niche market
Definition – identifying and exploiting a small segment of a larger market by

developing products to suit it.
Example: Bentley is a car manufacturer that sells its cars in a exclusively luxury niche
mark
b) Mass market
Definition – selling the same product to the whole market with no attempt to target
groups within it.
Example: Coca Cola is a mass marketing product.
Advantages of Niche market.
• Small businesses may be able to survive in small markets that are not catered to by
larger firms.
• The business will be able to gain high profits and sell at high prices in a niche market
as there won’t be many competitors. (consumers will be prepared to pay more for an
exclusive product)
Advantages of Mass market. (Disadvantages of niche marketing)
• Businesses operating in a mass market enjoy economies of scale as they produce in

large quantities, however businesses in niche markets produce in smaller quantities
and their average costs are higher.
• In a niche market as there are few customers, any change in consumer buying habits
could lead to a rapid decline in sales. However in mass marketing the risk of such
failure is much lower.
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3) Market Segmentation
Market Segment: this is a sub group of a whole market in which consumers have similar
characteristics.
Market Segmentation: this is identifying different segments a market and targeting different
products to the segments.
The business needs to have a picture of who the customers in the target market segment are.
This is called “consumer profiling”. Meaning that a quantified picture of consumers of a
firms products which shows proportion of age, groups, income levels, location, gender etc.
Market segmentation can be based on: a) geographical differences. b) Demographic

differences, c) psycho – graphic differences.
a) Geographic differences – the business can segment the market based on

geographical areas and it may be appropriate to offer different products and use
different marketing strategies based on these differences. E.g.: some products cannot
be sold over or promoted in some countries. E.g.: Samsung Galaxy grand was catered
specifically to Indian market. The demand for dual sim is much less in the west
compared to Asia.
Marketing strategies such as promotion, pricing needs to consider different cultural
and language barriers of different countries. Businesses therefore need to carry out
detailed market research before expanding into other market.
b) Demographic trend – Demography is the study of population trends, demographic

factors include age, gender, social class, income levels, family and ethnic
backgrounds, etc. Businesses can use these different demographic factors to segment
its market based on age or gender.
Social or economic class of individuals can also be used to segment the
market. In the UK, socio-economic classes are divided into following groups.
▪ A – Upper middle class. E.g.: higher managerial staff.
▪ B – Middle class e.g.: professionals, middle level managerial staff.
▪ C1 – lower middle class. E.g.: Junior management, supervisors.
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▪ C2 – skilled manual workers. (working class)
▪ D – Working class – semi and unskilled manual workers.
▪ E – Casual part-time workers and unemployed.
The socio-economic classes are divided based on the income levels and occupation of
individuals. Businesses can use this to segment the market and different marketing strategies
may have to be used for the different social classes. E.g.: a business providing luxury holiday
packages may target the “upper middle class customers”.
Certain marketing acronyms are used to define demographic groups.
1) DINKY –
2) NILK –
3) WOOF –
4) GLAM –
5) SINBAD –
c) Psychographic factors – these outline differences between people lifestyles, values,

attitudes and personalities.
The market can be segmented based on lifestyle. For instance a single person
may have different lifestyles from that of a married person. Therefore the goods and
services aimed at these 2 segments would be different. E.g.: an entertainment provider
business would target different events for single people and more family based events
for married people.
Values and attitudes towards ethical business practices may differ among
consumers. Some consumers may be very concerned about societal marketing
whereas other consumers would simply be concerned about price.
Personalities of different individuals can be used to segment the market. Some
individuals have risk taking personalities and for them activities such as sky diving,
water rafting and other dangerous sports seems interesting.
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Advantages of market segmentation
✓ Segmentation will allow the business to identify its target market. By the target
market the business can produce goods according to the requirement of that market.
✓ It enables the identification of market gaps. These are market segments that are not
yet catered to by other businesses and the business can successfully exploit these
market gaps. Differentiated marketing strategy can be used for different market
segments. This avoids wasting of money in trying to sell products to the whole
market.
✓ Small firms are able to find niche markets and specialize in those markets as they are
unable to compete in the whole market with large businesses.
✓ Price discrimination is possible and can be used to increase revenue and profits. This
means charging different prices from different customers for the same product.
Disadvantages of market segmentation
 Research and development has to be carried out in order to market different products.
This would be very costly.
 Adopting a differentiated marketing strategy can be very complicated and costly.
 Extensive market research is required to identify different market segments and their
requirements.
 Small businesses that focus on one or two limited market segments could incur a big
loss if the consumer’s preference and buying habits of those market segments change
significantly.
 Production and stock holding costs might be higher than for the option of just
producing one and stocking one undifferentiated product.
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Real life Demand and Supply situation
It seems we are in the midst of a chocolate deficit - where demand for chocolate exceeds
supply.
The Washington Post report data that indicates the world ate roughly 70,000 metric tons more
cocoa than it produced in 2014.
By 2020, the chocolate deficit could swell to 1 million metric tons, a more than 14-fold
increase; by 2030, the deficit could reach 2 million metric tons.
What's the problem?
In a word - supply. West Africa accounts for the majority of cocoa bean production and the
major producing countries there have been hit by some significant supply issues, including a
crop disease called "frosty pod".
Demand is also an issue - which is exacerbating the chocolate deficit. It seems the rising
middle classes in China are particularly fond of chocolate. A change in consumer preferences
towards dark chocolate (which requires more cocoa beans) is also having an effect.
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What should happen when demand increases and supply falls?
The chart below from the ICCO shows the average monthly price of cocoa beans globally.
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Real life example of segmentation based on gender
Why you should always buy the men’s version of

almost anything
Radio Flyer sells a red scooter for boys and a pink scooter for girls. Both
feature plastic handlebars, three wheels and a foot brake. Both weigh about
five pounds.
The only significant difference is the price, a new report reveals. Target
listed one for $24.99 and the other for $49.99.
The scooters' price gap isn't an anomaly. The New York City Department of
Consumer Affairs compared nearly 800 products with female and male
versions — meaning they were practically identical except for the gender-
specific packaging — and uncovered a persistent surcharge for one of the
sexes. Controlling for quality, items marketed to girls and women cost an
average 7 percent more than similar products aimed at boys and men.
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106, S.D.

Market - Market has two meanings.

Human needs and wants.

Value and satisfaction.

Why are marketing objectives important

• They provide a sense of direction for the marketing department.

Co-ordination of marketing with other department

To increase total sales – objective of marketing department

Production department – can increase production, which will increase sales

Reduce avg cost reduce price increase more sales.

To increase sales you need more workers.

HR dept - allocate more workers to increase production.

Advantages of Market Orientation.

Reasons as to why businesses remain product oriented.

Demand can be analysed using a demand schedule or a curve.

Other factors affecting demand

Supply can be depicted using a supply schedule or a curve

It could be depicted from the above diagram that,

• When price increase, the quantity increases (extension) and

Let’s look briefly at each of these

Supply and Costs of Production

Supply and External Shocks

Supply and New Technology

Supply and Taxation

Changes in taxation can affect both supply and demand.

Basic Market Equilibrium

This can be illustrated using demand and supply curves as follows.

What Happens When Demand Increases?

This change in market equilibrium - from an increase in demand - is illustrated below.

What Happens When Supply Increases?

Consumer markets Vs industrial markets

Consumers products are often classifies into

Industrial products are often classified into

Features of markets: location, size, growth, share and competitors

This is the % of sales in the total market sold by one business.

Benefits of high market share

2) Mass Marketing and niche marketing

Definition – identifying and exploiting a small segment of a larger market by

Advantages of Niche market.

Advantages of Mass market. (Disadvantages of niche marketing)

• Businesses operating in a mass market enjoy economies of scale as they produce in

Market segmentation can be based on: a) geographical differences. b) Demographic

a) Geographic differences – the business can segment the market based on

b) Demographic trend – Demography is the study of population trends, demographic

Certain marketing acronyms are used to define demographic groups.

c) Psychographic factors – these outline differences between people lifestyles, values,

Disadvantages of market segmentation

What's the problem?

What should happen when demand increases and supply falls?

Why you should always buy the men’s version of

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