Importance of marketing

Markets

Set of arrangements that allows buyers and sellers to communicate and trade in goods and services.

• Consumer goods markets – where products such as food, cosmetics, furniture and magazines are
sold.
• Markets for services – these are varied and could include services for individuals, such as banking,
or business services, such as cleaning.
• The housing market – where people buy and sell properties.
• Commodity markets – where raw materials such as oil, copper, wheat and coffee are traded.

Marketing

A management process involved in identifying, anticipating and satisfying consumer requirements

profitably.

✓ Identifying the needs and wants of consumers

✓ Designing products that meet these needs
✓ Understanding the threat from competitors
✓ Telling customers about products
✓ Charging the right price
✓ Persuading customers to buy products
✓ Making products available in convenient locations.

Satisfying customer needs

They have to produce goods and offer services that customers are prepared to buy. Businesses identify
customer needs by carrying out market research. Market research is one of the most important marketing
activities; it is the first step in satisfying customer needs.

Businesses need to anticipate customer needs. This means they try to predict what customers want in
advance and respond to changes very quickly. Businesses operate in a changing competitive environment
and have to keep up with the latest designs, trends, fashions and technology.

Building customer relationship

Many businesses try to build relationships with their customers. This means that they try to establish a
bond with them through effective communication and do everything possible to meet their needs.

Increasingly, businesses are using social media to

build customer relationships. Businesses are
likely to be more successful if communication is
two-way. Businesses are learning quickly the
value of using social media platforms to build
relationships with customers.

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Keeping customer loyalty

To retain existing customers, a business must continue to satisfy their needs by developing new products,
providing first-class customer service, maintaining effective communication links, delivering reliability and
responding to any changes in the market. It is also easier to keep customers loyal if a business can develop
a strong brand name.

However, one of the best ways to retain customers is to reward their loyalty.

Customer loyalty schemes

• Reward cards
• Free gifts
• Charitable donations: an approach to rewarding customer loyalty is for a business to make
donations to charity as a result of a customer purchase.
• Partnership deals

Product and market orientation

Product orientated: where a business focuses on the design and manufacture of the product itself rather
than the needs of customers

Market orientated: where a business focuses on the needs of consumers when developing products

Market share: proportion of sales in a total market that a business or product enjoys

Market Share = Total product or business sales x 100

Total sales in the whole market

Market analysis: quantitative and qualitative assessment of a market

Mass Market and Niche Market

Mass market: Very large markets in which products with mass appeal are marketed

• Business sells the same products to all consumers and markets them in the same way.
• The number of customers in these markets is huge
• Produce in large quantities at a lower unit cost by exploiting economies of scale.
• This might result in higher sales and higher profits.
• However, the competition is really high

Niche market: Smaller market, usually within a large market or industry

• A segment that has sometimes gone ‘untouched’ by larger businesses.

• It is the complete opposite of mass marketing.
• Small firms can often survive by supplying niche markets
• Less competition.
• It is a lot easier to focus on the needs of the customer in a niche market.
• Ability to charge premium prices.

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Responding to changes in the market

01. Changing customer needs

One of the reasons why markets change is because the needs of customers change. These needs change
for a number of reasons.
• Consumers’ incomes change so they choose different products.
• Consumers become better educated and more sophisticated.
• Consumers are influenced by changes in social habits.
• Fashions change over time.
• New technologies result in different needs.

02. Changing customer/consumer spending patterns

Businesses can gather information about spending patterns in markets. They can carry out their own
research, use statistics generated by the government or purchase market research reports from specialist
market research agencies, such as Mintel.

Businesses are most likely to be interested in spending patterns in those markets in which they operate.
However, they may also be interested in global spending patterns or spending trends in a particular
country.

03. Increased competition

Competition is the rivalry that exists between businesses in a market. It would be rare for a business to
operate in a market where there was no competition. The behaviour of competitors in the market needs
to be monitored very carefully.
For example, the arrival of a new competitor could have a dramatic effect on sales if their products are
more advanced or more effectively marketed.

04. Competition puts businesses under some pressure

The pressure from competition means that businesses have to encourage customers to buy their products
in preference to those of rivals. All of these methods cost money and generally reduce the amount of
profit a business can make.

They will use a range of methods to attract customers

✓ lowering prices
✓ making their products appear different to those of rivals
✓ offering better quality products
✓ using more powerful or attractive advertising or promotions
✓ offering ‘extras’ like high quality customer service.

However, businesses have to use such methods in order to survive in the market. Finally, if businesses do
not respond to market changes, they are likely to lose market share. At worst they could collapse.

Large vs small businesses

Marketing is important to business of all sizes. Failure to recognise the importance of marketing may mean that a business struggles in
relation to its rivals. A business may even fail owing to poor marketing.
However, larger businesses, with their depth of resources, are likely to invest more in activities such as market analysis and market research.
Some large businesses may employ specialist companies, such as market research agencies, to carry out work on their behalf.

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