Chapter 4.

1- Introduction to marketing
● Introduction:
○ Marketing- the management process of getting the right product to the right
customer at the right price, the right place and the right time
● Market orientation vs production orientation:
○ Product orientation- a business approach that focuses on making the product
first before attempting to sell it
○ Market orientation- a business approach of first establishing consumer demand
through market research before producing and selling a product

○
○ Benefits of a market orientated business:
■ Due to market research, firms have increased confidence that their
products will sell, which reduces the risk of failure
■ Access to market information means that firms can anticipate and
respond quickly to changes in the market
■ Due to regular feedback from consumers from market research, firms are
in a strong position to meet the challenges of new competitors entering
the market
○ Limitations of market orientated business:
■ Conducting market research can be costly and therefore weigh heavily
on a firms budget
■ Due to frequently changing consumer tastes, firms may find it difficult to
meet every customers needs with its available resources
■ Uncertainty about the future could have a negative influence on the
market-planning strategy.
○ Benefits of product orientated business:
■ It is associated with the production of high quality products such as
luxury sports cars or safety products
■ It can succeed in industries where the speed of change is slow and the
firm has already built a good reputation
 ■ It has control over its activities, with a strong belief that consumers will
purchase its products
○ Limitations of product orientated business:
■ Since the firm ignores the needs of the market, it takes risks that may
lead to eventual business failure or closure
■ Spending money on research and development without considering
consumer needs could be costly and not yield any promising results.
● Market share:
𝑓𝑖𝑟𝑚𝑠 𝑠𝑎𝑙𝑒𝑠
○ 𝑚𝑎𝑟𝑘𝑒𝑡 𝑠ℎ𝑎𝑟𝑒 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 = 𝑡𝑜𝑡𝑎𝑙 𝑠𝑎𝑙𝑒𝑠 𝑖𝑛 𝑡ℎ𝑒 𝑚𝑎𝑟𝑘𝑒𝑡
× 100
○ Ways to measure market share:
■ By volume- this measures the number of goods bought by customers. It
is a quantitative measure of the units sold by businesses
■ By value- this measures the amount spent by customers on the total
number of goods sold by businesses. It is the total revenue expressed
with a currency
○ An increase in market share could mean that a business has adopted effective
marketing strategies so that it sells more products and takes business away from
its competitors. This could lead to increased profits and it may result in the
business being a key player in the industry
● Market growth:
○ Market size- the total sales of all firms in a market. Market size represents the
total sales made by all businesses in a given market. Market size can be
measured by value or volume
○ Market growth- the percentage change in the total market size over a period of
time. Market growth is the increase in the number of consumers who buy a good
or service
○ Calculating market size:
 ■
○ Calculating market growth:
𝑚𝑎𝑟𝑘𝑒𝑡 𝑠𝑖𝑧𝑒 (𝑠𝑒𝑐𝑜𝑛𝑑 𝑦𝑒𝑎𝑟) − 𝑚𝑎𝑟𝑘𝑒𝑡 𝑠𝑖𝑧𝑒 (𝑓𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟)
■ 𝑚𝑎𝑟𝑘𝑒𝑡 𝑔𝑟𝑜𝑤𝑡ℎ 𝑝𝑒𝑟𝑐𝑒𝑛𝑡𝑎𝑔𝑒 = 𝑚𝑎𝑟𝑘𝑒𝑡 𝑠𝑖𝑧𝑒 (𝑓𝑖𝑟𝑠𝑡 𝑦𝑒𝑎𝑟)
× 100
● Importance of market share and market leadership:
○ Market share- the percentage of one firms share of the total sales in the market
○ Market leader- a firm with the largest market share in a given market
○ Market share importance:
■ Does not directly indicate profitability but offers insights into revenues,
growth and profit margins
■ Economies of scale:
● Decrease in average production costs with increased scale of
operation
● Bigger firms can serve more consumers in a cost efficient manner
■ Cost efficiency and profit margins:
● Larger firms can secure greater discounts through larger
wholesale orders
● Even if selling at the same price, higher market share and
economies of scale lead to higher profit margins
■ Competitive advantage:
● Larger firms, with higher profit margin, become stronger in the
market
● Can offer more promotions, attracting new consumers and driving
market share higher
■ Compounding effect:
 ● Larger firms operate more efficiently in providing goods or
services
● Efficient operations contribute to capturing more market share,
creating a reinforcing cycle
■ Driving force for growth:
● Firms with a compounding effect use market share as a driving
force
● Efficiency in providing goods or services contributes to capturing
and retaining market share
■ Important things to consider when calculating market share:
● Different results may be obtained, as it can be measured either by
volume or value
● Changes in the time period and market can influence market
share results
● The type of products included may also influence the calculation of
market share
■ Significance of measuring market share:
● Indicates if a firm is a market leader
● Market leader- firm with the largest market share in a specific
industry
■ Market leaders influence:
● Dominance allows the market leader to influence competitors
● Influence extends to areas like winning over consumers, pricing
decisions, distribution coverage, etc
■ Internet age impact:
● The internet age provides significant opportunities for businesses
to become market leaders
○ Benefits of being a market leader:
■ The market leader often has first mover advantage in new markets
■ The market leader enjoys increased sales revenue that translates to
higher profits
■ The business is able to gain economies of scale
■ The market leader could also be the brand leader (providing the product
with the highest market share), the leading brand can act as a good
promotional tool for consumers who would like to be associated with
popular brands
■ Market leaders manage to attract the highest quality development
partners and adopt innovative technologies and processes which help
them continue to outperform their competition
Chapter 4.2- Marketing planning
● The role of marketing planning:
○ Marketing planning- the process of formulating marketing objectives and
devising appropriate marketing strategies to meet those objectives
○ Marketing plan- a detailed document about the marketing strategies that are
developed in order to achieve an organisations marketing objectives
○ Marketing departments need to plan adequately and prepare themselves to face
the competition in the market
○ Marketing plan includes the following:
■ Marketing objectives- must be SMART. For example, increasing sales
by 6% in the next year
■ Key strategic plans- steps that provide an overview of how the
marketing objectives will be achieved. For example, plans on how to sell
new products in existing markets
■ Detailed marketing actions- providing information on the specific
marketing activities that are to be carried out. For example, which pricing
strategies to be used and how products will be distributed
■ Marketing budget- including the finance required to fund the overall
marketing strategy
○ Benefits of marketing planning:
■ Marketing planning helps a firm to identify potential problems and seek
solutions to them
■ Setting SMART objectives improves the chance of success for a firms
marketing strategy
■ Sharing the marketing plan with other business departments improves
coordination and provides the whole organisation with a clearer
picture or sense of where it is heading
■ Devising a marketing budget ensures that resources are not wasted on
unprofitable activities
■ A clearly spelled out plan could improve employees motivation and
inspire confidence about the organisations future
○ Limitations of marketing planning:
■ Marketing plans may become outdated if organisations are not quick to
consider changes in market conditions
■ The process may consume considerable resources in terms of time,
expertise and money in designing the plans
■ Failure to prioritise marketing objectives may make it difficult for firms to
tell whether they are meeting them
● Segmentation, targeting and position:
○ Market segment- a subgroup of consumers with similar characteristics in a given
market
○ Market segmentation- the process of dividing the market into distinct groups of
consumers so as to meet their desired needs and wants
○ Ways to segment markets:
 ■ Demographic segmentation- this considers the varying characteristics
of the human population in a market. Includes:
● Age
● Gender
● Religion
● Family characteristics
● Ethnic groupings
■ Geographic segmentation- this is where the market is divided into
different geographical sectors and considers factors including:
● Regions in a country where consumers reside
● Climatic conditions
■ Psychographic segmentation- this divides the market based on peoples
lifestyle choices or personality characteristics. Such as:
● Social and economic status
● Values
○ Advantages of segmentation:
■ Segmentation helps businesses to identify existing gaps and new
opportunities in domestic and international markets
■ Designing products for a specific group of consumers can increase sales
and hence profitability
■ Segmentation minimises the waste of resources by businesses through
identifying the right consumers for their products
■ By differentiating their products, businesses can diversify and spread
their risks in the market and so increase market share
○ Disadvantages of segmentation:
■ However, market segmentation can be expensive in terms of research
and development, production, and promotion, as a firm attempts to reach
a large segment of actual and potential consumers.
○ Targeting:
■ Target market- a group of consumers with common needs or wants that
a business decides to serve or sell to
■ Targeting - the process of marketing to a specific market segment
■ Mass market- a large or broad market that ignores specific market
segments
■ Targeting strategies:
● Mass marketing- a strategy where a firm ignores the differences
in the specific market segments and targets the entire market.
Businesses consider the common needs or wants of consumers in
the market and aim to sell their products to many customers in
order to maximise their sales
● Segmented marketing- a strategy that targets several market
segments and develops appropriate marketing mixes for each of
these segments. Firms can gain a stronger position in each of
their segments, thereby increasing sales and market share
 ● Niche marketing- a strategy that appeals to smaller and more
specific market segments. It is a good strategy for smaller firms
that have limited resources. These small firms can serve niche
markets where there are few competitors and take advantage of
opportunities that have been overlooked by larger firms. Targeting
specific consumers in these segments enables businesses to
market their products more efficiently and effectively
■ Niche market- a narrow, smaller or more specific market segment
■ Consumer profile- the characteristics of consumers of a particular
product in different markets based on their gender, age and income levels
among other characteristics
● Positioning:
○ Product positioning- involves analysing how consumers define or perceive a
product compared to other products in the market
○ Product position map/perception map- a visual representation of how
consumers perceive a product in relation to other competing products

○
○ Marketers identify crucial product features, like quality, price and image. Then the
firm selects key features to shape its positioning strategy. Lastly, the desired
position is communicated to target customers using the marketing mix
○ Importance of a position map:
■ Can help a firm to establish who its close competitors or threats are in the
market
■ Helps to identify important gaps or opportunities in the market that the
firm could fill by creating or offering new products
■ Simple and quick way of presenting usually sophisticated research data
■ Helps a firm in targeting specific market segments to best satisfy
consumer needs and wants
● Difference between niche and mass market:
○ Niche market:
■ Niche market targets a small group with aligned interests
 ■ Emphasises establishing niche appeal for products or services
■ Specialisation within a broader industry
■ Aims to capture a moderate number of buyers in the market
■ Focus on understanding and targeting a specific consumer group
○ Mass market:
■ Mass market targets a large or broad audience
■ Strategy involves communicating to the largest possible audience
■ Utilises mass communication channels, such as TV commercials
■ Focuses on capturing a wide customer base to find the highest number of
potential customers
■ Organisations can transition from niche market success to targeting a
mass market
● USP:
○ USP- a products feature that differentiates it from other competing products in the
market
○ Importance of having a USP:
■ Helps to establish a firms competitive advantage in its product offering
and helps to attract more customers
■ Leads to customer loyalty as customers can identify something special
about the product in comparison to rival products
■ Leads to improved revenue as customers buy a product or service that
best meets their needs. Some customers can pay top prices for a
reputable brand that they view as being high quality
■ Makes the product or service easy to sell. Sale representatives who see
value in the product or even use the product will find it easier to
passionately and persuasively sell the product to customers
● How organisations differentiate themselves and their products from competitors:
○ Product differentiation:
■ Product differentiation refers to the physical or perceived distinctions
in a product
■ It includes features like durability, performance and reliability
■ Marketers often focus on this type of differentiation to attract customers
■ It can be a short term strategy as innovations may be easily replicated
■ Intellectual property rights like patents and copyrights may not always
provide effective protection
■ Some businesses avoid patenting to keep their product details
confidential, though patents offer protection during their lifespan
■ Without protection, competitors with capital can swiftly replicate a similar
product
○ Service differentiation:
■ Differentiation extends beyond the product to encompass customer
service, delivery and related business elements like installation and
training
 ■ Some organisations may overlook the importance of service
differentiation, viewing it as a straightforward aspect of business without
requiring sophistication
○ Price differentiation:
■ Successful price differentiation acknowledges that each customer is
willing to pay a different price for a product
■ Business can maximise revenue by offering a differentiated product at
varying prices in different market segments
■ In price differentiation, the value of goods is subjective, varying by
consumer, use and operating environment
■ Negotiation often plays a role and some customers are willing to pay
more than the market price for a product or service
○ Distribution differentiation:
■ The distribution channel or path a product takes to reach consumers
serves as an effective means of differentiation
■ Differentiation can be achieved through immediate access to expertise,
easy ordering or high levels of technical service
■ In an unequal market with diverse consumer demands, distribution is
crucial for reaching end consumers
■ A strong distributor manufacturer relationship can be challenging for
competitors to duplicate, making it time consuming and costly
○ Relationship differentiation:
■ Differentiation through personnel involves employees or team
members with customer interactions
■ These individuals are crucial for daily communication with customers,
serving as a vital link between the product and the customer
■ A broken link can lead to business failure, emphasising the importance of
this connection
■ A close relationship between personnel and customers fosters trust,
enhancing overall business performance
■ While closely related to service differentiation, this type primarily
focuses on the people aspect, establishing a unique position for the
organisation
■ Building such relationships takes time but results in a highly
differentiated position for the organisation
○ Image/reputation differentiation:
■ Corporate image is often the result of various differentiators like high
product quality, excellent service or superior performance
■ Communication with customers plays a vital role in shaping and
managing this image
■ New entrants may struggle to establish themselves in markets
dominated by businesses with strong and reputable images
■ A brand alone doesn’t automatically differentiate an organisation- it must
stand for something, be recognised by the target audience and
communicate a unique value
■ Successful brand differentiation requires a significant marketing
budget for effective communication
Chapter 4.3- Sales forecasting:
● Introduction:
○ Sales forecasting- the process of predicting the future sales of a firm
○ It uses quantitative methods to estimate the future sales levels and trends over a
specified period of time
○ Helps in the management of stock and cash flow, and ensures better planning for
growth
○ However can still be affected by numerous external factors
● Sales forecasting terminology:
○ Time series analysis:
■ A quantitative sales forecasting method that predicts future sales levels
from past sales data
■ Key aspects that need to be identified:
● Trend- this is the visible pattern seen after inputting the past sales
data. It can indicate the rise and fall of sales over a given period
● Seasonal fluctuations- these are changes in demand due to
varying seasons in the year. Usually repeated and occur within
one year or less
● Cyclical fluctuations- these are variations tied to the business
cycle in an economy. Can extend for more than one year
● Random fluctuations- these are notable changes or fluctuations
that stand out from a given trend. Unpredictable and can occur at
any time
● Moving averages:
○ Moving average:
■ Sales forecasting method that identifies and emphasises the direction of a
trend

■
 ■
○ Extrapolation:
■ An extension of a trend line to predict future sales

■
○ Variance:
■ Difference between actual sales and trend values

■
○ Benefits of sales forecasting:
■ Alignment of an organisation strategy for better results- when sales
forecasting aligns with an organisation's strategy, it enables the right
resources to be allocated at the right time
■ Better cash-flow management- by considering cyclical, seasonal and
variation factors, financial managers can better plan to improve liquidity
position of the business
■ Increased efficiency- sales forecasting helps the production department
to know the number of goods to produce and to plan for stock required
in the future
 ■ Better workforce planning- accurate sales forecasting can help the HR
department in succession planning regarding the number of staff required
in the future
■ Improved marketing planning- marketers will gain greater awareness of
future trends and be able to adjust their marketing strategies accordingly
to increase their market share
○ Limitations of sale forecasting:
■ Time consuming- takes a long time to calculate because of its complex
nature, especially when considering the calculation of average seasonal
variations in each quarter over a number of years
■ Ignores qualitative external factors- STEEPLE factors can influence
the accuracy of sales forecast prediction
■ The entry of competitors into a market may be unforeseen- this can
significantly change an organisations dynamic and influence its sales
position
■ May be based on present technology- technology may be rendered
obsolete due to technological progress. Hence, products which may
currently be enjoying good sales may lose their market to products made
with latest technology