Marketing - An Introduction
MARKETING
MARKETING- AN INTRODUCTION
* MARKETING is the management process involved in identifying, anticipating and satisfying consumer requirements profitably.
* Remember that marketing is not simply advertising or selling, in fact 'selling' or 'Advertising' are just one of the many marketing aspects or functions.
* Marketing is a process. It does not have a start or and end but is ongoing all the time.
* It is not just a series of activities, but 'a way of thinking' about how to satisfy consumer needs in a way that it would be profitable to the business.
* It affects all aspects of the business, such as the production department, the personnel, as well as any pricing decisions that would have to be made.
* Lastly since consumers are vital to the business, finding out what they need or want through marketing research is very important. Subsequently, businesses are more and more involved in building relationships with consumers (relationship marketing) to create a loyalty towards the company. For ex. Tesco strongly stresses on this.
IMPORTANCE OF MARKETING TO A BUSINESS- A BRIEF
* Economic growth has led to an increase in demand for products and services. Therefore if the business wants to gain a share in the growing market and increase profitability, it MUST insure a successful marketing strategy.
* Rapid changes in fashions, tastes, lifestyles means that businesses must ANTICIPATE and respond to these changes. For ex. Toy manufacturers try to foresee the next 'craze' that would come up (shorter life cycles).
* Changes in technology mean that marketing and production departments now have to work closely together to anticipate new opportunities that may arise. For ex. Marketing media now used by firms include electronic billboards or satellite TV.
* Competition is nothing new but the scale of it is. For ex. Japanese goods have become very competitive in UK markets. This means that expenditure on marketing has to increase.
PRODUCT ORIENTATION
* A Product oriented business means that it focuses on the production process and the product itself. They assume that the products will self itself.
* Take the ex. Of the Concorde aircraft project. It was an absolutely new invention, and the developers assumed that the aircraft would sell itself. However this was not the case, because although the project was technically a success, its failure to take into account the needs of the market meant that it was not a commercial success.
* Product oriented businesses thus place their emphasis on developing the product, and then selling it without much contact with the consumers.
* A 'Pure research' has to be carried out in contrast to an 'Applied research'. A pure research is one where the researcher does not have a specific end product in mind. An applied research is when the search is based on a particular goal or purpose.
MARKET ORIENTATION
* A market oriented business is one that is 'led by the market' i.e. the starting point is the market itself and consumer needs and wants are central to the business's decision making.
* For ex. The Sony Walkman is a product developed in response to the wishes of the consumers.
* In COMPARISON to a product oriented business a market-oriented business can:
(a) Respond more quickly to changes in the market.
(b) Will be in a stronger position to meet the challenge of competition.
(c) More chances of a successful product commercially.
* Market oriented businesses make what they can sell; where as product oriented businesses try to sell what they make. Similarly while in market orientation plans are determined by customer needs, product oriented businesses are of the attitude that consumers should be "glad that we exist" :)
* Lastly market oriented businesses must produce the right product at the right price and in the right place and it must let the consumers know that it is available. This is known as the marketing mix.
FACTORS AFFECTING CHOICE OF ORIENTATION
* Whether a business will be market oriented or product oriented will depend on a number of factors such as:
(a) The nature of the product: if it is working in an innovative market, like pharmaceuticals or electronics, it must innovate to survive.
(b) The objectives of the business and its policy: where objectives are to increase market share or turnover, the emphasis would be on marketing.
(c) The nature and size of the market: in a small competitive market a business is likely to take into account consumer needs.
(d) The degree of competition: competitive markets are likely to spend more on marketing for fear of losing their share of the market.
ASSET-BASED MARKETING
* Asset based marketing is where a business develops those goods or services that make the best use of its major strengths or assets i.e. concentrating on what the business is 'good at' while still taking into account the needs of the market.
* For ex. Producing new products that are related to successful existing products. (Ice cream versions of best selling chocolate bars like mars or bounty: P)
SALES ORIENTED MARKETING
* Sales oriented businesses focus on simply increasing the number of sales, even if by doing so it hampers consumer satisfaction. For ex. The sale of Mobile phones such as the 'Ufone' at really low prices.
* The business hires sales persons that are paid a commission on every sale that they make. Consequently the sales persons are interested in making the largest amount of sales irrespective of consumer satisfaction.
MARKET RESEARCH
> Marketing research can be defined as the collection, collation and analysis of data relating to the marketing and consumption of goods and services. For ex. This data may include whether or not there is a NEED for a product, the style shape form that it should have, the functions it should provide etc.
> This data would be used:
(a) To identify what is happening in the market (descriptive reasons)
(b) To predict what may happen in the future (predictive reasons)
(c) To explain a variety of matters or problems ...
This is a preview of the whole essay
MARKET RESEARCH
> Marketing research can be defined as the collection, collation and analysis of data relating to the marketing and consumption of goods and services. For ex. This data may include whether or not there is a NEED for a product, the style shape form that it should have, the functions it should provide etc.
> This data would be used:
(a) To identify what is happening in the market (descriptive reasons)
(b) To predict what may happen in the future (predictive reasons)
(c) To explain a variety of matters or problems linked to its marketing (explanatory reasons)
(d) To investigate and explore any new opportunities in a market (exploratory reasons)
> There are two types of marketing research that a business may opt for:
1. DESK RESEARCH 2. FIELD RESEARCH
DESK RESEARCH
> Involves the use of secondary data. This is information, which already exists in some form. There are internal and external sources of secondary data.
> INTERNAL SOURCES would be:
(a) Existing market research reports,
(b) Reports from sales representatives who are in direct contact with customers,
(c) Annual report and accounts published by the business,
(d) Internet data where businesses plan websites that give up to date information,
(e) Stock movements provide the most up to date information on patterns of demand in the market. This is because as apposed to sales figures, they are recorded instantly.
> EXTERNAL SOURCES would include:
(a) Information from competitors: in the form of promotional material, price lists etc.
(b) Data from customer services or complaints,
(c) Retail audits: Epos (electronic points of sale) record instant sales in retail outlets. This provides the business with a continuous monitoring of their performance in the market. For ex. Weekly music charts.
(d) Government publications such as 'social trends',
(e) International publications published by organizations such as the World Bank or the IMF.
(f) General or commercial publications such as newspapers and magazines,
(g) And lastly research centers.
> The main advantage of secondary data is that it has already been collected and is therefore available at very little or no cost. It is quicker to obtain and it is usually easier for firms to establish trends.
> However the main disadvantage is that the data is not in the form that the business may require, since it has been collected for a different purpose. So it has to be adapted by the business before it can be made useful.
FIELD RESEARCH
> Involves collecting Primary data. This is information, which does not already exist. The research can be carried out by the firm itself or by a market research agency.
> The main advantage is that the firm, which initially collects it, will be the only organization with access to it. This means that it will have marketing advantages over its rival firms. Also since it is for their own purpose it will be in a form the firm would want.
> The main disadvantage of field research is that it is extremely expensive and requires specialist researchers. It is consequently very time consuming also.
> METHODS OF A FIELD RESEARCH:
(a) Questionnaires
(b) Personal interviews
(c) Telephone interviews
(d) Postal surveys
(e) Observation
(f) Use of technology
(g) Focus groups
(h) Consumer panels
(i) Test marketing
QUESTIONNAIRES:
> Personal interviews, telephone interviews and postal surveys all involve the use of questionnaires.
> There are certain considerations that have to be made while designing the questionnaire.
(a) A balance between close and open questions: close questions are specific, for ex. "How many products have u brought in the last month', they only allow the interviewee a limited range of responses. Open questions allow a larger scope of responses and give room to suggestions and strategies for improvement. For ex. "Suggest how the product could be improved".
(b) The clarity of questions: the questions should be very clear and not ambiguous and confusing. Technical language should not be used.
(c) The use of leading questions: leading questions are those, which encourage a particular answer. For ex. A researcher investigating the soft drinks market should avoid the question "Do you think Diet Pepsi is never than Diet Coke?" a better questions would be "Which brand diet cola do you prefer- Pepsi or Coke?"
(d) Initially clarify the purpose of the enquiry and then follow a logical sequence in questions. Avoid questions on topics which respondents would be reluctant to answer or which tax the memory too much. Lastly introduce some control questions perhaps.
PERSONAL INTERVIEWS:
> This involves interviewer obtaining information from one person at a time, face-to-face.
> The advantages are:
(a) The method is flexible,
(b) Visual material and observation of reactions is possible,
(c) Allows interviewee a chance to give detailed responses and there is time and scope for answers to be discussed,
(d) Difficult questions can be explained by the interviewer,
> The disadvantages are:
(a) Very time consuming
(b) Rely on the skill of the interviewer: the interviewer may be biased and may influence the responses of the interviewees by appearing negative
(c) Respondent can also be biased, e.g. false answers given to impress the interviewer.
(d) It is difficult to sample a scattered population.
TELEPHONE INTERVIEWS:
> This method allows interviews to be held over the telephone.
> Advantages are:
(a) Cheaper than personal interviews
(b) Allows a wide geographical area to be covered
> Disadvantages are:
(a) Often distrusted by the people
(b) It is only possible to ask short or closed questions
(c) Biased because it excludes those without phones or not in the directory.
POSTAL SURVEY:
> Involves the use of questionnaires sent to consumers through post.
> Advantages are:
(a) Relatively cheap
(b) No interviewer biased
(c) A wide geographical area can be covered
> Disadvantages are:
(a) The response rate is very poor and responses can be delayed.
(b) Questions have to be short, so detailed questioning is not possible.
(c) Questionnaires have to be exceptionally well designed and easy to understand.
OBSERVATION:
> Observation involves 'watching' consumers in retail stores.
> Observers look out for the amount of time consumers spend making decisions or how readily they notice a particular display.
> Advantages are:
(a) A tremendous number of consumers can be surveyed in a relatively short span of time.
(b) Relatively very cheap
> Disadvantage is:
(a) Observation alone leaves many questions unanswered. For ex. It may reveal that a particular display at a retail outlet is unpopular but provide no clues as to why this is the case.
USE OF TECHONOLOGY:
> Technology has developed many new ways in which businesses can carry out marketing research.
(a) Information is gathered from electronic points of sale (Epos) which give details of items brought, the time as well as the date of purchase.
(b) Video installation in retail stores: some even count the number of customers entering a shop and some differentiate between adults, children and pushchairs!
(c) Interactive methods: consumers may be able to express their views through Internet websites.
(d) Credit cards or loyalty cards could indicate spending patterns of consumers.
FOCUS GROUPS:
> This involves a group of consumers being brought together on one or a number of occasions. They are asked to answer and discuss questions that are prepared by market researchers. This group is thought to be a representative of all the customers of the business.
> Advantages are:
(a) Relatively cheap
(b) An easy, simple way of gathering information
> Disadvantage is:
(a) The views of a small number of customers may not reflect the views of the entire market the business is interested in.
CONSUMER PANELS:
> This involves a group of consumers being consulted on their reactions to a product over a period of time. TV companies widely use consumer panels to access consumer reactions to new programs.
> Advantages are:
(a) Panel members know the procedure and so time is saved,
(b) Consumer panels can be used to consider how consumer reaction changes over time.
(c) Consequently a picture of consumer trends can be build.
> Disadvantages are:
(a) Panel members tend to be atypical
(b) Panel sophistication can develop
(c) It is both difficult and expensive to choose and keep a panel available for research over a long period.
TEST MARKETING:
> Involves selling a product in a restricted section of the market in order to assess consumer reaction to it before making it available to the entire market.
> SAMPLING:
> The most accurate way to do the research would be to carry out the survey of every single potential consumer of a firm's product and is known as the 'Population'. This survey is called a 'consensus'. This is of course, impractical, expensive, and time consuming.
> Thus a 'Sample' of the population is taken. This sample group is made up of consumers that are thought to be representatives of the entire potential buyer's of the product (the population). This reduces costs, saves time, and requires fewer resources.
> First of all a business needs a 'sample frame' - a list of people from which the sample will be chosen.
> The sampling methods (the way in which people are selected) can be divided broadly into two categories:
RANDOM OR QUASI RANDOM METHODS: NON RANDOM METHODS:
(a) Simple random sample (a) Quota sample
(b) Systematic sample (b) Cluster sample
(c) Route random sample (c) Multi stage sample
(d) Stratified sample (d) Snowballing
SIMPLE RANDOM SAMPLE:
> The sample is selected at random, rather like picking numbers out of a hat. In this way each member of the group has an equal chance of being chosen.
> The main advantage is that bias cannot be introduced when choosing the sample. However, firstly, it assumes that all members are homogenous and secondly, it requires an up to date list of the whole population, which would be very costly and time consuming.
SYSTEMATIC SAMPLE:
> This involves choosing a starting point in a sample frame and then selecting every nth item thereafter. For ex. Choosing every tenth or twentieth name on a list.
> This is not fully random and will produce bias if there is a regular recurring pattern in the frame.
STRATIFIED RANDOM SAMPLE:
> With this method the population is divided into segments or sub-groups, 'strata's'. A random sample is then chosen from each of these groups making sure that there were the same proportions of the sample in each category as in the population as a whole. Say if the population had 10% lower class females, so would the sample.
> This method is seen as quasi-random.
QUOTA SAMPLE:
> Like a stratified sample this method involves dividing the population into a number of groups, which share specific characteristics. This may be based on the age, sex, and income of the population.
> Unlike stratified sampling the selection of individuals from each group is made on a non-random bases. In this case, interviewers are given targets for the number of people out of each segment who they must interview. For ex. An interviewer may be asked to interview 10 males between the age of 20 and 30. Once this target is reached, no more people are interviewed from that group.
> The quota method is relatively quick and cheaper to operate and can be used when a sample frame is not available. However, results from quota sampling are not statistically representative of the population and are not randomly chosen.
CLUSTER SAMPLE:
> This involves making a random selection from a frame listing not individuals but groups of individuals called 'clusters'-usually in different geographical areas.
> This method is used when the population is widely dispersed and a full sample frame is not available. It is also used when survey results need to be found quickly such as opinion polls.
MULTI STAGE SAMPLE:
> This involves selecting one sample from another sample-so that a series of samples are taken at successive stages, e.g. a region, then a town, then a suburb, and then a street.
> It is used when groups selected in a cluster sample are too large, with the result that a sub-sample has to be selected from each group.
SNOWBALLING:
> This is a highly specialized method of sampling. It involves starting the process of sampling with one individual or group, and then using their personal contacts to develop more and more-hence the snowball effect.
> One must realize that samples built up by snowballing cannot be representative of the population. Therefore they are only used when no other method is possible! Firms engaged in producing highly specialized one off products might use this method for a very limited range of consumers.
THE RESEARCH PROCESS
> The first step towards market research is identifying a research objective; clarifying what type of information, for what reason, and why it is required. Therefore the research project begins with a statement of research objectives.
> Before a business collects primary data by undertaking expensive field research, it should first review secondary data by means of desk research.
If it opts for field research, it should then chose the method or technique for collection of primary data. In making this choice consideration should be given to relative costs, the type pf people to be investigated, and the degree of accuracy required. Naturally there is no point in undertaking research if the costs exceed the benefits to the firm.
> The third step is to decide on the details of the research technique opted. For ex. The formulation of questionnaires or deciding on sampling methods etc.
> Fourthly once the data is collected it has to be analyzed, interpreted, and evaluated.
> The final part of the research project consists of recommending the strategy to be pursued in relation to the product and the marketing effort.
PROBLEMS OF MARKET RESEARCH
> If marketing research were totally dependable, this would mean that products launched onto the market would never fail! In reality, 90% of all products fail after they have been initially launched. Some of this, no doubt, can be put down to a lack of, or inadequate market research. However, a number of businesses have conducted extensive market research and still have launched products, which eventually fail. For ex. When coca cola launched 'New Coke' onto the market, research suggested it would be a huge success. In practice, 'New Cole' was quickly withdrawn from the shops!
> PRIMARY DATA: there are a number of reasons why field research does not always provide reliable information to businesses.
(a) All HUMAN BEHAVIOR is unpredictable. Therefore the responses of consumers who participate in the collection of primary data may chance from time to time.
(b) SAMPLING ERROR refers to the difference between the estimated statistic obtained from the sample and the true figure of the population. Sampling errors, which arise because of the failure of the sample to accurately represent the population from which it is chose, are caused by:
(I) The use of an incomplete or out of date sampling frame,
(II) Sampling discrepancies: The results from the sample may be different from those obtained if the whole population had been questioned.
(III) The sample is not large enough (statistical bias).
(IV) The method of sample that is chosen; random sampling introduces little or no bias because each member of the population has an equal chance of being selected.
(V) Non-responses from those chosen.
(c) NON SAMPLING ERRORS are caused not by the process of sampling but by the design of the survey and in the way it is carried out. Discrepancies can be caused by:
(I) The construction of questionnaires has to be done very carefully.
(II) The behavior of interviewers can affect the outcome of interviews.
(III) Data collation and presentation can affect the final conclusions.
(IV) Date analysis (e.g. confusing cause and effect).
> SECONDARY DATA: Businesses must also be careful when using secondary data. Firstly the data has to be correctly adapted for the use of the business. Secondly, external and internal business publications become out of date almost as soon as they go into print! In today's fast changing markets this can greatly reduce the reliability of data. Also there could be problems of interpretation, or the coverage may be inappropriate.
BENEFITS OF MARKET RESEARCH
> An aid to decision making- marketing research allows a business to make more informed decisions, especially in fast changing markets of today.
> Reducing risk- businesses are less likely to waste resources on failed activities if careful market research is carried out. Although the reliability of market research cannot be guaranteed, as we discussed earlier, it does reduce chances of failure and risk.
> Links with the outside world- businesses do not operate in a vacuum. Without market research they would have no way of finding out what consumers want, their reaction to particular products, and future trends and tastes of the market.
> To become more competitive- as markets become ever larger and competition is poured in, marketing research becomes even more important. Businesses need to find out the large differences in tastes of millions of consumers and the activities of their competitors.
> Public relations- carrying out market research may be good for the image of the business. Consumers may feel that their views are being considered. This may lead to corporate brand loyalty.
MARKET SEGMENTATION AND CONSUMER BEHAVIOR
* Breaking down the market into sub-groups with similar characteristics is known as Market Segmentation. A business can then target these groups and develop products and services for each of them.
* SEGMENTATION BY AGE: examples include marketing for financial services for older people, development of retirement housing.
* SEGMENTATION BY GENDER: examples include car producers have targeted women in their promotional campaigns, manufacturer of perfumes, designer brands like Armani and saint Laurent as well as many sports companies.
* SEGMENTATION BY SOCIAL CLASS: classes are usually based on employment status and conditions. This division is usually used in government reports and surveys. Examples include restaurants, leisure activities, and holiday packages.
* SEGMENTATION BY ETHNIC GROUPS: Markets can be segmented by country of origin or ethnic grouping. Examples include books, food, television programs, and clothes.
* SEGMENTATION BY FAMILY CHARACTERISTICS: examples include newspapers, like The Guardian aimed at labor or liberal democrat voters.
* SEGEMENTATION BY GEOGRAPHICAL REGION: examples include sports products, and extreme sports such as ski boarding, and clothing.
USES OF MARKET SEGMENTATION
* It is hoped that segmentation would help gain greater knowledge about customers and their needs.
* It allows firms to target particular groups with particular products.
* It helps to prevent promotion of products to the wrong people, which would lead to a waste of resources.
* Identification of these groups is important for creating brands and understanding why brand switching occurs.
* Eventually it is hoped that the information would allow greater demand overall and perhaps increased profitability.
TARGETING THE MARKET
* As I just mentioned that one of the uses of segmentation is that it allows firms to target particular groups. That is precisely what we are going to discuss now. Hmm...
* Should the firm target a particular segment or attempt to sell to all consumers? Three segmentation strategies can be identified.
* UNDIFFERENTIATED MARKETING: is like a shotgun with most of the 'shot' going astray! It ignores the existence of segments and offers a single mix to the heterogeneous market. This failure to target is likely to result in disappointing sales! However this strategy is likely to suit those products, which cannot easily be differentiated amongst groups of people. For ex. Milk was previously marketed in an undifferentiated way. Today, milk is differentiated according to its fat level; skimmed, semi-skimmed as well as the sources it comes from, cows, goats and Soya.
* In CONCENTRATED MARKETING a particular segment is targeted. The marketing mix is in absolute accordance with that particular segment. Like a high-powered rifle the product is not available to people outside the target segment. OR in other cases the product is available to all, even though firms expect only its target group to purchase the goods (usually in the case of small firms).
* In DIFFERENTIATED MARKETING a separate marketing mix is developed for each segment of the market. For ex. Banks have different types of accounts designed for teenagers, students and others geared up to the needs of retired couples. This strategy is very costly and therefore only available to large firms.
The figure bellow depicts these three strategies:
TOTAL POPULATION WITH
POTENTIAL CUSTOMERS
FIRM UNREVEALED
"UNDIFFRENTIATED MARKETING"
TARGET SEGMENT
FIRM
"CONCENTRATED MARKETING"
SEGMENT A
FIRM SEGMENT B
SEGMENT C
"DIFFERENTIATED MARKETING"
NICHE MARKETING
* Involves
CHECK LIST
Marketing concept: (Product or market oriented businesses)
Market research and sampling
Segmentation and consumer behavior
Objectives
Marketing mix
Product
Pricing
Promotion
Placement
Marketing strategy or plan
International marketing
Sales forecasting
