Marketing and the competitive environment Effective marketing Marketing: identifying and meeting customer needs. Market: anyone willing and with the financial ability to buy a product or service. There are 2 main strands to successful marketing: Identifying customer needs. Meeting customer needs. Niche marketing: meeting the needs of a relatively small number of potential customers.
Advantages Disadvantages Ability to focus on the needs of individual customers and respond quickly to changes in their needs Degree of specialization makes niche marketing vulnerable to changes n the market conditions Thro return on marketing expenditure is often high because it can be so well targeted. May attract the interest of large, multi-national companies- small companies may find it difficult to compete. Little competition which makes it easier to gain market gain market share Sales levels may be relatively low which could cause problems if cost rise unexpectedly, and profit margins are squeezed.
May be possible to charge premium prices because of the lack of direct competition. Mass marketing: meeting the needs of a very large of potential customers. Advantages High sales, at low prices, mean cost are spread over a greater number of units. High profits will attract a lot of competitor’s until the market which can drive down process and reduce profit margins. As products are aimed at a large range of potential customers, it is likely that revenue will be regular, and cash flow problems are less likely. May be difficult to spot changes in customer needs because market is large, which could lead to loss in market share.
Very difficult for small or medium sized businesses to compete with small number of very large businesses. Which is best? This decision will depend upon the business. However, there is a growing body of evidence to suggest that due to the growth of e-commerce, it is now possible for niche-businesses to operate in the global market. Consumer marketing and business to business marketing Consumer marketing: Creating and delivering products to solve consumer’s needs. Typically have a large number of potential buyers and purchasing alternatives.
By airmails predict or forecast changes in consumer tastes or behavior. They must rely on statistics gained from a larger population to predict this behavior. Business marketing: serving the needs of a business or businesses within one or ore industries. BIB typically contain significantly fewer possible purchasing alternatives than consumer markets. Is marketing important? Effective marketing is always important. Any business must ensure that potential consumers are aware of the goods and/or services on offer, or they will not survive.
Marketing is effective if it achieves the goal of increasing customer awareness to the extent that they chose to become a customer of your business. Designing an effective marketing mix Marketing mix: the integration of product, place, promotion and pricing designed to achieve the racketing objectives of the business. 1. Product Refers to features and functions of the product or service being offered. If a product has a unique selling point, it means that one of the features or functions is not available anywhere else. The development of new products should be based on the market research of customer needs. . Promotion This concerns communication with the customers. A product could meet all the right needs, but if potential customers are unaware of its existence, it will not be bought. 3. Place Where the purchase can be made by the consumer. The growth of e-commerce is an increasing place to buy products. The development applies to both the consumer and business markets. 4. Price How much the customer is expected to pay for the products? Should give an indication of the value of the product, and it can be altered as demand for the product changes.
New, nonnative products are usually given a very high price to reflect their unique qualities, however new products launched into very competitive markets are given a low price to attract customers. Influences on the marketing mix Finance How much money does a firm need to spend on marketing. Just because small easiness marketing spends much lower amount of money on marketing budget than multinational business, does not mean that their marketing Is not effective, if the elements are used in a creative and innovative way, the impact on customers can be just as positive.
Market research Marketing mix should be based on identified needs of the customers which in turn should come from market research. It is also important for businesses to continue carrying out market research as their business grows. Needs of customer can change over time, and so the marketing mix may need to be adapted. Competitor actions The marketing mix shouldn’t be seen as something fixed. It can be used as the abs’s of a response to the actions of competitors in the market. Technology Place- e-commerce. This is useful for small businesses as cost are so low.
However, pricing strategies should also reflect technological change. Using the marketing mix: Product development: changing aspects of goods and services to meet the changing needs of existing customers or to target a different market. Product line: a set of related goods or services. Product mix: the full range of products offered by a business, also known as product oratorio. The product development process: Unique selling point: a feature or function of a product that makes it different to any other on the market.
Product differentiation: creating a perceived difference for a product in a competitive market. What factors influence product development? Advances in technology Actions of competitors The entrepreneurial skills of managers and owners. Product portfolio analysis: analyzing the existing product mix to help develop a balanced range of goods are services. A technique used to identify the position of every product in a firms portfolio within its market. Boston matrix – a method of analyzing the products in a firms portfolio based on relative market share and market growth.
The question mark/ problem child A new product with a small share of a growing market; high maintenance: needing relatively high levels of investment to become well established in the market; high failure rate but potential for future success. The rising star High share of growing market; high maintenance: marketing resources and effort should be concentrated on this type of product so that market share is maintained; fierce competition is likely. The cash cow gig share in low growth market; any increase in sales will be at the expense of a competitor; low maintenance; little marketing expenditure needed; relatively high profits.
The dog Low share of a declining market; may be kept going because they complete a product line; can possibly be declined. Portfolio 1. A question mark/ problem child helps to ensure the business is meeting the needs of the customers. Without new product development the firm could miss opportunities and lose market share. 2. A rising star real revenue earner. It brings new customers to the business, who may become loyal customers. However, it may still need a great deal of cast investment to remain competitive in the face of fierce competition. 3.
A cash cow can be ‘milked’ to provide the finance needed to pay for the marketing of question marks and rising stars. 4. The dog Is inevitable, although too many should be avoided. Drawbacks of using the Boston Matrix It is based on 2 assumptions that are flawed: Market share is the best way to measure the success of a product A fast growing market is the best quadrant to be in. Product life cycle -The path of a product from its introduction onto the market, to its eventual acceptance form that market. Why is the product life cycle significance?
Development stage- the product is being researched and prepared for introduction to the market. Introduction stage- being launched into the market. Lots of money being spent on product development and sales promotion, and as sales are low at this stage cash inflows are likely to be less that cash outflows. The growth stage- sales increase significantly, and product should achieve break-even. Issues at this stage are about maintaining expansion of sales. – The maturity stage- occurs when sales bevel off and revenue generated by the product stabilizes.
Customer loyalty has been achieved and else needs to be spent of promotion. Expenditure on product can be reduced. Decline- sales being to decline, and is most difficult stage to spot. Business can take one of 2 options at this stage: they can consider extension strategies where modifications are made to the product or service to meet the changing needs of by the business. Problems with the product life cycle – Hard to exactly say where the product is on the graph. -may react too quickly to the changes.
Using the marketing mix: promotion Promotion: brining a product to the attention of existing and potential customers. Promotional activities: the ways in which a business can communicate with its potential and existing customers with the aim of increasing sales. The range of promotional activities available to a business Sales promotion -offers designed in order to increase sales. These will hopefully lead to longer term loyalty. Direct selling – a way of selling directly to the final consumer without another intermediary.
This can be split into 2: Direct selling- usually made face-to-face; either where a product is demonstrated in he home or catalogue is left with the consumer Advantages: feature and functions of product can be explained fully; orders can be collected and delivered; feedback can be gathered. Disadvantages: expensive to maintain a sales team; some customers dislike ‘cold callers’. Direct mailing- Sending information about a product to potential customers through the post. Merchandising -the visual presentation of a product to the consumer at the point of sale. Advertising -the use of media to communicate with consumers. Is known as ‘above the line’ promotion, whereas all other types of promotion is ‘below he line’. -Advertising is categorized into 2 main types: – Persuasive: trying to convince consumers to buy the product. – Informative: increasing consumer awareness of a product, by providing details of its features. Public relations -communicating with the media and other interested arties to enhance the image of the business and its products, and thereby increase sales. Branding -Creating an identity for a business and is products to differentiate it from its rivals in the market.
The promotional mix The combination of promotional activities which make up a campaign to communicate with a target market. The combination chosen will depend on a number of factors: Cost: Many small businesses do not have enough money. Competitors: n/a Target market: any business should have a clear idea about what market they are aiming at. The product: Is it new? Then focus should be making people aware of it and so on. The market: n/a Using the marketing mix: Pricing Pricing strategies: long-term pricing plans which take into account the objectives of the business and the value associated with the product.
For Price skimming: entering a market with a high price to attract early adopters and recoup high development cost. Penetration pricing: below market pricing to gain a foothold in an established and competitive market. For example, existing product strategies Price leaders: a product that has significant market share and can influence the market price. Price takers: a firm which sets its prices at the same or similar level to those of the dominant firm in the industry. Pricing tactics: The manipulation of price to achieve a specific short-term objective.
For example, Loss leaders: products sold at less than cost to attract customers to a product range. Aim is to create interest and encourage customers to visit the shop/website. Psychological pricing: the use of odd number pricing to increase the value-for-money appeal off product. Influencing on pricing decisions Costs Competitors The market The target market Objectives of the business Sensitivity of demand to price changes Price elasticity of demand The responsiveness of demand for a product to a change in it price.
Price inelastic demand: the demand for a product changes relatively less that the change in price. Price elastic demand: the demand for a product changes relatively more that the change in price. What determines a products price elasticity of demand? The number of similar products available to consumers If there are many, PEED is likely to be elastic because a rise or fall in price will cause customers to switch form one supplier to another. How essential is the product? If it’s a necessity, or really addictive, customers will continue to buy the product even if the price changes.
So these products are price inelastic. Time will affect price elasticity. Brand or product? The demand for petrol is likely to be price inelastic due to the essential nature of the product. However, the demand for any one brand of petrol could be elastic if only nee company, shell for example, increased their prices. Car owners would quickly switch to other retailers. Using the marketing mix: Place Distribution channel: method by which a product is sold to the customer. Direct distribution Direct sale: where no intermediaries are used.
The development of e-commerce has made direct sales increasingly realistic option for many smaller firms as it can keep price that the consumer pays to the minimum. Intermediaries: organizations involved in the distribution of goods and services on Traditional distribution For many firms, whose customers are geographically dispersed or who need to educe the quantity sold into smaller units, intermediaries such as wholesalers, retailers and agents are used. Business to consumer markets: Companies meeting the needs of final consumers of goods and services.
Retail -This can be expensive form of distribution because the cost for premises and staff are higher than other alternatives. Mail order -Catalogues can give access to a greater number of potential customers or can be used to target a particular consumer group. Costs are low. Direct selling -Producer sells straight to the final consumer of the products, without intermediaries. Examples, door to door selling and telephone sales. Multi-channel -Business using more than one channel of distribution.
Business to business markets: Companies meeting HTH needs of other businesses in the market place. Direct sales -Very important in the business to business market because many products or services are high-value and complex. E-commerce -Growing interest and use of theses. Mail order -used particularly when a business has a wide range of product options for clients to choose from. Choosing appropriate outlets or distributors Factors influencing place decisions: Cost -Fixed and variable will to need be calculated and compared.
Many small businesses now distribute their products via the internet as the start-up and running cost are much lower. The target market – should always been consider, for example placing a clothes retail in a dodgy place for teenage grills, isn’t good. Control -control over the distribution process is also very important, and the more intermediaries a business uses, the less influence the original supplier may have. Volume of sales -If the business needs high volume to cover cost and achieve profit, there must be an appropriate distribution network in place.
Marketing and competitiveness Degree of competition: the number and size of businesses operating in a given market, be it local Key features Great competition regional, national or international. Less competition A few large firms dominate industry One dominant form- monopoly. Similar product Try to differentiate products Little consumer choice Price takers Price competition could lead to price wars Price maker Competition will force firms to be cost efficient High marketing and promotional spending May not have incentive to develop new products or services.
How do market conditions impact on the marketing mix? Market conditions: the nature of them product, the needs of consumers, the number of firms and the ease of entry to the market. Marketing mix MS: very competitive with many small to medium-sized firms MS: a few firms dominate MS: one firm control the market Product All products similar, firms must try to develop and differentiate goods and services to meet needs of particular customers. New product development, USPS, and extension strategies enable a Fri. to compete. No pressure on business to improve their products or innovate. Promotion
Don’t have much money to spend so need to find effective ways on how to attract customers to their business. Branding is very important, and firms will compete in order to establish brand loyalty. Concentrate on information advertising to consumers and public relations. Pricing Firms are price takers. Pricing can be very competitive. The largest of the dominant firms may be the price leaders. Pricing is not completive. Place Direct selling is becoming increasingly important. Technology will be used to great effect by large businesses with the resources to pay for latest expertise.
Channel of distribution will depend on market, but need to be convenient rather than competitive. The characteristics that permit a firm to compete effectively with other businesses. Methods of improving competitiveness: -Product, Promotion, Price and Place. Non-marketing methods: Reducing cost- If labor cost can be reduced, cheaper sources of raw materials found then the business can afford to charge a lower price. Quality- If the product/ service I good quality this can result in customer loyalty of repeat purchase. Staff training- Wider range of activities may be able to be offered.