Chapter 5– Marketing

Marketing is used to identify the needs and wants of the customer and satisfy the customer more
effectively than the competitors. It links the firm with its customers in order to get the right product,
sold at the right price, to the right place and at the right time. Effective marketing will allow business
to understand the needs of its customer and supply those needs profitably. It also constantly search
for new market opportunities.

Market-oriented (orientated) means the business focus on the identifying and meeting the needs
of the customer.

Product-oriented (orientated) means the business focus on the production process and the
product itself.

MARKETING - Putting the right product in the right place, at the right price, at
right time.

Marketing Mix consists of the 4 P’s which is Product, Price, Place and promotion. It can also include
People, Process and Physical Evidence. Marketing managers use this to satisfy customers in the target
Market.

Product - Identify and select the product to offer to potential customers and satisfy their needs.

Price - Set a price to sell the product. If the price is too high, a company may not achieve the sales
Volume target. If it set to low, volume targets may be achieved but no profit earned. Pricing is an
Important factor as it determines the revenue the company will generate.
Place – providing the product at a place which is convenient/easy for the customer to buy. Place is
using a distribution channel such as wholesalers, distributors, agent, internet and others to move
the goods from manufacturer to customer.

Promotion - This determines how the company use promotion to promote the benefits of the
its goods and services to the customers and boost up the sales. Some types of promotional
tools are personal selling, advertising in magazines, radio, TV and Newspaper, direct mail,
sponsorship, telephone selling and etc. Promotion is used to influence consumer opinions
and buying habits.

People – Staff who have contact with customers must not only be well trained but the right person for
the job. Staff must have a high level of customer service as customers cannot separate customer
from product. Example: waiting time and also helpfulness of staff is important. The level of after
sales support will add value to the product.

Process – the process of delivering product and service to the customer have an impact on what the
customer think of the company.

Physical Evidence – is the term used to describe the image of how the company portrays to the
customer Example: Building (design and lay-out), appearance of staff, car park for visitors, entrance
to office and etc. Physical Evidence is important for companies which offer services rather than
tangible products. A brochure can describe and give pictures of important elements of the
service product.
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PRICING

Cost-based Pricing – This takes the cost of producing any product or service and adds an amount
that we need to make a profit. This is usually expressed as a percentage of the cost.
It is generally more suited to businesses that deal with large volumes or which operate in
markets dominated by competition on price.

Demand-based pricing is a pricing method based on the intensity of demand rather than the costs
of production and distribution. It relies on being able to segment the market and apply price
discrimination. An example is air travel or hotel stay where during peak periods a higher price will
be charged and low price during a low season.

Competition-based pricing is a pricing method based on on the prices charged by competitors rather
than on costs and demand. The market usually has low product differentiation. All producers are
basically price takers e.g the market for petrol, pampers, soap powder and etc.

USP stand for Unique Selling Point. The USP should be based on the unique feature of the product
and that consumers perceive that it is better than your competitors. For example a sports car boasting
that it has the fastest acceleration.

Other examples such as Head and Shoulder shampoo gets rid of dandruff, Domino fresh pizza delivered
to your door in less than 30 minutes

Price skimming is setting a high price for a new product. The company sells fewer but more profitable
sales. The product quality and image must support the high price. Example Apple's i-phone and i-pad,
High Density Television, digital cameras and others. Computer industry will use price skimming as
the changing technology is very fast.

Market segmentation is the identification of portions of market which is different from one and
another. Segmentation allows the firms the satisfy the needs of its potential customer so that you
can effectively focus your marketing efforts to reach your potential clients. It is easier to reach your
clients if you understand their characteristic, what they have in common and what motivates them
to buy. The more you know about your customer the easier it is to market the products and services
to them and the better you can meet their needs.

Segmentation aims to match same groups of people with the same needs and buying behaviour.
Such group is known as segment.

Consumer markets can be segmented on the following customer characteristic:-

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Demographic

Demographic factors are as follows:-

Age - As people age their needs and wants also change and organisations have to develop products
aimed at the particular age group . Examples nappies for babies, toys for children and clothes for
teenager, curies holidays for the senior citizens.

Gender - Gender segmentation is commonly used within the cosmetic, magazine and clothing industry.
Generally males and females have different criteria when choosing a new car. A female might prefer
a smaller car

Family Size - small family are less likely to buy "economy" packs of products e.g soap powder or shampoo
Income - higher income demand for bungalows or high-end condos . Lower income demand for
cheaper houses
Occupation - Working class demand for working attire
Education - higher education demand for computers, i-phone / i-pad
Social class - higher status will buy branded and luxury goods

Socio-economic

A person’s occupation is often an good indicator of the products they are

likely to purchase.

Psychographic
Psychographic segmentation group customers according to lifestyle. Activities , interest and
opinion surveys are a tool for measuring lifestyle.
Include factors such as :-
Lifestyle - different lifestyles different needs such as sportswear for those who like sports
Attitudes - some prefer to buy organic foods
Benefits - Some may buy watch for telling time; whereas some treat it as a fashion accessory
Loyalty - some buyers stick with the same brand of product

Geodemographic (grouping of people in a geographical area)

Consumers in different areas display a different characrateristics and behaviour.

Geodemographic includes factors such as the following:-
Region - East, West, north , south, central, coastal, hilly
Density of area - Urban, semi-urban or rural
Country - size of country
Climate - hot ,cold , humid , rainy

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For example people in north and south of England have different beer preference. Another example
is different regions read different edition of newspaper. Burgers are made from lamb in India instead
of beef due to religious issues.

Situational bases for segmentation

An individual may seek an expensive meal at a restaurant on one occasion , but a faster business
lunch on another occasion.

Product Life Cycle

The product life cycle is a concept that all products have a life cycle of Introduction stage/birth, growth
maturity and decline.

SALES Maturity

Growth Decline

Introduction

In the Birth or Introduction stage the products is new to the market. Sales are often slow and there
is a high failure rate. Cash flow will be negative as money is spent on research and development,
market research, product launch, promotion and setting up the initial production line.
Potential customers for a new product maybe very few.

Growth stage - sales begin to increase and customers are aware of the products. As a result, Cash flow
improves and the business enjoy economies of scales due to higher output level. Machineries can start
to be used to greater capacity and individual employees will become more efficient at producing
larger quantities. Falling costs and rising revenue improve profitability and firm can start to reap
the benefits of economies of scale.

Maturity stage - Competitors may come in by launching similar product and slow down the growth
as the market becomes segmented by different brands. Stable share market and the product
provides a steady cash flow for the business.

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Decline stage - Sales will enter the decline phase of the life cycle where sales fall caused by changing
consumer tastes, new technology or introduction of new products.

Although most products will follow this simple pattern there will a great difference in the length of
each state and the total duration of the life cycle. Some products such as Cola-cola are still going
strong over 100 years after their birth. Fashion clothing normally lasts lee than one year.

Mass Marketing
Mass marketing is marketing a product to largest number of people possible. Mass marketing allows
economies of scale to be realised through mass production, mass distribution and mass communication.
It focuses on high sales and low prices. It aims to provide products and services that will appeal to
the whole market.
In mass marketing, products that many people want or need such as, toothpaste, bread and
household cleaners are advertised to a large audience.

Niche Marketing
Niche Marketing is a small segment of the bigger market; target a segment of the market that is
not targeted by other firms.

For instance, instead of offering cleaning services, a business might establish a niche market by
specializing in blind cleaning services or cleaning of high rise buildings windows.

Other examples are:

Wedding on a budget
How to house train you puppy

Why should you bother to establish a niche market?

Because of the great advantage of being alone there; other small businesses may not be aware
of your particular niche market, and large businesses won't want to bother with it.

Target Marketing

Target marketing is where the business aims at the group of customers and aim its marketing
efforts towards this group. These chosen segments are called the target markets. Target markets

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are defined in terms of age, sexual orientation, gender, economic class, religion, ethnicity, or
location/region.

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