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Old 21-06-2011, 06:03 PM
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Exclamation Marketing management notes complete


CHAPTER # 1
INTRODUCTION TO MARKETING






What is Marketing?




There are many different definitions of marketing. Consider some of the following alternative definitions:

“The all-embracing function that links the business with customer needs and wants in order to get the right product to the right place at the right time”

“The achievement of corporate goals through meeting and exceeding customer needs better than the competition”

“The management process that identifies, anticipates and supplies customer requirements efficiently and profitably”

“Marketing may be defined as a set of human activities directed at facilitating and consummating exchanges”


Which definition is right? In short, they all are. They all try to embody the essence of marketing:


• Marketing is about meeting the needs and wants of customers;
• Marketing is a business-wide function – it is not something that operates alone from other business activities;
• Marketing is about understanding customers and finding ways to provide products or services which customers demand



To help put things into context, you may find it helpful to often refer to the following diagram which summarises the key elements of marketing and their relationships:








Customers or Consumers?

A common question that arises when studying marketing is the following:
What is the difference between a customer and a consumer?
The following distinction should help:

A customer – purchases and pays for a product or service


A consumer – is the ultimate user of the product or service; the consumer may not have paid for the product or service


Consider the following example:


• A food manufacturing business makes own-label, Italian ready meals for the major supermarkets.
• So far as the business is concerned, the customer is the supermarket to whom it supplies meals
• The consumer is the individual who eats the meal
In terms of its marketing effort, who should the business above target?
In reality – it needs to understand the needs and wants of both the customer and the consumer.


It needs to develop a strong understanding of the needs of the supermarkets in terms of their requirements for ready meals (e.g. packaging, recipes, price & delivery).
It also needs to understand (perhaps with the help of the supermarkets) the needs and wants of the consumer. How are tastes changing? Are consumers happy with the standard / taste of the product?

Marketing Concept and Orientation

It is a fundamental idea of marketing that organisations survive and prosper through meeting the needs and wants of customers. This important perspective is commonly known as the marketing concept.

The marketing concept is about matching a company's capabilities with customer wants. This matching process takes place in what is called the marketing environment.

Businesses do not undertake marketing activities alone. They face threats from competitors, and changes in the political, economic, social and technological environment. All these factors have to be taken into account as a business tries to match its capabilities with the needs and wants of its target customers.

An organisation that adopts the marketing concept accepts the needs of potential customers as the basis for its operations. Success is dependent on satisfying customer needs.

What are customer needs and wants?

A need is a basic requirement that an individual wishes to satisfy.
People have basic needs for food, shelter, affection, esteem and self-development. Many of these needs are created from human biology and the nature of social relationships. Customer needs are, therefore, very broad.
Whilst customer needs are broad, customer wants are usually quite narrow.

A want is a desire for a specific product or service to satisfy the underlying need.

Consider this example:

Consumers need to eat when they are hungry.
What they want to eat and in what kind of environment will vary enormously. For some, eating at McDonalds satisfies the need to meet hunger. For others a microwaved ready-meal meets the need. Some consumers are never satisfied unless their food comes served with a bottle of fine Chardonnay.


Consumer wants are shaped by social and cultural forces, the media and marketing activities of businesses.

This leads onto another important concept - that of customer demand:
Consumer demand is a want for a specific product supported by an ability and willingness to pay for it.

For example, many consumers around the globe want a Mercedes. But relatively few are able and willing to buy one.

Businesses therefore have not only to make products that consumers want, but they also have to make them affordable to a sufficient number to create profitable demand.

Businesses do not create customer needs or the social status in which customer needs are influenced. It is not McDonalds that makes people hungry. However, businesses do try to influence demand by designing products and services that are

• Attractive
• Work well
• Are affordable
• Are available


Businesses also try to communicate the relevant features of their products through advertising and other marketing promotion.
Which leads us finally to an important summary point.

Marketing Orientation

Whilst marketing text books usually suggest that successful business will be "marketing orientated", it is the case in the real world not all businesses subscribe to the marketing concept.

The implications of believing in the marketing concept become clearer when the alternatives are examined:

There are three main alternatives to adopting a marketing orientation. These are:

(1) Sales orientation
(2) Production orientation, and
(3) Product orientation.

These are described briefly below.

Sales orientation

Some businesses see their main problem as selling more of the product or services which they already have available. They may therefore be expected to make full use of selling, pricing, promotion and distribution skills (just like a marketing-orientated business).
The difference is that a sale-orientated business pays little attention to customer needs and wants, and does not try particularly hard to create suitable products or services.

Production orientation


A production-orientated business is said to be mainly concerned with making as many units as possible. By concentrating on producing maximum volumes, such a business aims to maximise profitability by exploiting economies of scale.
In a production orientated business, the needs of customers are secondary compared with the need to increase output. Such an approach is probably most effective when a business operates in very high growth markets or where the potential for economies of scale is significant.


Product orientation

This is subtly different from a production orientation. Consider a business that is “obsessed” with its own products – perhaps even arrogant about how good they are. Their products may start out as fully up-to-date and technical leaders.
However, by failing to consider changing technological developments or subtle changes in consumer tastes, a product-orientated business may find that its products start to lose ground to competitors.

CHAPTER # 2
MARKET ANALYSIS


Market Analysis




Defining the Market

All businesses operate in “markets”. But what is a market? And how can it be defined?


It is important to be careful about how a market is defined. The following key marketing processes rely on a relevant market definition:



- Measuring market share
- Measuring market size and growth
- Specifying target customers
- Identifying relevant competitors
- Formulating a marketing strategy




A market can be defined as follows:


A market is the set of all actual and potential buyers of a product or service.



This definition suggests that a market is the total value and/or volume of products that satisfy the same customer need.



For example, if the customer need is “eat breakfast”, then the relevant market could be defined as the “Breakfast Food Market”. Many products would be relevant to measuring and analysing such a market:



- Breakfast Cereals
- Nutrition Bars
- Porridge / Oats
- Speciality Breads (e.g. croissants)
- Fast-food Outlets serving breakfast




In defining a market, it is important not to focus only on products/services that currently meet the customer need. For example, the button manufacturer who believed that their market was the “button market” would have made some poor marketing decisions unless he had seen the arrival of products such as Velcro and zips – which also satisfy the same need – “to fasten clothes”.



Thinking about customer needs first – and then identifying the products that meet those needs – is the best way to define a market.



However, it is also important not to define a market too broadly. For example, it is not particularly helpful for a marketing manager to define his or her market as the “food market” or the “transport market”. The purpose of market definition is to provide a meaningful framework for analysis and decision-making.



For example; consider the “entertainment market”. The customer need is to be “entertained”. There are many products and services that can claim to meet that need in different ways:

At home:



- Television
- Radio
- Video
- DVD
- Games Consoles



Outside the Home:



- Cinema
- Theatre
- Theme Parks
- Opera
- Sporting Events




It is important to avoid too broad a definition of a market. For example, it will be more manageable for marketing managers in the sporting events market to further refine their market definition into more detailed classes or segments.



To help with calculating market share, the following definitions are helpful:

Product class – e.g. computers, televisions, holidays

Product subclass – e.g. laptops, digital televisions, long-haul holidays

Product brands – e.g. Dell, Panasonic, Kuoni



Kuoni as a brand, for the purposes of measuring market share, is only concerned with the aggregate of all other travel brands that satisfy the same group of customers. However, Kuoni also needs to be aware of the trends in long haul holidays and the holiday market in general.

Market Analysis


Introduction to Market Share


Definition



Market share can be defined as the percentage of all sales within a market that is held by one brand / product or company. Market share can be measured in several ways. However, the two most important measures are by:



- Sales revenue

- Sales volume (the number of units sold)


Importance of Market Share


Why is Market Share important?



An important piece of research in the 1960's provided the basis for understanding the importance of market share - and emphasised the implications for marketing and business strategy.



The Profit Impact of Market Strategy ("PIMS") analysis was developed at General Electric in the 1960's and is now maintained by the Strategic Planning Institute.� The PIMS database provides evidence of the impact of various marketing strategies on business success.



The most important factor to emerge from the PIMS data is the link between profitability and relative market share. PIMS found (and continues to find) a link between market share and the return a business makes on its investment. The higher the market share - the higher the return on investment. This is probably as a result of economies of scale. Economies of scale due to increasing market share are particularly evident in purchasing and the utilisation of fixed assets.


Case Study on Market Share - Dixons



Dixons is widely regarded as the dominant electrical retailer in the UK. What does dominant mean? It refers to the fact that Dixons (which is the market leader) has a very high relative market share. In other words, it is substantially bigger than the next largest competitor. This can be illustrated by the chart below which lists the leading UK electrical retailers in 2000.



How might Dixon's market dominance enable it to further increase its market share? Many retail analysts believe that the electrical retailing market provides advantages to larger businesses. In recent years, Dixons, along with the number two Comet, has been able to thrive while other retailers have suffered. The reasons for the advantages of size include:


Buying advantage: An ability to use size to source product more cheaply is a clear advantage in an industry that faces rapidly declining consumer prices


Volume advantage: As a low-margin business, retailers that can sell in high volumes are in the best position to gain market share


Access to new products: The largest retailers typically have first-mover advantage in stocking new "in demand" products that have just been released


Advertising scale: As a price-led business, access to national advertising provides the ability to keep customers regularly informed of the latest product deals. This helps to reinforce customer perception of value, in addition to strengthening the Dixons Group brands

Access to retail property: With the continuing trend towards out-of-town, larger destination stores that offer a broader range of choice, and with restrictive planning laws limiting opportunities, the larger electrical retailers have both the financial and operational capacity to secure such important new sites.

The UK electrical retail market has many examples of businesses with a small market share that have fallen victim to the intense competition in the market. In the UK, Tiny Computers and US brand Gateway both folded. In the electrical appliance sector, well-known market casualties include Tandy (which was acquired by Carphone Warehouse who subsequently closed 110 of Tandy's shops and reformatted the remaining 160 into its own format) and Scottish Power's consumer appliance chain. These are summarised in the table below:
Retailer
Format
Stores Closed
Date
PowerZone
Electrical Appliances
60
Feb-02
Scottish Power
Electrical Appliances
80
Jun-01
Tandy
Electrical Appliances
110
Jan-99
Tempo
Electrical Appliances
37
Sep-01
02
Mobile Phones
133
Feb-02
The Phone People
Mobile Phones
60
Jul-01
The Wap Store
Mobile Phones
70
Jan-02
Gateway
Personal Computers
12
Sep-01
Time/Time
Personal Computers
50
Apr-02
Source: Lehman Brothers
Measuring Market Share

Measuring Market Share


An accurate measure of market share is dependent on several factors:


- A satisfactory definition of the market. This would answering questions such as which products to include, which geographical areas, which means of distribution?


- The availability of reliable, up-to-date information
- Agreement on which measures of share are most relevant. For example, should market share be calculated on the basis of sales revenues, profits, units produced or some other measure that competitors in the market generally recognise as valid.
In reality, market shares are calculated in a myriad of ways. However, most tend to be based on one or both of the following:


- Sale revenues
- Sales volumes (units)

Worked Example of Market Shares based on Sales Volumes


In this example, we take figures for the global sale of personal digital assistants ("PDA@s") in 2001.


According to research by Dataquest, global sales of PDA's totaled 13.1 million units, a 18% increase from sales in 2000
The breakdown of these 13.1 million units by major PDA manufacturer is shown in the table below:
Company (Operating System)
2001 Sales
Units
2001 Market
Share %
2000 Sales
Units
2000 Market
Share %
Sales Growth %
Palm (Palm)
5,056
38.6
5,588
50.4
-9.5
Handspring (Palm)
1,648
12.6
1,369
12.4
20.4
Compaq (Microsoft)
1,283
9.8
466
4.2
175.4
Hewlett-Packard (Microsoft)
711
5.4
442
4.0
60.9
Casio (Microsoft)
529
4.0
440
4.0
20.4
Others
3,884
29.6
2,777
25.1
39.9
Total Market
13,111
100.0
11,083
100.0
18.3
Source: Gartner Dataquest February 2002
As can be seen from the table, Palm continues to lead the PDA market with a market share of 38.6%. However, in just one year, its market share fell by 11.8 percentage points from 50.4% in 2000 reflecting the aggressive marketing of new and strong players in the market such as Compaq and Hewlett-Packard.
In 2000, Palm was four times the size of the next largest competitor (Handspring). By 2001, Palm was just three times the size of Handspring, implying a reduction in its relative market strength.
Worked example of Market Share Based on Sales Revenues
In this example, we look at the retail sales figures of the major UK grocery chains.
This analysis is based upon data collected by the leading market research company Taylor Nelson Sofres ("TNS"). The TNS data is sourced via a continuous interview of 15,000 households in the UK. It measures the relative sales performance of the major grocery chains using what it calls the "Till Roll" measure.�
The Till Roll measures by retailer the total amount spent by each household in the grocery store as captured by the total printed on the till receipt.� This is then adjusted to exclude items such as petrol purchases, kiosk sales and amounts spent in the coffee shop or restaurant.
Based on the Till Roll measure, the monthly market shares of the leading grocery chains in August 2002 were as follows:






Types of Market

Before delving too deep into the study of marketing, it is worth pausing to consider the different types of market that exist.


Markets can be analysed via the product itself, or end-consumer, or both. The most common distinction is between consumer and industrial markets.
Consumer Markets


Consumer markets are the markets for products and services bought by individuals for their own or family use. Goods bought in consumer markets can be categorised in several ways:


Fast-moving consumer goods (“FMCG's”)


– These are high volume, low unit value, fast repurchase
– Examples include: Ready meals; Baked Beans; Newspapers



Consumer durables


– These have low volume but high unit value. Consumer durables are often further divided into:
White goods (e.g. fridge-freezers; cookers; dishwashers; microwaves)
Brown goods (e.g. DVD players; games consoles; personal computers)



Soft goods



– Soft goods are similar to consumer durables, except that they wear out more quickly and therefore have a shorter replacement cycle
– Examples include clothes, shoes

Services (e.g. hairdressing, dentists, childcare)

Industrial Markets


Industrial markets involve the sale of goods between businesses. These are goods that are not aimed directly at consumers. Industrial markets include
• Selling finished goods
– Examples include office furniture, computer systems

• Selling raw materials or components
– Examples include steel, coal, gas, timber

• Selling services to businesses
– Examples include waste disposal, security, accounting & legal services



Industrial markets often require a slightly different marketing strategy and mix. In particular, a business may have to focus on a relatively small number of potential buyers (e.g. the IT Director responsible for ordering computer equipment in a multinational group). Whereas consumer marketing tends to be aimed at the mass market (in some cases, many millions of potential customers), industrial marketing tends to be focused.






Last edited by usmanstar; 22-06-2011 at 10:02 AM.
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