1.1.1 The Market

Marketing: 

The action or business of promoting and selling products or services, including market research and advertising.

The purpose of marketing:

What makes someone buy a product?

Or more importantly, what makes them buy the product you are trying to sell? More here. 

Mass marketing 

Attempting to sell an identical product or service to the 'average' customer or the whole market.

Advantages: 

Cost effective because of economies of scale, proven to work, can build a very powerful brand.

Colgate has 45% share of the world market for toothpaste.

Disadvantages: 

Not personal, assumes everyone's values, beliefs and needs are the same, lower profit margins. 

Customers wanting something more distinctive.

Click on the picture:

Niche marketing 

This involves targeting a product at a small, perhaps tiny segment of the market.

The A380 is the largest passenger plane in the world.

Imagine that you could afford to buy one.

How would you design the interior? 

Advantages of niche marketing: 

Initially there is not that much competition. 

It’s unlikely that large companies are going to focus their efforts on exploring such a small segment, so a small company can have real chances in becoming successful.

Being among the first in a specific area gives you a competitive advantage. 

You can create highly personalised promotion that targets your exact audience. 

If you were selling Winter ski breaks, what demographic group would you be aiming for?

Click on the picture:

Disadvantages:

If the market is poorly targeted then potential clients will not know about the product or service.

If there are only a few potential customers the product or service may not be viable.

If the niche proves to be profitable then larger firms may move into the market.

Market size:

A measurement of the total sales of a product by value (£'s) or volume (units).

The total market size could be represented by this:

Market share:

The percentage sales of one brand within the market.

This could be represented by a slice of the pie chart above.

Click on the headline:

Market share / market growth calculations:

Market growth/decline = Increase/decrease in the size of the market  x 100

                                      --------------------------------------------
                                Original Market value                                                     

Customer numbers and spending at nightclubs, 2007-09

	2007	2008	2009
Sales volume (no. Of customers)	2600	2200	3000
Sales value (revenue rec’d)	£52000	£48400	£63000

Calculate the percentage decline in both volume and value between 2007 and 2008 (to 1 decimal place).

Calculate the percentage growth in both volume and value between 2008 and 2009 (to 1 decimal place).

1)    Market share =            Sales of one product/brand/company             
                                      -----------------------------         x 100
                                     Total sales in the market  
                                            

Nightclub attendances, 2009

Nightclub	No. of customers per week	Market share %
Ali’s	450
Guy and Toni’s	750
St. Elmo’s Fire	1200	40
Stephen Fry experience	600	20
All nightclubs

Calculate the market share for the other 2 nightclubs. All 4 clubs should equal 100%.

Introduction to the Marketing Mix. Great lyrics, suspect singing. Play the video:

Branding:

The process involved in creating a unique name and image for a product in the consumers' mind, mainly through advertising campaigns with a consistent theme.

Branding aims to establish a significant and differentiated presence in the market that attracts and retains loyal customers.

Dynamic markets:

A dynamic market is one that is fast moving and characterised by constant change, activity, or progress.

Some examples of dynamic markets:

1. Online retailing

How has the growth of 'clicks' and the decline of high street 'bricks' impacted businesses and consumers?

The growth of smartphones.

2. Innovation led market growth

Technological change has led to rapid growth in the smartphone market, 3D printing, driverless cars, wearable technology, space travel and....

Could 'Femtech' be described as a dynamic market?

Click on the headline:

3. Social change:

For example, an increase in the number of people living alone has led to an increase in the demand for flats, meals for one etc.

4. Demographic change

Changes in the structure of the population can affect the size of the market.

How Competition Affects the Market & Risk and Uncertainty

Competition is the rivalry that exists between businesses in a market.

Some markets are competitive:

This is beneficial for consumers.

Why do you think this is the case?

Some markets are dominated by one company:

This is known as a monopoly.

What could South Western Railway do which is damaging to its customers?

Monopolies are closely regulated by the government.

Where a small number of very large companies dominate the market this is known as an oligopoly.



Market share for companies in markets can change.

Why do you think that Aldi and Lidl have grown so rapidly in the UK in recent years?





The difference between risk and uncertainty:

It is said that risk is quantifiable but uncertainty is not.

(Quantifiable means something that is capable of being measured or counted.)

There is obviously some overlap between the two concepts.

It could be argued that a risk is something that you are prepared to take whereas uncertainty is something that comes from nowhere.

Risk or uncertainty?

Opening a new restaurant.

Risk: Statistics indicate that 60% of new restaurants fail in the UK.

In 2007 Steve Jobs introduced the iPhone to the world.

Who knew consumers in rich countries would go crazy for a 'smart' phone (essentially a phone, music player and internet enabled device).

In this case uncertainty was very successful for Apple.

Risk versus uncertainty. More here.

1.1.2 Market Research

A market oriented business continually identifies, reviews and analyses consumers' needs.

A product oriented business focuses on what it has done well in the past.

Model T Ford: 'any colour you want as long as it is black'.

Other examples:

Advantages and disadvantages of each approach here.



Methods of primary and secondary market research:

Primary research 

The gathering of first-hand data that is specific to a firm's needs.

You could use: surveys or observation to collect information.

Secondary research 

Information collected from second-hand sources such as Google, reference books, government statistics or market intelligence reports.

Quantitative research 

Research using pre-set questions among a large enough sample size to provide statistically valid data.

An example would be using a questionnaire to question 200 people in a particular market segment.

Qualitative research 

In-depth research into the motivations behind consumer behaviour or attitudes. It may include the use of focus groups.

My focus group:

Should a television company commission a programme where viewers send in video clips of food eating contests?

Market research is used to:

- Identify and anticipate customer needs and wants.

- Quantify (counting or expressing something in numbers) likely demand.

- Gain insight into customer behaviour.

Limitations of market research:

1. Sample size

It is impossible to ask all possible customers questions about a product or service.

Market research will involve a sample of possible customers.

The sample size must be large enough to make it statistically valid and avoid statistical bias.

2. Bias (cause people to feel or show positive feelings or the opposite for or against something.)

A badly worded questionnaire could cause bias.

The behaviour of interviewers may influence peoples opinions.

Asking a non representative sample of people may cause bias.

Use of ICT to support market research:

Websites:

Companies can use their website for questionnaires.
But...who completes these online?

Social Media:

Companies can monitor social media to see what the public are saying about them.

Click on the picture.

Or companies could be more proactive on social media and attempt to build increased brand loyalty.

Click on the picture.

Databases:

Companies collect a vast amount of information about their customers.

This can be used as a very powerful research tool.

If you have a Tesco Clubcard what information does the company know about you?

Market segmentation 

Analysing a market to identify the different types of consumer. 

The main ways a market can be segmented are:

• Demographically e.g. by age, social class or sex.

• Psychographically (by attitudes and tastes).

• Geographically, by region.

Click on the picture:

Conducting Start-up Market Research

Methods of primary and secondary market research:

Primary research 

The gathering of first-hand data that is specific to a firm's needs.

You could use: surveys or observation to collect information.

Secondary research 

Information collected from second-hand sources such as google, reference books, government statistics or market intelligence reports.



Quantitative research 

Research using pre-set questions among a large enough sample size to provide statistically valid data. 

An example would be using a questionnaire to question 200 people in a particular market segment.

Qualitative research 

In-depth research into the motivations behind consumer behaviour or attitudes.

It may include the use of focus groups. The video below shows how a focus group operates.



Sampling: 

Choosing a group of respondents selected to be representative of the target market as a whole.

Random sampling 

Every member of the population has an equal chance of being interviewed.

Quota sampling 

Asking people in proportion to a specific profile. For example, 75 women and 25 men.

Stratified sampling 

Choosing a specific subgroup of the population, for example a beer company questioning men between 18 and 30 years of age.



The choice of sampling method and size of the sample will be influenced by:

-the finance available.

-the nature of the product.

-the risk involved.

-the target market.

What method of sampling and what sample size would you have used before bringing this product to market?