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Day 1 The Market
What marketing is A lot of people think that marketing is the same as advertising a product. In reality, marketing is a very complex process and advertising is just one of its many aspects. Marketing is a planning process that identifies the needs of potential customers, helps create a product or service to meet this requirements and then tries to convince potential customers to buy the new products or service. In order to do so, the business needs to understand the buying behaviour of the customer, what he is influenced by , what the competitors offer and many more things. In the ‘60s marketing meant letting people know that a new product was available: the customer came after the product. Nowadays the customer often comes before the product. What is the meaning of that?
Defining a market A market is anywhere where buyers and sellers come together to transact with each other. The traditional image of a market is a physical place where buyers and sellers come together in one place. This still happens, of course. The UK has many towns that are referred to as “market towns”, so-called because they host a town-centre market on regular dates throughout the year. However, the term market has a much wider relevance when it comes to business studies. The buyer and seller don’t have to be in the same place in order to conduct transactions with each other. Do you sell or buy items on eBay? Have you bought products from Amazon.co.uk, bought tracks from iTunes or iPhone apps from the App Store? In all these examples, you have participated in a market, although you were not physically with the other party to the transaction.
Types of Market There are four types of markets: COMMODITY: It’s the MKT for raw materials from primary sector of production e.g wood INDUSTRIAL: It’s the Mkt for manufactured products that industries need to function efficiently e.g components FINANCIAL: It’s the Mkt for services offered by banks and other financial institutions e.g insurance CONSUMER: The Mkt consisting of consumers who buy the good and services produced by the other three mkts
Local markets Local markets is where customers are a short distance from suppliers Common for the sale of fresh and locally-sourced products and the delivery of locally-supplied services. The use of local services (e.g. hairdressers) and your local shopping street is another example, where consumer goods are sold to people who tend to live pretty close. Businesses operating in local markets enjoy several advantages. They are physically closer to their customers, so are better placed to understand local cultural issues and traditions. It is also easier to develop relationships with local customers, to engage in market research and to respond quickly to changes in the market. The main downside to operating in local markets is that the market size may be relatively small. You are the owner of a traditional toy shop. You noticed that there has been a decrease in your revenue and there are less customers coming. How would you try to reconnect to your customers and understand why they’re coming less?
National markets A National market is where customers are spread throughout the country or over a large area typically a country, e.g. the markets for telephones, television, groceries and fast food. A business may have several (or many) locations in the country in order to reach its customers. Another way to think of a national market is in terms of the total sales of a product or service across the country. For example, the total demand for wine. Now list two national markets of your country in terms of total demand for a given product/service: one whose trend is going up and one whose trend is going down
e- markets A much larger number of markets are now electronic. Businesses find their customers using a variety of electronic media, including the Internet, mobile telephony, digital television and via email. Transactions are completed electronically with the delivery method depending on the nature of the product sold. The key points to remember about electronic markets are that: They provide an easier way for start-ups to enter a national market, particularly if the business has identified a small niche segment of that market. Setting up a new business in an electronic market tends to have lower start-up costs than entering a physical market. Electronic markets tend to be highly price-competitive since it is quite easy for customers to search for products from a variety of suppliers and to compare the best prices available . Which kind of products do you see more/less suitable for e-markets: shoes, electronic devices, perfumes, books? Why?
Segmenting the market Segmentation is all about understanding and analysing the target customers in order to split it into relevant sections . Segmentation is to make marketing more effective: by identifying groups of customers who have similar needs companies find a way of positioning a product in a way which is attractive to those customer groups. Segmenting allows a: Better matching of customer needs Creating separate products for each segment makes sense and provides customers with a better solution More effective promotion By segmenting markets, target customers can be reached more often and at lower cost Gain a higher share of the market Through careful segmentation and targeting, businesses can often become the market leader, even if the market is small
Demographic segmentation There are many ways in which a market can be broken down into segments. A very popular method of “demographic” segmentation looks at factors such as: Age Businesses often target certain age groups. Good examples are toothpaste – look at the variety of toothpaste products for children and adults) and toys (e.g. pre-school, 5-9, 10-12, teen, family) Gender Males and females demand different types of the same product. Great examples include the clothing, hairdressing, magazine, and cosmetics markets Income Many companies target rich consumers with luxury goods (e.g. Lexus, Bang & Olufsen). Other businesses focus on products that appeal directly to consumers on low incomes (e.g. Aldi and Lidl (discounted groceries) Social class Many businesses believe that a consumers "perceived" social class influences their preferences for cars, clothes, home furnishings, leisure activities and other products & services Can you match each criteria with one category of products: expensive jewellery, women’s perfume, deodorant, low quality shoes.
Limitations of segmentation Here are some key limitations with market segmentation: Lack of information and data: some markets are poorly researched with little information about different customer needs and wants Difficulty in measuring and predicting consumer behaviour: humans don’t all behave in the same way all of the time. The way that they behave also changes over time Hard to reach customer segments once identified: it is one thing spotting a segment; it is another finding the right way to reach target customers with the right kind of marketing message Can you try and segment the following products by categories of consumers: mineral water, chocolate, shampoo? Try and say which kind of values and media would you use to reach them
Who is the customer? A customer is anyone who receives a product – either a good or a service – from an organisation. In most situations the customer will have to pay to obtain the product, but this is not always the case. For example, students are increasingly referred to as the ‘customers’ of the schools and colleges that they attend, but the majority of students do not pay directly for the educational service they receive the persons who actually pay for the tuition is called responsible of the purchase. Internal customers are members of staff or outside suppliers that contribute towards the service provided to external customers. Good customer service to internal customers will help to establish good working relationships between colleagues, managers and staff teams. These relationships are important if the business is to function effectively. For example, working in a pleasant environment where staff are supportive of each other can keep staff turnover and absenteeism costs to a minimum. External customers, on the other hand, are the people who we more usually associate with the term ‘customer’, i.e. the people that actually buy or use an organisation’s products and services. Can you name three different categories of products: where internal customers are very important, where external c are more important where they’re equally important.
