Marketing

The role of marketing

Marketing is the management task of getting the right product to the right customer at the right price, place and time. It links a business to the market it serves.

The role of marketing

Effective marketing identifies what customers need, then designs the offer to satisfy those needs. Once customers buy, marketing works to maintain loyalty so they return, and to build relationships that turn one-off buyers into long-term customers. Loyal customers cost less to keep than new ones cost to win, and they are more willing to try a firm’s other products.

Why markets change

Customer spending patterns shift as incomes, tastes, fashions and technology change — for example, the move from physical media to streaming. A business that keeps offering what customers used to want will lose sales to rivals who have moved on.

Responding to change and competition

Markets become more competitive as new firms enter, as existing firms expand, and as customers gain more choice online. Businesses respond by changing the marketing mix: improving or updating products, adjusting prices, opening new distribution channels, or promoting more effectively. Firms that monitor the market and adapt quickly protect their market share.

Niche, mass and segmented markets

Before designing a mix, a business decides how wide a market to serve and how to divide the customers within it.

Niche versus mass marketing

Niche marketing targets a small, specialised group: less competition and higher prices, but limited sales volume and exposure if that one group’s tastes change. Mass marketing targets a large market with a standardised product: high volume and economies of scale, but intense competition and often thin margins.

Segmenting a market

Markets are commonly segmented by age, socio-economic group (income and occupation), location and gender. Segmentation lets a firm target its marketing at the group most likely to buy, tailor the product and message to that group, and avoid wasting spending on customers it cannot serve. In a scenario, a business should choose the segmentation method that best matches how its customers actually differ.

Market research

Market-orientated businesses base decisions on what customers actually want, which they find out through market research.

Primary and secondary methods

Primary methods include postal questionnaires, online surveys, interviews and focus groups. They give data specific to the firm’s question but cost time and money, and are up to date and unavailable to competitors. Secondary methods use existing sources — online data, government statistics and paid commercial reports. They are quicker and cheaper but may be out of date or not quite fit the firm’s needs. Because asking every customer is impractical, firms use sampling; the larger and more representative the sample, the more reliable the results.

Presenting and using results

Results are shown as graphs, charts and diagrams so patterns are easy to read. Candidates should be able to interpret such displays and draw simple conclusions — for example, identifying the best-selling product or the age group most likely to buy — and then link that conclusion to a marketing decision.

Product and the product life cycle

Product is the first P. A strong product, brand and package give a business something worth pricing, placing and promoting.

Product, brand and packaging

Developing new products can win customers and replace ageing lines, but it is costly and risky if the product fails. A strong brand image raises sales and builds customer loyalty, letting a firm charge more. Packaging protects the product, makes it easy to store and transport, and promotes it through design and information on the label.

The product life cycle

Most products move through four stages — introduction, growth, maturity and decline. Extension strategies, such as new versions, new markets or fresh promotion, prolong the mature stage and delay decline. The stage a product has reached influences the mix: promotion is heavy at introduction to build awareness, while price is often cut in decline to clear stock.

Price

Price is the only P that earns revenue directly. The method chosen depends on the product, the market and the firm’s objectives.

Pricing methods

Cost-plus adds a mark-up to unit cost — simple, but ignores competitors. Competitive pricing sets price in line with rivals — sensible in a crowded market but limits profit. Penetration pricing sets a low price to enter a market and win share, then may be raised later. Skimming sets a high launch price for a new, distinctive product, lowered as competitors appear. Promotional pricing uses temporary low prices to boost short-term sales. The best method fits the product’s newness, the level of competition and the firm’s aim.

Price elasticity of demand

Demand is price elastic when a change in price causes a larger change in quantity demanded — common where close substitutes exist. Demand is price inelastic when quantity demanded changes little as price changes — common for necessities or strongly branded goods. A firm with inelastic demand can raise price with little loss of sales; one with elastic demand risks losing many customers. This is treated as a concept only.

Place

Place is about getting the product to the customer through the right channel of distribution.

Channels of distribution

A wholesaler buys in bulk from producers and breaks the stock into smaller quantities for retailers — suited to producers making a narrow range in large volumes, but adds a layer of cost and distance from the customer. Selling through retailers gives wide coverage and lets customers see products in store, though retailers take a share of the price and control the display. Selling direct to the consumer — increasingly online — removes the intermediaries, giving the producer control and a larger margin, but the firm must handle its own storage, delivery and customer service.

The best channel depends on the product and market: perishable or technical goods often need short channels, while everyday items suit wide retail distribution. A recommendation should be justified against the specific business in the scenario.

Promotion and technology

Promotion communicates with customers; technology has widened how, where and how cheaply that can be done.

The aims and forms of promotion

Promotion aims to inform customers a product exists, persuade them to buy it, and remind loyal customers to buy again. Advertising (television, print, online) reaches large audiences to build awareness and image. Sales promotions — discounts, offers, free samples, loyalty points — give a short-term boost to sales. Because promotion is expensive, spending must be cost-effective: the extra sales it generates should justify its place in the marketing budget.

Technology and the marketing mix

E-commerce means trading over the internet. For businesses it opens a global market, lowers the cost of reaching customers and allows selling around the clock; but it brings strong online competition and the cost of running secure websites and delivery. For consumers it offers wider choice and convenience, though they cannot physically examine goods and must trust the seller with payment details. Firms also use the internet and social media to promote products cheaply and interact directly with customers.

Strategy, law and global markets

The four Ps are only effective when combined into a single, justified strategy — and adapted when a firm sells abroad.

Justifying a marketing strategy

No P works alone: a strong product still fails if its price, place or promotion is wrong. A marketing strategy weighs how much each element matters for the particular product and customer, then combines them to influence the buying decision. In a scenario, a recommendation must be justified against that firm’s situation.

Legal controls on marketing

Laws protect customers from unfair marketing. Businesses must not use misleading promotion — claims that exaggerate or deceive — and must not sell faulty or dangerous goods. Breaking these rules brings fines, legal action and lasting damage to reputation, so controls shape how firms may promote and sell.

Selling in foreign markets

New foreign markets offer growth beyond a saturated home market, but bring cultural differences in taste and language, and a lack of local knowledge. Firms reduce these risks by working with a local partner: a joint venture shares costs, risk and local expertise; licensing lets a local firm make or sell the product for a fee. Both ease entry but mean sharing profit or control.