Key definitions in marketing

Marketing involves recognising what customers desire and fulfilling those desires in a way that generates profit for the business.

Important terms in marketing

• Marketing - Identifying customer wants and satisfying them profitably.
• Customer - A person, business, or organisation that purchases goods or services from a business.
• Customer loyalty - When existing customers repeatedly purchase products from the same business.
• Customer relationships - Communicating with customers to encourage them to become loyal to the business and its products.
• Market share - The percentage of total market sales held by one brand or business.
• Consumer - Someone who buys goods or services for personal use, rather than to resell them.
• Mass market - Where there is a very large number of sales of a product.
• Niche market - A small, usually specialised, segment of a much larger market.
• Market segment - An identifiable sub-group of a whole market in which consumers have similar characteristics or preferences.

The role and functions of marketing

Marketing plays a central part in helping businesses understand and meet customer needs, which supports long-term success and profitability.

The main roles of marketing

• Identifying and satisfying customer needs.
• Establishing close customer relationships to build customer loyalty.
• Gaining information about customers.
• Anticipating changes in customer demand.

It is often less expensive to keep existing customers through loyalty than to attract new ones. Marketing extends beyond just selling products and includes various activities to support business growth.

Functions of a marketing department

• Market research - Gathering data about customer preferences and market trends.
• Sales - Managing the process of selling products to customers.
• Promotion and public relations - Advertising products and maintaining a positive business image.
• Distribution - Ensuring products reach customers efficiently.

Market changes and business responses

Markets are dynamic, with various factors influencing consumer behaviour and creating new opportunities or challenges for businesses.

Factors causing market changes

• New tastes or fashions that influence consumer preferences.
• New technology products that create new markets and opportunities.
• Changes in incomes that affect purchasing power and buying behaviours.
• An ageing population that shifts demand for certain products and services.
• Increased competition, including globalisation, that changes market dynamics.

How businesses respond to market changes

• Maintaining good customer relationships.
• Adapting existing products to meet changing needs.
• Developing new products.
• Keeping costs low to remain competitive.

These responses help businesses stay relevant and competitive in evolving markets.

Mass and niche markets

Businesses can target either broad or specific groups of customers, depending on their size, resources, and goals. The choice between mass and niche approaches affects sales potential and costs.

Mass marketing

Mass marketing involves selling the same product to a wide audience without customisation.

Features and advantages:

• Potential for high sales volume.
• Economies of scale advantages, reducing costs per unit through large production runs.
• Same product and promotion to all consumers.
• Growth opportunities in a large market.

However, it does not involve market segmentation, which can limit its ability to meet specific customer needs.

Niche marketing

Niche marketing focuses on a small, specialised group of customers with particular needs.

Features and advantages:

• Suitable for small businesses that can cater to unique demands.
• Able to meet the needs of a small group of consumers effectively.

Limitations:

• Potentially low sales volumes.
• Lack of economies of scale, which can keep costs higher.

The effectiveness of mass marketing compared to niche marketing depends on the specific business context, such as the product type and competition level.

The concept and types of market segmentation

Market segmentation divides a larger market into smaller groups with shared characteristics, allowing businesses to tailor their approaches. This can boost profits but also raises costs due to customisation.

Types of market segmentation

• Age.
• Geographical location.
• Socio-economic group.
• Gender.
• Lifestyle.
• Business or consumer focus.

Advantages of market segmentation

• Meets special needs of specific consumer groups.
• Enables effective targeted marketing.
• Increases likelihood of customer loyalty.

Disadvantages of market segmentation

• Requires detailed market research, which can be time-consuming.
• Expensive to adapt products and promotion for each segment.
• Segments may be too small to be profitable.