3.1 Role of Marketing

Question 1

What is marketing?

Answer 1

The process of identifying and satisfying consumer needs are wants

Question 2

What is the role of marketing?

Answer 2

• Identifying customer needs
• Satisfying customer needs
• Maintaining customer loyalty: building customer relationships through a variety of methods that encourage customers to keep buying one firm’s products instead of their rivals’. For example, loyalty card schemes, discounts for continuous purchases, after-sales services, messages that inform past customers of new products and offers etc.
• Gain information on customers: by understanding why customers buy their products, a firm can develop and sell better products in the future
• Anticipate changes in customer needs: the business will need to keep looking for any changes in customer spending patterns and see if they can produce goods that customers want that are not currently available in the market.

Question 3

How do you identifying customer needs?

Answer 3

through market research

Question 4

How do you Satisfying customer needs?

Answer 4

by producing and selling goods and services

Question 5

How do you Maintain customer loyalty?

Answer 5

By building customer relationships through a variety of methods that encourage customers to keep buying one firm’s products instead of their rivals’. For example, loyalty card schemes, discounts for continuous purchases, after-sales services, messages that inform past customers of new products and offers etc.

Question 6

How do you gain information on customers?

Answer 6

by understanding why customers buy their products, a firm can develop and sell better products in the future

Question 7

How do you Anticipate changes in customer needs?

Answer 7

the business will need to keep looking for any changes in customer spending patterns and see if they can produce goods that customers want that are not currently available in the market.

Question 8

What are some marketing goals that business might set?

Answer 8

-Develop products that meet customer needs and wants
- Promoting product to customers
- increase sales
- Target a new market

Question 9

Why do customer spending patterns change?

Answer 9

• change in their tastes and preferences
• change in technology: as new technology becomes available, the old versions of products become outdated and people want more sophisticated features on products
• change in income: the higher the income, the more expensive goods consumers will buy and vice versa
• ageing population: in many countries, the proportion of older people is increasing and so demand for products for seniors are increasing (such as anti-ageing creams, medical assistance etc.)

Question 10

Why do businesses have to respond to the changes in customer spending patterns?

Answer 10

Firms need to always know what their consumers want (and they will need to undertake lots of research and development to do so) in order to stay ahead of competitors and stay profitable. If they don’t produce and sell what customers want, they will buy competitors’ products and the firm will fail to survive.

Question 11

Why do some markets become more competitive?

Answer 11

• Globalization: products are being sold in markets all over the world, so there are more competitors in the market
• Improvement in transportation infrastructures: better transport systems means that it is easier and cheaper to distribute and sell products everywhere
• Internet/E-Commerce: customers can now buy products over the internet form anywhere in the world, making the market more competitive

Question 12

How can businesses respond to increased competition?

Answer 12

• maintaining good customer relationships: by ensuring that customers keep buying from their business only, they can keep up their market share. By doing so, they can also get information about their spending patterns and respond to their wants and needs to increase market share
• keep improving its existing products, so that sales is maintained.
• introduce new products to keep customers coming back, and drive them away from competitors’ products
• keep costs low to maintain profitability: low costs means the firm can afford to charge low prices. And low prices generally means more demand and sales, and thus market share.

Question 13

What is Niche Marketing?

Answer 13

identifying and exploiting a small segment of a larger market by developing products to suit it. For example, Versace designs and Clique perfumes have niche markets- the rich, high-status consumer group.

Question 14

What are the advantages of niche marketing

Answer 14

• Small firms can thrive in niche markets where large forms have not yet been established
• If there are no or very few competitors, firms can sell products at a high price and gain high profit margins because customers will be willing be willing to pay more for exclusive products
• Firms can focus on the needs of just one customer group, thereby giving them an advantage over large firms who only sell to the mass market

Question 15

What are the disadvantages of niche marketing?

Answer 15

• Lack of economies of scale (can’t benefit from the lower costs that arise from a larger operations/market)
• Risk of over-dependence on a single product or market: if the demand for the product falls, the firm won’t have a mass product they can fall back on
• Likely to attract competition if successful

Question 16

What is mass marketing?

Answer 16

selling the same product to the whole market with no attempt to target groups with in it. For example, the iPhone sold is the same everywhere, there are no variations in design over location or income.

Question 17

What are the advantages of mass marketing?

Answer 17

• Larger amount of sales when compared to a niche market
• Can benefit from economies of scale: a large volume of products are produced and so the average costs will be low when compared to a niche market
• Risks are spread, unlike in a niche market. If the product isn’t successful in one market, it’s fine as there are several other markets
• More chances for the business to grow since there is a large market. In niche markets, this is difficult as the product is only targeted towards a particular group.

Question 18

What are the disadvantages of the mass market?

Answer 18

• They will have to face more competition
• Can’t charge a higher price than competition because they’re all selling similar products

Question 19

What is market segment?

Answer 19

A market segment is an identifiable sub-group of a larger market in which consumers have similar characteristics and preferences

Question 20

What is market segementation

Answer 20

Market segmentation is the process of dividing a market of potential customers into groups, or segments, based on different characteristics. For example, PepsiCo identified the health-conscious market segment and targeted/marketed the Diet Coke towards them.

Question 21

What segments can you divide the market into?

Answer 21

• socio-economic groups (income),
• age
• location
• gender
• lifestyle
• use of the product (home/ work/ leisure/ business) etc.

Question 22

What are the advantages to market segmentation?

Answer 22

• Makes marketing cost-effective, as it only targets a specific segment and meets their needs.
• The above leads to higher sales and profitability
• Increased opportunities to increase sales
• Marketing becomes more effective (e.g. advertising)

Question 23

What are the disadvantages of market segmentation?

Answer 23

• Business may only focus on one segment which is very risky (incase demands fall business wont make money)
• 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! A good example is the “grey generation” (i.e. people aged over 50). The attitudes and lifestyles of the grey generation have changed dramatically in recent years.