The marketing function has two key roles to play in a firm.
– It collects and analyses data from the firm’s markets and from its consumers.
– It promotes and supports the firm’s products and services in the marketplace.
Collecting and analyzing data involves market research. Data are collected by field research and/or desk research. Field (also known as primary) research collects original data exclusively for this research purpose. The main technique used to collect data is through completing a questionnaire − either through the post, by telephone, or by personal interview. Other techniques include observing customers buying products, test marketing a product to gain information, and using a panel of consumers to comment on products. Although expensive, field research produces information fully relevant to the product being researched. To be effective, field research must use suitable sampling techniques because the firm cannot normally obtain information from all its consumers (because of time and cost limitations).
Desk (also known as secondary) research is based on existing sources such as the firm’s own sales and market data, UK and European official statistical publications, and information from trade associations. Because this information is already available, it is quicker and less expensive to obtain than field research. The main disadvantage of desk research is that it has not been collected specifically for the firm’s purpose, and is therefore not always sufficiently detailed or fully relevant.
Markets can be segmented: divided into distinct sub-groups. Segmenting a market allows the firm’s marketing experts to concentrate their marketing on particular characteristics of either the consumer or the product: these key features of the product or the consumer are used to split markets into their distinct segments. Advertising and other promotion can then focus on certain features of the product, or characteristics of consumers in the segment. Some firms concentrate on making products for small and distinct market segments − niche markets – whereas other firms (many multinationals, for example) will produce products for many different markets and segments.
The marketing mix consists of the so-called “Four Ps”:
“P”: Product
Key elements: product mix, product life cycle, product differentiation.
“P”: Price
Key elements: pricing decisions: skimming or penetration pricing.
“P”: Promotion
Key elements: advertising, sales promotion, personal selling.
“P”: Place
Key elements: channels of distribution.
The “product” consists of both goods and services. Many firms market more than one product: they must consider their product mix when planning advertising, pricing and other marketing strategies.
Any product has a limited life. The stages in its life cycle are:
– Introduction: it is introduced on to the market, with low sales but plenty of promotion.
– Growth: consumer loyalty develops, sales increase and profits start to be made.
– Maturity: growth slows, and the firm uses various techniques to extend the product’s life.
– Decline: total sales and profits fall as the market becomes saturated or new products take over.
Ways of extending product life include the “new, improved” approach to change its image, introducing new models, and extending the product into other formats (for example, the development of washing powder into a liquid form).
Product branding allows product differentiation to take place. The brand allows customers to distinguish between near-identical products, encourages them to develop brand loyalty and also makes it possible for the producer to advertise the product.
Organizations must price their products. Pricing decisions will be influenced by costs of production (the firm will typically set a price which covers costs and includes a profit element). There are two main market-led pricing policies.
– Skimming: this is a high-price or “creaming” strategy, often used when a completely new product is launched. The producer has a temporary monopoly and can therefore charge a higher price until competitors start to sell similar products.
– Penetration: this strategy involves lower prices and profit margins (for example, to increase market share) and is often used with high-volume and long-life products.
Firms promotetheir products in order to increase sales of existing products, to introduce new products and to compete with other firms. Advertising seeks to inform people about − and/or persuade them to buy − the firm’s products. Informative approaches provide facts and figures about the product. Persuasive approaches use tempting images in attempts to convince consumers that they must have the product. Popular media used include commercial TV and radio, and print-based media such as magazines, newspapers and posters. To select a suitable medium the advertiser will balance cost and effectiveness against coverage.
Sales promotion and personal selling − sometimes called “below-the-line” promotion – are other methods used to push products. Sales promotion techniques include free samples, price cutting, competitions and after-sales service. Personal selling has the advantage over advertising in that it can target its message at a particular customer: it is not impersonal (but is much more expensive, however).
Marketers must establish how their products and services will reach the marketplace. Decisions involving place include having to identify the most appropriate channel of distribution for the firm.