Transcript File

3.1 – Setting marketing
objectives
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Learning outcomes
What you need to know:
• The value of setting marketing objectives
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Marketing
• Marketing is the management process responsible for identifying,
anticipating and satisfying customer requirements profitability.
– Chartered Institute of Marketing (CIM) definition
• It is about more than just advertising
• Marketing involves a range of activities including:
– Market research
– Setting prices
– Designing and using promotion methods, including advertising
– Designing the product and packaging
– Deciding where to sell the goods/services
– Managing distribution channels
– Customer service and communicating with customers
– The method of selling the good/service
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Purposes of marketing
As described in the definition, marketing has three main purposes:
1.
Anticipating consumers’ wants – This can be done through carrying out market
research to discover what the customer wants and what might make them
purchase the good/service. It can also be used to analyse the market the firm
intends to enter, including market size, number of rivals, current trends, average
prices charged, etc. to know how best to deal with them when designing their
strategy.
2.
Satisfying customers’ wants – Once firms understand the market they can
design a marketing strategy to attract customers and build a company brand and
reputation. The business will use a range of variables known as the marketing
mix (the ‘Seven Ps’) to do this.
3.
Meeting the needs of the business – Marketing should help ensure a firm
achieves its aims and objectives, such as survival, sales growth, market share
gains, profit maximisation, social responsibility and ethics, etc.
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The value of setting marketing
objectives
• Businesses must set marketing objectives to determine what they must do in
their marketing strategy to help achieve their overall company objectives.
• Marketing objectives: The specific goals/targets of the marketing department.
They must be in line with the firm’s overall corporate objectives.
Discuss potential examples of marketing objectives a firm may set.
Increase sales volume and sales value
Brand image and awareness
Market and sales growth
Increase market share
Build brand loyalty
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Market size: Sales volume and sales value
• Market size: The total volume of sales of a product or the value of the
sales of a product
• Sales volume measures the number of items sold or produced
– for example, 2.26 million vehicles were sold in 2013.
• Sales value measures the financial worth of the items sold.
– for example, the average car price in 2013 was £27,219 meaning a
value of £27,219 x 2.26 million = £61,514,940,000
• Firms may set objectives to maximise their sales volume or value or may
set targets simply to maintain what they have particularly in difficult
times.
• Market size can increase by either convincing consumers to buy more
goods/services or to pay more for the same amount.
• A large market size will attract many competitors so many firms will prefer
to operate in smaller niche markets. (For example, Hornby operating in
the model railway business rather than other larger mass appeal toy
markets)
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Market and sales growth
Sales growth: The percentage change in sales (volume or value) over a period of time for a
specific brand.
Market growth: The percentage change in sales (volume or value) over a period of time for
a whole market.
• Sales and market growth is a percentage change which is an essential calculation to
know for A-level business. To work out a percentage change between two figures you
must use the following calculation:
Percentage change = new figure – original figure x 100
original figure
•
Therefore sales growth and market growth are calculated the same way:
Market growth = new market size – original market size x 100
original market size
Sales growth = new sales – original sales x 100
original sales
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Market and sales growth
• Firms will want to enter markets that are growing to maximise
sales. However market growth will attract many rivals.
• Market growth can be difficult to achieve for one firm so they
may set targets to move into new growing markets by
targeting new consumers, developing new products or by
completely diversifying (new products in new markets)
– For example, Microsoft and Lenovo moving into the
mobile phone market in recent years
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Factors influencing market growth
• Economic growth - If a country’s economy is growing, employment, pay levels
and therefore consumers’ disposable income will be higher resulting in better
sales and market growth, particularly for luxuries such as holidays. The
opposite will be true when an economy is in decline although some goods
may see sales increase, especially those that focus on low prices such as
Primark and supermarket own-brands.
• Type of product - Luxury products will grow in sales most when the economy
is growing and suffer when people are more worried about their spending.
• Social changes – Changes in the general public’s behaviour will see market
growth. Examples may include:
– Consumers spending more time at home combined with low supermarket
drink prices resulting in a decline in pubs but a rise in pay-for-TV services
such as Sky & Virgin
– An increase in working hours and working households has made
consumers cash-rich but time-poor resulting in demand for convenience
products like readymade meals and restaurants
– The popularity of healthy lifestyles resulting in growth of certain healthy
food products and e-cigarettes.
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Factors influencing market growth
• Demographic changes – The changing make-up of the UK
population may see certain types of product markets become
more popular. For example the UK has an ageing and increasingly
diverse population which has seen the growth in certain trends
of products that were previously more niche cultural or agespecific items.
• Changes in taste and fashions - for example. trends on television
such as cookery, or mobile phone popularity causing app sales
growth
• Firms can influence what is popular and therefore market growth
through their own marketing efforts.
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Market share
Market share: The percentage of the total sales of a product or service
achieved by one business compared with the total sales in the market.
Market share (%) =
sales of one brand
x 100
total sales in the market
• It is a key measure of a company’s success as it compares its sales
with those of its rivals
• To increase market share a firm must perform better than its rivals
to take some of their customers
• Firms often may set objectives to become the market leader by
having the highest market share, or to maintain their existing
market share or even to increase market share in a particular
section of the market.
For example, Tesco is currently market leader in the supermarket
industry but has seen their market share fall from 30.3 per cent in
2013 to 28.9 per cent with intense competition.
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Brand loyalty
Brand: The set of physical attributes of a product or service, together with the beliefs and
expectations surrounding it - a unique combination which the name or logo of the product
or service should evoke in the mind of the audience. (CIM definition)
•
A brand is designed to differentiate a company from its rivals and it can be represented
by names, logos, slogans, etc.
Brand loyalty: A measure of the degree of attachment that a consumer has for a particular
brand. Loyal customers are more likely to make repeat purchases and less likely to switch to
rival brands.
•
•
There is much debate and research in this area but generally it is considered much
cheaper to retain existing customers than attract new ones, so brand loyalty is essential.
Brand loyalty is important for firms because:
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–
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It will ensure customers return for repeat purchases
Firms will need to spend less on promotions as consumers are already convinced about the brand
Companies may be able to charge higher prices as it reduces a brand’s price elasticity (The amount demand
changes as price changes). As consumers are more committed to the brand they may be willing to pay higher
prices even if they change. This means they become less price sensitive.
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Other marketing objectives
• Increase size – For example, sales revenue, market share, sales volume
• Market positioning - Appealing to particular or new market segment
• Security/survival – A common objective for new start-up firms, those
in difficult financial positions and during a recession
• Successfully launch a new product or end unsuccessful products
• Increase product awareness
• Innovation and developing new products
• Differentiation – Creating a unique selling point and making the brand
stand out from rivals
• Add value to existing products – Methods to ensure consumers are
willing to pay a high price for the product/service, such as high quality,
strong brand image, excellent customer service, etc.
• Ethical and environmental marketing objectives
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