Download Marketing concepts

Important Marketing Concepts
1. Segmentation

A market segment is a sub group of a whole market in which consumers have
similar characteristics.

Identifying these groups and marketing different products to them is
segmentation.

Companies try to produce different products to different segments to maximise
sales.

E.g. soft drinks market.

Segementation can be through;

Geographic differences
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Demographic differences

Psychographic differences (lifestyles/personality)
2. Mass marketing and niche marketing

Niche marketing involves identifying and exploiting a small part of a larger
market.

Mass marketing is the exact opposite. It involves selling the same products
to the whole market with no attempt to target groups within it. (Coca-Cola)
Advantages of niche marketing

Small firms able to survive and thrive

If the market is unexploited,
opportunity to sell at high prices and
high profit margins until competition
enters the market.

Niche market products can also be
used by large firms to create status
and image.
Advantages of mass marketing

Small niches do not allow for
economies of scale. Mass market has
lower average costs.

Mass market strategies run less risks
than niche strategies. Consumer
trends/fashions can lead to business
failure if they concentrate on one
niche market.
3. Market share, market size and market growth

Successful marketing requires firms to understand

Which market they are operating in

Who their consumers are

Whether the market is growing or shrinking

And what their share of the market is.
A market means “who the consumers are” no longer a place where buyers and
sellers meet. The market is potential customers.

To calculate market share:
Sales of the business
x 100
Total market sales

High market share is beneficial as:



Higher sales than competitors
Retailers keen to stock and promote best products
Market leader can influence the whole market.

Market growth is measure by the percentage increase in the size of the
whole market.

Firms must be careful when analysing market growth, as the whole market
might grow while a segment might be shrinking or vice versa.

Identifying the markets with the highest growth potential is one of the keys
to success of business organisations.
4. Adding value

Literally, “added value” means the difference between the selling price of a
product and the cost of the materials and components bought to make it.

E.g.
Tub of luxury ice cream sell for $4
Cost of milk, cream, sugar and flavourings is $1
Value added = $3

This is not the same a profit as it does not include wages, rent and other
costs.

If a business is able to increase added value then the potential for greater
profits is clear.
Strategies to “add value”

Create exclusive/luxurious image

High quality packaging to differentiate the product from competitors (used
in cosmetics and confectionary)

Promote brand so it becomes a “must have” which consumers will pay a
premium price for.

Create a USP (unique selling point)