2.3 Reading Essential Principles of Marketing

Marketing information One of the prime functions of marketing personnel is to collect and analyse the information needed in order to identify the needs and wants of potential and present customers. This will also involve observation of the activities of the competitors. It is also their function to use historical data to establish the past and current performance of the whole of their product range and to develop forecasts of potential future sales of current, modified or new products. This information is then analysed in order to assist other functional departments, design, production, personnel, and financial, in their task of managing the firm’s efforts. The purpose of the marketing department is to act as a centrepiece of the business, enabling it to ‘sell products which do not come back, to people who do’. The techniques which are used are: market research, sales forecasting, target marketing, benchmarking of competitors on product and price, the product life cycle concept, the ‘Boston Box’ concept. The purpose of these techniques is to collect and analyse three sets of information.

INFORMATION ON

PAST PERFORMANCE

sales
market share
product life cycle
profit analysis

CURRENT MARKET POSITION

benchmarking competitors
product portfolio
market segments
customer satisfaction

FUTURE TRENDS

sales forecasts
new competitors
environmental and legal factors
new technologies

Table 1 Types of marketing information required

The analysis of the information generated will lead to strategic decisions at the highest level in the company as to the appropriate marketing strategy and the appropriate marketing mix needed in order to carry out that strategy.

Market research This is a process by which information is collected and analysed on the basis of which marketing opportunities and problems may be identified. Table 2 summarises the various types of market research which may be undertaken and indicates their uses.

SALES RESEARCH	estimate market size identify market segments identify market trends obtain information on present and past customers information on competitors
PRODUCT RESEARCH	generate new product ideas product concept testing product testing test marketing packaging research
PRICING RESEARCH	identify demand for the product place price in relation to competition
COMMUNICATION RESEARCH	effectiveness of advertising media selection research copy testing sales territory planning
DISTRIBUTION RESEARCH	warehouse location research retail outlet location research retailer type research

Table 2 Types of market research

These activities may be undertaken in-house, or by an outside advertising agency. In the latter case, product knowledge and confidentiality may be critical factors. It would not be sensible to use an agency which is also used by a rival company.

Market research methods All these activities require that a scientific research method be used. Three broad approaches might be used:

sampling and survey techniques
field experiments (such as product testing)
observation (it may range from sending buyers out to look at competitors’ products in the retail environment to industrial espionage)

The results of such weork must be presented in an appropriate format, summarising the statistics generated.

Sales forecasting It is more than just predicting sales, but it is also part of the financial planning process – identifying cash flows and potential profits. The aim is to avoid having ‘slack’, surplus capacity. There are two ways in which forecasting may be conducted:

make a forecast for the industry and try to work out what share of that markert the company may reasonably seek to win
forecast sales on the basis of historical sales data

Forecasting may be short (for tactical reasons), medium (for business budgeting purposes to predict input costs, plant and manning requirements – 1 year ahead), and long term (for the purpose of strategic planning - 5 to 10 years ahead).

Target marketing (Market segmentation) This involves attempting to relate the characteristics of products to the requirements of potential customers. Firms seek to target specific groups of customers, with particular requirements which the firm can meet. This could also be called ‘niche’ marketing, especially when applied to a new entrant to the market. The process of choosing a target market involves identifying

market ‘segments’ – distinct groups of buyers
market targets – selecting one segment to be evaluated and targeted
product ‘positioning’ – in a particular ‘niche’ in that market segment.

Target markets may be identified in a number of ways by categorizing customers by age, sex, income, family size, educational background, or occupation. Customers can also be classified by their loyalty and heaviness of use., etc.

Benchmarking of competition Before using the above analysis to ‘position’ the product it is vital to discover in some detail what key competitors are doing, both in marketing strategy, product development and price. This may be undertaken by desk research and by observational studies.

The ‘Boston Box’ The purpose of this model is to rate products according to sales growth and market share. It is most appropriate for a company which has been established for some time and has a wide product portfolio. It will enable senior management to use marketing information in order to optimise the product mix and to set objectives for each product in the portfolio. The model is set out diagrammatically in Fig.1.

Fig. 3 The Boston Box Model Market share

High Low