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Theory of Knowledge

Learner Profile: Reflective

The importance of market share and market leadership

The benefits of begin the market leader with the highest market share include:

  • Sales are higher than those of any competing business in the same market and this could lead to higher profits.
  • Retailers will be keen to stock and promote the best selling brands. They may be given a prominent position in shops.
  • The fact that an item or brand is the market leader can be used in advertising and other promotional material. Consumers are often keen to buy the most popular brands.

Cultural differences:

Failing to respond to cultural differences can lead to bad feeling and bad publicity whereas responding to local tastes and sensibilities can encourage consumers to accept a new brand as being designed for their needs.

Example 3: Getting the name wrong

While Microsoft Vista might conjure up images of open windows and scenic views in some countries, the name means "chicken" or "frumpy women" in Latvian. Getting brand names or logos right can be particularly tricky in some languages.

Sometimes in marketing like in any other area of business you make a mistake:

  • you change your product and the customer doesn't like it.
  • Your advertising campaign shocks consumers so much it leads to a fall in sales.
  • When you market your product in a new country it doesn't sell.
  • The price you charge for the product is too low so sales are good but profits are not.
  • Your products turn out to be dangerous and it leads to lots of bad publicity.

E-cigarette market on fire.

An internet survey has found that the market for e-cigarettes is expanding rapidly. A member of the team at the University of California, San Diego, which helped lead research into the impact on public health, stated that the product has "caught on fire" with ten new brands entering the market every month for the past two years and over 7700 flavours in total.

E-cigarettes contain a battery-powered heating cartridge that vaporizes liquid containing nicotine and/or flavorings. On the whole, they deliver significantly lower levels of nicotine when compared to normal cigarettes, and some studies suggest that they help those trying to give up smoking. They will be of benefit to public health, provided they are used to help quit smoking, although there are concerns they could encourage children that it is safe to smoke.

The US is proposing regulations that would mean each individual e-cigarette would require federal approval, which is causing concerns for the companies creating them. This could create an endless stream of paperwork for both the companies and the federal government.

Ethical considerations:

Marketing activities can have a major impact on whether a business achieves its ethical objectives. Consider advertising sweets to children then there will be arguments for and against taking an ethical stance.

Examples 2: "Children's impulse control for sweets influenced by video games."

A study from the Netherlands has found that children playing computer games featuring advertisements for sweets consume more calories than when the game contains adverts for toys. This research comes at a time when doctors and dieticians are worried about growing rates of obesity, especially amongst young children.

Children with poor self-control where particularly vulnerable and ate more sweets even when offered a reward not to eat.

"Apple Surpassed Samsung As Global Phone Market Leader, Says Report"

Assignment: Do some research to find out about some major marketing mistakes make by organizations. As a reflective CEO, examine how you would respond to the marketing mistakes considered above.

Exam Tip: It is very important to understand that a firm's market share can fall even though sales are rising.

Discuss the knowledge issues associated with knowing whether e-cigarettes are a good thing for society. To what extent should we be supporting the successful marketing of e-cigarettes?

Marketing in non-profit organizations

Evolving marketing strategies

Recap of Calculating Market Share.

How innovation, ethical considerations and cultural differences may influence marketing practices and strategies in an organization.

2. Non-profit-making organizations:

A non-profit organization usually has an objective that has a social, cultural, philanthropic, welfare or environmental dimension.

Charities and other non-profit organizations have very clear fund raising objectives - to support their cause or help achieve social objectives and this money needs to be raised in a cost effective way.

Marketing objectives for non-profit include:

  • Maximize revenue from trading activities.
  • Increase recognition of the organization by society.
  • Promote the work and aims of the organization to a wide audience.

Marketing should never stand still. Changed in consumer preference should be researched, anticipated and acted upon by the marketing department. Examples of recent changes are:

  • fuel-efficient cars - and fewer "gas guzzlers"
  • healthy food - and less fried food
  • tablet computers - and fewer PCs
  • informal business clothing - and fewer "business suits"

Businesses that fail to respond to these and other changes in preference by developing and marketing new products will usually quickly lose sales and market share.

Not all firms are profit maximizers and a number of other corporate objectives exist. Maynard (2009) argues that it is important for non-profit organizations to establish a well-defined niche; while most are not selling goods, they are selling their organization's mission, their ideas, their vision and their services.

In order to sell itself a non-profit organization must:

  • Identify the target audience - determine key stakeholder groups
  • Maintain constant communication.
  • Create a strong visual identity and logos.
  • Use message repetition wherever possible: create a slogan.
  • Employ multiple communication tactics.

Innovation:

The major innovation in recent years that have had impact on marketing activities have been internet marketing. The growth of social media networks is encouraging businesses to switch a higher proportion of their budgets towards this form of communicating with customers rather than traditional forms of newspaper and TV advertising.

Example 1: Nike switches to digital

Nike has switched its promotional activities towards digital media such as social networking sites. it has reduced spending on TV by 40% in three years. Most of its huge 2.7 billion US$ marketing budget in 2013 was spent on enhancing its communications with online customers.

Do practice calculations on 4.1 Calculating Market Share - Smartphones.

Marketing

Market share and market leadership

Social Marketing FYI

Market share is calculated by the following formula:

Do:

4.1 Activities

  • TOK Q
  • Exam Practice Q - Microsoft

market share =

x 100

sales

total market sales

To be effective marketing strategies should:

  • fit in with the overall aims and objectives of the business
  • Be determined by senior management
  • Be realistic, motivating, achievable, measurable, and clearly communicated to all departments in the organization.

Marketing objectives are important for the following reasons:

  • They provide a sense of direction for the marketing department.
  • Progress can be monitored against these targets.
  • They can be broken down into regional and product sales targets to allow for management by objectives
  • They can form teh basis of a marketing strategy. Need a clear vision of what the business hopes to achieve for its products.

Remember this can be measured by units sold (#) or revenue ($)

Marketing is more than just advertising and selling products.

Marketing is the management task that links the business to the customer by identifying and meeting the needs of customers profitably - it does this by getting the right product at the right price to the right place at the right time.

This includes: market research, product design, pricing, advertising, distribution, customer service and packaging.

4.1 The Role of Marketing

Example 1: In a market of 100000 units sold a company has sales of 35000.

35000

100000 x 100 = 35%

Example 2: Total sales

in market A in 2014 were 54000 units. The average price was $300. Company X sold 15000 units at $300 each.

Calculate the market share of company X.

Top 10 Marketing Fails

  • marketing and business functions
  • characteristics of the market in which an organization operates
  • market vs product orientation
  • commercial marketing and social marketing
  • market share and market leadership
  • marketing objectives for both profit and non-profit organizations
  • how marketing strategies in response to changes in consumer preferences
  • how innovation, ethical considerations and cultural differences may influence marketing practices and strategies

Marketing Objectives

Commercial marketing and social marketing

Marketing and the other Business Functions

SOCIAL MARKETING EXAMPLE

Fletcher's Drive" is the latest entry in AT&T's "It Can Wait" campaign, which warns against texting, web-surfing, emailing and other forms of potentially dangerous smartphone use while driving. ESPN CreativeWorks, the cable network's in-house agency, crafted the six-minute film, which focuses on former high-school football star Fletcher Cleaves

Marketing objectives are the goals that are set for the marketing department to help the business to achieve its overall objectives.

1. For-profit organizations

Examples of marketing objectives are:

  • higher market share - perhaps to gain market leadership
  • increased total sales (value or volume or both)
  • average number of items purchased per customer visit.
  • frequency that a loyal customer shops
  • percentage of customers who are returning customers (customer loyalty)
  • increase in number of new customers
  • improved customer satisfaction
  • enhanced brand awareness

Commercial marketing is satisfying consumers needs for profit. It is about providing what customers want, when they want it and where they want it. Ethics play a small role, if any at all. There may be controversies with the market on fast food, soft drinks, tobacco or alcohol but commercial marketing aim to increase sales revenue and profit.

Social marketing is the use of mainstream marketing methods to achieve the benefits of social change. An example would be informing the public about the dangers of under-age drinking.

The social marketing concept:

  • It is an attempt to balance three concerns: company profits, consumer wants, society's interests.
  • It considers long-term welfare (protecting the environment and paying workers reasonable wages).
  • Using this concept can give a business a competitive advantage.
  • A social marketing strategy could lead to the firm being able to charge higher prices for its products as benefiting society becomes a unique selling point. Such as selling tins of dolphin safe (not caught by nets) tuna which is more expensive.

Important strategic marketing decisions are unlikely to succeed unless they are integrated and coordinated with the other main business functions.

News title: Under Armour increases its Marketing Budget. Company forecasts sales could increase substantially this year.

How are the other business functions impacted by the marketing decisions?

Finance - the department needs to fund the increased promotion budget. Without knowledge from the finance department that adequate finance is available, the marketing department could not increase their budget.

Human Resources - additional employees are likely needed for the additional marketing and promotion activity for Under Armour products to be successful.

Operations - the links between marketing and operations are vital. Market research data will be used by operations to determine the preferences of customers. Output will increase.

Keep your eyes on the road,

not on your phone.

#ItCanWait

The achievement of any or all of these marketing objectives will help the organization achieve its primary profit-seeking corporate objective.

Marketing approaches

Difference between marketing goods and marketing services

Market orientation

Pros & Cons

Market Characteristics

Markets can be differentiated by the following characteristics:

Marketing of goods and services can have many similarities as well as differences. Both benefit from creating trust and building brand recognition into the marketing activities but goods can be impulse purchases whereas services need time to be delivered to consumers.

Marketing services focuses on relationship building and trust.

Perceived value. Many service companies focus their marketing efforts on instilling a high perceived value of the service in the minds of the customer. The emotional connection is a key element in service marketing.

Product orientation - an inward looking approach that focuses on making products that can be made or have been made for a long time and trying to sell it.

1. Product- oriented businesses invent and develop products in the belief that they will find consumers to purchase them.

2. Product-oriented business concentrate their efforts on efficiently producing high-quality goods.

Evaluation: The trend now is being market led (oriented) the customer is put first. Most companies have to try and satisfy and increasingly demanding consumer base empowered by knowledge and information from the Internet.

A few companies such as Rolls Royce and Apple are able to operate profitably by concentrating solely on the strength of their product and effectively ignoring the needs of the market. Dyson vacuum too still can be successful due to its innovative product.

Market orientation - an outward looking approach basing product decisions on consumer demand as established by market research.

In this approach the customer is put first and the business attempts to produce what consumers want. This requires market research and market analysis to indicate present and future consumer demand.

Benefits:

  • The chances of a newly developed product failing are reduced.
  • If consumer needs are being met with appropriate products, then they are likely to survive longer and make higher profits.
  • Constant feedback from customers will allow the product and how it is marketed to be adapted to changing tastes before it is too late.

Tangible, physical consumer goods are often marketed in different ways to intangible consumer services. Managers responsible for selling services (banking, hotels, hair dressing) have to recognize several key differences between goods and services.

  • services are consumed immediately - they cannot be stored - empty hotel rooms during off peak season may have to be filled by charging much lower prices.
  • services cannot be taken back to be repaired or replaced - so the service quality must be right the first time or the customer will not return.
  • Consumers find it much more difficult to compare service quality than for manufactured goods - so promotion of goods must be informative and detailed about the precise nature of the range and quality of services offered.
  • People (trained, approachable and helpful employees) are very important to the successful marketing of services. Products often "sell themselves" due to innovative features.
  • market size
  • market growth
  • competitors and ease of entry
  • differentiated or homogeneous products
  • segmentation

Product Orientation

Pros & Cons

Competitors and ease of entry. All businesses need to be aware of the number and size of their direct competitors and the ease with which new rivals could join the market. Generally, the greater the number of competitors and the easier it is for new ones to joint a market the more price competition there will be. If products can truly be "made different" from rivals products, it might still be possible to charge a high price.

Segmentation. This term refers to the dividing of prospective consumers into groups (segments) who share common tastes and requirements. You would market to distinct groups of consumers who share common tastes and requirements. Segmentation enables companies to target different groups of consumers. Target marketing focuses marketing activity on particular segments of a market. Mass marketing sells to the whole market using a standardized product and the same marketing activities.

Market growth is the percentage change in the total size of a market (volume or value) over a period of time. Some markets are growing faster than others and some are declining rapidly. The pace of growth will depend on several factors including: economic growth, changes in consumer incomes, development of new markets, changes in consumer taste and technological change, which can boost market sales through innovative products. The rate of growth will also depend on whether the market is "saturated" or not. Washing machine sales in North America vs in India.

Differentiated or homogeneous products. Milk, bottled water and gas are products which are difficult to differentiate. A business selling these products will be less able to stand out from their competitors in terms of product quality.

Homogeneous products are goods that are physically identical or viewed as identical by consumers. It will be difficult for a business to charge prices that are different than the "going rate" for these products.

Market size is the total level of sales of all the producers within a market

The size of a market is important for three reasons:

  • a marketing manager can assess whether a market is worth entering or not.
  • businesses can calculate their own market share
  • growth or decline in a market can be identified.

Market size can be measured two ways:

1. volume of sales (units sold)

2. value of goods (revenue)

  • Measuring by value or volume will depend on the product. If a product is cheaper measure by units sold if it is expensive measure by value. Bugatti vs deodorant.

and more.... There are other Smart watch competitors. Samsung and Garmin are two others

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