The nature of marketing: markets, segmentation and CRM

Last time

Before we start: last time, in The marketing mix, you learned these points. Here they are again on one card. Keep them in mind, because today builds on them.

Understanding markets

Marketing starts with understanding the market: who the customers are, what they want, and how the market is changing. This lesson covers the role of marketing, market size, growth and share, mass and niche marketing, segmentation, and customer relationship management.

The role of marketing

Marketing identifies, anticipates and satisfies customer requirements profitably. It links with other departments: operations must produce what marketing plans; finance must fund it. Marketing objectives, such as increasing market share, support corporate objectives.

Market size, growth and share

Market size is total sales in the market, by value or volume. Market growth is the percentage change in market size. Market share is a firm's sales as a percentage of total market sales: 30 million of a 150 million market is 20 per cent. If the market grows from 150 to 165 million, growth is 10 per cent.

Mass and niche marketing

Mass marketing sells one product to the whole market: high volumes and economies of scale, but strong competition. Niche marketing targets a small segment: less competition and higher prices, but small volumes and higher risk. Many firms combine both, with a mass brand and niche variants.

Is mass marketing essential?

For a fast-food business, mass marketing gives national reach, brand recognition and economies of scale. But niche approaches, such as healthy or premium fast food, can succeed with loyal customers and higher margins. So it depends on the firm's size, brand and target market.

Segmentation

Segmentation divides a market into groups with similar characteristics: demographic, geographic, psychographic and behavioural. Benefits: better-targeted products and promotion, less waste, and discovery of gaps. Drawbacks: research costs, and a segment may be too small to be profitable.

Consumer and industrial markets

Consumer markets sell to individuals; industrial markets sell to other businesses. Industrial buyers buy in larger quantities, more rationally, and value relationships and reliability. So marketing methods differ: personal selling and trade fairs suit industrial markets.

Customer relationship management

CRM uses customer data to build long-term relationships and loyalty. Methods: loyalty schemes, personalised offers, and excellent after-sales service. Keeping customers is usually cheaper than winning new ones.

Segmentation bases

The four bases of segmentation, with examples.

Mistakes that lose marks

Mistake one: confusing market share with market size. Mistake two: calculating growth from the new value instead of the old. Mistake three: saying mass marketing is always best. The fix: correct formulas and situational judgement.

The full-marks tip

The full-marks tip: use market share and growth formulas, and show the working. Judge marketing approaches by the firm's size, brand and target market.

On one card

So, on one card: the nature of marketing. Keep it for revision.