Topic 4: Marketing
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For the IB Student, Marketing is the most identifiable function of business and also what most students focus on when completing the IB Business and Management Internal Assessment.
But what exactly is Marketing. If we can agree that gaining and retaining customers are the main reason why businesses engage themselves in production, then how businesses meet the needs and wants of potential customers is the role of marketing.
There are many definitions for marketing, but most will infer that it is about identifying needs and generating wants profitably by creating, communicating and delivering value to customers. It is also about managing customer relationships to the benefit of the business and stakeholders.
Business not only markets tangibles in the form of products (cars, clothes, food) but also intangibles in the form of services (tourism, banking, insurance), places (countries, cities or tourist destinations), events (sports competitions, automobile and fashion shows), people (pop and film stars), experiences (Disney world, diving in the oceans), ideas (social messages about the dangers of drugs or alcohol), properties (residential or real estate), Organizations (Oxfam, Museums) and information (university or school statistics for decision-making).
4.1 The role of marketing
The market:
A market is traditionally a physical place where there is both a Buyer and a Seller. There are consumer markets (Businesses Selling to Consumers also called B2C), business markets (Businesses selling to other Businesses also called B2B) and Consumer to Consumer markets (consumers selling to other consumers also called C2C).
Examples of B2C are where we as consumers go to buy products (T-shirts) or services (movie theatres). Therefore, all retails stores represent the business. The B2B is similar to a supplier of the movie theatre (e.g. for drinks or the actual films shown). An example of C2C would be selling platforms such as e-bay or a garage sale. This is therefore where consumers sell the products they have bought to other consumers.
Market size
The size of a market refers to the physical number of Buyers and Sellers of a product or service that are in a particular market. Once a market has been identified, businesses would like to know the likelihood of successful sales in the market, as well as the competition. For new products that are to be launched, market research would determine if the market size is able to support a high volume of goods. Although there are people living in the Artic zone, there is no market for air-cooling systems or air conditioners meaning that the market size (and the temperature) is next to zero.

Also to be taken into account is that a large market also implies a large concentration of sellers or competition.

Market growth
When the overall demand increases in a market, growth is said to be taking place. An increase in market sales is the best indicator that consumers are now demanding more from the producers. Market growth, however, does not mean that all companies are experiencing increased sales as this is spread across the entire market or concentrated in select companies.

Market share
Examine the characteristics of the market in which the firm is immersed
Calculate market share from given information
The sales that a company reports at the end of the year do not reveal how well the company is doing relative to the competition. When a company wants to determine its position in the market place and against its competition, the overall share of the market that it commands is the best measure. This can be expressed as the company’s sales relative to the total sales made but all the companies in the market.
When a business increases it market share it thereby is able to increase sales revenue. The formula for determining market share is:
Total Company Sales/Total Sales in the Market x100/1 = Market Share
If a Steel manufacturer has sales that total 100 tons per year and the total sales in the market is 200 tons, the market share is therefore 50%.
However, market share is subject to certain qualifications:
  1. A companies market share is best judged against its closest rivals and not the entire market
  2. A decline is market share may also mean that a new company has entered the market and therefore the company is not worse off then other companies
  3. A drop in market share can be deliberate, if for example the business ceases to provide some clients with its business
  4. Sales and seasonal changes can affect market share and cause fluctuations

Definition and nature of marketing
Define marketing and describe its relationship with other business activities.
Explain the difference between the marketing of goods and services.
Marketing of goods/services
In Business a Product is anything that can be offered to consumers to meet their needs and wants. So yes Lady Gaga is a product!
However, there is a classification into three groups
  1. 1. Nondurables (such as food) which is consumed relatively fast and repeatedly
  2. 2. Durable goods (such as a washing machine, cars and clothes) that are used repeatedly
  3. 3. and Services (like a haircut or teaching)
Describe the difference between market and product orientation.
A business will seek to market its products on the basis of its strength. Therefore, the question that one must ask is whether a business will use its core competencies and thereby produce something that the market will potentially want, or alternatively conduct market based research and determine what it is that the consumer in the market desires.
Companies such as Apple have technical engineers that brought us the Ipod and Ipad. Through what is referred to as the core competencies of the business, namely their labor expertise, capital-intensive investments and entrepreneurial sense of creativity they have been able to Produce products that we the consumers find appealing. Apple is therefore referred to as product or asset-led orientated business. Its assets that lead its productivity are primarily in the labor (human) and vision of Steve Jobs.
The Market orientated business focuses on the needs of buyers, which can be both reactive and proactive.
The Product orientated approach is the more traditional approach of providing consumers with products of services of higher quality and affordability.
HL Only Additional marketing orientations:
There are numerous changes that have taken place in the ability of business to market its products. With this widening reach, business is also faced with increasing choices on how they can and should influence public opinion. The Internet is a powerful information channel and the proliferation of special interest TV channels, podcasts, and Internet news groups among others means that marketing orientations have shifted. Consumers are also increasingly more price and quality sensitive as they become more informed and knowledgeable.
Social marketing

Marketing by the government or non-for-profit organizations that seeks to defray the negative externalities in society or promote the positive externalities is referred to as social marketing. This “cause” related marketing such as posters that state “smoking is bad for your health” or “wear your seat belt” are designed to change habits, values, promote action or alter behaviors patterns. Value related campaigns such as promoting tolerance are popular in multicultural nations. Social marketing is subsidized by government programs and continually seeks to promote beneficial services or products. Does the government subsidize your school? Perhaps you may have heard the phrase often used in social marketing for education and changes in behavior “don’t be a fool, stay in school”.
Asset-led marketing
Asset-led marketing is mostly successful in developing countries where expansion is desired. However, although the business may have the core capability of delivering qualitative products, the successful pricing, distribution and marketing of these products will still be a challenge.
Consider the vastly popular products that Apple Computers has created. The engineers of Apple are highly competent individuals and through their ingenuity have created products we did not know we would desire. Therefore, their approach in marketing their products was strictly based on the assets of the business (especially labor).
LO. HL Only. Analyse the influence of marketing orientation on the success or failure of firms.
The Motorcycle company Harley Davidson, which twice narrowly escaped from bankruptcy, embarked on a campaign to boost the sales of its products by improving on the quality of its products and creating (HOG), Harley Owners Group. The creation of this social interaction group lay within the competency of Harley Davidson, which has profoundly fostered a strong brand community. They now find themselves in the enviable position of demand exceeding supply. The brand revitalization of Harley Davidson lay in a return to basics strategy through product orientation.
With the communication revolution, businesses have come to realize that market trends dictate sales over the Internet. Facebook, Skype, Google Voice among others have achieved success through a freemium strategy (free online content with premium components that would be paid separately) or free with advertising or without advertising. As market research is conducted it becomes quickly self evident that very rarely will a consumer pay for computer to computer telephony. This market orientation is a continuing trend that will undoubtedly influence entrepreneurs keen on the Internet as a marketplace. The outcome will also be more services based on the freemium or similar strategy.

Marketing in non-profit organizations
The government sector and a segment of the private sector both have non-profit as a status. The government will provide services such as hospitals, military, police, postal and fire departments among others. While the private non-profit sector will fill-in the needs that are not met by the government such as environment defense groups, animal shelter and animal treatment or care groups, health services, museums, charities and educational institutions among others. These non-profit sectors usually provide a service as opposed to a product.
LO. Analyse the marketing techniques in non-profit organizations.
The marketing within these organizations is “cause related” or social marketing, and is usually supported through partnership with individuals, especially celebrities or other organizations. Because of the non-for profit status of the organizations, there is a heavy reliance on endowment charitable contributions). Some good examples are The Boys and Girls Club of America and Unicef. After choosing the right goal or objective the planning and implementation of a marketing campaign is similar to that of a for-profit organization. However, the focus on social marketing means that they must:
  • Choose the most responsive target markets (e.g. wealthy and affluent patrons)
  • Provide a compelling and clear message of the need
  • Choose the must attention grabbing messages
  • Promote a single and doable behavior in simple terms
Marketing campaigns can be an expensive endeavor and in particular for non-profit organizations. They may take time and require phased actions, such as the steps taken to discourage smoking: cancer reports, labeling, banning cigarette advertising and smoking in locations.
LO. Describe the elements of a marketing plan.
The marketing plan is a document that outlines how an organization intends to reach a specified objective based on what is known about the marketplace. The plan will include tactical guidelines and financial obligations or the period of the marketing campaign. The marketing plan is developed by a marketing team, which draws input from all the business functions. The greatest drawback in marketing plans, as expressed by executives, is the not having enough information on the competition.
The contents are:
1) Executive Summary: A brief summary of the main goals and recommendations for Senior management to review.
2) Table of Contents: An outline of the marketing plan
3) Situational Analysis: Following marketing research, this section will present details of the market in terms of its size, trends, sales, competitors and costs. Marketing tools are used to reveal critical information.
4) Marketing Strategy: The competition plan or position is emphasized here, with a clear definition of the goals and objectives and how they are to be accomplished. Input from the other functions of the business (Human Resources, Finance, Operations and Management) must be included to ensure that for a tactic, as an example, there are enough financial resources.
5) Financial Projections: Sales and expense forecasts including break-even analysis are part of the financial projections.
6) Implementations controls: This sections indicates how the marketing plan will be monitored and adjusted to meet the goals and objectives set out.

Due to increased and refined resources, marketing plans have become more customer orientated and competitor orientated. The planning has now adopted contingencies for macroeconomic or other environmental developments such as price warts or strikes.