Marketing Basics

Marketing is a core component in business management but what is it exactly? According to the Japan Marketing Association, marketing is a comprehensive activity for creating markets through fair competition, with companies and other organizations gaining a global perspective and gaining mutual understanding with customers. Philip Kotler, the father of modern marketing, adds to that saying that marketing is human actions directed at meeting customer needs and desires through an exchange process. The easier way to understand this would just be the creation and maintenance of a market. So why do we need marketing? From the business point of view, it is to promote future sales and profits by communicating with the market which ultimately is the general public or consumers.

Basic marketing compromises of six steps; the discovery of market opportunities, target marketing, market segmentation, positioning setting, building a marketing mix (strategy) and communication.

Figure 1: Basic Flow of Marketing

  1. 1. Discovery of Market Opportunities
  2. 2. Target Marketing
  3. 3. Market Segmentation
  4. 4. Positioning Setting
  5. 5. Building Marketing Mix (Strategy)
  6. 6. Marketing Communication
  7. 7. Contact Us

Discovery of Market Opportunities

Discovery of market opportunities can be done via a series of processes. First is the environmental analysis to get an idea on the potential influence of various aspects of the environment on business operations. External environmental factors can be divided into macro-environment and micro-environment where macro division includes economy, politics, society and culture while micro division the industry, competition and customer analysis. Internal environment analysis, on the other hand, involves in-house analysis of people, goods, money, the know-how and information.

After getting all the potential factors that may affect the operating business, SWOT or 3C analysis can be done. The SWOT analysis will allow the business to identify its strengths, weaknesses, as well as external opportunities and threats while 3C analysis points out the three key factors a business need to succeed; the company, customers and competitors. From there, business and product critical success factors (CSF) can then be extracted to match the market opportunities for the product.

Figure 2: Example of a SWOT Analysis

Target Marketing

Next step is target marketing. To do this, we first need to identify the market size and calculate and understand the trends. The market is a collection of potential and apparent needs and wants. Wants are demand for specific things that are not necessary to meet your needs while needs are what the customers are looking for. A good example to differentiate the two would be an office worker wanting to go to work in the morning. The want here would be wanting to get on a train or bus to reach the destination while the need is just to reach the destination which is the office. More specific detail is usually taken into account by businesses and this is the advanced need which in this case is wanting to go to the destination comfortably or quickly. These advanced needs are where businesses strive to differentiate themselves from competitors however if the wants are mistaken as needs, this will lead to wrong product/ service development.

When conducting marketing, determining the target market is an important step. If the market is classified into ‘by market space’, it can be classified into three target markets which are mass market, segment market and each customer. These cannot be considered separately but more organically linked where individual customers are narrowed down from the uniform.

Figure 3: Target Markets

Market Segmentation

Market segmentation is the division of a market of customers into groups having the same common needs, similar product recognition, value, use and purchasing processes. It can be segmented according to geographical, demographic, psychological, behavioural variables, product usage pattern etc. Segmentation can also be done following the 4R principle; rank, realistic, reach and response.

Once the segments are established, businesses can choose to develop products/services based on different segments. The first type is a single market type where only one market is targeted and superiority and efficiency are pursued in that market. Downturns in this market will directly affect the business. Product specialization type, on the other hand, involves deploying a single product in multiple markets. This is often used by small and medium-sized specialized manufacturers with limited technology and products. Dispatch of new technologies threatens this market type. Another type is the market-specific type. They provide various products and services required by target markets and customers such as a complete set of hardware and software products while the selectively distributed type develops with multiple markets based on marketability and superiority of their products as a measure to diversify corporate risk. Last but not least, is the overall type. This strategy is usually implemented by top companies in the market such as Toyota and Panasonic where they develop all kinds of products that comprehensively cover the entire market.

Figure 4: Market Types

An example of market segmentation in the healthcare industry is by age (in ten years) and gender of patients. Since lifestyle diseases such as obesity, high blood pressure, dyslipidaemia and diabetes affect mostly patients of both genders from age 30 to 50 years of age, this will be the core target for pharmaceutical companies developing treatments for these diseases.

Positioning Setting

Positioning; an activity to make your product different from competitor products, and to clearly position superiorly in the customers’ mind, and to define the marketing mix. It is the first step before strategy development in marketing. Positioning can be done based on two parties, the company or the customer however, the latter is more commonly used. As stated before, first, there is a need to identify the differential factors. The best combination of those factors is then selected before building the marketing mix. Example when marketing for Gaster, a drug targeted for gastric and duodenal ulcers, the product concept “Gaster to know” was used where it states the safety margin of the drug, ease of drinking, effective speed and its effects on the conditions; moderate gastric acid secretion/ excellent gastric mucosal protection. The concept is a clear and concrete statement in the client’s language of what benefits the drug gave. In the case of pharmaceuticals, the market is also influenced by the trend of medical research and academic society.

Building Marketing Mix (Strategy)

Following that is the building of a marketing mix (strategy). It is a combination of different means that you can control yourself to approach your segments. According to E.J. McCarthy, marketing is based on four elements as theorized in the 4P model; product, price, place and promotion. A product can be a new or improvised form of an older product. You should also be clear on how the product has a differential advantage over other competitive products. Once a clear understanding of the product is achieved, the pricing comes into play. How much profit is set to be gained and what price is acceptable to consumers and competition? The third P then represents place, the setting where products are placed. Are products sold directly to consumers (direct sales) or from a wholesale store to store? The form of sales and transaction conditions should also be determined at this stage. Lastly, promotion is, like the word itself means, the incorporation of various ways to increase awareness of the product in the general public and sales subsequently.

Marketing Communication

The last step in marketing is the communication stage. It links with the last stage of the 4P model stated above which is promotion. In order to promote a product, information needs to be disseminated via communication in ways including human sales, advertising, sales promotion and public relations.

Human Sales Sales staff directly directs products and services to consumers and sales associates
Appeal and sell.
Advertisement Informing / understanding / inducing an image of an “enterprise / product / service”
Cultivate and brand.
Sales Promotion Make a good impression on the product, have it tried, have it used continuously, make it stand out in the store, etc.
Secure a lot of display space in the stores.
Ask the people involved in sales to sell.
Public Relations Have the media take-up products from a “third party” perspective, gain confidence and high sensitivity, and foster good relationships with consumers and various other people around the company.
Figure 5: Different Ways to Promote a Product

 

It is important to understand that products cannot be sold simply by raising product recognition with advertisements. In order to effectively market a product, a combination of these different ways stated above are to be used. Therefore, it is necessary to understand each feature, function and purpose as well as the current situation of the customer and product life cycle to productively apply each technique in a different situation. The effective combination and interlocking of human sales, advertisement, sales promotion and public relations is known as communication or promotion mix.

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