Marketing & Markets (DP IB Business Management)
Revision Note
Written by: Lisa Eades
Reviewed by: Steve Vorster
An Introduction to Marketing
A market is any place where buyers and sellers can meet to conclude a transaction e.g. amazon.co.uk or a shopping mall
Different markets have different characteristics and are affected differently by changes
The aim of marketing is to help identify, anticipate and satisfy consumer needs and wants profitably
Needs are considered to be essential e.g. shelter or food
Wants are desires which are non-essential, even if consumers consider them to be essential e.g. Nike trainers
Market research is the process of systematically gathering data from consumers, which can be used to influence business decisions
Market research is essential in helping businesses identify products/services they can develop in response to the needs and wants of their customers
Market Orientation Versus Product Orientation
Product orientation is an approach to marketing that focuses on the characteristics of the product rather than the needs of the consumer
The emphasis will be on creating a product first and then finding a market
The business has a belief that the product is superior i.e. it will sell itself
One problem with being too product orientated is that over time your business may move further and further away from what the market is looking for, thus increasing the risk of business failure
E.g. Gillette's razors can be classed as a product oriented business as the business focuses on the quality of its products and regular innovations aim to increase sales
Diagram: tools of product orientation
Market orientation is an approach to marketing that focuses on the needs of consumers and uses this information to design products that meet those needs
Consumers are at the centre of marketing decisions
Products will be developed which respond to consumer needs
The result of market orientation is that the firm will benefit from increased demand, increased profits, and a valued brand image as its products become more desirable
E.g. Universities often develop new courses based on the feedback they receive from students and employers
Diagram: tools of market orientation
Market share
The size of a market can be measured through sales volume or sales value
Sales volume is the number of products sold i.e. the physical number of units sold
Sales revenue = price x quantity sold i.e. the financial value of the units sold
The market share that a business enjoys is the proportion of the total sales of a product/service as a proportion of the size of the market as a whole
E.g. Tesco has 26% of the UK grocery market
Market share is expressed as a percentage and is calculated using the formula
An increase in market share can indicate that a business has made effective use of marketing strategies to increase sales and gain customers from competitors
Worked Example
In 2022 the UK coffee shop/cafe market was worth £4.6bn. Sales of Starbucks Coffee were £328m in 2022.
Using the data calculate, to 2 decimal places, the market share of Starbucks Coffee in the coffee shop/café market. You are advised to show your workings.
[4 marks]
Answer:
Step 1: Identify annual sales of Starbucks Coffee
£328m [1 mark]
Step 2: Identify the total size of the coffee shop/cafe market
£4.6bn [1 mark]
Step 3: Substitute figures into the formula
[1 mark]
Step 4: Present the answer to two decimal places
7.13% [1 mark]
Examiner Tip
By providing the formula and showing your working out, even if you do not get the right answer you will still be able to gain some marks.
Market Growth
Market growth is the increase in the overall size, value or volume of a market over a period of time, usually expressed as a percentage
This metric considers the size of the whole market/industry as opposed to a single firm's share of the market
Some common ways to measure market growth include sales revenue, sales volume or the number of customers
If market growth is
Positive, the market is getting bigger (expanding)
Negative, the market is getting smaller (contracting)
Market growth is expressed as a percentage and calculated using the formula
Worked Example
In 2021 worldwide sales of plug-in hybrid vehicles was 1.94 million units. By 2022 sales had increased to 2.84 million units.
Calculate the rate of market growth in the plug-in hybrid vehicles market. [2 marks]
Answer:
Step 1 - Deduct 2021's sales from 2022's sales
Step 2 - Divide the outcome by 2021's sales
[1 mark]
Step 3 - Multiply the outcome by 100 to find the percentage growth rate
[1 mark]
Market growth provides an incentive for businesses looking to expand, increase sales and generate higher revenue
Businesses are often attracted to the potential of growing markets - and they can become increasingly competitive quite rapidly
Diagram: reasons for market growth
Examiner Tip
You may be asked to calculate the sales in a market given a certain growth rate. In simple terms you are being asked to calculate a percentage increase.
For example, in 2022 a niche market had total sales of $850,000. This was expected to grow by 15% in 2023.
To calculate expected market sales in 2023 you must first find 15% of $850,000:
Then add this amount to 2022's sales:
So, with a market growth rate of 15%, market sales in 2023 are predicted to be $977,500.
Niche Markets & Mass Markets
In niche markets, products are aimed at a subset of the larger market, e.g. gluten free products
Niche marketing occurs when businesses identify and satisfy the demands of a small group of consumers within the wider market
Production usually happens on a small scale
In mass markets, products are aimed at broad market segments e.g. Kellogg's Cornflakes is an example of a breakfast cereal aimed at the mass market
Market segments are groups of consumers who share similar characteristics e.g. age, lifestyle, etc.
Mass marketing occurs when businesses sell their products to most of the available market
Production usually happens on a large scale
Characteristics of Niche Markets & Mass Markets
Niche Markets | Mass Markets |
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