4.1 The Role of Marketing (Importance of market share & market…
4.1 The Role of Marketing
Market share & market leadership
market share (%) = (firms's sales n time period/total market sales in time period) x 100
- the % of sales in the toal market sold by one business
- when a business has the highest market share of all firms that operate in that market
benefits of highest market share
Sales are higher than those of any competing business in the same market & this could lead to higher profits too.
Retailers will be keen to stock & promote the best-selling brands.
As shops are keen to stock the product, it might be sold to them with a lower discount rate
The fact that an item or brand is the market leader can be used in the advertising & other promotional material.
Importance of market share & market leadership
Being 'market leader' with the highest market share can be used in
advertising & promotional material
Market leaders are in a strong bargaining position with both suppliers & retailers. Suppliers want to continue with long-term supply contracts with the most successful business in the market.
Retailers are keen to stock the market-leading product as customers will feel disappointed not to find it in their stores hence these strong bargaining positions could lead to lower costs & longer credit periods from suppliers & higher selling prices to, & shorter payment periods from, retailers.
Recruitment of high-class employees is often easier for market-leading businesses as people would rather work for 'winners'
Financing might become easier if investors & banks become convinced that the status of being market weader w the highest market share adds to the stability & profit potential of the business
1. For-profit organisations
The long-term objectives of a company will have a significant impact on both the
& marketing strategies adopted.
- the goals set for the marketing department to help the business achieve its overall objectives
Examples (that include an increase in):
market share - perhaps to gain market leadership
total sales (value or volume - or both)
average number of items purchased per customer visit
frequency that a loyal customer shops
% of customers who are returning customers (customer loyalty)
num. of new customers
To be effective, marketing objectives should:
fit in with the overall aims & mission of the business
Be determined by senior management
Be realistic, motivating, achievable, measurable and clearly communicated to all departments in the organisation
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 & product sales targets to allow for management by objectives
They form the basis of marketing strategy.
2. Non-profit organisations
non-profit are distinguished from profit-maximising by three characteristics
non-profit do not have external shareholders providing risk capital for the business
they do not distribute dividends so any profit (or surplus) that is generated is retained as a further source of capital
their organisational objectives usually include some social, culture, philanthropic, welfare or environmental dimension
Similarities in activities between non-profit & for-profit:
Identifying the best ways to communicate effectively with donors
The need to assess the effectiveness of different promotions & campaigns to increase value for money in the future
Differences in marketing
The importance of maintaining high ethical standards to avoid alienating the public
Constant feedback on the success of charity campaigns - & future issues to be addressed - to maintain public interest & awareness
Free publicity, with the aim of capturing the public's imagination, e.g. for fundraising events and stunts, is much more important for charitable causes than for most consumer products
Marketing objectives for non-profit include
Maximise revenue from trading activities
Increase recognition of the organisation by society
Promote the work & aims of the organisation to a wide audience
How these factors influence marketing practices & strategies in an organisation
In the case of internet marketing, the increasing growth of social media networks is encouraging businesses to switch higher rportion of their budgets towards these forms of commnicating with customers rather than traditional forms of newspaper & TV advertising
If a single issue is considered- advertising sweets to children - then the arguments for and against taking an ethical stand can be the basis for a discussion on many other marketing issues with an ethical dimension
Failing to respond to culturl differences can led to bad feeling & publicity whereas responding to local tastes & sensibilities can encourage consumers to accept a new brand as being designed for their needs.
Businesses that fail to respond to these & other changes in preference by developing & marketing new products will usually quickly lose sales & market share