Product may appeal to other customers (people that are not targeted may want to use)

Business could pick the wrong target market (if not enough research)
Problems with market segmentation:
To make sure they meet the needs&wants of customers more effectively
To help them decide how to market their product/service
Get more customers = make more profits
Why do businesses segment the market?

Demographic: definining a market by age, gender and family size

Socio-economic: defining a market by income and occupation
Lifestyle: defining a market where customers are located
defining a market by values, opinions, hobbies, interests, personality characteristics
Geographic: defining a market where customers are located

Market segment: A group of customers with similar needs and wants Types of segmentation:

Market Segmentation
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Marketing Mix - the 4Ps

Marketing mix - Refers to the combination of factors which help a business sell its products. The
4Ps Product: applies to the product itself, its design and quality, comparing with competitors'
products.
Price: the price at which the product is sold, comparing with competitors' products' price,
should cover costs
Place: questioning method of distribution channel
Promotion: how the product is advertised and promoted, questioning methods of
promotion that would be effective/suitable for the product
What makes a product successful?

satisfies existing needs and wants of consumers

not too expensive to produce
design - performance reliability, quality must be consistent with product's brand image
capable of stimulating new wants from the customer
has something distinctive to make it look different
produce a new product or introduce new changes to original product before its competitors

 Quantitative: numbers and statistics; able to retrieve by close-ended questions

Qualitative: produces information in the form of descriptions
Types of information
Why is market research needed?
Market research: process of gathering, analysing and interpreting information about a market
Product-oriented: business focus mainly on the product itself; produce product first then find
market Market-oriented: business carries out market research first to find out what consumers
want before a product is developed and produced
Businesses use market research to help them decide the right mix

The importance of Market Research

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Primary Research
+s/-s of questionnaires:

+ detailed qualitative information

+ can be carried online; cheaper and easier to collate/present
- time and money consuming (collating/analysing)
- answers to questions might not be very accurate -> misleading to business

+s/-s of interviews:

+ interviewer able to explain the questions to interviewee

+ detailed responses from interviewee
- interviewer could lead the interviewee -> inaccurate results due to bias
- time-consuming; often also expensive way

Sample: a group of people who are selected to respond to a market research Random
sample: when people are selected at random for source of information Quota sample: when
people are selected on the basis of certain characteristics as a source Focus group: a group of
people who are representative of the target market

Government statistics
Newspapers
Market research agencies
The internet

External sources of information:

Sales repartment sales record, pricing data, customer records, sales reports
Opinions of distribution and public relations
Finance department
Customer Service department

Internal sources of information:

Secondary Research
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Product Packaging
Packaging: is the physical container or wrapping for a product. Often used to appeal to
consumers.
New packaging can extend the product lifecycle
Purposes of packaging:

protects the product

easy to transport
present an appealing image
easy to open and use the product
provide product information inc. barcodes
promotes brand image

Don't Imagine Good Maggi So Daringly

Product life cycle: describes the stages a product will pass through from its introduction,
through its growth until it is mature and then finally its decline Development: product is
tested and developed before it is launched; market research is carried; there will be no
sales Introduction: initial sales are low until customers start buying; production costs =
higher than revenue from sales Growth: sales increase = production becomes more profitable;
early development costs can be recovered; success of product -> brand loyalty and repeat
sales Maturity: product reaches peak of sale; most profitable point for the company; competitors
enter marketSaturation: product/service becomes less popular (satured); decline in sales; more
competitors enter market . **** Decline: sales have fallen; new design for product has been
introduced; revenue has fallen; product may be removed****Extension strategies: extend life of
product before it goes into decline; businesses use marketing techniques to improve sales eg use
a new advertising campaign or make small changes to the product's design, colour or packaging

Product Life Cycle

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Pricing Methods
Cost-plus pricing: the cost of manufacturing the product plus the profit mark up; + easy to
calculate; + all costs are covered; + costs increase = price increase; - competition may not increase
prices when you do; less incentive to control costs Example: cost = RM50; percentage mark up =
50; selling price = 1.5 x 50 = RM75 Competetive pricing: when product is priced in line with or just
below competitors' prices; happens when there is a lot of choice Psychological pricing: involves
setting a price just below a large number to make it seem cheaper; charging a very high price
for a high quality product; little sales revenue is lost Penetration pricing: when the price is set
lower than the competitors' prices in order to be able to enter a new market; ensures that sales are
made for new product entering the market; profit per unit sold may be low Price skimming: high
price is set for a new product on the market; people will pay because of the novelty factor; can
help to establish the product as being good quality; may put off potential customers Promotional
pricing: setting a very low price for a short period of time; boost sales throughout; useful for getting
rid of unwanted stock; renew customers' interest; lower sales revenue Price discrimination: firms
charge different prices to different consumers for same product; lead to increased revenue and
profits but can also add costs (prices constantly changing)

To increase sales
To create brand image
To introduce new products to the market
To improve the company image
To inform people about particular issues, often used by government
To compete with competitors' products

Aims:
Advertisements
Sales promotion
Promotion: the way in which a business communicates with existing and potential customers to
encourage demand Promotion as part of the marketing mix includes:

Aims of Promotion
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Price Elasticity
Price elasticity: a measure of the responsiveness of demand to a change in price. Law
of demand: as price increases, demand decreases Price elastic (very responsive): small
percentage change in price = large percentage change in demand. Eg Pepsi vs Coke Price
inelastic: (unresponsive): large percentage change in price = smaller percentage change in
demand. Eg Nexus uniform (even if price increases, new students will have to buy no matter what)
SPLAT!

Substitutes: no substitutes = inelastic

Proportion of income: takes up small proportion of someone's income = inelastic
Luxury of necessity: essential for living and is needed eg petrol = inelastic
Addictive: product is addictive = inelastic
Time to respond: no time to search for cheapest price = inelastic

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Types of Distribution Channels

Distribution channel: the means by which a product is passed from the manufacturer to
the customer - this can often involve an intermediary (aka middle men) Direct channel: no
intermediaries; increasingly popular method; + simple; + no intermediary = cheaper to customer; not suitable for large products; - expensive to send by post so not cost effective Retailers: more
popular when retailer is large or when products are expensive; they deal directly with the customer;
+ producers sell large quantities to retailers; + reduced distribution costs (bc you're sending large
quantities in one go) = more cost effective; - price increases for customer; - producers lose control
over how product is sold Wholesalers: breaking bulk; benefit from economies of scale (the more
they buy the cheaper each unit becomes); simplifies process for retailers; + small retailers are able
to purchase smaller quantities; + wholesaler saves storage space; - fresh products might not be
of good quality as it takes longer for them to reach shops; - producers lose control Agent: have
specialist knowledge of that country, so they sell on behalf of the business; they can also be the
only intermediary; do not hold stock; operate in tertiary sector; + offer specialist knowledge; know
about local conditions; - producers lose control; - consumers pay more