Market Orientated businesses are those businesses that make/produce what can be sold in the market. Whereas, product orientated businesses are those that sell what they produce/make. E.g. Speciality goods
Advantages of Product Orientated businesses:
- Quality: Business can focus on the quality of the product
- The business can also invest more of technology
- Economies of Scale can be achieved by the business.
- Outsourcing, through this they can ensure that there are lower costs of production for the product.
Disadvantages of Product Orientated businesses:
- Missed opportunities: a product orientated approach will cost the business if the consumers don’t want what the business is catering.
- Obsolescence: If your brand or brand line is based on your products, there might be other products in the market which might take over.
Advantages of Market orientated businesses:
- Flexible to changes in tastes and fashion, as these businesses work towards creating a product wanted by the society.
- New products are designed to meet customers need
- Decisions are based on effective marketing strategies
Disadvantages of Market orientated businesses:
- High cost of market research
- Constant internal change
- Unpredictability of the future
Niche market is a market where the businesses target segments of consumers. They divide the consumers into small groups based upon several characteristics.
There are indeed various advantages of this marketing method:
- There is less competition since the market is focused on a small group of customers.
- They specialise at serving the customers of this market segment and eliminate any kind of competition that may arise.
- There are high profit margins due to this
- Customers are more loyal
There are various disadvantages of this marketing method:
- Lack of economies of scale
- There’s high risk since they only target a certain market segment
- Attract competition
- Due to market changes, they may not be able to change their marketing methods.
Mass market is a market where the businesses target the market as a whole, and not certain parts.
There are certain advantages of this:
- There are many customers being targeted, so lower risk as compared to Niche markets.
- Economies of Scale can be achieved, due to high production and consumption quantities
- High revenue as it is associated with lower production costs.
The disadvantages for this include:
- No focus, hence more chances of failure.
- The customer needs are more general and less specific which makes it difficult for the producers to decide what and how to produce.
Unique selling point refers to something special or different about a product, which differentiates it from the other similar products/substitutes in the market. Through investing in product development, brands can work on their brand recognition and standing in the market.
This unique point can exist in many ways, maybe the product is differentiated, the place where it’s being sold is different, the price is lowered, or the promotion technique varies from others in the market.
We can work on many of the points on the marketing mix to ensure that a unique selling point can be achieved. This is crucial for a business for not only increasing its market share but also its customer base.
It consists of a combination of factors that can be controlled by a company in order to influence the customers to purchase their products.
Such strategies include:
- Market Development: Selling existing products in new markets.
- Product development: Selling new products in existing products.
- Diversification: Selling new products in new markets.
- Product innovation: refers to the objective of launching an original or new product onto the market.
The business focuses on these factors for this purpose: Product, Place, Price and Promotion.
A term coined by Jack Trout in 1969, is a visual tool that reveals customer perceptions about a product or a brand in relation to other substitutes in the market. It is a two-dimensional diagram, used for plotting customer perceptions using certain criteria such as price and quality.
Certain terms to know:
- Premium products: are of high quality and high price such as, Lexus.
- Economy Products: are of low quality but at appropriate prices such as supermarkets supply no frills own label to attract price-sensitive customers.
- Bargain products: are of high quality but low prices.
- Cowboy products: poor quality yet highly priced.
This map allows businesses to identify any gaps in its product portfolio, which is a collection of all the products and services offered by the business.
Advantages and disadvantages:
- It helps us better understand market segments
- To find out how the target market perceives the brand in the market
- To be able to monitor the changes in consumer preferences over time.
- To be able to evaluate the performance of recent marketing campaigns and other marketing mix changes that have occurred.
- To confirm whether how consumers perceive the company fits with their positioning goals or product profile.
- To check that the brand has a clear positioning space in the market.
- To track how successfully the new products have been positioned into the market.
- To help the organization identify gaps in the market.
- These maps often simplify consumers’ purchase decision to two attributes.
- More relevant for individual brands rather than for corporate brand image.
- There sometimes is a difference in consumer’s awareness of the brand’s benefits and the reality.
There are mainly five types of market systems:
1- Perfect Competition:
There are certain conditions for this:
- There should be many firms in the market.
- The firms must be able to enter or exit the market easily.
- Each firm should sell a non-differentiated homogeneous product in the market.
- Each firm must be a price-taker. (A price taker can’t control the prices of the goods it sells)
- In a Monopolistic market, there’s only one firm large in size unlike in perfect competition where all the firms are small in size.
- There’s only one firm in the market. There are high barriers to enter.
- There are no close substitutes, the monopoly doesn’t face any competition.
- There are different types of barriers to entry:
- Patents: If a firm holds a patent on a production process, it can legally exclude other firms from using the same process for a number of years. If there isn’t an alternative production process, the firm that holds the patent will have a monopoly.
- Large start-up costs: In some markets, firms while entering will face large start-up costs, and if they are large enough, most of the firms will be discouraged from entering the market.
- Limited access to resources: A monopolistic market structure will arise when access to resources needed for production is limited.
- A few of the monopolies also arise naturally, where there are large economies of scale, example, a local telephone company, as the networks increase, it requires more workers. This is how economies of scale work.
- The demand curve is steep.
- This kind of market structure only a few large firms. This makes this system different from a monopoly where there is only one large firm.
- It has high barriers to entry.
- May produce either differentiated or homogeneous products.
- It is a market setting where there are a lot of sellers offering differentiated products to a large number of buyers.
- In this market system, the sellers have some control over the prices.
- There are no barriers to enter or exit.
- Demand curve is flat.
- There is one buyer and many sellers.
- Maximising profit:
- The marginal cost of employing one more worker will be higher than the average cost as in order to employ one more worker the firm has to increase the wages of all the other workers.
- To maximise the level of profit, the firm employs Q2 of workers where the marginal cost of labour equals the marginal revenue product MRP = D
- In a competitive labour market, the firm would be a wage taker. If they tried to pay only W2, workers would go to other firms willing to pay a higher wages.
A market for a particular good or service consists of different types of customers, subdivided into market segments (distinct subgroups). A market segment refers to a distinct group of customers with similar characteristics (such as age or gender) and similar needs and wants.
By dividing the market segment into different groups, it is easy to identify which group of customers buy the product hence target them more distinctively.
Targeting refers to each distinctive market segment having its own specific marketing mix. For instance, air travelers and different classes.
Consumer profiles are demographic and psycho-graphic characteristics of consumers in different markets, such as their age, gender, occupation, income level, religion, martial status and purchasing habits. This knowledge helps a business to identify the needs and wants of its customers and to identify any segments that might be overlooked.