Understanding the Marketing Function and Business Strategy
Marketing Function
Trade as a Consequence of Interaction
Trade is a consequence of the interaction between those who need to purchase goods or services and those who produce them. These changes are dynamic as they depend on market mechanisms, such as supply and demand, mainly from the competition.
Companies’ Involvement in the Market
Companies are involved in the market and depend on it to operate and exist. This is where markets exist. The market involves transactions between sellers and buyers, i.e., between supply and demand of goods and/or services.
Human Needs and Wishes
The human need is the state in which one feels the lack of some basic necessities. Needs are an integral part of human biology and are also created by society.
Wishes are specific satisfiers of needs. Where needs are few, wishes are many. Human desires are constantly being shaped by social forces and institutions.
Demand in the Market
Demand is the specific product requirements that are supported by the ability and willingness to buy. This means that companies must not only measure how many people want their products but also how many are willing and able to buy them.
Definition of the Marketing Function
It is the activity that every company undertakes and is defined as planning, organizing, directing, and controlling the flow of satisfaction (goods or services) from producer to consumer, and the flow of information derived from the conduct of these, to modify or adapt the current, thereby obtaining a benefit.
Another definition: It is the process from detecting a need for consumers to their satisfaction, through delivering a final product made with the integrated efforts of the company and made available to buyers at the right price, quality, and place.
Philip Kotler defines marketing as a human activity whose purpose is to meet the needs and desires of human beings through exchange processes.
Determination of the Business Strategy
It involves determining the target market for the company and defining the commercial mix.
1. Determination of the Target Market
From the organization’s point of view, the target market represents all the people and institutions that buy or may be induced to buy.
Market: A group of individuals or corporations who use goods or services for final or intermediate consumption and have perceived needs, purchasing power, and are free from the influence of inhibitors.
To address more than one buyer in the market, it may be divided into segments to determine differences among buyers that enable companies to select those who can focus their efforts more efficiently.
Factors Considered in Market Segmentation
They are based on the personal characteristics of consumers.
- A) Geographic
- B) Demographic (sex, age, etc.)
- C) Personality (occupation, religion, usage rate, reason for purchase, etc.)
Target Market: Consists of all consumers who meet certain requirements specified by the criteria of segmentation, and the company is interested in reaching them.
When considering the target market in which the company operates, we can find three forms of consumer behavior:
- Fair market: Actively looking for the product
- Border market: Indifferent to the product
- Negative market: Rejecting the product
Market Research
Information Gathering
Information related to the market is obtained through a technique called market research. This tool is responsible for collecting, recording, and analyzing information that impacts marketing decisions in general, such as advertising media, motivations affecting consumer behavior, consumer characteristics, etc. It allows the location of likely consumers, determines their needs, and provides a basic guide for decision-making and marketing programs. The media can be internal or external specialized agencies.
Basic Methods Used in Market Research
- a) Experimental: An experiment is performed under realistic conditions as possible, e.g., selling a product in a city.
- b) Observation: Observation is used to determine facts, e.g., what product is sold.
- c) Survey: Direct queries to a sample of possible consumers.
These methods can be quantitative, qualitative, or mixed.
2. Commercial Mix
Optimizing Controllable Variables
Seeks to optimize controllable variables to reach the consumer in the best possible way. These variables are: Product, Price, Place, Promotion.
Product
The set of special materials, service, and symbolic benefits that provide expected satisfactions to the consumer. This includes the package, label, brand, after-sales service, and the product itself.
When we identify a product with particular attributes, the products exhibit extremely variable behavior over time compared to their lifespan in the market. This is called the product life cycle.
Product Life Cycle
This cycle has four phases:
Introduction Stage
- Implies a high cost
- The level of sales is low
- The balance is a net loss
Growth Stage
- Costs are reduced due to economies of scale
- Sales volumes increase significantly
- Benefits begin to be received
Maturity Stage
- Costs are very low
- Maximum levels of sales are achieved
- Prices tend to fall due to the proliferation of competitive products
- Higher profitability is reached
Decline Stage
- Sales fall
- Prices fall
- Benefits are reduced
The life cycle is inevitable, but its length and the shape of the curve depend on the strategy and the company product.
Product Life Extension Strategies
Companies strive to extend the life of the product as much as possible because it is much cheaper to keep a product on the market than to remove it and launch a new one. Among the strategies used by producers are the following:
Relaunching
- Change formula
- Changing characteristics
- Noticeable improvement in quality
- Important and new competitive advantages