4.1 Introduction to marketing
What marketing is, two ways of approaching it, and how to measure position in a market.
Marketing is the process of identifying, anticipating and satisfying customer needs and wants profitably. It covers far more than advertising, including research, product design, pricing, distribution and building relationships with customers.
Market orientation versus product orientation
Market orientation
Start with customers: research what they want, then develop products to meet those needs.
- Products more likely to sell
- Responds quickly to changing tastes
- Research is costly and customers do not always know what they want
Product orientation
Start with the product: focus on making the best product possible, then find customers for it.
- Suits technical innovation and high quality crafts
- Can create completely new markets
- Risk of making things nobody wants
Most businesses today are market oriented, but highly innovative firms (new technology, luxury crafts, pharmaceuticals) often begin from the product.
Market share and market growth
Market share = a firm's sales ÷ total market sales × 100. It can be measured by value (revenue) or by volume (units). Market growth = (this year's market size − last year's) ÷ last year's × 100.
A firm's sales can rise while its market share falls, if the whole market grows faster than the firm. Always look at both figures together.
Why market share and market leadership matter
The market leader has the largest market share.
Benefits of being the market leader include:
- Economies of scale (lower unit costs)
- Strong brand recognition
- Bargaining power with retailers and suppliers
- Being able to set prices that others follow
- Attracting investors and talented staff
Leaders must defend their position against challengers, and large market share can attract scrutiny from competition regulators.
- Describing product orientation as "bad". It suits firms with unique technology or expertise, where customers cannot yet say what they want.
Practice questions
New IB style questions every time. You won't get the same one twice until you've done them all at this level.
All companies, people, products, places and figures in these questions are fictional. Any resemblance to real businesses or people is a coincidence and is not intended.