Business Fundementals

Niche Marketing

This involves a business selling its product(s) in small, often lucrative, segments of a market. It is the opposite strategy to mass marketing. Many small businesses can identify unsatisfied consumer needs in a particular segment within a large industry, and they can develop products to meet these needs.

This allows the small businesses to exist in industries that are dominated by large businesses (e.g. Classic FM in the radio broadcasting industry, SAGA in the holiday industry). However, if larger rivals appear within the niche market, the smaller businesses will often find it difficult to compete effectively with these well-resourced businesses.

It is also dangerous for a business to offer just one product within the market, since any larger rivals are likely to be more diversified and have a wider product portfolio. Theses larger businesses could, therefore, reduce their prices to such a low level that the small business cannot compete profitably.

Nevertheless, during periods of economic growth and higher consumer spending, then niche markets can offer a very lucrative opportunity to many small businesses to offer a personalised, high value-added service/product.

Asset-Led Marketing

This refers to the situation where a business develops its strategy based upon its existing strengths and assets. This involves the business focussing on what it currently performs effectively, and then using this as the base for developing new products or breaking into new markets.

Niche marketing capitalises on the consumer loyalty that a business has, and helps it to develop new products and devise new marketing strategies.

Product

Products can generally be classified under two headings - consumer products and producer products...

Consumer products

Purchased and used by individuals / citizens for use within their homes and these products fall into 3 categories:
Convenience products
Shopping products
Specialist products

Producer products

Purchased by businesses and are either used in the production of other products, or in the running of the business. For example, raw materials (timber, steel), machinery, delivery vehicles, and components used to make larger products (e.g. tyres and headlights for vehicles).

The price level that a business decides to sell its product(s) at will affect both the quantity of sales and the profit-margin received per unit. There are many considerations that a business will need to take into account before it decides upon a selling price for a new product, such as:

The objectives of the business if the main objective of the business is to maximise profit, then it is likely that the product will be priced at a high level.
The degree of competition in the industry the number of competitors in the industry will affect the price level that the business decides upon for its product.
The channels of distribution the more intermediaries that are used in getting the product from the factory to the consumer, then the higher the selling price is likely to be.
The business image if the image of the business is prestigious and up-market, then a higher price is likely to be charged for the product.

Price

There are many methods and strategies that a business can use in order to arrive at a selling price for its products:
Cost-plus pricing.
Mark-up pricing.
Predatory (or destroyer) pricing.
Skimming pricing.
Demand-orientated pricing.
Competition-orientated pricing.

Promotion

Promotion refers to the tactics that a business uses to make consumers aware of their product(s) and to entice them to purchase the products, creating sales revenue for the business. Promotion can often be referred to as either:

'above the line' - promotional activity refers to extensive promotional campaigns on national media, such as television and newspaper advertisements.
Or, 'below the line' - promotional activities include more short-term tactics such as personal selling, sales promotions, packaging, branding and direct mail.

Most businesses will use a combination of 'above-' and 'below the line' tactics in order to create the desired impact on consumers.

Place

This refers to:

firstly to the stores and the retail outlets where consumers can purchase the products of the business,
secondly to the channels of distribution that the business uses to get its products from the factory to these outlets.
The channels of distribution refer to the intermediaries that a business chooses to use to transport its product and make it available to consumers (e.g. wholesalers, distribution companies and retail outlets).