Marketing
Marketing tests whether you can analyse a market and build a defensible marketing mix. Expect calculations of market share and growth, interpretation of market research, product portfolio decisions, and evaluation of pricing or promotional choices against the target segment.
Core rules
- Orientation: market orientation starts from customer research; product orientation starts from what the firm can make.
- Market share = firm's sales ÷ total market sales × 100; market growth = change in market size ÷ original size × 100.
- Segmentation: demographic, geographic, psychographic, behavioural. A niche strategy targets a small segment with specialised needs.
- Research: primary (collected for this purpose, costly, current) versus secondary (already exists, cheap, may be dated); qualitative versus quantitative; the sampling method determines bias.
- Product life cycle: development, introduction, growth, maturity, decline; extension strategies (new markets, rebranding, added features) delay decline.
- Boston matrix: axes are market growth rate and relative market share. Stars (high/high), cash cows (low growth/high share), question marks (high growth/low share), dogs (low/low).
- Pricing: cost-plus, penetration (low launch price to build share), skimming (high launch price to recover development), competitive, loss leader, psychological.
- Place and promotion: channel length, intermediaries, e-commerce; above-the-line versus below-the-line and digital.
Worked example: portfolio position
A firm sells $45m in a $300m market, so its share is 15%. Its largest rival holds 50%, so relative market share = 15 ÷ 50 = 0.3, which is low. Market growth is 8%, which is high. High growth plus low relative share makes the product a question mark: it consumes cash, so the decision is to invest to build share or divest - the case's cash position and core competence decide which.
Traps
- Confusing market share with market growth, or with share price.
- Swapping penetration and skimming pricing.
- Reading the Boston matrix axes the wrong way round - it is relative, not absolute, share.
- Assuming primary research is always superior; it costs time and money.