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Unlock This CourseMarketing is much more than just advertising. It's a crucial business function that directly impacts how much a company sells and how profitable it becomes. In today's competitive business world, effective marketing can be the difference between a thriving business and one that struggles to survive.
Key Definitions:
Effective marketing strategies create a direct path to increased sales. When businesses understand their customers and communicate effectively, they can convert interest into actual purchases.
Marketing helps potential customers learn about your products. Think about how you first discovered your favourite trainers or mobile phone. It was likely through some form of marketing! When people know your brand exists, they're more likely to consider buying from you.
Good marketing doesn't just inform it creates desire. When Apple launches a new iPhone, their marketing doesn't just tell you about features; it makes you feel like you need the product in your life. This emotional connection drives sales beyond what practical need would generate.
Businesses use various marketing approaches to increase their sales volume. Each technique targets different aspects of customer behaviour.
How a product is presented in relation to competitors. For example, Innocent Smoothies positions itself as healthy and natural, appealing to health-conscious consumers.
Temporary price reductions to boost sales volume. Think of "Buy One Get One Free" offers at Tesco or seasonal sales at clothing retailers like Next.
Using online channels to reach customers. ASOS uses social media influencers and personalised email marketing to drive significant online sales.
While increasing sales is important, marketing's ultimate goal is to improve profitability. This happens in several key ways:
Strong brands created through effective marketing can charge higher prices. Compare a basic white t-shirt from Primark (£3) with one from Nike (£25). The product costs are not dramatically different, but Nike's brand value allows for a much higher profit margin.
When customers strongly value a brand, they become less sensitive to price increases. Apple customers will often pay premium prices for new products because the marketing has convinced them the experience is worth it.
Marketing that builds customer relationships leads to repeat business, which is typically more profitable than constantly acquiring new customers. Tesco's Clubcard is a perfect example of marketing that encourages loyalty and increases lifetime customer value.
In 2019, UK bakery chain Greggs launched their vegan sausage roll with a brilliant marketing campaign that mimicked Apple's product launches. The campaign went viral on social media, generating massive publicity.
Results:
This case demonstrates how clever marketing can dramatically impact both sales volume and profitability, even for an established business with a simple product innovation.
Businesses need to know if their marketing efforts are actually working. Here are key metrics they use:
This measures the profit generated compared to marketing spend. For example, if a £10,000 campaign generates £50,000 in profit, the ROMI is 400%.
Formula: ROMI = [(Revenue from marketing - Cost of marketing) / Cost of marketing] × 100%
This calculates how much it costs to gain a new customer. If a business spends £5,000 on marketing and acquires 100 new customers, the CAC is £50 per customer.
Lower CAC typically means more profitable growth.
Different businesses may prioritise sales volume or profit margins depending on their situation:
New businesses often focus on gaining market share by maximising sales volume, even at lower profit margins. This might involve:
For example, when Uber entered the UK market, they offered heavily discounted rides and driver incentives to quickly gain market share, accepting lower initial profits.
Established businesses might focus on increasing profit margins through:
Hotel Chocolat focuses on premium positioning, emphasising quality ingredients and unique recipes to justify higher prices than competitors like Cadbury.
These two UK sports retailers demonstrate different approaches to sales and profitability:
Sports Direct: Uses a high-volume, low-margin approach. Their marketing emphasises discounts and value, attracting price-sensitive customers who buy in larger quantities.
JD Sports: Focuses on premium positioning with exclusive product ranges and partnerships with brands like Nike. Their marketing highlights fashion and exclusivity, allowing them to maintain higher profit margins.
Both are successful but use different marketing strategies to achieve their sales and profit goals.
Modern digital marketing has transformed how businesses increase sales and profits:
Digital platforms allow precise targeting of potential customers based on interests, demographics and online behaviour, reducing wasted advertising spend.
Analytics tools help businesses understand which marketing activities generate the most sales and profit, allowing them to optimise their spending.
Tailoring marketing messages to individual customers increases conversion rates and encourages higher spending per customer.
While marketing is crucial for sales and profitability, businesses face several challenges:
Marketing plays a vital role in increasing both sales and profitability by:
For businesses to succeed, marketing cannot be an afterthought it must be a strategic function aligned with overall business objectives for growth and profitability.