Mass Markets
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AQA A-Level Business
Unit 3 - Decision making to improve marketing performance
Chapter 3 - Making marketing decisions: segmentation, targeting and positioning
Edexcel A-Level Business
Theme 1 - Marketing and people
Chapter 1 - The market
The Ford Motor Company
In 1903, Henry Ford founded the Ford Motor Company. Five years later, in 1908, Ford forever changed the automotive market.
Ford introduced the Model T, which made "horseless carriages" accessible to all consumers.
Before the innovation of the Model T, "horseless carriages" were only bought by wealthy individuals, like doctors.
The manufacturer of the first horseless carriage, Duryea Motor Wagon Company, sold one of its models for $1,600. Adjusted for inflation, it's the equivalent of $53,637 (£42,338) today.
Ford sold the Model T for $850, approximately 50% less. At this price point, it appealed to many people earning an average income who needed to get from A to B faster than walking or cycling.
The Ford Motor Company sold over 6,000 Model T's in 12 months. Duryea Motor Wagon Company only sold 60 of its own models during the same period.
A basic, identical product
The Model T was designed to be practical rather than attractive. It was a basic vehicle. For example, it had no features like headlights or a speedometer. With fewer parts and fewer complexities, the cost of production was less.
Ford jokes, "Any color the customer wants, as long as it's black." There were no customisations. Ford chose black because it was the cheapest colour, the fastest to dry, and meant the production line was streamlined with one model to make.
Economies of scale
In addition, the Model T was manufactured with standardised and interchangeable parts. For example, it had four wheels of the same size, rather than two big wheels at the back and two smaller ones at the front.
This allowed Ford to buy large volumes of the same design and size of the wheel to get each wheel for less, thus benefiting from economies of scale.
Mass production
Furthermore, Ford pioneered flow production (a.k.a mass production). The Model T flowed from one end of the factory to the other end, passing dedicated workstations along the way. It took 90 minutes to turn components into a motorised vehicle, which was highly efficient.
The production line was efficient because Ford's system broke down car assembly into smaller and simpler tasks performed by individual workers. For example, one worker's role was to only screw on the front left wheel. As a result, workers became very skilled, which meant they could produce the Model T faster than unskilled workers.
Workers were paid well
Ford paid his workers double the average wage. His workers received $5 a day, equivalent to $167 (£132) today. While it may sound counterintuitive, $5 a day boosted morale, reduced staff turnover, and improved efficiency. It meant Ford's workforce consistently produced the Model T's at a high speed.
Instalment plan
While the Model T was nearly 50% cheaper, $850 was still a lot of cash in savings. Ford recognised it and allowed buyers to pay for the car over time. It made it more accessible to individuals who couldn't afford the total price upfront.
Mass advertising
Ford advertised the Model T everywhere. He emphasised affordability, durability, and practicality. Ford paid for local, regional and national newspapers and magazines read by anyone for adverts.
Distribution
Consumers knew the Model T. Ford wanted to make seeing and buying one easy. So, he invested in a network of dealerships all over the US.
A mass market is the largest segment of buyers with general needs and wants.
Advantages of Targeting the Mass Market
There are lots of potential customers.
Maximise its sales volumes.
Gain a bigger market share.
Achieve buyer power over suppliers.
Consumers have the same general needs and wants.
Develop one product that appeals to majority consumers.
Save money on developing multiple products that are specific to smaller segments of the market.
Reduce its operating expenses and increase its operating profit and operating profit margin.
High production output of the same product.
Benefit from economies of scale.
Achieve lower variable costs per unit.
Higher contributions per units or gross profits per unit or gross profit margins per unit.
Mass marketing methods like newspapers, television and radio.
Benefit from marketing economies of scale.
Reduce the cost per customer acquisition.
Achieve greater return on investment.
Disadvantages of Targeting the Mass Market
Lots of competitors fighting for the same customers.
A business may have to offer lower prices than the competitors.
Lower prices could shrink gross profit margins.
Forced to allocate a bigger advertising budget to achieve the same levels of gross profits.
Is it a good idea that a business targets the mass market?
1
Ultimately, it depends whether a business can effectively differentiate its product from all of the competitors in terms of the marketing mix. For example, create clever, highly catchy advertisements.
2
Ultimately, it depends whether a business has the financial resources in order to pay for national media like newspapers, radio and TV.
3
Ultimately, it depends whether a business is a able to achieve a low cost advantage through operational efficiency to compete with low prices while still achieving a gross profit.