10. Finance function and marketing Flashcards
Marketing
Process of planning and executing the concepts of pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational needs
What is the difference between strategic and tactical marketing
Strategic: corporate strategy, long term, identify products and markets
Tacticial: focused on short-term, particular elements of the marketing mix
What is B2C and B2B
Business-to-consumer marketing - mass audience
Business-to-business marketing - professional buyers
What are the different forms of organisation orientation
Marketing orientation- organisation activities centred around customer needs
Production orientation: activities centred around producing goods at optimum quality cost-efficiently
Sales orientation: sales is key
Product orientation: focuses on product development
What is the push or pull methods of marketing
Push: pushing goods out to cutomers
Pull aproach: generating demand through adertising to pull customers in
What are the two types of digital marketing
Pull digital marketing: using media to pull viewers in eg.streaming
Push digital marketing: direct marketing eg. online adverts
What are the three levels of the marketing environment
- Macro: PESTEL ( political, economic, social, technology, ecological, legal)
- Micro: customers, suppliers
- Internal factors: assets, employees, fianance
How can macro factors affact marketing
Political: changes in government policy
Economic: Inflation, interest rates affect consumers propensity to save
Social/Cultural: demography , values
Technology: new products, processes
Ecological: climate change, consumers attitudes
Legal: customer rights
What is SWOT analysis
Strengths: areas of organisation that should be exploited by strategies
Weaknesses: areas for improvement
Opportunities: what profit making potential is there
Threats: what are the risks and how will it affect
Define marketing mix
Consist of the 7Ps
- Product, price, place, promotion, people, processes, physcial evidence
- Activities that form a part of marketing strategy
What is the meant by product of marketing mix
Whether product meets customer needs
How are products broken into
Consumer goods: Sold directly to person using
Industrial: goods used in production of other goods
What are the aspects of price in marketing mix
price setting is based on 3CS:
- Cost
- Competition
- Customers
What are the disadvatages and advantages of using cost to price set
Advantages: reliable, price stability
Disadvantages: does not consider demand, reative rather than proactive strategy
How is competition used to price set
- competition can be price or non price based
- Goin rate pricing - prices are based on average market price
- Price based competition: agreements between companies
- Competition is based on product rather than pricing
How are customers can be used in pricesetting
- Price determinent: elasticity of demand
- Strong demand: higher price
What is price differentiation or differential pricing
Pricing strategy where the company charges different prices for the same product to different customers
What are other pricing strategies
- Perceived quality pricing: customers judge quality by price
- New product pricing: new products have no pricing reference point so based on the recommended price to the reseller
- Multiple products: focuses on profit as a whole from range rather than a single product
- Market penetration: low price for a product to stimulate the growth of market
- Market skimming: the high initial price for a new product which is gradually reduced
- Early cash recovery: The organisation aims to recover investment quickly when the business is at high risk
- Dynamic pricing: prices change in line with demand
- Target pricing: The organisation selects a price that gives a specific return
- Price leadership/predatory pricing: price leader has a large market share and dominates price levels
- Captive product pricing: customers buy two products one cheap and one higher when they are captive
- Psychological pricing: eg. 99p, not £1
When is market penetration relevant
- When unit costs fall with increased output: economies of scale and experience curve
- The market price is sensitive and relatively low prices will attract new sales
- Low prices discourage new competitors
What is meant by place in the marketing mix
- Channel: where will products be solf
- Logistics: to support where product will. be sold
What is meant by promotion in the marketing mix
- Communication and marketing to make customers aware of products
- AIDA
A: arouse attention
I: generate Interest
D: inspire desire
A: initiate Action
What is meant by processes in the marketing mix
- Service industry - efficiency in processes increases customer satisfaction
- Eg. automation of processes, queuing and waiting times, accessibility
What is meant by people in the marketing mix
- Role of people is important due to the inseparability of employees from the service provided
- Front line staff should be trained in customer satisfaction
What is meant by physical evidence in the marketing mix
- Services are intangible: the customer has no evidence of ownership
- By making customers have psychical symbols of the service - symbolic of service
What are features of the service industry’s which require special attention of marketing
- Intangible outputs
- No storage: services cannot be stored so demand is important ‘under sell and over-perform’
- Heterogeneity: maintaining consistent service
- Inseparability: importance of employees
- No transfer of property
What is meant by promotion mix
Consist of the blend of promotional tools that are considered appropriate for a specific marketing campaign:
- Mass media
- Personal and interactive
- Personal and direct
What is meant by market research
Process of gathering, recording, analysing and reporting information relating to company’s market, customers and competitors
What is the difference between primary and secondary data
Primary: data collected for specific research
- Secondary: data generated from internal or external sources although not intended for specific research but still useful
What are examples of primary data
- Questionnaires and surveys
- Trial testing
- Interviews
- Experiments
- Observation
- Focus groups
What are examples of secondary data
- Data from information system
- Published stats from government or other bodies
- Trade journals
- Research from agencies
- Internet
- Mobile devices data
What is meant by market segmentation
Dividing of a market into distinct homogenous subgroups of customers
- subgroups can be selected as a target market with unique marketing mix
What are the different bases for segmentation
- Simple: based on demographic, income, occupation, education, religion, ethnicity, lifestyle category, etc
- Family life cycle: bachelor, newly married couple, full nest, empty nest
What is the rule for the valid segment
Valid segment - must be substantial, measurable and accessible
- segment can be measured, is big enough, can be reached, respond differently, reach profitability
What are the benefits of market segmentation
- Identify new marketing opportunities
- Specialists can be used to reach major segments
- Marketing budget can be allocated appropriately based on the return on investment
- Adjustments for each segment
- Organisation can dominate specific segments for a competitive edge
- Product can be responsive to customers
What are potential market strategies of market targeting
- Mass/undifferentiated: single product to all people
- Concentrated marketing: ideal product for single segment
- Differentiated marketing: market several product versions for different segments
What is market positioning
How customers perceive a brand or product relative to others
- want to seem superior or different
- want to be people’s number one
What are potential product strategies
- Ansoff matrix
- Porter’s potential positioning strategies
- Perceptual mapping
- Integrated marketing
What is Ansoffs matrix
Y axis: markets: new & existing
X-Axis: products: new & existing
- Market existing + product existing= market penetration 1
- Market existing + product new = Product development 4
- Market new + product existing = market development 2
-Market new + product new = Diversification 16
What is meant by market peentration
Increasing sales of exist products in existing markets
- Lowest risk of 1
What is meant by market development
- Expansion into new markets using existing products
-Risk 2
What is product development
- Redesign or repositioning of existing products or introduction of new ones in existing markets
- Risk 4
What is diversification
- producing new products for new markets
- Risk high at 16
What is Porter’s potential positionning strategies
Y axis: Narrow targe , Broad target
X axis: Low cost, high cost
Broad target + low cost = cost leadership
Broad target + high cost = Differentiation
Narrow target + low cost = cost focus
Narrow Target + high cost = differentiation focus
What is perceptual mapping
Using customer perceptions of brands to map out how the market is serviced currently
- Critical SuccessFactors - Y: price, X: quality
What is the integrated marketing approach
- Product maker -> product decisions + pricing decisions + place decisions + promotion decisions -> advertising -> customer
What are the types of marketing
- Direct marketing
- Indirect marketing
- Guerrilla marketing
- Viral marketing
- Interactive
- Experimental
- Search engine
- Digital and social media
- Relationship
- Post modern
What is the difference between direct and indirect marketing
Direct: zero-level channel: tv, radio, direct mail
Indirect: marketing of products as a consequence of another activity eg. using a specific brand in recipes
What is Guerrilla and experimental marketing
Guerilla: taking people by surprise and creating buzz
Experimental: providing experience that creates emotional connection with brand for loyalty
What is viral marketing and interactive marketing
Viral: uses pre-existing social networks to spread brand awareness. the marketing message is spread
Interactive: Information systems, organisations collect customer data to set preferences and behaviour
What is search engine marketing and digital/social media marketing
Search engine marketing: promoting on a website to increase visibility on search engines
Social/digital : use of internet and electronic devices to engage with customers
What are relationship marketing and post-modern marketing
Relationship: maximise customer retention and satisfaction through two-way communication - long term customer retention
Post-modern: focus on treating the customer as an individual and customised experiences
What is the process of product development
- Identify customer needs by market research - analysis of market data
- Screening for ideas which meet the criteria - verification of profitability, costing
- Design Process - value engineering procedures, costing of all components
- Time to market -
- Testing
What are the levels of product
- Core/generic: benefits all products in same category have
- Augmented product: core benefits + extra benefits which differentiate it from other products
- Expected product: features product is expected to have
- Potential product: future avenues to develop product
What is meant by product range
Various subcategories of same product
- variations in models or style
- variations in quality
- associated items
What is the BCG Matrix
Classifies products or brands on the basis of relative market share and according to rate of growth of the market
Low Market share + Low market growth rate = dog
Low market share + high growth rate = problem child
High market share + low market growth = cash cow
High market share + high market growth rate =star
Explain the four categories of the BCG Matrix
Problem child = strong competitors, will need lots of funds and new marketing mix to market, might consider build strategy to increase share or withdraw product
Dog: established product but losing consumer support. Consider divestment
Cash cow: established product with high level of consumer loyalty, low costs , holding strategy to maintain market growth or harvesting strategy to maximise short term profit
Star = Potential for generating significant earnings now and in future - maintain strategy
What is the product life cycle
- Introduction stage: low volume, low sales, needs trade acceptance
- Growth stage: volume and demand for product increases, quality should be maintained
- Shakeout stage: weaker players of the market are shaken out of the market by stronger
- Maturity: demand levels off, standardized products, less organisations
- Decline stage: demand declines and competitors withdraw from the market
How can finance function forecast demand
- Analyse current demand
- Opinions of sales force
- Expert opinions
- Past sales analysis for trends
- Sales potential
- Buyer’s intentions
- Market tests
What is full cost pricing
Full cost may be fully absorbed production cost or some absorbed non-production costs eg/. selling distribution and an amount added to full cost base to represent profit per unit
Advantage: fixed costs are covered
Disadvantage: does not take into account market demand
What is marginal cost plus pricing
Amount for profit is added to the marginal cost
Advantages: simple and easy
Disadvantages: pricing decisions cannot ignore fixed costs, still does not take into account market and demand conditions
What is mark up cost pricing
- Percentage of cost added to reach selling price of product
What is the margin on sales pricing
Margin is profit expressed as a percentage of the selling price of the product
What are KPIS finance functions can use in the marketing function
- Relative market share
- Market growth rate
- Click through rate
- Bounce rate
- Revenue per user
- Sales by channel
- Upselling success rate = number of successful up sales/number of selling attempts x 100
- Conversion rate - number of goal achievements/visitors x 100
What are other general KPIS for sales and marketing
- Sales volume
- Gross margin
-customer retention - marketign cost per customer
- customer lifetime value
what are promotion KPIS
- cost of promotion
-awareness levels - website conversion rate
-social media reach - sales team response times
What are products KPIS
- warranty claims
- repurchase rate
- product development time
- brand value
What are pricing kpi
- Price vs industry average
- price elasticity of demand
What are place KPIs
- Cost of storage
- cost of transport
