10 - Finance Function & Sales & Marketing Flashcards
Marketing =
the process of planning and executing the concepts of pricing, promotion and distribution of ideas, goods and services in order to create exchanges that satisfy individual and org objs.
IS the aim of marketing to just meet org objs?
NO - to facilitate MUTUALLY beneficial exchanges.
Role of marketing diagram
Marketing –> identify/anticipate/supply –> customer needs & org objs venn diagram overlap = mutually beneficial exchange,
Strategic marketing =
LR focus, tied with corporate strategy - identify which products and markets the org wants to operate in.
Tactical marketing =
Focused more SR & on particular elements of marketing mix e.g. playing with price, promotion, place etc.
Consumer markets definition + AKA + implication for advertising
AKA business-to-consumer (B2C)
consist of mass audiences which are cost effectively accessible by online, TV or other media advertising. Very little personal selling.
Business to business (B2B) markets definition + implication for advertising
Great deal of personal selling at diff levels of org. Needs of ind companies are different hence mass advertising would be wasteful.
Key marketing concept: org success can be achieved by…
meeting customer needs effectively.
Marketing orientated org =
centres its activities on satisfying the needs and wants of customers.
Production orientated org =
Believe success achieved through producing goods/services of optimum quality as cost efficiently as possible. Pursue improved production and distribution efficiency.
What do production orientated orgs assume?
That consumers wan to buy products that have been produced efficiently.
Sales orientated org = + eg
Actively and perhaps aggressively sell a product. A good sales force can sell anything to anyone. e.g. sales of double glazing knock door-to-door.
Product orientated org = +eg
Focus on product development e.g. new features. More advanced product or one with more features will be perceived as superior and sell itself. e.g. apple iphones.
Push marketing =
Traditionally, the seller pushes goods out to resellers and consumers e.g. by offering to pay for in-store promotions.
Pull marketing =
Generate consumer demand through advertising which will pull products into retail outlets by end users requesting the retailer stock these items.
Digital marketing =
Use of electronic devices such as tablets, PCs, phones, games consoles to communicate with the customer. Methods include internet, email, apps, social networks.
Which marketing approach is digital marketing challenge to: push or pull?
The traditional approach - push.
Push digital marketing =
Individual is sent the marketing message directly e.g. by seeing online advert or sent an email without requesting it. Aim = advertise to as many people as possible to turn a reasonable % of recipients into customers.
Pull digital marketing =
The individual seeks the marketing effort e.g. through web searches or streaming media. The aim is to pull viewers (generate demand) & turn them into customers.
3 levels of the marketing environment
- Macro
- Micro
- Internal org factors
Marketing environment: define macro environment, what model can explain it, org’s control of it.
All factors that can influence an org such as PESTEL factors. Generally out of org’s control.
Marketing environment: define micro environment + org’s control of it.
Factors specifically related to the org such a the org’s customers and suppliers. Some influence.
Marketing environment: Internal org factors + org’s control of it.
Assets, employees, finance. These can be controlled.
What does PESTEL stand for?
Political, economic, social (or cultural), technological, ecological, legal.
PESTEL: political factors impact on customers
Impact their confidence, spending power, rights. Big affect on normal business.
PESTEL: economic factors impact on customers
Determines customers’ effective demand. Uncertainty affects spending/saving ratio.
PESTEL: social factors impact on customers
Demography: size & purchasing power of customer groups. Care about status signals. Culture affects acceptability of marketing messages e.g. alcohol, as well as of attitudes towards purchasing.
PESTEL: technological factors impact on customers
Offer new products, comm in diff ways - consumers diff attitudes to innovation.
PESTEL: ecological factors impact on customers
Climate change, natural disasters + consumer attitudes to it. Changing attitudes enables orgs to satisfy new needs with new products.
PESTEL: legal factors impact on customers
Legislation and judicial decisions may increase customer rights. Customers may be increasingly willing to take legal action.
SWOT analysis can be used on which of the 3 levels of the marketing environment?
Micro & internal org levels (not macro)
SWOT stands for…
Strengths
Weaknesses
Opportunities
Threats
SWOT analysis: strengths =
areas the org has strengths that should be exploited with suitable strategies.
SWOT analysis: weaknesses =
areas the org has weaknesses that need suitable strategies to improve them.
SWOT analysis: opportunities =
Ops in bis environ, what is their profit making potential? What is comparative capability profile of competitors? What is org’s comparative perf potential in this field?
SWOT analysis: threats =
What threats might arise in bis environ? How will org and competitors be affected?
Marketing Mix AKA
7P’s
Marketing mix consists of…
the 7P’s: product, price, place, promotion, people, processes & physical evidence. All activities that form part of org’s marketing strategy.
What did the traditional marketing mix consist of? Why were additions made?
4P’s: product, price, place, promotion.
+ 3Ps: people, processes & physical evidence = service marketing mix
A product is defined as…
Goods or services or anything that satisfies a need or want. It is NOT a thing with features but a package of benefits.
What is a product from (i) org’s pov and (ii) customer pov?
Org: product = what is being sold.
Customer: product = solution to a problem or a package of benefits.
Products can be classified into 2 groups…
- Consumer goods = sold directly to end user
2. Industrial goods = used in production of other products.
the 3 main influencers on price setting are…
- Costs
- Competition
- Customers
AKA the 3C’s
3 other aspects of pricing mix
- Bulk discounts
- Credits offered
- Methods of payment
The 3C’s: 2 pros and 2 cons of cost-plus price setting rules.
Pros: easy to apply & ensures costs covered; price stability - only change if costs change.
Cons: reactive strategy; doesn’t consider effect on demand.
The 3C’s: 2 types of competition
- Price based
2. Non-price based
Going rate pricing =
price based on average market price
How may price based competition be avoided?
Informal agreements between orgs - but limited by regulation.
Non-price competition =
Competition based on product and factors other than price such as branding.
The 3C’s: what is the customer pricing stratgey?
Base price on elasticity of demand (not cost/comp). Price determined by WTP. Price discrimination: charge each consumer their own WTP so each pays a diff price.
Price discrimination AKA
differential pricing
How are ‘ad-on’ features to a product an example of price discrimination?
Ad ons enables the brand to appeal to a wider cross-section of customers. The total price does not necessarily reflect the cost price + price of add ons directly. The top range carries a price in excess as a prestige appeal.
How do airlines use dynamic pricing?
Offer cheaper prices the earlier a booking is made.
Other pricing strategies: perceived quality pricing =
Some customers judge quality by price. Higher price perceived as higher quality = higher demand.
Other pricing strategies: new product pricing =
No reference point for new products so pricing decisions difficult. One option is to set a RRP to assist the reseller in setting their own price.
Other pricing strategies: multiple products =
Market range of products which are interrelated as compliments or substitutes. Focus on profit from the whole range. Loss leaders: very low price for one product the make customers buy other related products which carry higher profit margins.
Example of ‘loss leaders’ pricing strategy in real world
Games companies sell the consoles at a loss knowing customers will buy games later on which carry high profit margins.
Other pricing strategies: market penetration =
Set relatively low price to stimulate market growth and obtain a larger share.
3 factors that make a market penetration price strategy appropriate
- Unit costs fall with output (EOS) + experience (exp curve)
- Market price sensitive so low prices attract sales.
- Low prices discourage new entrants.
Other pricing strategies: market skimming =
Set high initial price for a new product to take advantage of buyers who have high WTP to obtain the product before others. Then gradually reduce price to attract more price-sensitive segments of market.
3 factors making market skimming an appropriate strategy
- Insufficient production capacity & competitors cannot increase their capacity.
- Some buyers relatively price insensitive
- High price perceived as high quality
Other pricing strategies: early cash recovery
Aim to recover investment in a new product/service ASAP to achieve min payback period. Set price accordingly to max rev.
3 factors making early cash recovery price strategy appropriate
- Business is high risk
- Rapid changes in fashion/tech expected
- Innovator is short of cash
Other pricing strategies: dynamic pricing =
Price changes in line with demand. E.g. airline ticket prices rise as more seats are sold.
Other pricing strategies: target pricing =
Select price that gives target rate of return for a given output.
Other pricing strategies: price leadership
Price leader has large market share and is efficient producer with a good reputation for technical competence. Increases or decreases in price followed by the market.
Other pricing strategies: predatory pricing + how does it diff to price leadership?
Similar strategy but the reason a price leader sets a low price is to damage competition. They’re the most efficient producer so can survive a period of low prices to drive out competition then raise prices even more after
Other pricing strategies: captive product pricing =
Customers buy 2 products: 1 at a cheap price to attract them, the 2nd which is expensive when they’re captive. e.g. printers cheap but ink/toners expensive.
Other pricing strategies: psychological pricing =
Set price up to a psychological level but not beyond it e.g. Set price at 99p not £1.
The place aspect of the marketing mix refers to…
How the product is distributed & how it reaches customers.
Place: what does channel refer to?
Where are products sold?
Place: what does logistics refer to?
Location of warehouses and efficiency of the distribution system
Zero level distribution vs one level distribution vs two level.
sell directly to customer vs sell to retailer who sells onto customer vs sell to wholesaler who sells to retailer who sells to customer.
Which element of the marketing mix do the marketing dept generally have most control over?
Promotion
Aims of promotion: AIDA mnemonic
arouse Attention
generate Interest
inspire Desire
initiate Action
Promotion in the marketing mix is AKA…
the communications mix.
4 types marketing communications
- Advertising
- Sales promotions
- Direct selling by sales people
- Public relations
2 benefits of efficient order processing
- Increases customer satisfaction
2. Cuts down time it takes to complete a sale
7 key issues for org to consider wrt process aspect of marketing mix
- Policies - ethical dealings
- Procedures for efficiency & standardisation
- Automation
- Queuing and waiting times
- Info gathering, processing & comms times
- Capacity mgmt, matching supply to demand timely & cost effectively
- Accessibility
Why is the process aspect of the marketing mix particularly important for services?
Because difficult to standardise services - quality varies. So need process planning to ensure efficient work.
What does the people aspect of marketing mix refer to? Why is it particularly important in services?
Services: inseparability of service from service provider
Physical presence of people performing the service is vital to customer satisfaction. Need well selected, trained and motivated staff.
What does the physical evidence aspect of marketing mix refer to? Why is it only important in services?
Services are intangible - no physical substance = customer has no physical evidence of ownership. Difficult for consumer to compare quality and reduce incentive to consume. Make physical symbol or representation of the service & its benefits (e.g. ticket, certificate), or incorporate into design of service environment - design premises to reflect quality.
5 features unique to services (cf goods)
- Intangible - harder to give assurances over quality.
- No storage
- Heterogeneity
- Inseparability
- No transfer of property
What can help service orgs with intangibility problem that it’s harder to give customers assurances over quality?
Customer testimonials.
What does the no storage feature of services mean?
Services cannot be stored = meeting customer needs on demand vital. Better to under sell and over perform.
What does the heterogeneity feature of services mean?
Challenge to maintain consistent service quality. Extra care needed with training and development.
The ‘promotion mix’ refers to…
a blend of promotional tools that are considered appropriate for a specific marketing campaign. Deploy deliberate & intentional methods to bring about a favourable response in customer behaviour.
3 broad approaches towards promotion
- Mass media
- Personal & interactive
- Personal & direct
Mass media promotion =
whole market segment targeted with same communication.
Personal & interactive promotion =
2-way communication between salesperson and potential customer.
Personal & direct promotion =
1-way communication from seller to potential customer, usually by letter or email.
What has helped promotion become more scientific?
Access to consumer and media databases - big data. Computer systems used to match consumer characteristics with promotional tools.
Market research =
the process of gathering, recording, analysing and reporting data and info relating to org’s market, customers and competitors.
Market research is used to determine what 3 things?
- Opportunities for products
- Selling approaches
- Suggest segments
Quantitative vs qualitative market research
Quant = measure response of a sample (to structured Qs) assuming measurable conclusions can be drawn. Qual = unstructured Qs to get people to say what they think and feel.
Primary market data =
collected for specific research purpose - may come from internal or external sources.
Secondary market data =
Generated by internal or external sources, intended use is NOT the specific research the org is using it for.
Do orgs choose to gather secondary or primary market data?
Secondary gathered first as cheaper and used to guide primary, but not sufficient on its own.
6 egs of primary market data
- questionnaires
- trial testing
- interviews
- experiments
- observations
- focus groups
6 egs of secondary market data
- data from org’s existing info systems
- published stats e.g. from gov
- trade journals
- market research agencies
- internet
- data from mobile devices (big data)
Market segmentation =
the subdividing of a market into distinct and increasingly homogeneous subgroups of customers, where any subgroup can be selected as a target market and met with a distinct marketing mix. Each segment similar needs/preferences/response to market stimuli.
Can an org use >1 basis to segment the market?
Yes - 1 variable might be superior, or 2 or more could be valid at the same time.
State some examples of ways a market can be segmented
- demographics
- situational/end use
- income, occupation, education
- religion, ethnicity, nationality
- social class
- buyer behaviour: what occasion, how frequent
- lifestyle e.g. status seeking, hedonistic preference.
What does family lifestyle segmentation model do?
It categorises customers by their current position in the family life cycle.
Family lifecycle segmentation: Bachelor (characteristics + products bought)
Well-off, fashion leaders, recreation orientated. Buy cars, holidays, kitchen equip.
Family lifecycle segmentation: Newly married couple
Still well off, high consumption of durables e.g. cars, furniture, holidays, fridges.
Family lifecycle segmentation: Full nest i
Liquid assets low, peak home purchasing, low savings. Kitchen appliances, baby food, clothes, toys, medicine.
Family lifecycle segmentation: Full nest ii
Better off, less influenced by advertising. Large groceries, cleaning, bikes.
Family lifecycle segmentation: full nest iii
better off still, purchase durables again e.g. new furniture, luxury appliances, recreational goods.
Family lifecycle segmentation: empty nest i
Children leave home. Satisfied with financial situation. Spend money on things you enjoy: travel, luxuries, home improvements.
Family lifecycle segmentation: empty nest ii
retirement: drastic cuts in income, spend lots of time at home, buy medicine and health aids.
Segment validity general rule: MASS acronym
Measurable, accessibly, substantial, stable.
A market segment is only valid if…
if it is worth designing and developing a unique marketing mix for it.
5 Qs asked to determine if a market segment is valid
- Can the segment be measured?
- Is the segment big enough?
- Can the segment be reached? (via promotion & distribution channels)
- Do segments respond differently?
- Can the segment be reached profitably?
What does the ‘do segments respond differently’ market segment validity Q mean?
We could have >1 segment in terms of characteristics, but if they respond in the same way to a marketing mix, the segments are effectively one and the same. There is no point distinguishing them.
What does segment attractiveness consider?
a segment could be valid and potentially profitable but not attractive e.g. if cannot meet segment needs by building on org’s strengths, demand forecasts and growth not favourable.
How is market segmentation beneficial to marketing? (3)
- Identify new marketing ops as better understanding of customer needs in each segment
- Specialists used for each segment = effective marketing systems
- Optimise ROI by allocating marketing budget proportionally to each segment
How does market segmentation promote efficient use of resources?
Org can make small adjustments to product/service offerings and to promotional aspects for each segment
How can market segmentation help generate competitive advantage?
Org can try to dominate a particular market segment. Advantages created may function synergistically, promoting competitive ability i.e. the outcome is more than the sum of its parts. Means an org could dominate one segment, take what it’s learned and find other segments to dominate.
How can market segmentation help meet customer needs?
Product range more closely tailored to specific segment to reflect differences in customer needs across population. Benefits of being very responsive to customer for org.
Target market =
a market or segment selected for special attention by an org, possibly served with a distinct marketing mix. Segmentation helps determine target market.
Why can’t orgs sell to entire market?
Limited resources, competition and very large markets - would be ineffective and inappropriate to try.
Mass/undifferentiated marketing strategy =
produce a single product and hope to get as many customers as possible - ignore segmentation.
What competitive strategy is mass/undifferentiated marketing related to?
Cost leaders or companies pursuing differentiation strategy within a single market.
Concentrated marketing strategy = (+ what corp strategy aligned to)
Produce the ideal product for a single segment. Essentially a focus strategy, whether by cost or differentiation.
Differentiated marketing strategy =
Market several product versions, each aimed as diff market segment.
What competitive strategy is differentiated marketing related to?
Multi-focus strategy - org pursues different ops in different segments.
Market positioning =
how customer perceive a brand or product relative to other brands or products. Each org wants to achieve a specific niche.
3 key considerations relating to market positioning
- Many products very similar so need to make them distinct in customer’s mind
- Few products occupy a market space on their own - positioned relative to competing products
- ‘Number 1’ for some positioning variable - customers remember this.
Ansoff Matrix: what’s on vertical & horizontal axes?
Vertical = new vs existing market Horizontal = new vs existing product
What does the Ansoff matrix show?
Possible strategies for products and markets.
Ansoff strategy for existing market, existing product
Market penetration = increase sales of existing products in existing markets/
Ansoff strategy for existing market, new product
Product development = redesign or repositioning of existing products or intro completely new ones to appeal to existing markets.
Ansoff strategy for new market, existing product
Market development = expand into new market using existing product.
Ansoff strategy for new market, new product
Diversification
Ansoff matrix: risk level for market penetration
1
Ansoff matrix: risk level for product development
4
Ansoff matrix: risk level for market development
2
Ansoff matrix: risk level for diversification
16
Porter’s positioning strategies: what’s on vertical & horizontal axes?
Vertical: narrow vs broad target
Horizontal: low vs high cost
Porter’s positioning strategies: broad target, low cost
Cost leadership e.g. Aldi
Porter’s positioning strategies: broad target, high cost
Differentiation e.g. Waitrose - broad target but focus on quality, not cost.
Porter’s positioning strategies: narrow target, low cost
Cost focus = niche player but cheap
Porter’s positioning strategies: narrow target, high cost
Differentiation focus = niche player & expensive (high quality)
Perceptual mapping involves…
using customer perceptions of brands to map out how the market is currently serviced & spot any gaps in the market to deploy new products/reposition existing ones.
What 2 CSFs are identified for perceptual mapping?
Price (Y axis) & quality (X axis)
The integrated marketing approach consists of what 2 things?
- Marketing mix
2. Communications mix (promotion)
State 4 aspects of communications mix in integrated marketing approach
- Advertising
- Public relations
- Sales promotion
- Personal (direct) selling
4 aspects of marketing mix in integrated marketing approach
- Product
- Price
- Place
- Promotion
Outline how the integrated marketing diagram looks ito where the marketing and communications mix fit in and what do they feed into?
Product maker –> marketing mix (4 P’s) –> promotion feeds into communications mix. Both feed into advertising –> the customer.
Define direct marketing + egs
Zero level channel: removes all parties between the seller and customer apart from the advertising and delivery mediums. e.g. TV, direct mail, internet, newspaper.
Define indirect marketing + egs
The marketing of a product as a consequence of another activity or action. Orgs perform a number of related activities that arouse interest e.g. food magazine have recipes which include a particular producer’s product.
Define guerrilla marketing
Taking people by surprise and creating a buzz in unexpected places. Relies on use of imagination rathe than lots of money. Can be done online or physically.
Define viral marketing
Use pre-existing social networks: marketing message copied and shared by customers and spread like a virus.
Define interactive marketing + egs
Relies heavily on info systems. Org remembers customer details and preferences and demonstrates these were remembered in future. e.g. cookies –> personalised suggestions.
Define experiential marketing
Providing an experience that creates an emotional connection to the brand, product or idea. Customers engage with the personality of the brand –> loyalty.
Define search engine marketing
Promote a website by increasing visibility on search engines like Google
Define digital media & social media marketing
Digital marketing uses electronic devices to engage with customers. Ads on social media to gain internet traffic and publicity.
Define relationship marketing
Max customer retention and satisfaction thru 2-way comms rather than to directly increase sales. Recog LR value of building customer relationships - don’t bombard customer with advertisements.
Define postmodern marketing
Focus on treating customer as an individual and giving them a customised experience. Marketing approach as flexible as possible.
Product development can refer to 1 of 2 things…
- Design and development of new product/service that satisfies a customer or market need.
- The alteration of existing product/service, or how it is presented to the market.
Product development stage 1 + how finance help
Customer needs.
Market research, finance analyses data to identify what customer needs are.
Product development stage 2 + how finance help
Screening - ensure meet certain criteria such as profitability or market share.
Finance can verify profit/market share by providing cost/rev info. Also market analysis to project market share.
Product development stage 3 + how finance help
Design - build electronic/physical prototype. Finance support value engineering by providing detailed costing of all components.
Product development stage 4 + how finance help
Time to market - short time span desirable as lower cost + get ahead of comp. Finance assure time to market reasonable by testing assumptions & calcs marketing function have made.
Product development stage 5 + how finance help
Testing - check it works, meets customer needs & customer likes it. Internal audit provide independent verification that all testing procedures followed & results are correct.
Two key issues in relation to product development are…
- Level of the product
2. Range of the product
4 levels of the product
- Core/generic
- Augmented
- Expected
- Potential
Levels of the product: core/generic =
Those benefits that all products in the same product category would have e.g. all cars provide transport.
Levels of the product: augmented =
Core product + extra benefits that differentiate it. e.g. warranty, delivery, installation, after-sales support.
Levels of the product: expected =
Features a product is expected to have - potential for customer to be dissatisfied (disappointed expectations) or delighted (exceeding expectations)
Levels of the product: potential
Future avenues org could pursue to develop the product and marketing message in order to get ahead of comp and stay fresh.
How does product development affect levels of a product?
Prod dev can be used to move a product between these levels or create a new product based on a potential product.
what does product range refer to?
various sub-categories of the same product e.g. colour or features.
4 ways prod dev can be used to manage the range of a product
- Introduce variations in models or style
- Differentiate quality offered @ diff prices
- Develop associated items
- Develop new products with little technical or marketing relationship to existing range
What does the BCG matrix show?
It classifies products or brands on the basis of their market share and according to the rate of growth in the market as a whole as a way of assessing their role in the product range.
BCG matrix: Vertical axes
Low (<10%) vs high (>10%) market growth rate
BCG matrix: horizontal axis
High (>1) vs low (<1) relative market share - relative to largest rival.
BCG matrix: high market growth, high relative market share
Star
BCG matrix: high market growth, low relative market share
Question mark / problem child
BCG matrix: low market growth, high relative market share
Cash cow
BCG matrix: low market growth, low relative market share
Dog
BCG matrix: what is a star? What strategy?
High market share in high growth industry. Generating significant earnings now & in future. Maintain strategy - significant marketing expenditure.
BCG matrix: what is a question mark? What strategy?
High growth industry but low market share. Popular generic product with limited customer support. If future looks good: build strategy (increase mkt share thru substantial mkt funds & new mkt mix). If future looks bad: withdraw.
BCG matrix: what is a cash cow? What strategy?
High market share but in mature, low-growth industry. Well-established product w customer loyalty, product dev costs low & mkt well-established. Holding strategy if mkt growth still strong. Mkt growth &/or share weakening, ‘harvesting’ strategy - cut back on mkt to max SR profits.
BCG matrix: what is a dog? What strategy?
Low market share low growth industry. Well-established product but losing customer support/has cost disadv. Divest unless cash flow strong then harvest SR prior to withdrawing from product range.
State 5 stages to product life cycle (PLC)
Intro, growth, shakeout, maturity, decline.
What 3 lines are on PLC diagram and how do they change over time?
Sales: smooth increase, peak, decline
Cash flow: straight increase, peak, straight decrease, -VE (same for profit but slightly earlier)
Describe intro stage of PLC
Product offers something new to customers, unlikely to be any competitors, heavy advertising to raise awareness. -VE cash flow & profit.
3 key issues for org to consider in intro stage of PLC
- Design changes as customer needs better understood
- Operational capability to allow flexibility
- Secure trade acceptance (shelf space) + build awareness
Describe growth stage of PLC
sales rise, breakeven, more competitors, product features become more important.
4 key issues for org to consider in growth stage of PLC
- Main obj = keeping up with demand
- Quality standards maintained/improved. Cost & price more significant.
- Promote to build mkt share
- Mkting comms need to differentiate & clearly position the product.
Describe shakeout stage of PLC
Some of weaker players are shaken out by stronger ones.
Describe maturity stage of PLC
cash flow profit have reached their peak & decline.
Mkt now fewer orgs left.
4 key issues for org to consider in maturity stage of PLC
- Product design mostly standardised but develop new varieties to extend lifecycle
- Compete on price/value for money (prod diff)
- Improve productivity to lower costs
- Retain customer loyalty: sales promotions to encourage trial by non-users & reward current users.
Describe decline stage of PLC
Sales fall, competitors start to withdraw. Excess capacity in industry, remaining orgs compete on price.
3 key issues for org to consider in decline stage of PLC
- Key op obj = cost targets
- Decision to stop making product or not
- Direct mkting & well-targeted advertising can remind/reassure brand loyalists.
What helps an org to draw its PLC curve?
Forecasting demand
What 4 factors do finance consider when analysing current demand to estimate it as it would be today?
- Total mkt potential
- Area (geographic) mkt potential
- Total industry sales
- Relative mkt shares
How can the sales force help forecast demand?
opinions - salespeople get a feel for the market by talking to clients and potential clients.
Problem with asking salesforce opinions for forecast demand
- might forecast very low if these forecasts form the basis of their future sales targets
- or could be over-optimistic to help gain approval for the project/motivate the sales force
How can experts help forecast demand?
Industry experts, distributors or consultants provide independent forecasts. Good to use >1 source then combine = more realistic forecast.
How can past sales analysis help forecast demand?
Past sales as starting point for future sales forecasts. process through a model that accounts for various factors like sales trends, seasonal/cyclical factors, competitor activity, impact of marketing campaigns.
What is sales potential and what factors influence it?
Estimate max amount of sales that a product could achieve. Influence by: necessity/luxury; size of mkt; level of comp; price; promotional $; whether consumers delay purchasing (luxury items).
How can survey of buyers intentions help forecast demand?
Mkt research agencies undertake surveys of customer intentions. More valuable survey when: small no customers; low cost of reaching them; clear intentions.
What are market tests & how can they help forecast demand?
Rather than asking customers about their intentions, conduct tests e.g. to finalise product design, evaluate alternate features etc.
How can finance help marketing with pricing?
Provide accurate cost figures that can be used as a basis for determining price.
Full cost plus pricing =
Full cost = fully absorbed production cost or may include some absorbed non-production costs like admin, selling or dist.
Amount added on to represent profit per unit.
1 pro of Full cost plus pricing
ensures fixed costs covered if working @ normal capacity.
1 con of Full cost plus pricing
Does not account for market and demand conditions e.g. if rival orgs offer lower prices.
Marginal cost plus pricing =
MC = change in total cost for producing add unit.
Amount of profit added to MC only.
2 pros of MC plus pricing
- simple &easy
2. draws mgmt attention to contribution & creates better awareness of concepts such as breakeven analysis
2 cons of MC plus pricing
- Can’t ignore FC - need to cover in LR
2. Still doesn’t fully account for mkt/demand conditons.
Mark up =
a % of cost added to the cost to reach selling price.
Mark up AKA
Return on costs
Mark up pricing is traditionally used by…
Retail companies which buy products in from wholesales then add a retail mark up to wholesale price to determine their price.
3 steps to mark up on cost pricing
- Consider cost base = 100%
- Add to this profit mark up of say 40% of cost
- Calc selling price = 140% cost base
Margin =
a profit expressed as % of selling price
Margin AKA
Return on sales
4 steps to margin on sales pricing
- Consider selling price = 100%
- This consists of 60% cost base & 40% margin
- Calc profit margin based on % in (2)
- Add this to cost base to determine selling price
Mark up vs margin
Mark up = return on costs - profit % of cost base.
Margin = return on sales - profit % of selling price.
5 sources of big data for forecasting demand
- Website traffic
- Online trends
- Customer feedback
- Promotions
- Microeconomic factors
Modelling future demand AKA
Demand sensing
Once a demand forecast is produced, who is it passed onto in org?
Operations function to make sure supply can meet this demand.
How can big data improve customer experience?
Create unique customer experiences which is based on hard data and evidence, not just intuition.
Each method of purchasing goods is known as…
a channel
Contemporary customer transactions are said to be…
multi-channel - can buy in many ways such as in store, on website, apps, games consoles etc.
What role does big data play in transactions?
Monitor multi-channel transactions to ensure customer experience is consistent. achieved by creating customer account - easier for online purchases, for over phone need loyalty cards/request email to link customer to their account.
1 benefit to org and 1 benefit to customer of linking customer to their account regardless of what transaction channel they use.
org: monitor all activity & expand knowledge
ind: purchase history all in one place, returning goods or complaints easier & can demonstrate loyalty.
What role does big data play in identifying customer preferences?
Key role: collect data on past transactions, cookies, responses to emails and online adverts, data on social networks. Combine personal data with general demographic data and trends to generate predictions.
What role does big data play in market segmentation?
Volume & variety of big data can help identify highly specific segments to help tailor products.
What role does big data play in product dev?
Customer and social media data used to enhance existing products or dev new ones to meet customer needs.
What role does big data play in marketing decisions?
Real-time data to adjust marketing tactics and optimise inventory/pricing.
What role does big data play in customer feedback?
social media feedback can be used to identify changes needed to meet customer needs.
3 ways finance assist marketing ito assembling info
- costings for pricing
- collect basic mkt data
- identify & assemble KPIs
3 ways finance assist marketing ito analysing for insight
- demand forecasting
- analyse mkt segments
- analyse KPI data
3 ways finance assist marketing ito advising to influence
- Analyse PLC & product portfolios to guide prod dev
- analyse & comm appropriate mkt strategies
- Use insights from KPI to advise functions
3 ways finance assist marketing ito applying for impact
- identify & analyse customer preferences
- manage multi-channel comms
- apply lessons learned from KPIs to achieve function objs
KPI: relative market share
org mkt share / largest competitor mkt share
KPI: mkt growth rate
org total annual sales in mkt / total sales in mkt for last year
KPI: click thru rate
% people visiting website from search engine or advert. Measures effectiveness of web presence and e-mkting.
KPI: bounce rate
% people who land on website but leave without viewing its other pages. Measures website attractiveness.
KPI: rev per user
total rev / total customers
Profit on a per user basis.
KPI: sales by channel
Measures effectiveness of diff mkting channels - adjust $ spend on each to get best ROI.
KPI: upselling success rate
number successful upsells / number attempts x 100%
How successful in persuading customers to buy smth additional or more expensive. Tells org how effective sales team are & whether products wanted or not.
KPI: conversion rate
number goal achievements / visitors x 100%
Turning customer leads/potential customers into actual customers. How effective sales team are.
2 KPIs for ‘place’
- cost of storage
2. cost of transport
2 KPIs for ‘price’
- Price vs ind av
2. PED
4 KPIs for ‘product’
- warranty claims
- repurchase rate
- product dev time/cost
- brand value
4 KPIs for ‘promotion’
- Cost of promotion
- awareness lvls
- social media reach
- sales team response time
4 general marketing and sales KPIs
- Sales volume
- Customer retention rate
- customer acquisition cost
- customer lifetime value
