3 - Decision making to improve marketing performance 💫 Flashcards
Define marketing
The process of identifying, anticipating and satisfying customer needs profitably
Define marketing objective
provides a focus for marketing management set usually be a marketing team
Formula for market growth %
New market - old market / old market X100
If market growth is negative, what does this mean for the market?
It is shrinking
Formula for market share %
sales / total market size X100
What does it mean if a business’ market share decreases?
Competitors are gaining an advantage
Formula for sales growth %
sales this year - sales last year / sales last year X100
What would be some effective marketing objectives?
- all have same vision
- provide a focus
- provide an incentive
- establish priorities
The marketing function in a business has what 3 basic objectives?
- Determine what the market wants
- Develop the strategy to achieve the objectives
- Deliver the marketing actions to achieve these
Define market size
The number of sales, by value or volume, in a market as a whole
Define market share
The proportion of total sales that a particular firm controls
Define market growth
The % increase in the size of the total market in terms of either value or volume
Define sales growth
The % increase in the size of the sales of a firm in terms of either value or volume
Define brand loyalty
Customers have a strong preference towards the identity of a particular product or company
Internal Influences on Marketing Objectives
How does corporate objectives effect this?
marketing objectives must be aligned with the company’s overall goals
Internal Influences on Marketing Objectives
How does finance effect this?
the marketing department will be given a budget by the finance department, so they must work within this
Internal Influences on Marketing Objectives
How does HR effect this?
if HR decides to cut/increase staff, the marketing department must adjust its objectives to make sure they are achievable
External Influences on Marketing Objectives
How does the market effect this?
an economic boom will mean the company could focus on sales volume increases, but a recession would focus on maintaining market share
External Influences on Marketing Objectives
How does technology effect this?
changes mean objectives must stay dynamic as new tech can cause prices to change fast
External Influences on Marketing Objectives
How do competitors effect this?
actions of competitors will mean objectives will need to change to stay competitive
External Influences on Marketing Objectives
How does ethics and environmental factors effect this?
awareness for these issues are increasing, so behaving in a harmful way will damage a business’ reputation
External Influences on Marketing Objectives
How does government effect this?
- predatory pricing
- the law
-Trade Description Act
What do businesses need to know when analysing market data?
- is the business market local/national/international?
- selling online or physical?
- who is the target?
How can a market be classified?
- geographically
- nature of the product
- seasonality
- development level (new/growing/saturated)
- product destination (trade/private)
Advantages of market mapping
- spot gaps in the market
- can be used to see customer views
- support with pricing strategy
- shows closest competition
Disadvantages of market mapping
- other research still needed
- can simplify things too much
- lack of data
- opinion-based = biased
Define market research
The process of gathering info about the market
Why is market research carried out?
- help to decide future plans
- spot opportunities
- supports seeing if plans work
- reduce risks
Cons of market research
- can be expensive
- needs planning
Define quantitative research
- concerned with data (fixed answers)
- statistically valid
- main methods are survey
Define qualitative research
- based in opinions, attitudes, beliefs
- aims to understand behaviours
- main method is focus groups
Pros to quantitative research
Easier to compare
More statistical
Cons to quantitative research
No expansion nor detail in answers
No understanding what customer wants
Pros to qualitative research
Opinion based
Detailed
Develops answers
Cons to qualitative research
Harder to compare
Subjective
Expensive
Examples of primary research
Focus groups, questionnaires, interviews, surveys, test marketing, sampling
Pros to primary research
- specific so good for niche markets
- exclusive so competitors can’t benefit
Cons to primary research
- labour-intensive
- expensive
- time-consuming
- may not want to annoy customers
Examples of internal sources of secondary research
Loyalty cards data, feedback from salesmen, analysis of company reports, financial accounts and stock records
Examples of external sources of secondary research
Govt publications, marketing agency reports, pressure groups, trade magazines
Pros to secondary research
- easier
- faster
- cheaper
- efficient
- done for you
Cons of secondary research
- not tailored to business
- outdated
- unsuitable
- contains error
What is a sample?
A group of subjects that have been chosen from a larger group, the population, for investigation
What will a bigger sample give you?
- better chance of being accurate
- not always totally representative
What will impact the value of sampling?
- the sample technique used
- how the sample was carried out
- the size of the sample
What will impact the size of the sample?
- the budget available
- the importance of accuracy
- degree of confidence in results
What is random sampling?
Names picked randomly from a list
Pros to random sampling
- wide range of opinions
- good for certain industries (supermarkets)
- cheaper
Cons to random sampling
- time-consuming
- wasted info/resources
- difficult to find out specifically for target
What is quota sampling?
People are picked who fit the category (eg. Mums aged 30-40)
Pros to quota sampling
- specific target market = accurate
- more reliable
Cons to quota sampling
- time-consuming
- have to target lots of people to get enough data
What is stratified sampling?
The population is first segmented into subgroups, before respondents are randomly selected from within that subgroup
Pros to stratified sampling
- more accurate
- specific for target market
Cons to stratified sampling
- have to get the right subgroup
- time-consuming
- expensive
What can market research not be?
Bias
Define correlation
The relationship between such data and the business sales levels
What method is correlation?
A method of sales forecasting
Strong correlation means what?
Means little room between data points
Weak correlation means what?
Means data points are spread apart
How can correlation be described?
- strong
- positive
- weak
- negative
- random
What is time series analysis?
A method of interpreting market data by looking at data over time, revealing underlaying patterns by recording and plotting data over time
What is a trend?
The long-term movement of a variable
eg. upwards/downwards/constant/seasonal/random
What is time series analysis used for?
- analyse market research effectiveness
- forecasting future decisions
- tracks trends
- efficient and clear
- shareholders could be encouraged
What is extrapolation?
Using data in the past to extend an identified trend into the future when the market is stable
Cons to extrapolation
- past isn’t always good indication of future
- conditions and trends can soon change
What is the value of technology?
- less human error
- enables two way communication
- encourages consumer feedback through social media
- collect consumer opinions
- track and interpret habits
- gathers large amounts of data fast
How can technology be used to gather market research?
- loyalty cards
- search engines
- social networking sites
- WI-FI signals
Advantages of technology
- cheaper
- more efficient
- more relevant
- faster and immediate
Disadvantages of technology
- seen as unethical (WIFI)
- initial costs are high
- can lower profit margins (discounts)
- narrows target marketing (may miss out on potential customers)
Confidence intervals do what?
Are used to assess the reliability of sampled data when trying to forecast figures such as sales levels
What does a confidence level of + - 4 mean if the survey shows a high chance that 36% of the population will buy the product?
That 32% to 40% will buy the product
What can a confidence interval be compare to?
The range of the population that is predicted to buy the product
What is a confidence level?
The degree to which statistics are a reliable predictor of actual events
What does a 95% confidence level mean on a 36% + - 4 condense interval?
That 95% of the time the number of buyers will fall between 32% and 40%
What factors affect the confidence interval?
- sample size
- population size
- % of sample choosing a particular answer
What is price elasticity of demand?
A measure of how responsive demand is to a change in price (inverse relationship)
What factors affect whether a product is elastic or inelastic?
- time
- availability of substitutes
- price of competitors
- branding
- income
- nature of the good
- choice
What does price ELASTIC demand mean?
Demand is more sensitive to price changes
What does price INELASTIC demand mean?
Demand is not very responsive to price change
How do you calculate PED?
% change in quantity demanded / % change in price
What does a PED between 0 and -1 mean?
Demand is inelastic as it doesn’t change very much
Eg. Insulin, petrol
What does a PED less than -1 mean?
That demand is elastic
Eg. Car sales
Price ELASTIC demand
Raise selling price = revenue decreases
Lower selling price = revenue increases
Price INELASTIC demand
Raise selling price = revenue increases
Lower selling price = revenue decreases
Problems of PED forecasting
- changes over time
- competitors keep changing
- difficulty finding accurate info
- tastes change over time
What is the formula for income elasticity of demand (YED)?
% change in demand / % change in income
What is YED for normal goods?
Always positive
If a product is a luxury, what is YED?
Above 1 = positive elastic
Fast rate/high impact
As income grows, more is spent on luxuries
If a product is a necessity, what happens to YED?
Below 1 = positive inelastic
Slow rate/low impact
As income grows, less is spent on necessitates
What are inferior goods YED?
Inferior goods = cheaper value products
Eg. 35p beans
Negative elasticity of demand
Demand falls when income increases
How does PED and YED help a business make marketing decisions?
- helps predict the economy
- increase or decrease price accordingly
- release new ranges
- change packaging = more luxurious
- change advertising campaign
- rearrange stores to showcase cheap/expensive goods depending on YED
What is market segmentation?
Involves dividing a market into parts that reflect different customer needs and wants
How can a market be segmented?
- demographic
- income
- geographical
- behavioural
What is targeting?
The process of deciding which segment to focus on
What is targeting influenced by?
- mission and objectives
- perceived level of demand
- competition
What is mass marketing?
Business targets the whole market, ignoring segments, undifferentiated
What is segmented marketing?
Business targets several debarments within the same market, differentiayed
What is a niche market?
Business focuses on smaller segments in an aim to achieve strong market position
What does demographic segmentation include?
Age, gender, occupation, socio-economic group
What does geographical segmentation include?
Classification of residences
What does behavioural segmentation include?
Lifestyle, brand loyalty, frequency of purchases
What is it called when you have to choose who to target?
Value propositions
What are the 7 P’s?
- place
- product
- price
- promotion
- physical evidence/environment
- process
- people
What factors could influence the marketing mix?
- PESTLE
- competition
- PED and YED
- availability of resources
- seasonality
- imports/exports
How can businesses stay competitive?
- improve quality
- reconsider distribution channels
- advance tech
- develop processes
- develop skills of staff
Boston Matrix
What is on the axis?
x axis = market share
y axis = market growth
Boston Matrix
What are cash cows?
Customers know brand and is very profitable
Eg Cadbury’s
Boston Matrix
Where are cash cows?
High market share
Low market growth
Boston Matrix
What are stars?
Immature market with new customers being attracted, so competition and costs are high but will hopefully turn into cash cows
Eg apple watch
Boston Matrix
Where are stars?
High market share
High market growth
Boston Matrix
What are question marks?
Worst situation as products aren’t selling and competitors are winning
Boston Matrix
Where are Question Marks?
Low market share
High market growth
Boston Matrix
How can a question mark be saved and turned into a cash cow?
A relaunch or redesign
Boston Matrix
What is a dog?
Still can be marginally profitable, but take up time and are not worth redeveloping
Eg hand carpet cleaners provide profits for niche businesses, but can’t compete with Dysons
Boston Matrix
Where is a dog?
Low market share
Low market growth
Boston Matrix
Why use the Boston Matrix?
- to judge how to manage products
- recognise profitable products
- to see potential
What are the 6 stages of the product life cycle?
- R&D
- Introduction
- Growth
- Maturity
- Decline
- Extension Strategies
What are the cons of the product life cycle?
- shape and duration varies with product
- decline not inevitable
- hard to know which stage it’s in exactly
- length can’t be reliably predicyed
Why might a product enter the decline stage?
- technological advancement
- change in trends
- increased competition
- failure to innovate
Price
What factors affect price?
- PESTLE
- branding
- market growth and share
- convenience
- demand
- location of business
- PED & YED
Price
What is price skimming?
Setting a high initial price for a new product in order to recoup costs and lowering it once the “early adopters” have gone
Price
How do firms get away with price skimming?
By creating a “must-have” mentality
Price
What is penetration pricing?
Involves setting a low initial price for a new product in order to get a foothold in the market and gain market share
Price
What market is penetration pricing suitable for?
Mass markets
Price
When would price be raised in penetration pricing?
Once a loyal customer base has been established
Price
Pros to price skimming
- High profits
- Prolong sales
- Competitive advantage
Price
Pros to Penetration pricing
- establishes loyal customer base
- quick to gain market share
- benefit from economies of scale
Price
What is dynamic pricing?
Changes prices
Eg. Demand is high so prices rise
Closer it is to departure date, high
prices
Price
What is competitive pricing?
Making sure the monitor competitors pricing to determine their own prixea
Price
What is psychological pricing?
Basing the product in customer expectations
Eg high price for high value
Price
What is price discrimination?
Prices different depending on customers
Eg. Children or OAP
Price
What is loss leaders?
Sold at below cosy prices to entice people in, in hope they’ll buy more products
Eg. Boohoo’s £5 dress
Price
What is predatory pricing?
When a business deliberately lowers prices to force another business out of the market (illegal)
Promotion
Pros of advertising
- attracts customers
- wide coverage
- control of message
- brand loyalty
Promotion
Cons of advertising
- often expensive
- impersonal
- one way communication
- lacks flexibility
- limited ability to close a sale
Promotion
Pros to personal selling
- 2 way communication
- interactive
- customised
- opportunity to close a sale
- persuasive impact
- potential development of relationship
Promotion
Cons to personal selling
- high cost
- labour intensive
- only reaches a small audience
Promotion
Pros of sales promotion
- effective at achieving quick boost of sales
- encourages customers to trial product and switch brand
Promotion
Cons of sales promotion
- short term effect
- May damage brand image
- customers may expect further deals
Promotion
What are sales promotions?
Tactical points of sale material or other incentives designed to stimulate purchases
Promotion
What is merchandising?
Displaying products to maximise sales
Promotion
Give examples of public relation strategies
- enhancing public awareness
- promote social responsibility
- projecting good employee relations
- favourable reviews
Promotion
What is sponsorship?
Takes place when a payment for an event is given in return for consideration
Promotion
What is direct marketing?
Promotional material directed through mail, phone or to individuals household
Promotion
Pros to direct marketing
- focuses limited resources
- can personalise promotion
- easy to measure response
- cost effecguce
Promotion
Cons to direct marketing
- response rates vary hugely
- negative image of junk mail
- database expensive to maintain and keep accurate
Place
Define place
- how the product is sold
- where the product is sold
- distribution channels
Place
List some distribution channels
- e-commerce
- retailers
- B2C
- wholesales
- m-commerce
Place
What is each part of a distribution channel called?
An intermediary
Place
List the longest distribution channel and give examples
Producer - wholesaler - retailer - customer
Eg. Cadbury’s, Heinz
Place
Pros and cons to using producer-wholesaler-retailer-customer
👍 reach more customers
👍 convenience
👎 lower profit margins
👎 worse customer service
Place
What distribution channel uses 3 intermediaries?
Give examples
Producer - distributors/agents - customer
Eg. Travel agents, Avon, Amazon
Place
Pros and cons to using producer - distributor - customer
👍 wider audience
👍 good marketing = persuasive with sales
👎 lower profit margins
👎 more costs of agents + commission
👎 old fashioned
Place
What is the shortest distribution channel?
Give examples
Producer - customer
Eg. Clive’s Fruit Farm, Nike, Butchers
Place
Pros and cons of producer-customer
👍 higher profit margins
👍 better customer service
👎 less demand
👎 only sells to local
Place
What is multichannel distribution?
A business using more than 1 channel to reach a large audience with different demographixs
Place
Why use intermediaries when they lower profit margins?
- geography
- lack of retail experience
- convenient
- trends
- brand size
Place
Why is it important that products are placed in the right location in stores?
- easy to find = convenient
- stand out from competitors
- ensure with similar products = rep
People
Why are people important?
- provide customer service = rep and reviews
- special expertise
- promote the business
- provide idea on ethics of business
People
Why are people important in B2B trade?
Needs interpersonal skills, respect, honesty and explanations
Process
Examples of processes are:
- how easy it is to get an appointment
- how long you wait for food to arrive at a restaurant
- payment systems
- user friendliness
Process
Why is process so important?
Businesses must maximize profits while keeping customers happy
Physical environment
What does this include?
Customer surroundings and evidence of purchases
Physical environment
Examples of this to attract customers
- lighting
- decorations
- uniform
- store layout / website appearance
- aesthetics and colours
Why must the marketing mix be integrated?
Each one of the 7 P’s contributes consistently and positively to the success of the marketing effort to attract the target market
Factors affecting the integrated marketing mix:
- PESTLE
- mission statement
- competitors
- budget
- position in the product life cycle
- target market
