3. Marketing Flashcards
What are the roles of marketing?
identifying customer needs
satisfying customer needs
maintaining customer loyalty, building customer relationships
Why do customer/consumer spending patterns change?
price of competitor’s product
price of products
changes in consumer income
changes in population size and structure
changes in trends
spending on advertising and other promotional activities
What is ‘customer loyalty’?
when customer keeps buying the same brand no matter what the price
Why do some markets become more competitive?
legal controls prevent individual firm from dominating market
deregulation - removal of government controls from industry
e-commerce and social networks
How do businesses respond to changing spending patterns and increase competition?
Develop their products
Improve efficiency
Increase promotion
Look for new markets
What is ‘niche marketing’?
developing products for a small segment of the market
benefits + limitations of niche marketing?
+ less competition
+ customers willing to pay large sum of money
- luxury goods go out of favour during time of recession/economic crisis
- large companies see success, copy/sell for cheaper
What is ‘mass marketing’?
selling the same product to the whole market
benefits + limitations of mass marketing?
+ potential for high sales and profits
+ products don’t go out of favour during time of recession
- increased competition
- people sensitive about prices, not willing to pay large sum
What is ‘market segmentation’?
dividing whole market into segments by consumer characteristics + targeting different products to each segment
What are the two types of segmentation?
geographic segmentation: dividing consumers in the market by geographic area
demographic segmentation: dividing consumers in the market by factors
Benefits of market segmentation?
Goods + services designed to meet specific needs of consumers → increases sales
Small firms (not be able to compete in whole market) able to operate in one or two segments - e.g. a niche market
Marketing strategies can be better targeted at each segment
May be possible to charge higher prices
What are ‘market-orientated businesses’?
Products are developed based on consumer demand as identified by market research
What are the uses of market research information?
Identify customer needs
Discover current + future market size for product
Provide information about business’s existing products + markets
Identify strengths + weaknesses of competitor products
Decide how to price product + promote product
Predict how changes + trends in customers tastes may affect future demand
What is ‘primary research’?
the collection of first-hand data for the specific needs of the firm
benefits + limitations of primary research?
+ data is up to date
+ data collected for specific purpose that is relevant to business
+ not available to other businesses → competitive advantage
- costly
- time consuming
- risk of inaccurate data
What is ‘secondary research’?
collection of data from second-hand sources
benefits + limitations of secondary research?
+ fairly cheap to obtain
+ easier and quicker to obtain
- may not be up to date
- may not be directly relevant to the business
Name methods of primary research
Focus groups
Observation
Test market
Consumer surveys
Interviews
Postal surveys
Online surveys
The need for sampling
Name methods of secondary research
reports
internet documents
newspaper
What are the factors that can influence the accuracy of market research data?
Sample chosen may be too small
Business may have chosen wrong type of method to collect data
People may not answer questions truthfully
Questions asked may be bias, which forces interviewee to not give true view
Language may be unclear
Secondary data may be out of date
Data may be recorded incorrectly
Ways of analysing / presenting data?
Tables
Bar charts
Pie charts
Pictograms
Line graphs
What are the costs of developing a new product?
Market research to identify customer needs
Development of a new product
What are the benefits of new product development?
Charge higher prices for new products
Increase potential sales, revenue and profit
May achieve growth and economies of scale
What is ‘brand image’?
general impression of a product held by consumers
What are the purposes of ‘brand image’?
Consumers recognise their product more easily
Product can be charged higher than less well-known brands
Easier to launch new products into market
What are the roles of packaging?
Protect product
Give information about product
To help consumers recognise product
To keep product fresh
What is the ‘product life cycle’?
the cycle which every product goes through from introduction to withdrawal or eventual demise
What are ‘extension strategies’?
marketing activities to extend the maturity stage of a product
Examples of ‘extension strategies’?
Finding new markets for product
Finding new uses for product
Adapting product or packaging to improve its appeal to consumers
Increased advertising and other promotional activities
What are the different types of pricing?
price skimming
penetration pricing
competitive pricing
cost-plus pricing
promotional pricing
What is ‘price skimming’?
Setting a high price for a new product that is unique or very different from any other product on the market
Advantages + disadvantages of price skimming
ads:
Profit earned is very high
Helps to recover research and development costs
disads:
Laws may have been placed to stop this
Backfire if competitors produce similar products at a lower price
What is ‘penetration pricing’?
Setting a low price to attract customers to buy a new product
Advantages + disadvantages of penetration pricing
ads:
Attracts customers more quickly
Can increase market share quickly
disads:
Cannot recover development costs quickly
Possible loss of revenue due to lower prices
What is ‘competitive pricing’?
Setting a price similar to that of competitor’s products which are already established in the market
Advantages + disadvantages of ‘competitive pricing’?
ads:
Business can compete on other things e.g. service
disads:
Still need to find ways of competing in order to attract sales
What is ‘cost-plus pricing’?
Setting price by adding a fixed amount to the cost of making or buying the product
Advantages + disadvantages of ‘cost-plus pricing’?
ads:
Quick + easy to work out price
Makes sure that price covers all costs
disads:
Price might be set higher than competitors/ more than customers are willing to pay, → reduces sales and profits
What is ‘promotional pricing’?
Setting price of a small number of products at below cost to attract customers into outlet in hope that they will buy other products priced to earn a profit
What is ‘price elasticity of demand’?
Measures by how much demand for a product changes when there is a change in price
What is ‘price inelastic demand’?
The percentage change demand is less than the percentage change in price. Products that are not very responsive to changes in price
What is ‘price elastic demand’?
The percentage change demand is greater than the percentage change in price. Products that are more responsive to changes in price
What is a ‘channel of distribution’?
a chain of businesses or intermediaries through which a good or service passes until it reaches the end consumer
Name the advantages + disadvantages of ‘Producer → Consumer’
ads:
All of profit is earned by producer
Producer controls all parts of the marketing mix
Quickest method of getting product to the consumer
disads:
Consumers are not always able to see or try product before they buy it
Delivery costs may be high if there are customers over a wide area
All storage costs must be paid for by producer
All promotional activities must be carried out and financed by producer
Name the advantages + disadvantages of ‘Producer → Retailer → Consumer’
ads:
- Consumers can see and try product before buying it
- Cost of holding inventories of product Is paid by retailer
- Retailer will pay for advertising + other promotional activities
- Retailers are more conveniently located for consumers
disads:
Retailer takes some of the profit away from the producer
Producers lose some control of marketing mix
Producer must pay for delivery costs to retailers
Retailers usually sell competitors’ products as well
Name the advantages + disadvantages of ‘Producer → Wholesaler → retailer → Consumer’
ads:
Wholesaler buys in bulk from the producer
Wholesalers will advertise and promote the product to retailers
Wholesalers pay for transport costs + storage costs
disads:
Another middleman so more profit is taken away from the producer
Producer loses even more control of the marketing mix
Name the advantages + disadvantages of ‘Producer → Agent → Wholesaler → Retailer → Consumer’
ads:
- The agent has specialist knowledge of the market
disads:
- Another middleman is added so even more profit is taken away from the producer
What is ‘promotion’?
Marketing activities used to communicate with customers and potential customers to inform and persuade them to buy a business’s products
What are the purposes of promotion?
Attract attention of consumers by making them aware of the product
Persuading consumers to buy to product
Explaining how a product is better than competitors’ products
Creating and developing brand image
Encouraging wholesalers and retailers to stock the product
Reassuring consumers
What are the methods of promotion?
advertising
sales promotion
below-the-line promotion
personal selling
direct email
sponsorship
What is ‘sales promotion’?
Incentives used to encourage short-term increases in sales or repeat purchases
What is ‘below-the-line promotion’?
Promotion that is not paid for, uses incentives to encourage consumers to buy.
What is ‘below-the-line promotion’?
Promotion that is not paid for, uses incentives to encourage consumers to buy.
What is ‘personal selling’?
Sales staff communicate directly with consumer to achieve a sale and form a long-term relationship between firm + consumer
What is ‘direct mail’?
Also known as mail shots, printed materials which are sent directly to addresses of customers
What is ‘sponsorship’?
Payment by a business to have its name or products associated with a particular event
What is ‘marketing budget’?
the amount of money made available by a business for its marketing activities during a particular period of time
What is ‘e-commerce’?
Use of internet and other technologies used by businesses to the market and sell goods and services to customers.
What are the opportunities of e-commerce to businesses?
Increased market
Reduced costs
Better information
What are ‘legal controls’?
laws that control the activity of businesses
What are the purposes of ‘legal controls’?
Protect consumers from faulty and dangerous goods
Prevent businesses from using advertising to mislead consumers
Protect consumers from being exploited in industries where there is little or no competition, also known as monopolising
What are the opportunities of entering new markets abroad?
Increase sales, revenue and profits
Increases potential customers
What are the problems of entering new markets abroad?
Difference in language and culture
Lack of market knowledge
Economic differences
Social differences
Difference in legal controls to protect consumers
Name one example of a a method to overcome problems when entering a foreign market
Joint venture
Ads + disads of joint venture
ads:
Market and product knowledge can be shared to benefit of businesses
Market potential for businesses in joint venture is increased
Each business brings different expertise
Reduces risks and cuts costs
disads:
Decision-making may be ineffective due to different business culture/ leadership styles
Any mistakes made will reflect on all parties, may damage their reputations
The role of Place
affects whether or not consumer wants to go to shop, depends on how convenient it is to reach, how far away it is and how important it is to go there
The role of Price
affects whether or not consumer will be willing to pay for product, if it is too cheap they may think product is dodgy
The role of Promotion
affects whether or not consumer is aware of product and how many consumers are aware of product
The role of Product
affects whether or not consumer wants to buy product, if it is not unique enough or not useful then consumers may not want to buy it
What are the opportunities of e-commerce to businesses?
Increased market
Reduced costs
Better information
Opportunities of e-commerce to business and consumers
To businesses:
Increased market
Reduced costs
Better info
To consumers:
Convenience
Wider choice
Lower prices
Better info
Threats of e-commerce to business and consumers
To businesses:
Increase competition
Unfamiliarity
To consumers:
Fraud
Hacking
No personal service
Returning items
What is marketing?
Marketing is identifying customer wants and satisying them profitability.
What is a customer?
A customer is a person, business or other organisation which buys goods or services from a business.
Large business will have different sections within their marketing departments:
The Sales team.
The market research section.
The promotion section.
Distribution.
What does distribution do?
Transports the products to the market.
What is the sales team responsible for?
The sales of the product.
What is the market research section responsible for?
Finding out customers’ needs, market changes and the impact of competitors’ actions.
What does the promotion section deal with?
Organising the advertising for products.
What 5 things are the central roles of marketing?
Identifying customer needs.
Satisfying customer needs.
Maintaining customer loyalty.
Building customer relationships to gain information about customers.
Anticipate changes in customer needs.
What is customer loyalty?
Customer loyalty is when existing customers continually buy products from the same business.
What are customer relationships?
Customer relationships is communicating with customers to encourage them to become loyal to the business and its products.
What is market share?
Market share is the percentage of total market sales held by one brand or business.
If the marketing department is successful in identifying customers requirements and predicting future customer needs, it should enable the business to: 7.
Raise customer awareness of a product or service of the business.
Increase revenue and profitability.
Maintain or improve the image of products or a business.
Target a new market or market segment.
Enter new markets at home or abroad.
Develop new products or improve existing products.
Increase or maintain market share.
What is a consumer?
A consumer buys goods or servoces for personal use - not to re-sell.
Why customer/ consumer spending pattterns change?
Consumer tastes and fashions change.
Changes in technology.
Changes in incomes.
Ageing products.
Why have some markets become more competitive (3 reasons)?
Globalisation of markets has meant that products are increasingly sold all over the world.
Transportation improvements have meant that it is easier and cheaper to transport products from one part of the world to another.
Internet/E-Commerce has meant that consumers can search for products and buy from overseas markets.
In order to remain successful, a business may need to do the following: 4.
Maintain good customer relationships. This has a key role in continuing to meet customer needs and it also provides market research information about customers.
Keep improving its existing product.
Bring out new products to keep customers’ interest. Helps the business to maintain, or even increase, its market share.
Keep costs low to maintain competitiveness.
How can market be measured? 2.
It can be measured by the total number of sales or by the value of the sales for that good or service by all suppliers of that particular good or service.
What are the two types of marketing?
These can be either mass market or niche markets.
What is meant by mass market?
Mass market is where there is a very large number of sales of a product.
What are the 4 advantages of selling to a mass market?
Total sales in these markets are very high.
The business can benefit from economies of scale.
Opportunities for growth of the business due to large potential sales.
Risks can be spread.
What are the 3 disadvantages of selling to a mass market?
High levels of competition between businesses selling similar products.
High costs of advertising and promotion.
Standardised products or services are produced and so many not meet the specific needs of all customers or potential customers.
What is meant by a niche market?
A niche market is a small usually specialised, segment of a much larger market.
What are the two disadvantages of niche markets?
Niche markets are usually relatively small and therefore have limited sales potential.
Often businesses in a niche market will specialise in just one product and this is risky because if the product is no longer in demand then the business will fail.
What are the two advantages of niche markets?
Small businesses may be able to sell successfully in niche markets as larger businesses may not have identified them but concentrated on the mass markets instead.
The needs of consumers can be more closely focused on and therefore targeted, by businesses in a niche market.
Define market segment.
Market segment is an identifiable sub-group of a whole market in which consumers have similar characteristics or preferences.
What three things can segmenting a market help a business to do?
Make marketing expenditure cost-effective by producing a product which closely meets the needs of these customers.
Enjoy higher sales and profits because of cost-effective marketing.
Identify a market segment which is not having its needs fully met and therefore offers opportunities to increase sales.
What are the six ways of segmenting a market?
By socio-economic group.
By age.
By region/location.
By gender.
By use of the product.
By lifestyle.
What are three factors a business will consider before choosing an appropriate method of segmentation?
Detailed analysis of the market and the size of each potential segment in terms of consumers and likely sales.
Company image and brand image.
Costs of entering each segment.
What is the marketing mix?
The marketing mix is a term that is used to describe all the activities which go into the marketing of a product or service. These activities are often summarised as the four P’s - product, price, place, and promotion.
What are the four p’s of the marketing mix?
Product.
Price.
Place.
Promotion.
What is the product?
This applies to the good or service itself - its design, features and quality.
What is the price?
The price at which the product is sold to the customer is a key part of the marketing mix.
What is the place?
This refers to the channels of distribution that are selected.
What is the promotion?
This is how the product is advertised and promoted.
Why is the product itself the most important in the marketing mix?
The product itself is probably the most important element in the marketing mix - without a product that meets customer needs, the rest of the marketing mix is unlikely to be able to achieve marketing success.
What will a business do after deciding on the product and appropriate market segment?
After deciding on the product and the appropriate market segment, the other parts of the marketing mix - price, place and promotion - will be determined.
What are the 4 types of product?
Consumer goods.
Consumer services.
Producer goods.
Producer services.
What are consumer goods?
Goods which are bought by consumers for their own use.
What are consumer services?
There are services that are bought by consumers for their own use.
What are producer goods?
These are goods that are produced for either businesses to use.
What are producer services?
These are services that are produced to help other businesses.
Producing the right product at the right price is an important part of the marketing mix.
The product needs to satisfy consumer wants and needs and stimulate new wants.
The product needs to be of the right quality.
Not too expensive to produce.
Design - performance, reliability and consistent quality.
Has something very distinctive that makes it appear different.
What are the six steps to product development?
Generate ideas (customer suggestions, employees, research and development department, sales department and competitors’ products.
Select the best ideas for further research.
Decide if the company will be able to sell enough for the product to be a success.
Develop a prototype.
Launch the product in one area to test
the market.
Fully launch the product.
What are the benefits for the business when developing new products?
Unique selling point means the business will be first in the market.
Diversification for the business.
Allows the business to expand into new markets.
May allow the business to expand into existing markets.
What are the costs for the business when developing new products?
Carrying out market research.
Producing trail products.
Lack of sales if the target market is wrong.
Loss of company image if new product fails.
Define brand name.
The brand name is the unique name of a product that distinguishes it from other brands.
Define brand loyalty.
Brand loyalty is when consumers keep buying the same brand again and again instead of choosing a competitor’s brand.
Define brand image.
Brand image is an image or identity given to a product that gives it a personality of its own and distinguishes it from its competitors’ brands.
Why do consumers prefer branded products?
Branded products are normally sold as being of higher quality and this gives assurance of a standard quality that makes consumers confident in buying it.
What are eight key points of branding?
Unique packaging.
Unique name.
Higher quality than unbranded products.
Assured quality.
Encourages brand loyalty to customers.
Creates a brand image.
Needs advertising to reinforce.
Higher prices than unbranded products.
Define packaging.
Packaging is the physical container or wrapping for a product. It is also used for promotion and selling appeal.
What 7 things should packaging be?
Eye-catching.
Promotes the brand image.
Carries information about the product.
Easy to open the container and use the product.
Easy to transport the product.
Protects the product.
Suitable for the product to fit in.
Define product life cycle.
The product life cycle describes the stages a product will pass through from its introduction to its decline.
What are the stages of the product life cycle?
A product is DEVELOPED and no sales at this time.
The product is INTRODUCED and sales grow slowly because consumers don’t know of the product.
Sales start to GROW rapidly and profits start to be made as costs are covered.
MATURITY as sales now increase slowly.
Sales reach SATURATION and stabilize at their highest point.
Sales of the product DECLINE as new products come along.
What is the product life cycle affected by? Give an example of this.
It is affected by the type of product e.g fashionable items will go out of fashion quickly whereas food products will not.
How may a business extend the product life cycle?
If extension strategies are effective, the maturity phase of the product life cycle will be prolonged.
Introduce new variations of the original product e.g. children’s version.
Sell into new markets e.g. export outside the country.
Make small changes to the product’s design, color, or packaging.
Use a new advertising campaign.
Introduce a new or improved version of the old product.
Sell through addition or different retail outlets.
What might a business do to counteract declining products?
A business will need to have products coming up into the growth phase to counteract those that are in decline.
How will stages of the product life cycle influence pricing decisions?
A branded product is likely to be sold at a high price.
Prices are likely to be higher than competitors in the growth phase.
In saturation or maturity stage a business will likely lower prices as competitors would have released new products.
Some substantial price discounts might be offered during the decline stage.
How will stages of the product life cycle influence promotional decisions?
Spending on promotion will be higher at the introduction stage.
Advertising would probably be reduced in later stages.
Promotion spending might be increased again if the business decides to adopt an extension strategy.
Define extension strategy.
An extension strategy is a way of keeping a product at the maturity stage of the life cycle and extending the cycle.
A business can adopt new pricing strategies for several reasons, including:
To try to break into a new market.
To try to increase its market share.
To try to increase its profits.
To make sure all its costs are covered and target profit is earned.
What are the main methods of pricing:
Cost-plus pricing.
Competitive pricing.
Penetration pricing.
Price skimming.
Promotional pricing.
Define cost-plus pricing.
Cost-plus pricing is the cost of manufacturing the product plus a profit mark up.
What are the benefits of cost-plus pricing?
The method is easy to apply.
Different profit mark up could be used in different markets.
Each product earns a profit for the business.
Define competitive pricing.
Competitive pricing is when the product is priced in line with or just below competitors’ prices to capture more of the market.
What are the benefits of competitive pricing?
Sales are likely to be high as the price is at a realistic level.
Avoids price competition, which can reduce profits for all businesses in the industry.
Often used when it is difficult for consumers to tell the difference between the products of different businesses.
What are the limitations of competitive pricing?
A higher quality product might need to be sold at a price above competitors to give higher quality.
In order to decide what this price should be, detailed research would be needed to see what prices competitors are charging.
If a business’s production costs are higher than those of competitors, then a competitive price could lead to losses.
Define penetration pricing.
Penetration pricing is when the price is set lower than the competitor’s prices in order to be able to enter a new market.
What are the benefits of penetration pricing?
Often used for newly launched products to create an impact on customers.
Market share should build up quickly.
It should ensure that sales are made and the new product enters the market successfully.
What are the limitations of penetration pricing?
The product is sold at a low price and therefore the profit per unit may be low.
Customers might get used to low prices and reject the product if the business starts to raise the price after the product’s early success.
Might not be appropriate for a branded product with a reputation for quality.
Define price skimming.
Price skimming is where a high price is set for a new product on the market.
What are the benefits of price skimming?
Skimming can help to establish the product as being of good quality.
High research and development costs can be rapidly recouped.
If the product is unique, a high price will lead to profits being made before competitors launch similar products.
What are the limitations of price skimming?
The high price may discourage some potential customers from buying it.
The high price and high profitability may encourage more competitors enter the market.
Define promotional pricing.
Promotional pricing is when a product is sold at very low price for a short period of time.
What are the benefits of promotional pricing?
It is useful for getting rid of unwanted inventory that will not sell.
It can renew interest in a product if sales are falling.
What are the limitation of promotional pricing?
The revenue will be lower because the price of each item will be reduced.
It might lead to a price competition with competitors.
What are the consumer perceptions of a high-quality product if the price is very high?
A very high price for a high-quality product may mean that high-income customers wish to purchase it as a status symbol.
What are the consumer perceptions if a product is set just below a whole number, for example, 99c?
If a price for a product is set just below a whole number this creates the impression of it being much cheaper.
What are the consumer perceptions of when supermarkets charge low prices?
Supermarkets may charge low prices for products purchased on a regular basis which will give customers the impression of being given good value for money.
What do repeated sales do?
Repeated sales are often made when the price reinforces consumers’ perceptions of the product - this may be its brand image when the price is set high.
Define dynamic pricing.
Dynamic pricing is when businesses change product prices depending on the level of demand.
Why would businesses use dynamic pricing?
Often customers can be spilt into two or more groups and are then charged different prices for basically the same product or service because they had different abilities or willingness to pay these prices or price sensitvity.
Define price elastic demand.
Price elastic demand is where consumers are very sensitive to changes in price.
Define price inelastic demand.
Price inelastic demand is where consumers are not sensitive to changes in price.
How responsive the demand for a product is to changes in price is affected by how many close substitutes there are. Explain what is meant by this.
If there are many close substitutes for the product then, even if its price rises only a small percentage, consumers will respond by buying the substitute product.
Give an example of price elastic demand.
If the price of a chocolate bar rose by 5 percent, some customers would buy alternative chocolate bars and sales might fall by 15 percent.
Give an example of price inelastic demand.
If products such as electricity where they are not really any close substitutes increase in price by 15 percent it will not cause much of a fall in sales.
Therefore, if the demand for the products of a business is elastic then it is ___ a ____ idea to raise prices unless there have been rising _____. If the price elasticity of demand is inelastic then businesses can ______ revenue by _______ prices.
Therefore, if the demand for the products of a business is elastic then it is not a good idea to raise prices unless there have been rising costs. If the price elasticity of demand is inelastic then businesses can increase revenue by increasing prices.
Why is place important, give an example to your reply.
The product or service must be available where and when customers want to buy it.
If the product is not available to customers in convenient locations and they have to go searching in different shops, then they may give up and buy a competitors product.
OR
Luxury high-priced chocolates would not sell well in a local shop where people are on low incomes.
What is a distribution channel?
A distribution channel is the method by which a product is passed from the place of production to the customer.
What is distribution channel 1?
Producer → Consumer.
What is distribution channel 2?
Producer → Retailer → Consumer.
What is distribution channel 3?
Producer → Wholesaler → Retailer → Consumer.
What is distribution channel 4?
Producer → Agent → Wholesaler → Retailer → Consumer.
What are the advantages of distribution channel 1?
Very simple as the manufacturers sell directly to consumers.
Suitable for certain products e.g. food sold straight from the farm.
Lower prices as it cuts out wholesalers/retailers.
Products can be sold by mail order catalog or via the Internet.
What are the disadvantages of distribution channel 1?
Impractical as some consumers do not live near the factory.
May not be suitable for products that cannot be sent by post.
Expensive to send products by post or courier.
Give an example of when distribution channel 1 is suitable.
Car components are sold directly to the car producer.
What are the advantages of distribution channel 2?
Producer sells large quantities to retailers.
Reduced distribution costs compared to selling directly to consumers.
What are the disadvantages of distribution channel 2?
No direct contact with customers.
The price is higher than ‘direct selling’ as retailer has to cover costs and make a profit.
What are the advantages of distribution channel 3?
Wholesaler saves storage space and reduces storage costs.
Small retailers can purchase fresh products in small quantities from wholesalers.
Wholesalers may save on transport costs.
Wholesale can advise small retailers.
Wholesalers may give credit to retail customers.
What are the disadvantages of distribution channel 3?
May be more expensive for small shops to buy from a wholesaler.
Wholesalers may have a limited range of products to sell.
May take longer for fresh products to reach the shops.
Wholesalers may be a long way from the small shops.
The consumer price is often higher as both the wholesaler and retailer have to cover costs and make a profit.
What are the advantages of distribution channel 4?
Manufacturers may not know the best way to sell the product in other markets.
Agents will be aware of local conditions and will select the best most effective place to sell.
What are the disadvantages of distribution channel 4?
The producer has less control over they way the product is sold.
Give 9 methods of distribution.
Department stores.
Chain stores.
Discount stores.
Superstores.
Supermarkets.
Independent retailers.
Direct sales.
Mail order.
Internet/ e-commerce.
What 7 questions do manufacturers ask themselves when deciding on which distribution channel to use?
What type of product is it?
Is it sold to other businesses or to consumers?
Technical product?
The product must be sold to someone with technical knowledge who how it works etc.
Pruchased often?
If it is bought every day, it will need to be sold in many retail outlets e.g. newspapers.
Expensive product?
Would a Rolex sell in a discount jewelry shop?
Perishable product?
If the food rots like fruit, it will need to be widely available.
Location of customers?
If customers are in the city don’t sell in only rural areas. If customers are located in another country, online trading would be necessary.
Where do the competitors sell their products?
Manufacturers will sell their products in the same outlets as competitors so that they can compete directly for customer.
What is marketing
Marketing is identifying the customers wants and satisfying them to make profit
Customer loyalty
When existing customers continually buy products from the same business
Niche marketing
A small usually specialised segment of a much larger market
Advantages and disadvantages of a niche market
less competition from larger businesses as many large business are mass markets and aren’t specialised into one main product
the needs of the consumer can be more closely focused
easier to have a USP, can charge higher prices
are usually relatively small and therefore have limited sales
will specialise in one main product if demand falls for that product the business will lose sales quickly
Mass market
Where there is a very large number of sales of a variety of products
Mass market advantages and disadvantages
Sales are high
easier to benefit of economics of scales
lower prices
High levels of competition
High costs of advertising and promotion
Standish (basic) products may not meet the customers needs
The role of marketing
Identifying and satisfying customers needs
Building brand image
Increasing customer base
Maintaining customer loyalty
Why do customers spending patterns change? And how can a business respond to these changes
Change in incomes
Change in age
Change in tastes, likes and dislikes
Maintain good customer relationships
Keep improving its existing product
Bringing out a new product to keep the customers interest
Keeping costs low
What is market research
Process of gathering, analysing and interpreting information about the market
What do business research on
Demand
How much competition there is and what type
Target market
A suitable price on summers are willing to pay
What features do the cus timers like/dislike the most
Qualitative data
Research on people opinions and views
Quantitative data
Collects factual information can be recorded down easily
primary market research
The collection of original data by talking to potential customers
Secondary research
The use of information that has already been collected and is available for the use by others
Examples of primary market research
Questionnaires
Focus groups
Interviews
Online surveys
Examples secondary market research
Research reports
Government
Newspapers article
Advantages of primary market research
Research is up to date and exactly what you need is as detailed as much as you want it to be
Disadvantages of primary market research
Time consuming
Often costly
Risk of survey bias
Advantages of secondary market research
Fast and low cost
Disadvantages of secondary market research
Provides broader results and is less detailed may not be up to date
Sample definition and examples
Sample - the group of people who are selected to take part in a market research exercise
Random sampling - people are selected at random often by a computer progam
Quota sampling - when people are selected based on characteristics such as age gender or income
What does it mean by market oriented business
An organisation which carries out market research to find out the consumer wants before the product is formed
Market segmentation
When the market is categorised into sub groups with consumers have characteristics or preferences
Why do business use market segmentation
Can increase sales as business aim their product to consumers that are more likely to use and want that product
Types of market segmentation
Gender
Age
Hobbies
Income
What is the marketing mix
The 4ps price promotion place and product
Types of pricing strategies
Price skimming
Price penetration
Cost plus pricing
Competitive pricing
Price skimming
When you price higher initially and it lowers over time
Price penetration
When a business tries to increase market share by lowering its price
Cost plus pricing
The cost of manufacturing the product plus a profit mark-up
Competitive pricing
When a product is priced in line or just below competitors’ prices (to try to capture more of the market)
What determines a price
Costs
Product life cycle
Degree of competition
Quality of the product
Advantages of price skimming
Maximise revenue
Covers fixed cost quickly
Your product is seemed higher quality
Disadvantages of price skimming
Slower sales
People may think its to high
Competitiors may sell for cheaper
Advantages of price penetration
Increases market share
Attracts customers
Switches customers from competitors
Disadvantages of price penetration
Your product may seem low quality
Short term profits
Risky if customers have brand loyalty to your competitors
Customers may get used to the low prices, harder to set higher prices in the future
Advantages of cost plus pricing
Easily can cover costs
Easy to work out and use
Disadvantages of cost plus pricing
Ignores market conditions and customers wants
Competitors may have lower prices
Advantages of competitive pricing
Have on edge over your competitors, increase market share
Disadvantages of competitive pricing
Ignores customers
you might risk selling at loss
Risky if customers have brand loyalty
Pricing is not unique
Promotional pricing
When a product is sold at a low price for a short period of time to increase short term sales
Dynamic pricing
When business change product prices depending on the level of demand
Price elastic demand
When consumers are very sensitive to changes in prices and the percentage change of products demanded/bought is greater than the percentage change in price
eg: prices increase by 5% then sales decrease by 15% = falling revenue for the business
This usually happens when the product is common on the market so consumers can easily buy a cheaper version of it (eg: chocolate bars)
Therefore its better to decrease prices to increase revenue
Price inelastic demand
Where consumers are not sensitive to changes in the prices
The percentage change in quanity demanded/bought is less than the percentage change in price
Prices increase by 15% then sales decrease by 5% = increase revenue for the business
This usually happens to products that are not common on the market (have less competitors) so consumers cant really chose a cheap option and it may be just easier if they stick to buying the product
Therefore its better to increase prices to increase revenue
How to design a product
Market driven approach responds to the needs and wants of the customers
Product differentiation, USPS
Product life cycle
Definition - describes the stages of a product will pass through
Research and development - where the prototype is made and market research is carried out
- no sales at this point
Introduction - launched to the market, sales are slow (not many people know about it)
- price skimming can be used as their is no competitors
- informative advertisement happens at this stage
- no profits as developmental costs need to be covered
Growth - sales grow rapidly price go down a little as new competitors enter the market
- the advertisement may change to more of a persuasive tone (to encourage brand loyalty)
- profits are made
Maturity - sales now increase slowly, so is profit, as competition and advertisement is at its highest
Decline - product is now lost appeal, may be withdrawn from the market price and sales are at the bottom
Remember : pricing and promotion lowers over time and extension strategies can be used to prolong the product from going into the decline stage
Extension strategies
A strategies to try and prevent a product to go to the decline stage and keep it at the maturity stage to maximise profits
Extension strategies examples
Update packaging
Advertisement
Adding more features
Lowering the price
Advantages extensions strategies
Low cost of production
No need for advertisement
No need to set up a distribution channel
Disadvantages extension strategies
Risky
High costs
Brand image and brand loyalty
Brand loyalty - when consumers keep buying from the same brand again
Brand image - an image or identity given to a product to distinguish from its a competitors brand
Why is packaging important?
has to be suitable for the product to be put in
has to give protection to the product
has the allow the product to be used easily
used for promotion, to appeal to the customer
The benefits and drawbacks of developing new products
The business will be the first into the market with a new product (gives a USP)
Diversification for the business
Allows the business to expand into new or original markets
The costs of carrying out market research
They cost of trial products
Time consuming
May fail, may lead to bad brand image
The importance of brand image
It is the assurance of a certain quality the business is known to have business like to have good brand image as consumers are more likely to buy from them as they know that the quality of the products is known to be good it may also encourage them to buy less/none from their competitors
Types of promotion
Sales promotion
Advertisement
Advertisement vs sales promotion
Advertisement (above the line promotions) - Promoting your product, service long term eg: newspaper television adverts
Sales promotion (below the line promotions) - short term promotions to reinforce the long term promotions this usually includes special offers and deals eg: coupons free gifts or product placement
BOGOF
Meaning
Advantages and disadvantages
Buy one get one free
Offers customers extra value
Encourages them to buy more
Loss of profit
increases cost and time
Competitions
When you buy a product and get entered into a competition
More likely for customers to buy a product
Customers may view your competitions not special anymore
Product placement
Putting branded products in a movie
Easy to read a wider audience
A larger market
Can reach your target market
Expensive
Competitive brands cancel each other out
Leaflets
A printed sheet apparently containing infomation
Easy to produce
Cheap, great when starting out
Discarded after its read, bad for the environment
Easily dismissed by consumers
Online advertising
Adverts pop up when scrolling or watching
Easy to target market
Reaches a large market
Easy to produce
Expensive
Sponsorships/ celebrities endorsement
Business donating money to an event/ team or in ideal to return of displaying or talking about your product
Reaches many people and target market
Expensive af
Marketing budget
The amount of money made available by a business for its marketing activities during a particular period of time
What is promotion
Where the marketing activities aim to raise customers awareness of a product or a brand to generate more potential customers and sales
Target audience
Refers the people who are more potentially to buy your product or service
Distribution channels definition and examples
Distribution channels - by which a product is passed from the place of production to the consumer
Direct to consumer
Manufacturer- wholesaler- retailer- customers
Manufacturer- retailers- customer
Manufacturer- agent- wholesaler- retailer- customers
Wholesaler
An organisation where they buy products from manufacturers in large quantities and divide the inventory into smaller quantities for the retailers to buy
Retailers
An organisation that sells directly to customers
Advantages of wholesaler
Large network of buyers, easier to get your product in the public
Saves storage costs for small retailers
Wholesalers may give credit to retailers
Wholesaler may pay for transportation costs
Wholesaler can also say what is selling well and what isn’t to retailers and manufacturers
Disadvantages of wholesaler
More expensive for the retailer than to buy directly from the manufacturer
Takes longer for fresh produce to reach the shops (may not be as fresh)
Consumer price will also be higher
Manufacturer- retailers- customers
Advantages and disadvantages
Advantages
Controls over which shops so they can react there target market
Lower prices retailers are more likely to put lower prices because we don’t have the middle man
Disadvantages
- hard to contact retailers
- Higher cost to deliver the goods to the retailers
Products that are used on a daily basis are more likely to use this channel
M commerce
Buying goods online with a mobile phone eg: app
M= mobile phone, how to remember
