3.3 Decision making to improve marketing performance Flashcards
Value of setting market objectives
Helps coordinate activities within the business
Provide a focus for decision-making and effort
Provide incentives for marketing team and a measure of success / failure
Clear objectives helps clarify what the priorities are
Marketing Objectives - SALES VOLUME AND SALES VALUE
Sales volume - measures the level of sales in a given period in terms of units sold
Sales Value - measures the level of sales in a given a period in pounds sterling (in the UK)
Marketing Objectives - SALES GROWTH
Sales growth - the % change in sales volume or value over a given period
Marketing Objectives - MARKET SHARE
Market share - sales of a business % / total market sales % x 100
High market share is good for businesses because:
- high sales –> profit
Marketing Objectives - BRAND LOYALTY
Keeping customers is easier & cheaper than attracting new ones
Brand loyalty is important if the business is trying build a relationship with customers
Brands are valuable and can be sold later –> stronger the loyalty, the more possible gain
Influences on marketing objectives - INTERNAL
Functions of the business:
1) Finance
2) Human resources
3) Operations
Influences on marketing objectives - EXTERNAL (PESTLE)
POLITICAL - affects marketing targets that relate to where products are sold
ECONOMIC - changes in economy can affect demand for products e.g. through recession
SOCIAL - affects customers views of what is acceptable and what they expect from a product e.g. ethical?
TECHNOLOGICAL - affects how business communicate with customers and tracks their behaviour e.g. through e-commerce
LEGAL - determines what is allowed by the law
COMPETITORS - degree of competition in a market affects the range of options open to customers and what a business might have to offer to match its rivals
Primary market research - advantages & disadvantages
Involves gathering data for the first time e.g. through interviews, surveys
Advantages include:
- Provides detailed insights – particularly into customer views
Disadvantages include:
- Time-consuming and often costly to obtain
- Risk of survey bias – may not be representative of the population
Secondary market research - advantages & disadvantages
Data that already exists
Internal secondary data - comes from within the firm itself
External secondary data - data that has been published by other organisations
Advantages include:
- Already available so can be conducted quickly & cheaply
Disadvantages include:
- May not be the exact info your require
- May be out of date –> thus being useless
Quantitative Data (numbers) - PROS & CONS
Based on data in a numerical form & gathered through surveys
Advantages include:
- Relatively easy to analyse
- Can be compared with data from others e.g. competitors
Disadvantages include:
- Doesn’t explain the reasons behind numerical trends
- May lack reliability if sample size and method is not valid
Qualitative Data (opinions / beliefs)
Based on opinions & beliefs, gathered through interviews, and aims to understand why customers behave certain ways
Advantages include:
- Focused on customer needs, wants, expectations
Disadvantages include:
- Expensive to gather & analyse
- Based around opinions – risk that sample is not representative
Market Mapping - Advantages v Disadvantages
Analyses market conditions to identify the position of one product or brand relative to others in the market in terms of given criteria
Advantages:
- Help spot gaps in the market
- Useful for analysing competitors
- Clear & easy to interpret
Disadvantages:
- Just because there is a gap doesn’t mean there is demand for it
Value of sampling
Involves gathering data from a sample of respondents, results of which should be representative of the population as a whole
Interpretation of marketing data - CORRELATION
Looks at the strength of a relationship between two variables
Positive correlation - goes upwards on the graph
Negative correlation - goes downwards on the graph
No correlation - no relationship between the variables
Strong correlation - little room between the points and line
Weak correlation - points are spread quite wide and far away from the line of best fit.
Interpretation of market data - EXTRAPOLATION
Estimation of something from past data
Interpreting marketing data - CONFIDENCE INTERVALS
Confidence level - probability that research findings are correct e.g. 68% confidence levels means 68% that findings are correct
Confidence interval - possible range of outcomes for a given confidence level e.g. 68% confidence level that sales will be between £500,000 and £700,000
The more precise you want your confidence level to be e.g. from 500,000 - 700,000 to 550,000 - 680,000, the less certain researchers will be on their findings because its even more precise
Value of technology in gathering and analysing marketing data
Can gather more data on customers –> better understanding of them, faster & cheaper information which improves decision making
Data can provide detailed insights into buying patterns –> helps find correlations –> builds relationship with customers by anticipating what you want (buying habits)
PED (price)
PED = % change in quantity demanded / % change in price
Elastic - more than 1 –> luxury
- price increase –> demand decrease = revenue falls
- price decrease –> demand increase = revenues rises
Inelastic - less than 1 –> necessity
- price increase –> demand stays same = revenue rises
- price decrease –> demand stays same = revenue falls
YED (income)
YED = % change in quantity demanded / % change in income
Positive YED = normal products
- increase in income –> demand increase
- decrease in income –> demand decrease
Negative YED = inferior product
- increase in income –> demand decrease (because you can buy better alternatives
- decrease in income –> demand increase (lower budget so have to stick with lower priced goods which are inferior)
Segmentation - identifying needs & wants of different groups
Demographic - age, gender, race, income, religion
Geographic - based on geographical area
Income - socioeconomic grouping
Behavioural - based on buying habits
Pros and Cons of segmentation
Pros:
Effective marketing –> focus on needs and wants
Business growth - different markets? new products?
Customer experience - increased brand loyalty
Cons:
Expensive –> more markets means more money for R&D
Unprofitable target –> segments may not be large enough to generate profit
Target Markets - MASS MARKETING, pros & cons
Targets the whole markets, focuses on general needs and wants of customers
Pros:
Larger scope of customers –> increased sales
Brand awareness
Cons:
May face competition from businesses that fit specific needs & wants of customers (niche markets)
Target market - NICHE MARKETING, pros & cons
Targets smaller segments, specific needs & wants
Pros:
less competition
clear focus on needs & wants –> leads to customer loyalty
charge higher price – customers are prepared to pay for expertise –> higher profit margins
Cons:
Risk of over dependence on a single product or market
Vulnerable to market changes –> “eggs all in one basket”
7 elements of marketing mix
Product - good / service that the customer buys
Price - price of product
Place - distribution of product
Promotion - promoting the product e.g. advertising
People - people involved with customers when delivering the product e.g. employees
Process - systems that deliver a product to a customer
Physical environment - elements of physical environment to customer experiences
Influences on marketing mix - CONSUMER PRODUCTS
Goods bought for consumption by the general public
3 types of consumer products:
Convenience - bought frequently –> low price, widespread distribution, mass promotion e.g. milk, newspapers
Shopping products - bought less frequently, customers are careful on quality, brand, style –> higher price, selective distribution, advertised by producer or resellers e.g. TV
Speciality products - unique characteristics, effort made when buying –> high price, exclusive distribution, very targeted e.g. sports car
Influences on marketing mix - INDUSTRIAL PRODUCTS
Goods bought for use in business processes
3 types of industrial products:
Raw materials
Capital equipment - products used in operations e.g. IT systems,
Suppliers & services - e.g. maintenance and security
Product Decisions - BOSTON MATRIX
Analyses all of a firms products in terms of market share & growth
DOGS - low share, low growth –> managers either invest to revitalise or let them decline and remove them
CASH COWS - high share, low growth –> well established so doesn’t need much promoting but market is growing slowly
PROBLEM CHILD - low share, high growth –> not yet established, may turn out well or bad, managers want to invest & protect them
STARS - high share, high growth –> well established, investing and promoting needed to remain as stars
PRODUCT LIFE CYCLE
DEVELOPMENT - investment in R&D, complex, takes up resources
INTRODUCTION - product is launched, low sales, heavy promotion
GROWTH - sales increase, product awareness, positive cash flow
MATURITY - slower sales growth –> competition, high profits still
DECLINE - sales are falling, changes in tastes & fashions, competition
EXTENSION STRATEGIES
When a business attempts to prevent sales from falling so they might:
High promotional spending –> create awareness
Product differentiation
Why is new product development required?
Existing products are coming to decline phase
Way of achieving growth
Build upon brand awareness
Risks of new product development
Product don’t sell well because:
- Market hasn’t be understood properly
- Promotional problems
- Competitors actions
Pricing decisions - PRICE SKIMMING
Setting a high price before competitors enter the market
Once the sales start to slow, the business will begin to lower the price so that more customers can afford their product.
This short term pricing strategy can only work when there are little or no competitors in the market.
Pricing decisions - DYNAMIC PRICING
Sets flexible prices according to changes in demand
Takes into account factors such as:
- Customer’s location
- Level of demand
- Competitors’ pricing
Pricing decisions - PRICE PENETRATION
Offers a product at a very low introductory price –> which attracts new customers
Often used to support the launch of a new product where demand is elastic (luxury) –> so a lower price creates competitive advantage
Has lower profits in short term, but has long term profitability through higher market share
Promotional Mix - FACTORS affecting it
Target audience - need to understand target group
Promotional budget - how much is there to actually spend?
Technology - e.g. online advertising, social media etc.
Promotional Mix - BRANDING, pros & cons
A brand is a product with unique character
PROS of having a strong brand:
Allow customer loyalty –> continuous sales & recommendation
Good brand image
Premium pricing
Cons of having a strong brand:
High advertising costs
One mistake can tarnish brand reputation
Distribution decisions (place)
How a business gets its products available to the customers in the right place at the right time
Distribution Channels
All the organisations a product must pass through before it reaches the customer
Multi-channel Distribution - PROS & CONS
Multi-channel distribution involves a business using more than one type of distribution channel
PROS:
Allows wide range of customers to be reached
Customers increasingly expect products to be available via more than one channel e.g. in shops AND online
Enables higher revenues – e.g. if retail outlets have no stock, but customer can buy online
CONS:
Potential for channel “conflict” –e.g. competing with retailers by also selling direct
Can be complex to manage
Decisions relating to marketing mix - PEOPLE
People provide the service, advise customers, and carry out tasks
Managers will have to decide on:
Investment in training
How to reward staff
Decisions relating to marketing mix - PROCESS
Stores may compete by making process easier e.g. buying online and collect in store
Decisions relating to marketing mix - PHYSICAL ENVIRONMENT
Customer will want a welcoming environment which suits the brand / business
Good physical environment –> customer loyalty
E-commerce / Digital marketing - ADVANTAGES
Larger Market –> reach customers all over the country, can make purchases at any given time
Promotion - can advertise products the customer likes –> personalised content and product recommendations
Lower Costs - easy + cheap to set up, no need to train employees, no need for renting out a place
E-commerce / Digital Marketing - DISADVANTAGES
Lack of personal touch - customers appreciate physical aspect of interacting with employees –> essential for high-end brands
Lack of tactile experience - customers can’t touch products which limits experience as a customer
Security Issues - credit card fraud –> bad reputation –> fall in sales
