3.3 Decision Making to Improve Marketing Performance Flashcards
1
Q
Define Price Elastic
A
MORE THAN 1
Measure of how reactive the market is to a change in price for a given product (More than 1)
CHANGE IN DEMAND IS MORE THAN CHANGE IN PRICE
2
Q
Define Price Inelasticity
A
LESS THAN 1
Measure of how unreactive the market is to a change in price for a given product (Less than 1)
When the price goes up, consumers’ buying habits stay about the same, and when the price goes down, consumers’ buying habits also remain unchanged.
CHANGE IN DEMAND IS LESS THAN CHANGE IN PRICE
3
Q
Define Income Elastic
A
MORE THAN 1
How responsive the quantity demand for a good or service is to a change in income.
4
Q
Work out percentage change
A
- Work out difference between the 2 numbers
- Divide decrease by original number
- Multiply answer by 100
5
Q
Contextual example of Income Elasticity of Demand
A
Margarine vs Butter
6
Q
Inferior Good (YED)
A
Increased income leads to a fall in demand. Falls because consumers switch to better alternatives
E.g. cheap substitutes (supermarket coffee)
YED < 0
Negative elasticity of demand
- Demand falls when income rises
- Demand rises when income falls
7
Q
Luxury Good (YED)
A
Increased income leads to more increase in demand.
E.g. Ferrari
YED > 1
8
Q
Necessities (YED)
A
Income elasticity of demand of between 0 and +1
Demand is rising less than proportionately to income
9
Q
Normal Goods (YED)
A
As consumers’ income increase, there is a decrease in quantity demand - as they seek more luxury goods, making it income elastic.
10
Q
State PESTLE
A
P - Political E - Economic S - Social T - Technological L - Legal E - Environmental
11
Q
Give an example of the POLITICAL external environment
A
Government decisions / laws
12
Q
Give an example of the ECONOMIC external environment
A
Interest rates and exchange rates
13
Q
Give an example of the SOCIAL external environment
A
Demographic changes; trends and pressure groups
14
Q
Give an example of the TECHNOLOGICAL external environment
A
Robotics, new technology, disruptive technology
15
Q
Define disruptive technology
A
An innovation that significantly alters the way that consumers, industries, or businesses operate.
16
Q
Give an example of the LEGAL external environment
A
Laws: employment laws/minimum wage/health and safety laws
17
Q
Give an example of the ETHICAL / ENVIRONMENTAL external environment
A
Pollution, ethic sourcing, sustainability
18
Q
What is a sustainable business?
A
A business that has a minimal negative impact, positive effect on the global or local environment
19
Q
External factors affecting level of demand
A
- Prices & Incomes
- Tastes & fashions
- Competitor actions
- Social & demographic change
- Seasonal changes
- Changing technology
- Government decisions
20
Q
Define ‘marketing objectives’
A
Set out what a business wants to achieve from its marketing activities.
21
Q
Internal Influences on Marketing Objectives
A
- Corporate objectives
- Operational issues
- Finance available
- Management style
- Product availability
22
Q
External Influences on Marketing Objectives
A
- Economy
- Market dynamics (size etc)
- Technology changes
- Social / political changes
23
Q
Define ‘Sampling’
A
Getting opinions from number of people, chosen from specific groups
24
Q
How do you lower the margin of error whilst sampling?
A
Get a larger sample size
25
Define cluster sampling
Certain demographics of people (clusters)
26
Advantages of cluster sampling
- Quick and easy; doesn't need complete population
| - Good for face-to-face surveys
27
Disadvantages of cluster sampling
- Expensive if clusters are larger, may need to travel
| - Greater risk of sampling error
28
Define convenience sampling
- Use of volunteers
| - Convenient for participants
29
Advantages of convenience sampling
- Subjects readily available
| - Large amounts of information can be gathered quickly
30
Disadvantages of convenience sampling
- Doesn't represent entire population
- Prone to volunteer bias
- Relies on volunteers taking part
31
Define judgement sampling
Deliberate choice of sample (NOT RANDOM)
32
Advantages of judgement sampling
- Good for providing case studies
| - Allows businesses to approach their target market directly if wished
33
Disadvantages of judgement sampling
- Prone to bias
- Samples often small, more room for error
- Cannot extrapolate from sample
34
Define quota sampling
- Aim is to obtain a sample that represents the overall population
- Population divided/stratified by most important variables
- VERY SPECIFIC
35
Advantages of quota sampling
- Quick and easy
| - Accurate and convenient
36
Disadvantages of quota sampling
- Not random, risk of bias
| - Need to understand the population to be able to identify the basis of stratification
37
Define systematic sampling
Sample members from a larger population are selected according to a random starting point but with a fixed, periodic interval.
This interval, called the sampling interval, is calculated by:
Population size / sample size
(E.g.) every 4th customer that enters a shop
38
Advantage of systematic sampling
- Ensures sample is spread out
39
Disadvantages of systematic sampling
- Can be costly
| - Can be time consuming
40
How would systematic sampling be conducted?
1. Create list of employees
2. Select a beginning number
3. Select an interval
4. Gather list of employees based on interval number
41
Define test marketing
Launching a product to part of target market to test if the product will be successful in the target market when it is officially launched
e.g. SpotifyCarThing
42
What is the aim of test marketing?
To gather as much information about the optimum marketing mix as possible
Reduce failure rate
43
Advantages of test marketing
- Data coming from actual events happening (customer interaction)
- Reduces risk of the launch failing
- Provides way of tweaking marketing mix before the launch
44
Disadvantages of test marketing
- Danger of competition learning about the product
- Delays full launch, loss of sale opportunities
- Test markets may not represent full target market
- Costly and time consuming
45
Define 'a moving average'
Takes a data series and "smoothes" the fluctuations in data to show an average.
The aim is to take out the extremes of data from period to period.
Often calculated quarterly or weekly
46
Advantage of using 'moving averages'
Simplifies data, separates out random variations.
Allows extrapolation
47
Define 'Extrapolation'
The use of past data to establish a trend which can project into the future
Assumes the pattern will continue into the future
48
Advantages of Extrapolation
- Simple method for forecasting
- Not much data required to complete
- Quick and cheap
- Useful when trends can be clearly identified and the market is relatively stable
49
Disadvantages of Extrapolation
- Unreliable if there are multiple fluctuations in the data in general
- Assumes past trends only
- Ignores qualitative factors
- The past is not always a good indication of the future
- Conditions / trends can change whenever
50
Define correlation
Looks at strength of relationships between two variables
51
Define dependent variable
Something that depends on that of another.
52
Define dependent variable
Something that doesn't depend on that of another.
53
State the axis on a scatter graph for correlation
Y = Dependent Variable
X = Independent Variable
54
State the three types of correlation
- Positive
- Negative
- No correlation
55
Define a positive correlation
Independent variable increases in value, so does the dependent variable (/)
56
Define a Negative correlation
Independent variable increases in value, dependent variable falls in value (\)
57
Define a strong correlation
Little room between data points
58
Define a 'weak correlation'
Data points spread out/wide
59
Give an example of something that is price inelastic
PETROL: even if price increases, demand remains at an inelastic level, as petrol is essential
60
Define 'market segmentation'
Division of the market into distinct groups of customers with similar characteristics or needs (segments)
e.g. age / income groups
61
Define targeting
Determines which customer segment to focus marketing on, adapting the product and marketing mix to appeal to this group
Selecting a segment
62
Define positioning
Position the product in the target customers' minds so that they see it as better than the competitors
Allows customers to develop an opinion
Needs to position well to convince the target customers that the products have benefits to them and to differentiate from competitors
63
Suggest Positioning Strategies
- Offer more for less
- Offer more for more
- Offer more for the same
- Offer less for less
64
Define market mapping
Using a graph to plot competitors and their products to understand competitor behaviour and spot a gap in the market.
65
Advantages of market mapping
- Helps to spot gaps in the market
- Useful for analysing competitors
- Encourage the use of market research
66
Disadvantages of market mapping
- Just because there is a 'gap', doesn't mean there is demand in that gap
- No guarantee of success
- How reliable is the market research
- Based on opinion, can be BIAS
67
What is the marketing mix?
THE 7P's
- Product
- Place
- Price
- Promotion
- People
- Process
MUST ALL WORK TOGETHER!
68
Give an example of process (7P's)
- Contactless payments
69
Give an example of people (7P's)
- Customer support
70
Define 'people' (7P's)
Everyone who is involved in the product or service whether directly or indirectly.
All these people have their own roles to play in the production, marketing, distribution, and delivery of the products and services to the customers.
People must be trained correctly
Includes all job roles
71
Define 'physical environment' (7P's)
PHYSICAL EVIDENCE
The physical environment experienced by the customer.
The space, the decoration, the environment
72
Give an example of 'physical environment' (7P's)
- Physical design and layout of the premises
| - Layout of the website.
73
Define 'process' (7P's)
- Systems/processes that deliver the product to the customer
| - Can cause a customer to buy or not from a business
74
What is the Boston Matrix?
Model that helps businesses analyse their portfolio of businesses and brands.
Popular tool used in marketing and business strategy.
75
Why is the Boston Matrix useful for a business?
Helps decide where to allocate investment
76
Name all parts of the Boston Matrix
- Top left: Question mark / Problem child
- Top right: Rising star
- Bottom left: Dogs
- Bottom right: Cash Cows
77
Name all axis of the Boston Matrix
Y = % Market Growth Rate (are the numbers of potential customers in the market growing or not)
X = Relative market share (does the product being sold have a low or high market share?)
78
Suggest what being a 'rising star' means for a product (Boston Matrix)
- High share of a rapidly growing market
- Product is strong
- Requires high marketing spending to maintain its position and become future cash cow
- Cash flow may be positive, depends on profitability and market share
79
Suggest the strategies a 'rising star' may use (Boston Matrix)
- Invest to sustain growth
- Maintain/build market share
- Block competitors
80
Suggest what being a 'question mark/problem child' means for a product (Boston Matrix)
- Low share of fast-growing market
- Cash flow usually negative
- Products have potential
- Could either become a dog or star
81
Suggest the strategies a 'question mark/problem child' may use (Boston Matrix)
- Invest to increase market share
- Try to build a competitive advantage
- Be selective and invest in most likely stars, not dogs
- Cash flow likely to be negative
82
Suggest what being a 'cash cow' means for a product (Boston Matrix)
BEING MILKED
- High share of a low growth market
- Likely to be at mature stage of the product life cycle
- Little potential for growth
- Large, positive cash flow
83
Suggest the strategies a 'cash cow' may use (Boston Matrix)
- Defend market share, DEFENSIVE (1UP competitors)
| - Reduce investing in order to maximise cash flow and profits, slowwwwww down
84
What may a business do with the profits from cash cows?
Re-invest them into ? and *
85
Suggest what being a 'dog' means for a product (Boston Matrix)
- Products that have failed
- or Products in decline of the product life cycle
- Low share of low growth market
- Not going anywhere, no hope or potential
- Does not always mean the company will discontinue the product
86
Suggest the strategies a 'dogs' may use (Boston Matrix)
- Not worth investing in anymore
- Uses up more management time/resources
SO
May be worth getting rid/dropping it to improve unnecessary cash outflows
87
Advantages of Boston Matrix
- Useful tool for analysing product portfolio decisions
- Easy to create, easy to view
- Free to create
88
Criticism of Boston Matrix
- Relative market share and rate of market growth aren't the only factors important to a business when analysing their product portfolio
- Only a snapshot of current position
- Product life cycle can vary
89
Contrast the Product Life Cycle and the Boston Matrix
Product Life Cycle:
- Concerned with individual products
- Focused on sales
Boston Matrix:
- Concerned with portfolio of products, brand and business
- Greater focus on cash flow
90
What can the product life cycle model help with?
- Forecasting sales trends
- Market targeting and positioning
- Analysing and managing product portfolio
- Seeing which products to focus investment on
91
Name all stages of the product life cycle
1. Development
2. Intro
3. Growth
4. Maturity
5. EXTENSION
6. Decline
92
Describe the intro stage (product life cycle)
- Launch of the product
- Usually low sales
- Low capacity utilisation and high unit costs
- Heavy promotion to attempt to boost the product
- Usually negative cash flow
93
Strategies of the 'intro stage' (product life cycle)
- High promotion
- Price skimming / penetration
- Limited / focused distribution (only a few buyers)
94
Describe the 'growth stage' (product life cycle)
- Sales increasing - moves towards profit
- Rise in capacity utilisation
- Market acceptance
- Unit costs fall with economies of scale
- Positive cash flow beginning to build
95
Define 'market acceptance'
Level of satisfaction with a product or service in a target market
96
Strategies of the 'growth stage' (product life cycle)
- Heavy promotion, to maintain growth
- Intensive distribution
- Market penetration
- Wider target market
- Improving the product
97
Describe the 'maturity stage' (product life cycle)
- THE PEAK
- Slower sales growth (reached peak), but customer loyalty built
- High profits for those with high market share
- Weaker competitors start to leave market
- Price starts to fall
- Cash flow strongly positive
- At cash cow phase
98
Strategies of the 'maturity stage' (product life cycle)
DEFEND POSITION AT THE PEAK
- Promotion focuses on differing themselves from competitors
- Intense distribution
- Reduce costs (bulk buying)
- Expand: enter new segments
99
Strategies of the 'extension stage' (product life cycle)
- Attract new users
- Reposition in the market
- Adapt marketing mix (7P's)
- More efficient distribution (Amazon Prime)
- Innovate the product
100
Describe the 'extension stage' (product life cycle)
- Keeping a product going a little longer before it goes into decline
- HOLDING ON
101
Describe the 'decline stage' (product life cycle)
- Falling sales
- Market saturation (volume for a product maxed out in market)
- Rapid fall in profits and sales decrease
- Weak cash flow
- More competitors emerge
- Excess capacity (producing at a lower scale of output than it has been designed for)
- Rising unit costs
102
Define 'market saturation'
Happens when the volume for a product or service is maxed out in a given market
103
Strategies of the 'decline stage' (product life cycle)
- Maintain market share as best as can
- Cut prices to encourage sales
- Support loyal customers
104
Why do products enter decline?
- Obsolete product - no customer need
- Technological advance
- Changes in consumer tastes and behaviour
- Increased competition
- Corrupt management (internal)
- Failure to innovate and develop the product
- Damaged publicity
105
Contextual example of a business which avoided the decline phase
NETFLIX
Used to be a DVD rental business, realised DVD's will be obsolete due to streaming services taking over- saw a gap in the market and now lead the streaming market.
106
Disadvantages of the Product Life Cycle
- Shape / duration of cycle varies from product to product
- Hard to know where the product stands
- Decline isn't certain
107
What are some ways of extending a product's life cycle?
- Advertising
- Price reduction - more attractive to customers
- Adding value / innovating
- Explore new markets
- New packaging
- Innovation
108
Disadvantages of development/research stage (product life cycle)
- Often complex
- Absorbs significant resources - COSTLY
- NO sales to cover high costs
- High failure rate
109
Ways to reduce risk during the development phase
- Market research
- Evaluations
- Be patient
- Spend less - better to break-even than make a loss?
110
Factors influencing pricing decisions
- Marketing mix
- Stage of product life cycle
- Elasticity of a product
- Competitor actions
- State of economy
- Production costs
111
Define 'price skimming'
Setting a high initial price for a new product in order to recoup costs
Targeting segment of market known as 'early adapters'...
... who acquire the product as soon as it is launched for a high price, so a 'must have' mentality is formed
112
Define 'penetration pricing'
Setting a low initial price for a new product in order to get a low foothold in the market and gain market share
Most often used to launch a price elastic product: lower price means COMPETITIVE WEAPON
Encouraging customers to switch to a new product because of lower prices
113
Advantages of 'penetration pricing'
- Suitable for a product in a mass market, difficult to emerge (so uses competitive pricing)
- Allows to gain early customer base
- Have the ability to increase the price once the product is established
- Low price = barrier to competitors (competitive pricing)
- Forces the business to focus on minimising unit costs right from the start
114
Disadvantages of 'penetration pricing'
- May simply attract customers looking for a bargain, rather than customers who will become loyal
- Price war ('race to the bottom')
- Competitors may have such strong product or service branding that customers are not willing to switch to a low-price alternative
- Needs to focus on other factors such as quality to not lose customers
- Low initial price can create expectation of permanently low prices amongst customers who switch. ALWAYS harder to increase than decrease.
115
Advantages of 'price skimming'
- Higher return on investment guarantee
- Increase profit
- Early adopters help test new products, committed testers as willing to pay high price
- Works the best on products that are price inelastic
116
Disadvantages of 'price skimming'
- Limited: only works when price inelastic
- Ineffective in crowded market
- Attracts competitors to under cut
- Can frustrate early adopters
- Unattractive price
- May slow down the volume growth of demand - giving competitors time to develop alternative products, ready for time when market demand is strongest
- Distribution (place) can also be a challenge for an innovative new product - may need to give retailers higher margin to convince them to stock the product, reducing the improved margins that can be delivered by PS, defeating the objective
117
Define 'predatory pricing'
When a business deliberately lowers prices to force another business out of the market (ILLEGAL)
118
Define 'competitive pricing'
Setting the price at the same level as competitors'
Monitor competitors pricing to determine their prices
119
Define 'psychological pricing'
Setting prices lower than a whole number, makes the customer believe the product is cheaper than it is
120
Define 'loss leaders'
Sold at a price below its market cost to stimulate other sales that are more profitable
(e.g.) Eggs in supermarkets: sold at discounted prices to draw customers in
121
Define 'price discrimination'
Different customers are charged different prices for the same products or services.
122
Define 'dynamic pricing'
Set flexible prices for products or services based on current market demands and competitors (anything going on)
(e.g.) Demand high = price high
123
Advantages of 'predatory pricing'
- Increase market share: competitors driven out of market
124
Disadvantages of 'predatory pricing'
- ILLEGAL
- May not work in long term as new competitors constantly entering market place
- Ethical disadvantage, bad publicity
125
Advantages of 'competitive pricing'
- Prevents loss of customers to competitors / loss of market share
126
Disadvantages of 'competitive pricing'
Must add value as was as matching competitors' prices to maintain/gain customers - to ensure long term success
If at same price as competitors, it is all down extra added value (quality)
127
Advantages of 'psychological pricing'
- More persuasive, produces more sales (looks more appealing)
- Quick and easy
- Direct buyer's attention where they want
- Competitive advantage
128
Disadvantages of 'psychological pricing'
- Customers may think they are being manipulated/mislead, hurt reputation of brand and customers gone
- Only lowers price by a small amount, e.g. £1.99, ineffective as customers won't mind paying a bit more elsewhere
129
Advantages of 'loss leaders'
- Customer loyalty as low prices
| - Increased sales on other products, 'i might aswell buy something else'
130
Disadvantages of 'loss leaders'
- Insufficient profit / a loss on the sacrificed products
- Risk of loss
- Pricing perception: retaining a deep discount for too long can give buyers the impression that a product should have a lower price at all times
- Stockpiling: possible that each buyer will purchase the largest possible quantity of the item and stockpile it, creating a loss
131
Advantages of 'price discrimination'
- Benefits customers of lower income segment, customer loyalty
132
Disadvantages of 'price discrimination'
- Customer's may feel it is unfair, lack of trust
- Customers can pose as earning less to buy for less
- Administration costs
133
Advantages of 'dynamic pricing'
- Flexibility of price
- Allows pricing to reflect demand, updated to current trends
- Provides more insight into the behaviour of customers
- Maximise revenue: adjust price of items left that aren't selling
- Can use automation software to ensure that an item is never priced below cost
134
Disadvantages of 'dynamic pricing'
- Customers frustrated by constant price change
- Bad PR: demand refund for difference in what they paid compared to someone else
- Alienation of customers
- A system customers can change: noticed if they shop around too much for a specific item, the cost of that item might increase.
- Potential price war ('race to the bottom')
135
Contextual example of dynamic pricing
Uber in 2014. After a shooting incident in Sydney, numerous customers contacted Uber to book travel outside of the danger zone. The automated processes recognized the increased demand and initiated surge pricing to maximize profits for the company. Fares reached up to 4 times the normal fee.
136
Define 'mass marketing'
Intention of selling something to as many people as possible
137
Define 'mass marketing'
Intention of selling something to as many people as possible
138
Advantages of advertising
- Wide coverage
- Reach target market
- Repeated viewing
- Builds brand loyalty
- Increase sales
139
Disadvantages of advertising
- Expensive
- Impersonal, lacking connection to customer (one-way communication)
- Lacks flexibility
- PRICE WAR
- Could be deceptive advertising
- Creates a monopolistic market (monopoly)
140
Advantages of personal selling
- Two-way communication: more involving and interactive
- Customised message, feels more personal
- Persuasive impact
- Potential for further development of relationships
- Lead times are low
141
Disadvantages of personal selling
- High administration costs (expensive)
- Labour intensive
- Time consuming, slow response times (inefficient)
142
# Define 'merchandising'
Give examples
ANY type of activity that helps boost a product's sales to a consumer
For example: 'buy one get one free', or 'merch' to spread brand's name
143
Define 'public relations'
Where a business manages its relationships with different parts of the public, e.g. customers
(e.g.) Promote social responsibility: CO-OP
144
# Define 'sponsorship'
Give examples
Payment for something is given in return for some consideration of benefits
(e.g. FOOTBALL SHIRTS)
145
Define 'direct marketing'
Promotional material directed through mail, email, telephone to individuals
146
Advantages of 'direct marketing'
- Easy to test / measure
- Cost-effective
- Personalisation
- Easy to target the resources at correct market
147
Disadvantages of 'direct marketing'
- Response rates vary
- Negative image on business - junk folder emails
- Databases expensive to maintain + keep accurate
148
What is the objective of distribution?
Make products available in the right place, at the right time, in the right quantity
149
What are the 4 distribution channels?
1. Producer > Wholesaler > Retailer > Customer
2. Producer > Retailer > Customer
3. Producer > Customer
4. Producer > Agent > Customer
150
Advantages of 'direct selling' distribution
(Producer > Customer)
or
(Producer > Agent > Customer)
- Cheapest
- Direct and convenient
- Greater control over what customer receives
- Keeps 100% of profit
151
Disadvantages of 'direct selling' distribution
(Producer > Customer)
or
(Producer > Agent > Customer)
- Opportunity cost of building relationship with wholesalers who can sell products for you and spread the brand through their name
- Increased distribution costs
152
Define 'direct selling' distribution (0-level)
Producer > Customer
153
Define 'indirect selling' distribution (1-level)
Producer > Retailer > Customer
154
Advantages of 'indirect selling' distribution
(Producer > Retailer > Customer)
or
(Producer > Wholesaler > Retailer > Customer)
- Gain access to increased customer base, customers of retailer
- Easier for customers to find your products, publicity
155
Disadvantages of 'indirect selling' distribution
(Producer > Retailer > Customer)
or
(Producer > Wholesaler > Retailer > Customer)
- Distances producer and customer, wall of retailer in the way
- Having retailer increases amount of time it takes to get products to buyer: buffer time
- Hard to establish brand loyalty and research when not interacting directly with customer
156
Define 'direct selling through an agent' distribution (1-level)
Producer > Agent > Customer
157
Give an example of an agent
| Producer > Agent > Customer
KAYAK - book flights with them for
Personal shoppers
158
Define 'indirect selling' distribution (2-level)
Producer > Wholesaler > Retailer > Customer
159
Define 'multi-channel distribution'
Businesses sell through more than one method (e.g. online + in-store)
160
Advantages of 'multi-channel distribution'
- Gives flexibility for both customers and business
- Convenience for customers
- Increased customer base : wide market coverage
- Have backup options if one has issues: (e.g.) if website is down, still in-store
161
Disadvantages of 'multi-channel distribution'
- Complex to manage
| - Potential for channel “conflict” –e.g. competing with retailers by also selling direct
162
Contextual example of 'multi-channel distribution'
Apple have:
- 450+ retail stores
- Online stores
- Multiple retail partners (e.g. Curry's)
163
Advantages of using 'intermediaries' to distribute a product
- Convenient for customers
- Builds positive relations with other organisations
- Appears more authentic to customers
- Publicity of product
- Reach different segments
164
Disadvantages of using 'intermediaries' to distribute a product
- Disrupts connection with customers
- Makes the process more complex
- Receive less revenue than if sold product direct
- Increase buffer/delivery time
165
Why is placing the product in the right place so important?
- Correct people see it
- Convenient: easier to find for customers
- Reduces waste: sustainable amount of products sold
- Increased customer engagement
166
Define 'time series analysis'
Analyzing a sequence of data points collected over an interval of time.
Most commonly used to show changes over time
167
Advantages of 'time series analysis'
- Helps identify patterns
- Helps plot missing data
- Remove outliers
- Helps predict future
168
Disadvantages of 'time series analysis'
- Doesn't include facts (qualitative data)
| - The present isn't the past
169
Define Income Inelasticity
LESS THAN 1
How unresponsive the quantity demand for a good or service is to a change in income.
170
Define Unitary Price Elasticity
Exactly 1
Change in demand = change in price
171
How is Unitary Price Elasticity shown on a graph
A curve facing right
172
How is Price Elastic shown on a graph
Steady line
173
How is Price Inelastic shown on a graph
Steep line
174
Factors affecting PED and YED
- Brand strength
- Necessity or not
- Trends in market
- Availability of a product, (e.g. Supreme sell-outs)
175
List some external influences on a business' activity
- Competition
- Market conditions
- Income
- Interest rates / Government actions
- Demographics
- Environmental and fair trade
176
Purpose of marketing
- Determine what the market wants
- Develop the strategy to achieve the marketing and business objective
- Deliver the marketing actions to achieve the objectives
- Provides purpose for management
177
What makes effective marketing objectives?
- Ensure functional activities consistent with business objectives
- Provides focus for marketing decision - making effort
- Provides incentives for marketing team and a measure of failure and success
- Establish priorities for marketing resources and effort
178
External Influences on Marketing Objectives
- Pandemic
- Weather conditions
- Interest rates
- Compeititon
179
Relationship between technology and marketing objectives
Technology is constantly changing, meaning marketing objectives need to follow and stay dynamic (adaptable)
New technology can cause prices to rise and fall very fast
180
Relationship between competitors and marketing objectives
If a competitor is focussed on low prices, the marketing objectives may need to alter to allow the business to replicate these low prices
e.g. spend less on advertising so can decrease price of products
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What is the 'Trade Description Act' ?
It is an offence for businesses or salespeople to sell a product or service based on misinformation.
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How do the government interfere with business activity?
- Makes predatory pricing illegal
- LAWS: Trade Description Act
- What can and can't be advertised (watershed 9pm)
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What is 'market analysis' ?
Observing what is happening in the market
Businesses try to get ahead of competitors by analysing marketing that affect them
Gives a firm info about market size and growth
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What things do businesses need to understand when analysing the market?
- Working local, national or international scale ?
- Selling online or physically ?
- Who is their target market ?
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How can a market be classified?
- Geography (local, national, international)
- Nature of the product (agricultural or technological)
- Seasonality (seasonal or all-year round)
- Development level (new, growing, saturated)
- Product destination (trade, private consumers)
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Once they have identified their market, the marketing department can carry out analysis looking at...
- Sales growth
- Market growth
- Market share
- Market mapping
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Define 'market share'
Percentage of sales in a market that is made by one firm
Good to look at trends
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What is the layout of a market map?
A '+' with axis on each line
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What does a market map help to achieve
- Displays what customers are thinking
- Helps to analyse buying habits and preferences of customers
- Helps identify what segment of the market is underprovided for and look at producing products to fill this gap
- Compares to competitors
- Gives firm real insight into the competition within the same market as its product
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Advantages of primary market research
- Personal to the business
- Can trust the information
- Up-to-date and relevant
- You own the information so no permission of usage required
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Disadvantages of primary market research
- Can be COSTLY, unless voluntary (pay focus groups)
| - Can be TIME CONSUMING as have to do it yourself, other tasks could have been completed in this time
192
Advantages of secondary market research
- Cost-effective (often free)
- Easily accessible
- Wide range of information
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Disadvantages of secondary market research
- NOT PERSONAL to the business
- May be OUTDATED information
- Could be UNRELIABLE, anyone can publish anything - needs to be from reliable source
- May find difficulty in finding data that applies directly to the business
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Why would a business use market research?
- More detailed understanding of customer needs
- Reduce the risk of product/business failure
- Forecast future trends
- See what the market / competition is doing
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Examples of primary market research data
- Questionnaires
- Interviews
- Surveys
- Focus groups
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Examples of internal secondary market research data
- Information from loyalty cards
- Feedback from company salesman
- Analysis of company sales reports
- Financial accounts
- Stock records
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Examples of external secondary market research data
- Government publications
- Marketing agency reports
- Pressure groups
- Trade magazines
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Define 'simplified random sampling'
Random names from a list
e.g. phonebook
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Define 'stratified sampling'
- Divide population into groups, select random
| - Proportional e.g. based on demographics
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When doing sampling, companies must consider...
- Was it bias?
- Were there any leading questions?
- What about the interviewer? Did their opinions have an impact?
- How representative was our sample?
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Golden rules of sampling
1. Keep costs down
2. Are the results representative?
3. Set margins of error
4. Sample size depends on the company
5. Type of product
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Define 'no correlation'
No relationship between the independent and dependent variable
203
If there is a strong correlation...
the relationship may be used to make marketing predicitions
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Define the term 'seasonal fluctuations'
- Repeat on a regular basis
| - Happens every year
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Define the term 'random fluctuations'
Have no pattern
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What is time-series analysis used for?
- Make decisions on future campaigns
- Links between sales and marketing activity
- Efficient / clear way to look at data
- Identify if marketing campaigns / activities are working or not
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Give examples of elastic products
- Cars
- Laptop
- Clothing retailers
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Give examples of elastic products
- Cars
- Laptop
- Clothing retailers
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Give examples of inelastic products
- Petrol
- Insulin
- Electricity
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Whether a product is elastic or inelastic will depend on...
- Type of product
- Availability of product
- Substitute products
- Choice
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If the price of petrol decreases, what would happen to demand and revenue
Demand: INCREASE as people move from competitors for cheaper prices
Revenue: DECREASE as cash flow decrease due to lower prices
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Is petrol elastic or inelastic...
INELASTIC
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If the price of petrol (inelastic) increases, what would happen to demand
People won't be able to afford to run cars, decreasing revenue due to lack of customers
Customers may move to competitors for cheaper prices
Demand may also stay the same as it is ESSENTIAL.
- Only alternatives are diesel and electric
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Define 'confidence intervals'
A range of values that you are fairly sure the value of population lies within
Reflect the degree of certainty affected by factors such as sampling, research, expertise and analysis
How confident management is about something representing something.
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What is the accepted confidence interval to management?
95%
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Why are confidence intervals useful for a business?
- Businesses benefit from the use of statistics (like CI) in estimating or predicted future events
- Helps a business to evaluate the reliability of a particular estimate, less room for error
- Because no estimate can be 100% reliable, businesses need to know how confident they should be in their estimates and whether or not to act on them
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[Income elasticity]
A rise in consumer income will result in...
… rise of demand
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[Income elasticity]
A fall in consumer income will result in...
… fall in demand
219
What makes a product's positive elasticity of demand grow at a slow or fast rate?
The extent of the change will vary depending on type of product (when customers require it the most = trends)
e.g. is it essential?
220
Define 'luxury goods' (elasticity)
- Income elastic
- As income grows, proportionally more is spent on luxuries
e. g. Gucci and expensive holidays
221
What happens to inferior goods when income rises?
Demand falls
222
What happens to inferior goods when income falls?
Demand rises
223
Ways of segmenting a market
- Location / proximity
- Ethnicity
- Behaviour
- Income
- Religion / cultures
- Age (Demographic)
- Gender (Demographic)
224
Why segment the market?
- More efficient
- Identifying new customers
- Makes sure advertising isn't wasted (on segments that it won't appeal to)
- Identify best ways to market products
- Identify new markets
225
Drawbacks of market segmentation
- Can cause companies to ignore potential customers
- Can be difficult to break the market into obvious segments
- May require market research
226
Define a 'niche business'
Focusses on small markets (minimal or no competition)
227
Influences on product positioning
- State of the market
- Company's product portfolio
- Attributes of the company
228
Factors influencing the integrated marketing mix
- Competitors
- Target market
- Location
- Type of product
- Whether you're selling a good or service
- Product life cycle
- Scale of business
- Marketing and corporate objectives of the business
- Knowledge and skills of the employees
-
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In order to remain profitable, a business needs to do what involving its marketing mix?
- Review and update marketing mix to support marketing decisions
- Take actions of competitors on-board and use marketing mix to successfully compete
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Example of a business adapting 'product' part of the 'marketing mix'
Improving quality of a product
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Example of a business adapting 'place' part of the 'marketing mix'
Reconsider channels of distribution
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Example of a business adapting 'promotion' part of the 'marketing mix'
Use social factors to amend the promotion of their products
233
Example of a business adapting 'process' part of the 'marketing mix'
Develop processes for customers by allowing them to book appointments online
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Factors that can change elements of the marketing mix to stay competitive
- Where you want to position the market in people's minds
- Target market
- Technology available
- Price
- Quality of products
- Objectives of the business
- External factors
- Financial resources
- Laws
235
Define 'product portfolio'
ALl products that a company has on the market
236
What are the 3 types of consumer products?
- Convenience products - everyday items
- Shopping products - less regularly but still needed
- Speciality products - unique
237
Define 'convenience products'
everyday items
238
Define 'shopping products'
less regularly but still needed
239
Define 'speciality products'
a product that certain consumers will actively seek to purchase because of unique characteristics
240
Define 'product portfolio analysis' and how does this help?
Looks at a range of products and brands that a firm has under control
Can help a firm identify where every single one of its products are positioned in the market
241
Advantage of having a broad product portfolio
- Reach lots of target markets / people - increased products
242
Disadvantage of having a broad product portfolio
- Time-consuming
| - Expensive if a fail
243
Advantages of having products in different quadrants of the 'Boston Matrix'
- Allows the progression of products. E.g. a product going from star to cash cow
- Become more expansive and offer products in different markets
244
How can managers use marketing, human resource and operational data?
- Ask questions
| - Make judgements
245
Examples of marketing data
- Market growth
- Market share
- Sales growth
- Portfolio analysis
246
Examples of human resources data
- Labour productivity
- Labour turnover
- Labour retention
- Assessment of staff skills and qualifications
- Staff morale
- HR training and recruitment
247
Define 'mass markets'
Market for goods produced on a large scale for a significant number of end consumers.
248
How do 'mass markets' differ from 'niche markets' ?
The mass market differs from the niche market in that the former focuses on consumers with a wide variety of backgrounds with no identifiable preferences and expectations in a large market segment.
249
What will eventually happen to price inelastic products?
Become elastic as price gets too high, so customers think 'why should I bother?'
250
What can extrapolation use to calculate trends?
Moving averages!
251
Assumptions of Boston Matrix
- Market share can be gained by investment in marketing
| - The best opportunity to build a dominant market position is during the growth stage
252
Contextual example of a cash cow product
Standard AirPods
253
What is a business' ideal product portfolio?
Products in all categories (apart from dogs), to give a balanced portfolio and allow for development.
254
One word to explain the strategy of a rising star (Boston Matrix)
HOLD
255
One word to explain the strategy of a 'Problem Child' (Boston Matrix)
BUILD
256
One word to explain the strategy of a 'Cash Cow' (Boston Matrix)
MILK
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One word to explain the strategy of a 'Dog' (Boston Matrix)
GET-RID
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Market conditions required for price skimming
- Product needs to have... HIGH QUALITY and BRAND IMAGE
- Must have enough buyers willing to pay high price (early adopters)
- Competitors must be deterred from being able to enter the market with similar products and under-cutting the price skimmer.
259
Contextual example of price skimming
APPLE iPHONE
260
What does 'penetration pricing' work best on?
Price inelastic products
261
Why would a business use market research?
- More detailed understanding of customer needs
- Reduce the risk of product/business failure
- Forecast future trends
- See what the market / competition is doing
