3.3 Decision making to improve Marketing performance

Question 1

Marketing Objectives

Answer 1

The process of identifying, anticipating (predicting), and satisfying customer needs profitably
Provided the marketing objectives are relevant and achievable, there are some important business benefits from setting them and monitoring progress against them

Question 2

Types of marketing objectives:

Answer 2

Sales volume
Sales value (revenue)
Market growth (%)
Market share (%)
Brand loyalty/awareness

Question 3

External influences on marketing objectives and decisions:

Answer 3

Economic environment
Competitor actions
Market dynamics
Technological change
Social and political change

Question 4

Internal influences on marketing objectives and decisions:

Answer 4

Corporate objectives
Finance
Human resources
Operational issues
Business culture

Question 5

Primary Market Research

Answer 5

Involves the collection of first hand data that did not exist before and therefore it is original data. It fills gaps that secondary research cannot

Question 6

Secondary Market Research

Answer 6

Research that has already been undertaken by another organisation and therefore already exists

Question 7

Confidence Intervals

Answer 7

They measure the probability that a population parameter will fall between two set values. The confidence interval can take any number of probabilities, with the most common being 95% or 99%

Question 8

Correlations

Answer 8

Another method of sales forecasting that looks at the strength of a relationship between two variables

Positive correlations means the two sets of data are connected in some way (e.g the closer it gets to Christmas, the more Christmas trees that are sold)
Negative correlations also means the two sets of data are related but as x increases, y decreases

Question 9

Extrapolation

Answer 9

It is like an educated guess or a hypothesis
When you make an extrapolation, you take facts and observations about a present or known situation and use them to make a prediction about what might eventually happen

Question 10

Big Data

Answer 10

The process of collecting and analysing large data sets from traditional and digital sources to identify trends and patterns that can be used in decision-making

Question 11

Price Elasticity of Demand (PED)

Answer 11

Measures the responsiveness of quantity demanded for a product to a change in price
= percentage change in quantity demanded / percentage change in price

Question 12

The values of PED:

Answer 12

If PED = 0 demand is said to be perfectly inelastic – this means that demand does not change at all when the price changes

If PED is between 0 and 1 (i.e. the percentage change in demand from A to B is smaller than the percentage change in price), then demand is inelastic

If PED = 1 (i.e. the percentage change in demand is exactly the same as the percentage change in price), then demand is said to unit elastic. A 15% rise in price would lead to a 15% contraction in demand leaving total spending by the same at each price level

If PED > 1 then demand responds more than proportionately to a change in price i.e. demand is elastic.

Question 13

Income Elasticity of Demand (YED)

Answer 13

Measures the relationship between a change in quantity demanded for good ‘X’ and a change in real income
= percentage change in demand / percentage change in income

Most products have a positive income elasticity of demand – so as consumers’ income rises more is demanded at each price

Question 14

The income elasticity of demand is usually strongly positive for:

Answer 14

Fine wines and spirits, high quality chocolates (e.g. Lindt) and luxury holidays overseas
Consumer durables - audio visual equipment, 3G mobile phones and designer kitchens
Sports and leisure facilities (including gym membership and sports clubs)

Question 15

Income elasticity elasticity of demand is lower for:

Answer 15

Staple food products such as bread, vegetables and frozen foods
Mass transport (bus and rail)
Beer and takeaway pizza
Income elasticity of demand is negative (inferior) for cigarettes and urban bus services

Question 16

Limitations of using elasticity to make marketing decisions:

Answer 16

Consumer tastes change
Difficult to calculate
It assumes things stay equal
Consumers may not be able to predict their own spending so primary research could be unreliable
Consumers may react differently to what’s expected
Image of product may have changes
Technology
Competitors entering or leaving the market

Question 17

Market Segmentation

Answer 17

Splits up a market into different types (segments) to enable a business to better target its products to the relevant customers

Question 18

Advantages of market segmentation:

Answer 18

Better matching of customer needs
Enhanced profits for business –
Better opportunities for growth
Retain more customers
Target marketing communications
Gain share of the market segment

Question 19

Mass marketing

Answer 19

Business targets the WHOLE market, ignoring segments
Products focus on what customers need and want in common, not how they differ

Question 20

Niche Market

Answer 20

Business focuses narrowly on smaller segments or niches
Aim is to achieve a strong market position (share) within those niches

Question 21

The 7 elements (P’s) of the marketing mix:

Answer 21

Product – the good or service that the customer buys
Price – how much the customer pays for the product
Place – how the product is distributed to the customer
Promotion – how the customer is found & persuaded to buy
People – the people who make contact with customers in delivering the product
Process – the systems and processes that deliver a product to a customer
Physical – the elements of the physical environment the customer experiences

Question 22

Market Share

Answer 22

Whether the product has a high or lower share of the industry

Question 23

Market growth

Answer 23

The numbers of potential customers and whether this number is growing or not

Question 24

Penetration pricing

Answer 24

Aim to increase market share by setting an initial low entry price to attract new customers

Question 25

Cost Plus pricing

Answer 25

Aim to cover costs of production and then add a profit margin onto the price

Question 26

Marginal Cost pricing

Answer 26

aim to set the price of a product above the marginal costs to produce it

Question 27

Price Skimming

Answer 27

Involves setting a high price before competitors come into the market

Question 28

Premium pricing

Answer 28

Involves setting a high price to reflect the exclusive and luxury nature of the product

Question 29

Psychological Pricing

Answer 29

Prices are set with a view to perceive customers of the price
99p instead of £1

Question 30

Promotion

Answer 30

the way a firm makes it products known to the customers, both current and potential

Question 31

Methods of promotion:

Answer 31

Advertising
Public relations and sponsorship
Personal selling
Direct marketing
Sales promotion

Question 32

Impact of e-commerce on marketing:

Answer 32

Marketing strategy of differentiation increasingly effective (easier to reach niche markets online)
Product life cycles are shortened (note the link with technological disruption)
Greater use of digital promotion (much easier now to track effectiveness of promotion)
Brands and retailers increasingly using multiple distribution channels
Greater use of dynamic pricing (easier to maximise revenues, but is it fair for customers?)
Increased need for localisation (but on its own, not enough)
Ability to sell a much wider product range (the ‘long tail’)