3.3 Decision making to improve marketing Flashcards
What is the purpose of marketing?
To anticipate and satisfy customer needs and wants in a profitable way
What is sales volume?
The amount of an item sold
What is sales value?
Volume X price
What are some possible marketing objectives? (5)
-Sales volume / value
-Market size
-Sales growth
-Market share
-Brand loyalty
Advantage and disadvanatge of sales volume / value as a marketing objective
+ = Easy to measure, can be used to compare to rivals selling similar goods
- = Sales volume does not consider revenue , sales value does not consider profits/costs
Advantage and disadvanatge of market growth as a marketing objective
+ = A growing market allows a business to access new customers
- = Usually outside of the control of a business
What are some factors that influence market growth?
-Economic growth
-Nature of the product
-Fashion
What is sales growth?
The % change in sales over time.
What is market share? + / - of setting market share related marketing objectives
% of total sales of a good/service that a business has achieved.
+ = Good measure of success as compares businesses sales to that of rivals
- = Difficult to define what a market is
What is brand loyalty?
The degree of attatchment that a consumer has to a particular brand
Why would a business set marketing objectives?
- To provide a benchmark against which success or failure can be measured
- Gives a focus for decision making
- Helps departments have a common purpose
- Objectives can be motivating for staff
What are some external influences on marketing objectives? (4)
-Market factors (growth/decline)
-Competitor actions and performance
-Technological change
-Economic factors
What is primary market research? What are some examples?
New research that has never been done before ; experiments, observations, focus groups, surveys
What is secondary market research? What are some examples?
Researching and reading information that already exists ; gov.publications, company records, market research organisations, loyalty cards
What is the difference between qualitative and quantitative market research?
Qualitative means consumers are asked open ended questions such as Why? How?
Quantitative means information presented is based on numbers
What is market mapping?
A technique that analyses markets by looking at features that distinguish incumbent products or business. Can be used when a new business wishes to enter a market and is looking where there is a gap.
What is sampling?
The gathering of data from a group of respondants whos view represent that of the whole market
What is a confidence interval?
A confidence interval is an indicator presented next to a piece of data that represents how accurate that data is likely to be. For example:
A confidence interval of 95% next to the data from a survey asking customes if they are going to buy the product again, indicates that if 100 customers were surveyed then 95 of them would be giving a completely honest answer.
What is a correlation?
Correlation shows the strength of a relationship between 2 variables, for example the amount of £ spent on advertising and the amount of customer enquiries.
Is presented on a scatter graph.
Can be positive, negative or NO correlation
What is extrapolation?
Using previous patterns of numerical data to predict values in the future.
What is PED?
Price Elasticity of Demand measures the responsiveness of quantity demanded given a change in price.
In simpler terms: how consumers react to a change in price.
What is the formula for PED?
% change in Q demanded / % change in price
How do you calculate a % change?
(change / original value) x 100
How is PED usually presented?
A single digit number, usually negative because of the inverse relationship between price and quantity, the minus sign is left unwritten.
What are the 5 different types of PED? What are they numerically? What do they mean? How are they presented on a graph?
Elastic - PED greater than 1, a certain % change in price will result in a greater % change in demanded. On a demand graph, this is less steep gradient, closer to horizontal, ofc sloping down.
Inelastic - PED less than 1, a certain % change in price will result in a lesser % change in quantity demanded. On a demand graph, this is a steep gradient, closer to vertical, ofc sloping down.
Perfectly elastic - PED = Infinity. Meaning any change in price will result in quantity demaned falling to 0. Consumers are willing to purchase all they can at this price, if price rises demand will decrease infinitly and if prices fall demand will increase infinitly. On a demand graph, this is a perfectly horizontal line.
Perfectly inelastic - PED = 0. Meaning any change in price will result in NO change in quantity demanded. On a demand graph, this is a perfectly vertical line.
Unit elastic - PED = 1. Any change in price will result in a proportionally equal change in demand. Price rises by 10%, demand will fall by 10%. A demand curve with unit PED throughout is like a drop in on a skateboard ramp.
What is the significance of PED to a business?
Business can use PED to make pricing decisions that can increase total revenue.
What are the determinants of PED?
Think SPLAT
Substitutes - The higher number of close substitutes a good/service has, the more price elastic demand will be. The more price rises, consumers will switch to substitute products instead. The fewer substitutes, the close to price inelastic demand will be
Percentage of income - The greater the proportion of income a price change takes, the price elastic demand will be. For example if an expensive good rises 10% in price, this 10% will take up a large proportion of income, and demand will fall greater than if a product costing a few pence rises 10% in price.
Luxury or not - Luxury goods demand is more price elastic, necessities demand is more price inelastic.
Addiction - If the good is addicitive or habit forming, it will have a more inelastic PED. Consumers are less likely to care about the change in price
Time period - In the long run demand for goods and services is more likely to become price elastic as over time more substitues for the product enter the market.
What is Income Elasticity of Demand?
YED measures the responsiveness of quantity demanded given a change in income
How is YED calculated?
% change in Q demanded / % change in income
What does it mean if YED is positive or negative?
Positive = Normal good, meaning an increase in income leads to an increase in demand and vice versa
Negative = Inferior good, meaning a rise in incomes results in a decrease in demand I.E Margerine, as incomes rise people will prefer to buy butter.
What 3 types of goods can be identifies from YED?
Normal good = Positive YED
Inferior good = Negative YED
Luxury good = Highly positive YED, greater than +1
What is an elastic and inelastic YED?
Elastic = greater than 1, meaning a % change in income will result in a greater % change in Q demanded
Inelastic = greater than 0, less than 1….meaning a %change in income will result in a lesser % change in Q demanded
How can YEDs be useful to a business?
When booms or recessions are forecast
What are 3 criticisms of elasticity for business decision making?
Think ECV - Elasticity Can Vary
1) Estimates - Elasticity calculations are only estimates, as data may be collected from surveys that cannot be fully trusted OR past data which may not reflect current consumer habits or accurately predict the future. Therefore important decisions should not only be based on Elasticiy calculations and instead be used as a guide.
2) Ceteris Paribus - The assumption of Ceteris paribus can be misleading. For all elasticity calculations only one variable is assumed to impact quanitity demanded/supplied however there are many other factors that come into play such as income, changes in fashion, interesest rates, consumer confidence ETC
3) Varies - Elasticity varies along the curve therfore business must be sure to re-calculate elasticity at every change in price.
What is market segmentation?
The classification of customers or potential customers into groups, called market segments.
What are the 4 types of possible market segments?
-Demographic ; age, gender, maritul status
-Geographic
-Income
-Behavioural ; customers attitude to product IE heavy or light user
What is niche marketing?
Where a business targets a small segment of a large market
What are some + / - of niche marketing?
+ =
Less competition
Small scale of production
Less EOS barriers to entry
Easier to target customers
- =
Lower profits available due to market limits
Business vulnerable to small changes in demand due to lack of diversified risk
What is mass marketing?
Aiming a product/service at all available markets
What are some + / - of mass marketing?
+ =
Large scale production
High revenues
High EOS potential benefits
Barriers to entry for rivals preventing competition
Increases brand awareness
- =
High fixed capital costs due to barriers to entry IE big factories
Standardisation makes it hard for business to adapt products to meet individual needs of consumers
Less scope for adding value
Heavier competition
What is the process of market positioning
Market research -> identify target market segments ->decide how to position product
What is the marketing mix?
The combination of marketing elements used by a business in order to meet the needs and expectation of customers
What are the 7 points of the marketing mix?
Product
Price
Place
Promotion
People - those who make contact w customer during transaction
Process -how product is delivered to customer
Physical enviroment
What are the 3 different types of good?
Convenience good, shopping good and speciality good
What is a covenience good?
One that is purchased regularly, by habit and by a larger proportion of the population.
What is a shopping good?
One that is purchased quite often but less often than convenience good, the purchase of item is planned,
What is a speciality good?
One that has unique characteristics, traveled some distance to purchase and in which price is not considered a key factor.
What is the boston matrix?
A tool that analyses the product portfolio of a business and classifies them into 4 different categories, comparing the market share of the product and the growth of the market.
High market share, HIgh market growth = Star
High market share, Low market growth = Cash cow
Low market share, High market growth = Question mark
Low market share, Low market growth = Dog
Features of star products in the Boston matrix
High market share, HIgh market growth = Star
- Alot of promotional activity needed due to market growth
- Generally generate alot of revenue and profits
Features of Cash Cow in the Boston matrix
High market share, Low market growth = Cash cow
- Established markets, have reached maturity stage of product life cycle
- Low rates of growth discourage new competition, meaning little promotional cost needed
- Can be milked for profits
Features of question mark in the Boston matrix
Low market share, High market growth = Question mark
- Pose problems for the business
- Competiting in competivie market
- Despite low market share, the growth in the market indicates potential revenue increases for the product
Features of Dogs in the Boston matrix
Low market share, Low market growth
- Little scope for profit, think carefully about retaining
- In a recession, likely to be withdrawn
What are the 6 stages of the product life cycle?
Development, Introduction, Growth, Maturity, Decline, Abandonment
What is the strategic use of the product life cycle? What is ideal for businesses?
As many products in the marutity stage as possible, and for the maturity stage to last as long as possible using extension strategies
What are some examples of extension strategies? (6)
- Attracting new market segments.
Increasing usage among existing customers.
Modifying the product.
Changing the image.
Targeting new geographical markets.
Promotions, advertising, and price offers.
