3.3 Decision making to improve marketing performance Flashcards
What is the role of marketing?
The role of marketing is to identify, predict and satisfy the needs of the customer in a profitable manner.
The marketing function has 3 basic objectives, what are they?
- Determine what the market wants
- Develop the strategy to achieve the marketing and business objectives
- Deliver the marketing actions to achieve the objectives
What are marketing objectives?
Marketing objectives set out what a business wants to achieve from its various marketing activities. They need to be consistent with the overall aims and objectives of the business, this provides focus for the marketing department.
Give 5 examples of marketing objectives
Market size Market share Market growth Sales growth Brand loyalty
Define market size
The number of sales, by value or volume, in a market as a whole.
Define market share
The proportion of total sales that a particular firm controls in a market
Define market growth
The percentage increase in the size of the total market in terms of either value or volume
Define sales growth
The percentage increase in the size of the sales of a firm in terms of either value or volume
Give 3 examples of internal factors on marketing objectives
Corporate objectives
Finance
Human Resources
Give 4 examples of external factors on marketing objectives
Market
Technology
Competitors
Ethical / environmental factors
What are the 5 ways you can classify markets?
Geography Nature of the product Seasonality Development level Product destination
Give 4 ways a business can carry out market analysis
Sales growth
Market growth
Market share
Market mapping
Market growth formula
New market size - Old market size
————————————————– X 100
Old market size
Market share formula
Sales
———————— X 100
Total market size
Sales growth formula
Sales this year - Sales last year
———————————————- X 100
Sales last year
What is market mapping?
A market map is a diagrammatic technique that enables businesses to display the perceptions of customers.
It compares different variables regarding products and consumers; it can be used to analyse consumer buying habits.
It also highlights gaps in the market
What is market research?
Market research is the process of gathering data and information about the market. It supports businesses to spot opportunities and decide what to do next.
What is quantitative research?
Research concerned with data. Main method of collecting quantitative research is through surveys
What is qualitative research?
Opinions, attitudes, beliefs and intentions
Usually gathered through focus groups
What is primary research?
Business gathers new data themselves or employs someone to do it for them on their behalf
What is secondary research?
Analysing and utilising research that has previously been collected
What does sampling allow?
Sampling allows a business to gain an insight into the needs and wants of the customer in a cost effective manner
What impacts the value of information collected by sampling?
- The sampling technique
- How the sample was carried out
- The size of the sample
What does the size of a sample depend on?
- Budget available
- The importance of accuracy
- Degree of confidence in results
What should market research avoid?
Market research must as a whole avoid bias!
There should be no leading questions and no intimidating tactics during interviews and focus groups.
What are the 3 main types of sampling?
- Simple random
- Stratified
- Quota
What is time series analysis?
Times series analysis looks at data over time to reveal underlying patterns by recording and plotting data over time
What is a trend on a time series analysis graph?
Trends are the long term movement of a variable. Trends can be upward, constant or downward but there are usually fluctuations around the trend.
What are seasonal fluctuations?
Seasonal fluctuations are changes that repeat on a regular basis
What is extrapolation?
Using past data to extend an identified trend and extending it into the future
What is a disadvantage to extrapolation?
The past is not always a good indication of the future. Conditions and trends can soon change due to competitors’ actions, consumer tastes and market conditions
What is correlation?
Correlation is a measure of how closely two variables are related
What are confidence levels?
Confidence levels indicate how sure you are that the value for the population lies within the confidence interval
Why are confidence intervals useful for a business?
- A business benefits from the use of statistics in estimating or predicting future events
- A confidence interval helps a business evaluate the reliability of a particular estimate
Give 4 ways in which technology can be used to gather information about customers
- Loyalty cards
- Social networking sites
- Search engines
- WiFi signals
- (cookies)
Give 4 advantages of using software to do your marketing analysis
- gather and analyse large volumes of data quickly
- lower running costs
- track and interpret consumer spending habits
- store lots of information
Give 3 disadvantages of using software to do your marketing analysis
- higher fixed costs at the start
- you have to train staff to use new software
- takes time to update software or new technology
Define price elasticity of demand (PED)
Price elasticity of demand is a measure of how responsive demand is to a change in price
What does price elastic mean?
Price elastic demand means that a change in price will lead to a more than proportional change in demand.
ie demand is sensitive to price changes
What does price inelastic mean?
Price inelastic demand means that a change in price will lead to a less than proportional change in demand
ie demand is not sensitive to price changes
If the price elasticity of demand is greater than 1 (ignoring the negative sign), is the product price elastic or price inelastic?
Price elastic
If the price elasticity of demand is between 0 and 1 (ignoring the negative sign), is the product price elastic or price inelastic?
Price inelastic
Formula for PED
% change in quantity demanded
————————————————— = PED
% change in price
What happens to revenue if you raise or lower the price of a price elastic product?
If you raise selling price, sales revenue will decrease.
If you lower swelling price, sales revenue will generally increase.
What happens to REVENUE if you raise or lower the price of a price inelastic product?
If you raise selling price, sales revenue will increase.
If you lower selling price, sales revenue will decrease.
Give 6 factors which influence PED
- the availability of substitutes
- the price of competitor goods
- time
- branding
- income
- nature of the good
What does YED measure?
Income elasticity of demand measures the extent to which the quantity of a product demanded is affected by the change in income
If YED is more than 1, what type of good is it?
A luxury
If YED is less than 1 but greater than 0, what type of good is it?
A necessity
If YED is less than 0, what type of good is it?
An inferior good
Give 2 examples of luxury goods
- Expensive holidays
- Branded goods
Give 2 examples of necessity goods
- Staple groceries
- Own label goods
What does STP stand for?
Segment > Target > Position
What is segmentation?
Segmentation divides a market into groups of buyers. Each group will have different wants and needs and require a different marketing mix
What are the 4 ways you can segment a market?
1) Demographic
2) Geographic
3) Income
4) Behaviour
Why is segmentation useful?
It identifies new customers, markets and products. It can also help to indentify the best way to market a product
What is a disadvantage to segmentation?
It can cause companies to ignore the needs of potential customers. It can be difficult to break the market into obvious segments and even more difficult to find ways of marketing to specific demographics
After segmenting a market, what must a business then do?
Target
What are the 3 approaches to targeting a market?
1) Concentrated marketing
2) Differentiated marketing
3) Undifferentiated marketing
Explain concentrated marketing and what type of companies does this suit?
Involves targeting one or two segments. It is good for small businesses with limited resources. The segment must be big enough for a decent return and have potential growth.
Explain what differentiated marketing is and which companies this suits?
Where several markets are targeted and the product and marketing mix are adapted to appeal to each segment. This is only feasible for large companies with large budgets.
Explain what is undifferentiated marketing is and which types of products is this good for?
It is where segments are ignored and the company tries to reach the entire market with a single product to appeal to each segment. It makes sense for widely used products, eg toothpaste
What are the two markets that businesses can target?
Niche and mass markets
What should a business do after segmenting and targeting a market?
Position
What is positioning?
Positioning is creating an image of your brand or product in the mind of your target customer
Give 3 influences on the positioning of a business
1) State of the market
2) Company’s current products
3) Attributes of the company
List the 7p’s
Price Product Place Promotion People Physical environment Process
A business’ marketing mix must be…
Integrated
Give the 3 types of consumer product
Convenience
Shopping
Speciality
What is a convenient product?
Inexpensive, everyday items bought regularly by lots of people
What are shopping products?
These are things like clothes, computers and washing machines that are bought less regularly than convenience products. They are more expensive and are sold in fewer places than convenience products
What are speciality products?
These are products that are unique in some way. Percieved image and quality are more important to consumers than price for speciality products, so higher profits can be made from them
What does the Boston matrix analyse?
Product portfolio
What does the x-axis represent on a Boston matrix?
Market share
What does the y-axis on the Boston Matrix represent?
Market growth
What are the 4 quadrants of the Boston Matrix?
Stars
Question marks
Cash cows
Dogs
Give 3 reasons why it is beneficial to develop new products
1) Bring in new customers
2) They give a competitive advantage
3) They allow companies to maintain a balanced product portfolio
What are the 5 stages of the product life cycle?
1) Research and development
2) Introduction
3) Growth
4) Maturity
5) Decline
What extension strategies can a business implement to prolong the life of a product?
1) Product development
2) Market development
3) Change the distribution channels
4) Change the pricing strategy - offers and competitions
5) Promotions - new ad campaign
Give some factors that affect pricing decisions
1) Value of costs / mark ups
2) How price sensitive customers are
3) Price elasticity of demand
4) The stage of the products life cycle
5) Corporate objectives
6) The price of competitor products
Give the 7 types of pricing strategies
1) Price skimming
2) Price penetration
3) Predatory pricing
4) Competitive pricing
5) Psychological pricing
6) Loss leaders
7) Price discrimination
What is price skimming? And give an example
When new and innovative products are sold at high prices when they first reach the market. Consumers will pay more because the product has scarity value, and the high price boosts the products image and increases its appeal. An example of this is the launch of PS5
What is price penetration?
The opposite of skimming. It means launching a product at a low price in order to attract customers and gain market share. It is especially effective in markets that are price-sensitive
What is predatory pricing?
When a business deliberately lowers prices to force another business out of the market (this is illegal under EU and US laws)
What is competitive pricing?
When companies monitor their competitors’ prices to make sure that their own prices are set at an equal or lower level
What is psychological pricing?
Basing prices on customers expectations. A high price may make people think the product is high quality.
What are loss leaders?
Products that are sold at or below cost price. These products will lose money but they’ll make a profit for the business indirectly by enticing customers into the shop where they will buy full priced items
What is price discrimination?
When a company sells its product at different prices to different groups of consumers, eg theme park ticket prices will vary according to the age of the customer
What is the purpose of promotion?
Promotion is designed to inform customers about a product or service or persuade them to buy it
What is the difference between industrial promotion and consumer promotion?
Industrial promotion tends to be informative, whereas consumer promotion tends to be persuasive
Excluding advertising, what are the other types of promotion?
1) Merchandising
2) Direct mail
3) Personal selling
4) Relationship marketing
5) Event sponsorship
6) Shopping channels
What are the 4 types of distribution channels?
1) Direct selling (0 level channel)
2) Indirect selling (1 level channel)
3) Direct selling through an agent (1 level channel)
4) Indirect selling (2 level channel)
Describe the direct selling channel
Manufacturer => Consumer
Describe the indirect selling channel (1 level channel)
Manufacturer => Retailer => Consumer
Describe the direct selling through an agent channel
Manufacturer => Agent => Consumer
Describe the indirect selling channel (2 level channel)
Manufacturer => Wholesaler => Retailer => Consumer
The fewer intermediaries in the distribution chain, the more _ _ _ _ _ _ _ a business has over how its products are sold
Control
What are 5 examples of things that are included in physical environment?
1) Decor and appearance
2) Appearance of the website
3) Appearance of staff
4) Layout
5) Practicality and safety
