3.3 marketing Flashcards
what is marketing
the function within a business concerned with communicating with customers
its a two way process whereby the business learns about its customers in order to provide goods and services that meet their needs
it is then concerned with ensuring customers are aware, understand and desire the product
importance of marketing, what does the process of marketing allow a business to do
understand the market it is operating in
understand what customers want
understand the relative strengths and weaknesses in comparison to competitors
build a strong brand
build relationships with customers
understand the nature of pricing for its products
what is a market
where buyers meet sellers
a market exists wherever there are potential customers who want to buy a product and where there is a business able to produce and sell that product
all markets have unique charachteristics, can grow or shrink and can be distinguished on a local, regional national or global scale
eg the uk housing market or the global market for oil
what do mrketing departments set objectives around
market and sales growth
market share
brand loyalty
brand image
market and sales growth
measured in volume (units) or value (pounds)
marketing can increase the awarenes, desire and ability of customers to buy the product- leads to increased revenue
market share
the amount a business sells as a percentage of the whole market
increasing market share gives a business more influence and power in the market and means it has increased its number of customers
brand loyalty
businesses need regular custom in order to succeed
brand loyalty involves building a relationship with customers in order to encourage repeat purchasing
brand image
building brand charachteristics
if a business develops a good reputation(eg high quality)
it can attrat and reassure customers and allow them to charge a premium price
externa influences on marketing objectives
political
economic
social
competitors
internal influences on marketing objectives
finance
operations
human resources
what is the first stage of the marketing process
marketing research
it involves gathering and analysing qualitative and quantitative market data
what is market research a key indicator of
customer needs which drives decision making across all business functions, not just marketing
what is the market research process
define problem/question
develop market research plan
collect data
analyse data
interpret and report findings
what questions will market research attempt to answer
who are out potential customers?
what do our customers want?
how big is the market-is it growing?
who are our competitors?
what are customers willing to pay?
is there a gap/opportunity in the market?
advaantages of primary market research
specific to the needs of the business
more up to date and reliable
gives more opportunity for two-way communication and follow up questions
often better if you want to collet qualitative data
sampling provides an insight into the market but saves money as the whole population is not needed
a sample must be representative, unbaised and large enough to represent the whole market
disadvantages of primary market research
can be more time consuming and therefore costly
difficult to conduct a large sample size
examples of primary market research
questionaires
consumer panels
interviews
focus groups
customer observations
what is primary market research
research collected first hand
what is secondary market research
research that already exists conducted by another organisation
advantages of secondary market research
easily accessible and a good starting point
fast and less time consuming
often better if you want to collect quantitative data
disadvnatages of secondary market research
some data can be free but detailed reports can be expensive to purchase
not always up to date or specifically tailored to the business’ needs
examples of secondary market research
market research reports
competititors
webstes
government statistics
newspaper articles
what is market mapping
a technique used to understand how products/businesses are viewed relative to competitors based on two relevenat charachteristics
market mapping
helps businesses decide whether to set up in a market-is there a gap/opportunity
a useful process for comparing similarities and differences between businesses- market positioning
helps a business gain a better understanding of its competition
useful as a market research tool to gain an understanding of customer perceptions
limitation of a market map
only considers twomain variables- markets and customer perceptions are often very complex
what does correlation help businesses understand
the relationship between two factors
if a business can understand the key factors in determining demand for its products then it can manipulate them to achieve greater sales
what is correlation given as a value between
-1 and +1
what does sampling involve
selecting a representative group of people from the target population
advantages of sampling
it is quicker and easier than trying to collect research from everyone- this is often impossible
the bigger the sample size the more representative it will be
what determines the accuracy and reliabikity of the research
the sample size and method of conducting the research
anything less than the whole population cant be 100% accurate
confidence level
an indication of how accurate the research findings are eg 80%=80% confidence the results are accurate
confidence interval
the possible range of outcomes for a given confidence
as the interval narrows the confidence level will fall
extrapolation
means predicting future trends eg sales trends based on past results
extrapolation is reliable when conditions remain the same
the further into the futire we extrapolate the less confidence we have in the certaaintly of the prediction
what is price elasticity
the effect of a change in price on the quantity demand
what is income elasticity
the effect of a change in consumer income on the quantity demanded
what factors influenve elastcity
number of substitutes/competitors
relative effort/costs of switching to another product
extent to which the product is considered a necessity
percieved value of the brand
what happens if there is a price increase and the product is price/income elastic
leads to a bigger percentage decrease in demand
revenues fall
what happens if prices increase on a price/income elastic product
leads to a smaller percentage decrease in demand
revenues rise
what happens if prices decrease on a price/income elastic product
leads to a bigger percentage increase in demand
revenues rise
what happens if price decreases on a price/income inelastic product
leads to a smaller percentage increase in demand
revenues fall
how is market size expressed
in terms of units sold or value
market share formula
total company sales divided by total market sales x100
market and sales growth formula
increase in market size/sales (the difference) divided by original size/sales x 100
uses of market research
product development
budgeting
production forecast
sales forecasting
developing marketing activities such as promotional campaigns
workforce forecast
cash flow forecasting
technology and market research
technology can make the collection of market research data much faster and more specific to individual customers
this data can also be processed more effectively so that trends, patterns and correlations can be uncovered and used to help make marketing decisions
eg store and loyalty cards are an extremely effective way for businesses to collect data on their customers
what is segnemtation, positioning and targeting (STP)
the process a business will use to ensure it is able to succeed in a market without necessarily competing directly with other companies
what does market segmentation allow business to do
specialise in order to better meet the needs of customers
what does market segmentation allow businesses to do
differentiate itself from competitors
develop and build its brand
identify and satisfy the needs of a specific group of customers
reach its customers with relevant marketing activities such as advertising
focus the business activities
build loyalty towards its brand and products
methods of market segmentation
behavioural
income
demographic
geographic
behavioural
considering factors such as when people buy, why people buy, loyalty towards a brand
income
how much people earn
demographic
based on charachteristics such as age, gender, occupation
geographic
based on where people live
positioning
businesses might use a market map to help them position their business within the market
positioning involves a business considering the combination of benefits and price relative to competitors
what is niche marketing
where businesses tend to focus on a specific segment of the market with particular needs
what happens if a business targets a mass market
will produce a generic product that meets the needs of most people
whether a business is niche or mass market determines how a business markets its products and positions itself in the market
what is the scale of segmentation in a market
mass market
market segment
niche market
individual
mass market
targetting a large population of the market with a generic product
requires production on a large scale and investment in capacity
potential for high sales revenue
may compete with many other businesses in the market
promotion will involve mass market techniques such as TV and newspapers
busimess will have to be competitive on price in order to succeed
niche market
targetting a small population of the market with a specialised product
production on a small scale (possibly bespoke)
low volumes but high profit margins
few competitors but limited number of potential customers
promotion through specialist mediums
direct marketing
businesses will have to compete on quality and customisation to succeed
individual
in some industries technology has allowed businesses to profile individuals and customise their products so they can target customers as individuals such as online bespoke greeting cards
the STP process
segmentation
targeting
positioning
segmentation
identify target market based on bsuiness strengths, potential for sales, profitability of segment and presence of competition
segmentation
identify target market based on business strengths, potential for sales, profitability of segment and presence of competition
targeting
use of methods for categorising customers based on their charachteristics and needs
positioning
position business relative to competitors in order to meet customer needs currently not satisfied (gap in the market) or alongside a business where they can do it better
what is the marketing mix
7p’s
collection of factors a business must consider when marketing its products to meet the needs of its customers
to be successful these seven factors must complement each other
what are the 7ps
price
place
process
physical environment
people
promotion
product
price
set to match the expectations of customers and the features of the product
place
using the right channels to get the product to the customer
process
making the transaction convenient efficient and effectove for the customer
physical environment
matching the physical environment in which the transaction takes place to the product and brand
people
adding to the product by using the right people in the transaction
promotion
communicating the product offer, creatng an awareness and desire to buy
product
everytging that the customer buys- brand, features and benefits of a good or service
why do different products require different forms of marketing
customers go through a different process when buying different types of products
types of consumer products
convenience items
shopping goods
speciality products
conveience items
bought on impulse
not brand loyal
consumers are sensitive to price changes
products must be widely available
shopping goods
consumers will ‘shop around’
consumers take their time and will compare product features
brand and price become more important in the purchasing decision
consumers are susceptible to promotion techniques
speciality products
there are high levels of engagement
consumers take a long time to process information and make a decision
people involved in the transaction are very important
physical environment is very important
consumers are willing to travel far
what is it important to consider when analysing the product
‘whole product’
three levels
the core benefits
the actual product
the augmented product
the core benefits
this is what the product actually does and how well it does
how well does the product do its function
the actual product
this includes all of the product features
the details and benefits that add value
this might include deatures to improve quality convenience efficiency style and reliability
the augmented product
this includes everything the business builds around the product
service advice after-sales care and features to build loyalty and a long term relationship with the brand
influences on and development of new product development
when developing products a business must consider the ‘whole product’ along with design function and cost
all products must have a balance of design function and cost
influencing any one of these features can have a detrimental mpact on the other two
eg improving the design could reduce the functionability of the product or improving the functionality coukd increase costs
product portfolio analysis (PPA)
can be used to analyse and track the development of multiple products over time taking into account a number of factors such as growth, sales and market
5 stages of the product life cycle
introduction
growth
maturity
saturation
decline
introduction
price may be low to initial sales
heavy promotion to create awareness
low number of product variations launched
growth
price may increase with popularity
new varieties and distribution methods introduced
business must keep up with demand growth
maturity
consider cutting price to maintain demand, promotion slows as customers are aware of product
introduction of new customers slows down- focus instead on retention and repeat purchase
saturation
the market is ‘full’- all potential customers have the product and there are other better/cheaper alternatives
price may be cut to maintain competativeness
decline
further price cuts to maintain demand
variety of products streamlined to the most popular
business may consider discontinuing product if replacement can be introduced
an extension strategy may be used to re-launch the product to boost new growth
eg slight modifications may be made to the design and packaging of a product to make it appear new or ‘fresh’
life cycle curve
not all products have the same life-cycle curve
fad products may grow and decline very quickly whereas some products will maintain maturity for a long time
advantages of PPA
useful analysis tool for a business with a wide product range
useful for making decisions about where funds should be allocated
can be used to predict future sales and therefore plan production/distribution
disadvantages of PPA
products and markets are complicated and do not necessarily follow a pattern
does not provide clear solutions for businesses
as with all models, PPA simplifies what can be a complex issue
what is on the x and y axis of the boston matrix
x= relative market share (cash generation)
y= market growth rate (cash usage)
where is cash cow on the boston matrix
low market growth rate
high relative market share
bottom left
where is stars on a boston matrix
high market growth rate
high relative market share
top left
where are question marks on the boston matrix
high market growth rate
low relative market share
top right
where are dogs on the boston matrix
low market growth rate
low relative market share
bottom right
cash cow
successful products in mature markets
cash cows generate high revemue for a business that can be invested in other areas
relatively little promotion is required
stars
possibly a leading brand in the market
distribution must be effectove to ensure product availability
question marks
fast growing market but not yet an established product
normally requires heavy investment to develop and ensure success
usually lots of competititon from rival brands
dogs
invest to revitalise or discontinue the product
price
a key factor in any product decision
price will not only determine the demand for a product it will also determine the contribution of a product and the overall profit margin for the business
what factors influence price
costs
the price elasticity of demand
competition
product life cycle
branding
other elements of the marketing mixc
how does costs influence price
what profit margin is the business hoping to achieve
how does price elasticity of demand influence price
the potential for a business to change the priceh
how does competition influence price
the level of competition and the price set by the market
how does the product life-cycle influence price
the stage of the life-cycle product is in
how does branding influence price
the perceptions customers have of the brand and how much value they place on it
how do other elements of the marketing mix influence price
the 7Ps must complement one another
pricing strategies
dynamic pricing
penetration pricing
price skimming
dynamic pricing
applied to products where price can fluctuate with the level of demand such as hotel rooms
penetration pricing
applied to a new product attempting to enter the market
initial price is low in order to penetrate the market by undercutting competitors
over time price may increase as demand grows and reputation/popularity builds
price skimming
used to capitalise on ‘first movers’ (people willing to pay a premium to be the first to own a product)
initial price is high so the profit in the market can be ‘skimmed’
suitable for established brands where anticiptaion for a new product is high
particularly effective in technology markets
promotion
the key method a business will use to communicate with its customers and potential customers
succesfull promotion will create awareness, understanding and a desire for the product
what influences promotion
the target audience
promotion budget
the message
technology
competition
how does the target audience influence promotion
choosing the right method and channel to reach the right people
eg placing an advert in a magazine for a product that matches the demographic of the readership such as a new face cream in a fashion magazine aimedd at older women
how does promotion budget influence promotion
the pomotion budget will determine which methods are available and the geographical reach of the campaign
how does the message influence promotion
a public apology might be posted on a companys website but a sneak peak at a new product line might be shared via twitter
sponsoring a sporting event might encourage an association with healthy living
how does technology influence promotion
can help a business narrow down its promotion so that it only reaches the right people
subsciption services also allow a business to target customers with personal messages and relevant information
how does competition influence promotion
a business may use similar channels to its competitors in order to challenge their message or use strategies that allow it to stand out and be unique
appropriateness of advertising
factors such as focus and reach are important when choosing the right medium for advertising
wide reach/narrow reach
unfocused/focused
promotion methods
advertising
direct marketing
sales promotions
sponsorship
social media
public relations
advertising
above the line (mass media) and below the line (small and focused promotion) techniques
direct marketing
direct communication with the customer, often personal
sales promotions
special offers to encourage saless
sponsorship
paid association with a business or product
social media
promotion through networks such as facebook and twitter
public relations
media attention generated through a third party such as review from a blogger
importance of branding- strong brands
adds value to the product
allows a premium price to be charged
builds trust
makes a product recognisable
product might become the natural choice for the novice customer
helps a business to position itself in the market relative to other competatitors
brands can be traded
distribution
refers to how the product gets to the customer
many products use multi channel methods to reach the customer
the key is to make distribution easy and conveniant for the customer in order to maximise sales
influences on distribution
control over promotion and pricing
expectations of customers
nature of the product
scope/scale
how does control over promotion and pricing influence distribution
a business may opt to use its own website or retail chain if controlling these factors is important
how does expectations of customers influence distribution
will customers expect to access the product via multi-channels or will one suffice
how does the nature of the product influence on distribution
some products are not suitable for certain channels
eg it can be difficult and costly to ship plants, flowers and other delicate objects
how does scope/scale influence distribution
a product sold internationally may require distribution through an extensive network of wholesalers agents and distribution companies
by contrast a local business may simply require one retail oytlet
channels of distribution
scope/scale, control over promotion and pricing, expectations of customers, nature of the product will determine the mix of channels used to get the product from the business to the customer
many modern products use multiple channels such as direct, click and collect and instore purchasing
each stage in the distribution network adds to the cost snd/or adds value therefore increasing the price of the product
the value of digital marketing and e-commerce
allows a small business to target a global market
builds relationships through a more personal service by tracking buying habits
targeting specific segments is much easier- even on an individual basis
opportunities for personalisation and involving customers in the design of products
allows businesses to gather customer information easily
