3.3 Marketing Flashcards
Define marketing
The process of identifying anticipating and satisfying customer needs profitably
What is a marketing objective?
A specific goal or target relating to the marketing activities and performance of a business
Formula for sales value ?
Units sold x price
Define market size
A measure of the total value/volume of sales within a market
Market size value formula?
Units sold in the market x price
Define market growth
A measure in percentage terms of any increase in the size of the market
Market growth formula?
Change in market size / original market size x 100
Define market share
The proportion of a market that is held by an individual product or business
Market share formula ?
Sales of one business or company / total market sales x 100
Define branding
The process of establishing a distinctive and lasting identity for a product or service in the minds of consumers
Benefits of branding?
Helps encourage repeat purchases in the form of brand loyalty
Brand owner can usually charge higher prices
Easier to persuade retailers to stock your product in their stores
Problems with branding?
High advertising costs - brands must be prominent + maintain consumer awareness
Brand contagion - one bad brand can harm all of a company’s other brands
High research + development costs
Advantages of marketing objectives?
Ensure functional activities consistent with corporate objectives
Provide a focus for marketing decision
Establish priorities for marketing resources and effort
Disadvantages of marketing objectives ?
Easy to be too ambitious with marketing objectives
Does the business have the necessary skills and resources available
Potential conflict between marketing objectives
State the internal influences on marketing objectives
Corporate objectives
Finance
HR
Operational
State the external influences on marketing objectives
Economic environment
Competitor actions
Market conditions
Technological change
Social & political change
External influences on marketing objectives:
Define economic environment
State of the economy has big impact on marketing objectives
Economic boom = good time to increase sales volumes since income levels are generally higher
External influences on marketing objectives:
Define competitor actions
Marketing objectives have to take account of possible competitor response
External influences on marketing objectives:
Define market conditions
Key factor in determining demand
E.g marketing objectives changed as a result of the recession. Factors such as exchange rates would also impact objectives concerned with international marketing
External influences on marketing objectives:
Define technological change
Many markets are affected by rapid technological change, shortening product life cycles and creating great opportunities for innovation
External influences on marketing objectives:
Define social & political change
Changes to legislation may create or prevent marketing opportunities
Change in the structure and attitudes of society also have major implications for many markets
Internal influences on marketing objectives:
Define corporate objectives
The marketing department has to make sure its objectives are aligned with the company’s overall goals
Internal influences on marketing objectives:
Define finance
This influence allocates the marketing departments budget
This affects what the marketing department are able to do e.g if the budget is cut, they may need to scale down
Internal influences on marketing objectives:
Define Human Resources
For a services business in particular, the quality and capacity of the workforce is a key factor in affecting marketing objectives
A motivated and well-trained workforce can deliver market-leading customer service and productivity to create a competitive marketing advantage
Internal influences on marketing objectives:
Define operational
This influence has a key role to play in enabling the business to compete on costs (efficiency/ productivity) and quality
Define market research
The process of collecting information and data about a business’s customers, the market place and the activities of competitors within that marketplace
What are the three key areas of market research ?
- collecting of info
- analysing the info
- acting upon + making decision based on this info
Define primary market research
Collects data that is first hand and specific to the needs of your business
Define secondary market (desk) research
Data that already exists and which has been collected for a different purpose
Define quantitative data
Statistical information; includes numbers and values that are measurable; expressed numerically
Define qualitative data
Info about opinions and values ; cannot be expressed numerically
State three advantages of quantitative data
data is relatively easy to analyse
Numerical data provides insights into relevant trends
Can be compared with data from other sources (e.g competitors, history)
State three disadvantages of quantitative data
Doesn’t explain the reasons behind numerical trends
Focuses on data rather than explaining why things happen
May lack reliability if sample size and method isn’t valid
State three advantages of qualitative data
Focused on understanding customer needs, wants and expectations
Can highlight issues that need addressing e.g why customers don’t buy
Essential for important new product development and launches
State three disadvantages of qualitative data
Time - consuming to collect
Based around opinions = risk that sample is not representative
Expensive to collect and analyse - requires specialist research skills
Define the method of primary research
Focus groups
Interviews
Surveys
Mystery shoppers
Product testing
Methods of primary research:
Define focus groups
Small, carefully chosen groups of people who discuss products and services offered by a business
Methods of primary research:
Define interviews
Structured conversations used to obtain detailed info from a limited number of respondents
Methods of primary research:
Define surveys
Usually carried out using questionnaires using a range of open and closed questions
Methods of primary research:
Define mystery shoppers
A person employed to visit a shop or restaurant incognito in order to assess the quality of the goods or services
Methods of primary research:
Define product testing
Small-scale launch of a good/service in an area of the country chosen to best represent the entire market
Advantages of methods of primary research ?
Kept private = not publicly valuable
Directly focused to research objectives
More detailed insight - particularly into customer views
Disadvantages of methods of primary research
Risk of survey bias
Can quickly become out of date
Time-consuming and costly to obtain
Define the methods of secondary research
Government produced data
Internet
Industry magazines
Methods of secondary research:
Define government produced data
Collections of official statistics and data about the uk population
Methods of secondary research:
Define internet
Accessing the plethora of online data through different websites
Methods of secondary research:
Define industry magazines
Specialised magazines and journals written to support particular industries
Advantages of methods of secondary research ?
Often free and easy to obtain
Quick to access and use
Good source of market insights
Disadvantages of methods of secondary research ?
Not tailored to business needs
Specialist reports = often expensive
Sampling may not be representative
Define sampling
Selecting a smaller group from a larger population that a business will collect data from in your research
Name the three sampling methods
Random, quota and stratified
Define random sampling
Makes sure that every member of the population has an equal chance of selection
Benefits of random sampling
Simple to design and interpret
Free from bias and prejudice
Drawbacks of random sampling
Difficulty accessing lists of the full population
May not guarantee a true representation of larger population
Define quota sampling
Step 1 - divide larger population in segments
Step 2 - same are deliberately selected from these segments
Benefits of quota sampling
Relatively easy to administer
Closer representation of the population
Drawbacks of quota sampling
Sample selection is not random
Some risks of bias
Define stratified sampling
Step 1 - divide larger population into segments
Step 2 - same are randomly selected from these segments
Benefits of stratified sampling
More precision vs random
Enables representation from different segments
Drawbacks of stratified sampling
More time consuming
Risk of missing key segments
State three advantages of sampling
Flexible and relatively quick
Even a small sample size (if representative) can provide useful research insights
Using sampling before making marketing decisions can reduce risk and costs
Disadvantages of sampling
Risk of bias in research questions
Biggest risk = sample is unrepresentative of population leading to incorrect conclusions
Less useful in market segments where customer tastes and preferences are changing frequently
Market research - business constraints ?
Financial
Time
Data quality
Define market (positioning) mapping
A market (or positioning) map illustrates the range of “positions” that a product can take in a market based on two dimensions that are important to customers
Define advantages of market mapping
Helps identifying gaps in the market
Good for analysing competitors
Promotes market research
Disadvantages of market mapping ?
Just because there is a “gap in the market” does not mean that there is a demand
Only analyses two dimensions
Subjective
Define extrapolation
Uses trends established from historical data to forecast the future
Define moving averages
Takes a data series and “smoothes” the fluctuations in data to show an average
Define three advantages of moving averages
Allows a business to make decisions based on data
Smooths out fluctuations to reveal patterns
Helps set targets
Define three disadvantages of moving averages
May not consider unforeseen changes in circumstances
Relies on accuracy of data previously collected
Ignores qualitative factors (e.g changes in tastes and fashions)
Define correlation
Looks at the strength of a relationship between two variables
Define positive correlation
Two variables move in the same direction
Define negative correlation
Two variables move in opposite directions
Define no correlation
No relationship between factors
What does a strong correlation mean ?
That there is little room between the data points and the line
What does a weak correlation mean ?
That the data points are spread wide and far away from the line of best fit
Define confidence intervals
A confidence interval gives the percentage probability that an estimated range of possible values, will be achieved
Factors that influence the confidence interval ?
Sample size
95% standard to make business decisions
Narrower confidence interval represents a lower margin of error
Why are confidence intervals so useful in business?
Predicting future events
Evaluate the reliability
Businesses need to know how confident they should be in their estimates
Define price elasticity of demand
Price elasticity of demand measures the responsiveness of demand to changes in price
Formula for price elasticity of demand ?
% change in quantity demanded / % change in price
If the result is outside of -1 we can say demand is ?
Price elastic
If the result is exactly -1 we can say demand is ?
Unitary price elasticity
If the result is in between -1 and 0 we can say demand is ?
Price inelastic
Define inelastic price of demand
When change in QD is smaller than change in price
E.g water, power, petrol
Factors:
Necessities, strong branding, less alternatives, high income customers
Define elastic
When change in QD is greater than change in price
E.g cereals, chocolate bars, sport cars
Factors:
Goods that have a lot of substitutes, in a very high competitive market, luxury goods, goods that consumers want
Define income elasticity of demand
Measures the extent to which the quantity of a product demanded, is affected by a change in income
Formula for income elasticity of demand ?
% change in quantity demanded / % change in income
Define inferior goods
Have the characteristic of seeing demand decline when income levels rise
Have a negative income elasticity of demand
Define necessities
Income elasticity less than 1 but more than 0
As income grows, proportionally less is spent on necessities
Define luxury goods
Have an income elasticity of demand more than +1
Means that demand rises more than proportionally to any change in income
Limitations of calculating + using elasticities?
Can be difficult to get reliable data
Other factors affect demand
Competitors will react
Define the STP model
Segmentation, targeting, positioning
Define targeting
This is when a business selects which segments of the market that they will focus their efforts upon
Define mass market
Where a business sells into the largest part of the market, where there are many similar products on offer e.g baked beans
Define niche market
Where a business targets a smaller segment of a larger market, where customers have specific needs and wants e.g vegan
Define features of the mass market
- more general and less specific
- associated with mass production output
- mass advertising
Advantages of mass market?
Large market size + economies of scale
Disadvantages of mass market?
Lower profit margins and highly competitive
Features of niche market?
- small target group
- limited availability
- target advertising
Advantages of niche market
Can charge a premium price and customer loyalty
Disadvantages of niche market
Smaller market size and high manufacturing cost
Define customer profile
Businesses can build up a customer profile which shows the characteristics of their customers and what makes them behave in a certain way
Define the advantages of market segmentation
- focuses resources
- allows a business to grow share in markets
- helps make the marketing mix more effective
- helps with new product development
Define the disadvantages of market segmentation
- extensive market research required
- high research and development costs/ production costs
- high promotional costs
- higher production and stock holding costs
Define market segmentation
Involves dividing a market into parts that reflect different customer needs and wants
Define the 4 step process of segmentation
Step 1:
Conduct research into the different types of customer within the marketplace
Step 2:
See if they have common taste/habits
Step 3:
Identify the segment you wish to focus on
Step 4:
Devise a product for particular segment
Define the 4 categories of the market segment
- demographic
- behavioural
- income
- geographic
Define market positioning
The place a product occupies in customer minds relative to competing products
Define the 4 possible positioning strategies
- offer more for less
- offer more for more
- offer more for the same
- offer less for much less
Define the influences on positioning
- business strengths
- competition
- market conditions
- business innovation
Define the marketing mix
The marketing mix is the combination of elements used by a business to enable it to meet the needs and expectations of customers
Marketing mix:
Define the 7P’s
- product
- place
- price
- promotion
- physical
- process
- people
Marketing mix - 7Ps:
Define place
The location in which the product is made and the means of distributing the product
Marketing mix - 7Ps:
Define promotion
In the context of marketing this is the process of communicating with customers
Marketing mix - 7Ps:
Define physical environment
The nature and appeal of the physical evidence the customer will observe during a transaction
Marketing mix - 7Ps:
Define process
The system involved in ensuring that an efficient service is provided to prospective and actual customers
Marketing mix - 7Ps:
Define price
The sum of money paid by the customer for the unit of product
Marketing mix - 7Ps:
Define people
Anyone who represents the firm and comes into contact with its customers
Marketing mix - 7Ps:
Define product
The good or service provided by the business for its customers
Define a consumer product
Bought by final consumers for personal consumption e.g shampoo
Define industrial product
Bought for further processing by another business e.g raw material (steel)
What is the product life cycle?
A theoretical model which describes the stages a product goes through over its life
Define the 6 stages of the PLC
- development
- introduction
- growth
- maturity
- saturation
- decline
Stages of PLC
Define development
This stage is when lots of money is being invested into R&D
Stages of PLC
Define the key features of the development stage
- often complex
- absorbs significant resources
- may not be successful
Stages of PLC
Define the introduction stage
Sales are low as the new idea is first introduced to the market
Stages of PLC
Define the key features of the introduction stage
- costs high
- low level of sales
- small scale distribution
- high promotional spending
Stages of PLC
Define the growth stage
Rapid growth in sales and revenue
Stages of PLC
Define the key features of the growth stage
- fast growing sales
- cash flow may become positive
- attracts the entry of new competitors
- wider distribution
Stages of PLC
Define the saturation stage
Where sales are rapidly slowing and may start to slowly decline
Stages of PLC
What are the key features of the saturation stage ?
- weaker competition start to leave the market
- advertising is persuasive
- promotion focused on product differentiation
Stages of PLC
Define the decline stage
Shrinking market share, sales are low and declining
Stages of PLC
Define the key features of the decline stage
- falling sales
- competitors leave the market
- products could be withdrawn from production
- products may be sold at a reduced price
Define the benefits of the PLC
- forecast sales trends over time
- business can adapt their strategy depending on the stage
- can be applied across the portfolio of products
Drawbacks of PLC
- not all products follow the PLC
- hard to predict how long the product will be in each stage
Why do products enter the decline stage ?
- technological advancements
- changes in consumer tastes and behaviour
- increased competition
- failure to innovate and develop the product
Define extension strategy
Used to stop sales from falling and to prolong the life cycle as long as possible
Define the 5 examples of extension strategies
- finding new markets
- increasing marketing activity
- lowering the price
- changing the packaging/rebranding
- product differentiation
Extension strategies:
Advantages and disadvantages of product differentiation
Adv = customer loyalty
Disadv = high r+d costs
Extension strategies:
Advantages and disadvantages of changing the packaging/rebranding
Adv = raise PR
Disadv = loose existing customers
Extension strategies:
Advantages and disadvantages of increasing marketing activity
Adv = increase customer awareness
Disadv = high initial costs
Extension strategies:
Advantages and disadvantages of lowering the price
Adv = increase sales volumes
Disadv = decreases profit margins
Extension strategies:
Advantages and disadvantages of finding new markets
Adv = gain new customers
Disadv = high risk
Define product portfolio
The collection/range of all the goods and services offered by a business
Define Boston Matrix
A method of analysing the products in a business’ portfolio based on relative market share and market growth
Define the four categories in the Boston matrix
Problem child Star
Dog Cash cow
Boston matrix:
Define problem child
- have potential
- need substantial investment
E.g Apple smart speaker
Boston matrix:
Define star
- one of the market leaders
- requires high market spending
- cash flow positive
E.g iPhone
Boston matrix:
Define dog
- may generate enough cash to break even
- rarely worth investing in
E.g Apple TV
Boston matrix:
Define cash cow
- successful products
- little need for investment
Define two positives of the Boston matrix
- useful tool for analysing product portfolio decisions
- can understand market trends and suggest appropriate marketing strategies
Define two negatives of the Boston matrix
- is only a snapshot of the current position
- market share and market growth are not the only important dimensions to a business
