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3.3 Decision making to improve marketing performance > 3.3.2 Understanding markets and customers > Flashcards

3.3.2 Understanding markets and customers Flashcards

1
Q

What is market research?

A

the systematic and objective collation, analysis, and evaluation of information that is intended to assist in the marketing process

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2
Q

What is Primary Market Research?

A

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.

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3
Q

Draw a diagram of examples of primary research

A
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4
Q

What are examples of primary research?

A
  • Focus groups
  • Interviews (online & in-person)
  • Surveys & questionnaires
  • Mystery shoppers
  • Product testing and product trial
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5
Q

What are advantages of primary research?

A

Directly focused on research objectives = fit for purpose
Tends to be more up-to-date than secondary research
Provides more detailed insights – particularly into customer views

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6
Q

What are disadvantages of primary research?

A
  • Time-consuming and often costly to obtain
  • Risk of survey bias – research samples may not be representative of the population
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7
Q

What is Secondary Market Research?

A

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

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8
Q

Give at least 4 examples of the sources of secondary research

A
  • Government publications
  • Newspapers
  • Magazines
  • Company records
  • Competitors
  • Market research organisation
  • Loyalty cards
  • Internet
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9
Q

What are the advantages of secondary research?

A
  • Already gathered so may be quicker to collect
  • May be gathered on a much larger scale than possible for the firm
  • In some cases it can be very cheap or free to access
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10
Q

What are the disadvantages of secondary research?

A
  • Information may be outdated, therefore inaccurate
  • The data may be biased and it is hard to know if the information was collected is accurate
  • The data was not gathered for the specific purpose the firm needs or is not relevant to the original context
  • In some cases it can be costly (e.g. marketing firm reports)
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11
Q

What is market mapping?

A

a framework for analysing market positioning is a ‘market (positioning) map’. A market map illustrates the range of positions that a product can take in a market based on two dimensions that are important to customers

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12
Q

Give examples of dimensions you can put on the axes of a market map.

A
  • Low price v high price
  • Basic quality v high quality
  • Low volume v high volume
  • Necessity v luxury
  • Light v heavy
  • Simple v complex
  • Unhealthy v healthy
  • Low-tech v hi-tech
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13
Q

What are advantages of market maps?

A
  • Help spot gaps in the market
  • Useful for analysing competitors – where are their products positioned?
  • Encourages use of market research
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14
Q

What are disadvantages of market maps?

A
  • Just because there is a gap in the market doesn’t mean there is demand for the product
  • Not a guarantee of success
  • How reliable is the market research that maps the position of existing products based on the chosen dimensions?
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15
Q

What is sampling?

A

involves gathering data from respondents whose views or behaviours are representative of the target market as a whole

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16
Q

What is random sampling?

A

member of target population has an equal chance of being chosen

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17
Q

What is quota/stratified sampling?

A

based on obtaining a sample that reflects the types of consumers from whom the business wished to gain information (e.g. gender, age)

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18
Q

Give advantages of sampling.

A
  • Provides a good indication
  • Helps avoid expensive errors
  • Can be used flexibly
  • Reliable information
  • Helps firms learn about the market quickly
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19
Q

Give disadvantages of sampling

A

May be unrepresentative
Bias
Difficult to locate suitable correspondents
May not have an accurate profile of customers
Can be out of date due to time taken to collate

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20
Q

What are confidence intervals?

A

they measure the probability that a population parameter will fall between two set values

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21
Q

What probabilities can it take?

A
  • The confidence interval can take any number of probabilities, with the most common being 95% or 99%
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22
Q

What are confidence intervals used for?

A
  • It’s used to assess to reliability of sampled data when forecasting figures (e.g. sales levels)
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23
Q

Why are plus or minus numbers used in confidence intervals?

A
  • Plus or minus numbers are used to show the accuracy of statistical results arising from sampling data
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24
Q

What are factors influencing confidence levels?

A
  • Sampling size
  • Population size
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25
Q

How does sampling size influence confidence intervals?

A

the larger the sample, the better the reflection of opinion of the whole population, so confidence levels rise

26
Q

How does the size of the confidence level influence confidence intervals?

A

You can increase the confidence level to give a wider confidence interval, but this can too vague to be helpful – a 99% confidence level may be calculated as 78% or 90% customer satisfaction. This interval doesn’t help a business decide if they met their objective because it includes values below their target of 80%.

27
Q

What is an extrapolation?

A

it is like an educated guess or a hypothesis

28
Q

What happens when you make an extrapolation?

A

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

29
Q

When is extrapolation most useful?

A

Extrapolation is most useful in fairly stable environments, e.g. where the size of the market or the number of competitors is unlikely to change much.

30
Q

What are disadvantages of extrapolation?

A
  • Less reliable if fluctuations occur (e.g. weather is unpredictable)
  • Assumes past changes will continue
  • Ignores qualitative factors (e.g. changes in tastes and fashion)
  • Ignores the product life cycle
31
Q

What are correlations?

A

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

32
Q

What are positive and negative correlations?

A
  • 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
33
Q

What is big data?

A

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

34
Q

How can large data sets be both structured and unstructured?

A

They can be structured through e.g sales transactions from an online store or unstructured through posts on social media for example.

35
Q

Give examples of how the data is generated

A
  • Retail e-commerce databases
  • User-interactions with websites and mobile apps
  • Usage of logistics, transportation systems, financial and health care
  • Social media data
  • Location data (e.g. GPS-generated)
36
Q

State examples of how tech enables more effective marketing decisions.

A
  • Analytics and customer insights - this help businesses track how users and customers use their online products and services
  • Audience reach and segmentation
  • Customer relationship management (CRM)
  • Campaign testing
  • Competitor analysis - software is available to monitor what competitors are doing
37
Q

How does tech enable businesses to make a decision on dynamic pricing?

A

They can use Dynamic pricing software that automates the process of adjusting prices in response to the programmed factors and the large amounts of data it ingests in real-time (e.g., demand, competitor pricing, seasonality, and inventory levels).

38
Q

How does tech enable businesses to make a decision on audience reach and segmentation?

A
  • the widespread use of social media marketing is an example of how technology is enabling businesses to more effective reach their target audience and communicate with them
39
Q

How does tech enable businesses to make a decision based on CRM?

A

this is a technology used to manage interactions with customers and potential customers. A CRM system helps businesses build customer relationships and streamline processes so they can increase sales, improve customer service, and increase profitability

40
Q

How does tech enable businesses to make a decision based on campaign testing?

A

This is a key feature of digital marketing technology. It allows a business to set up more than one (and in some cases many thousands) of different marketing campaigns to test which is most effective.

41
Q

What is Price Elasticity of Demand (PED) ?

A
  • measures the responsiveness of quantity demanded for a product to a change in price
  • = percentage change in quantity demanded / percentage change in price
42
Q

Give examples of what firms can use PED to predict?

A
  • The effect of a change in price on the total revenue and expenditure on a product
  • The likely price volatility in a market following changes in supply – this is important for commodity producers who may suffer big price movements from time to time
  • The effect of a change in an indirect tax (e.g. VAT, fuel or other duties) on price and quantity demanded and also whether the business is able to pass on some or all of the tax onto the consumer
  • Information on the PED can be used by a business as part of a policy of price discrimination – this is where a business decides to charge different prices for the same product to different segments of the market (e.g. peak and off peak rail travel or prices charged by many of our domestic and international airlines)
  • A business contemplating a tactical price-war or planning a promotional discount based on price (e.g. 50% off for a limited period) will want to know how responsive customer demand will be to the pricing tactics used
43
Q

Explain the values of PED.

A
  • If PED = 0 demand is said to be perfectly inelastic – this means that demand does not change at all when the price changes (the demand curve will be drawn as vertical)
  • 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. For example a 20% increase in the price of a good might lead to a 30% drop in demand. The price elasticity of demand for this price change is –1.
44
Q

What are factors affecting PED?

A
  • The number of close substitutes for a good
  • The cost of switching between products
  • The degree of necessity or whether the good is a luxury
  • The % of a consumer’s income allocated to spending on the good
  • The time period allowed following a price change
  • Whether the good is subject to habitual consumption
  • The breadth of definition of a good or service
45
Q

How can the number of close substitutes affect PED?

A

the more close substitutes in the market, the more elastic is demand because consumers can easily switch their demand if the price of one product changes relative to others.

46
Q

How can the cost of switching between products affect PED?

A

there may be significant costs involved in switching between products. In this case, demand tends to be relatively inelastic (e.g. mobile phone service providers may insist on 12 or 18-month contracts being taken out)

47
Q

How can the degree of necessity or whether the good is a luxury affect PED?

A

goods and services deemed by consumers to be necessities tend to have an inelastic demand whereas luxuries tend to have a more elastic demand.

48
Q

How can the % of a consumer’s income allocated to spending on the good affect PED?

A

Goods and services that take up a high proportion of a household’s income will tend to have a more elastic demand than products where large price changes makes little or no difference to someone’s ability to purchase the product.

49
Q

How can the time period allowed following a price change of the good affect PED?

A

demand tends to be more price elastic, the longer that we allow consumers to respond to a price change.

50
Q

How can the good being subject to habitual consumption or not affect PED?

A

when this occurs, the consumer becomes less sensitive to the price of the good in question because their default position is to buy the same products at regular intervals.

51
Q

How can peak and off peak demand affect PED?

A

demand tends to be price inelastic at peak times and more elastic at off-peak times.

52
Q

How can the breadth of definition of a good or service affect PED?

A

if a good is broadly defined, i.e. the demand for petrol or meat, demand is often inelastic. But specific brands of petrol or beef are likely to be more elastic following a price change.

53
Q

What is Income Elasticity of Demand (YED)?

A

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

54
Q

What are normal goods’ YED?

A

Normal necessities have an income elasticity of demand of between 0 and +1 for example, if income increases by 10% and the demand for fresh fruit increases by 4% then the income elasticity is +0.4. Demand is rising less than proportionately to income

55
Q

What are luxury goods YED?

A

Luxury goods and services have an income elasticity of demand > +1 i.e. demand rises more than proportionate to a change in income – for example a 8% increase in income might lead to a 10% rise in the demand for restaurant meals.

56
Q

What are inferior goods and how do they exist?

A

Inferior goods have a negative income elasticity of demand, meaning that demand falls as income rises. Typically inferior goods or services tend to exist where superior goods are available if the consumer has the money to be able to buy it (e.g. the demand for cigarettes, low-priced own label foods in supermarkets and the demand for council-owned properties)

57
Q

What is YED usually strongly positive for? Give examples

A
  • 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)
58
Q

What is YED lower for? Give examples

A
  • 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
59
Q

What are limitations of using elasticity to make marketing decisions?

A
  • 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
60
Q

How does data help to make effective marketing decisions?

A

Data helps to make effective marketing decisions as it is accurate and can provide reliable results.

61
Q

When is marketing analysis needed?

A
  • Forecasting sales for new products or investments into new markets
  • Gathering evidence to support a finance raising exercise
  • To support a new marketing strategy or significant changes to the marketing objectives
  • To help make decisions in relation to significant organisational or operational change

3.3 Decision making to improve marketing performance (4 decks)

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