4. Marketing and Operations Flashcards
a) What is a target market?
b) Why is it important for a firm to-choose its target market early in the process of launching its venture?
(8 marks) 2011
a) A target market is a segment of the population that has been identified as most likely to want or need the product offering.
Target markets are determined by the market segmentation process, whereby a company/ individual segments the the market into different groups according to different demographic and psychographic attributes. The company then targets, within their chosen segment, a group to market their product to.
b) This is an important process to undergo early on because without a target customer, there is no sale or business. Marketing is an important process for a new business because it is the link between the business, the customer and henceforth profitability.
By identifying a target market early on, an entrepreneur can ensure that its product and all the elements of its marketing mix are consistent and suited to the target market. This increases the likelihood of the product being a sucess when it is launched as it appeals to certain group in society.
a) What are the four primary categories of environmental trends?
b) Provide an example of how a trend in each category could affect the toy industry.
(2,6 marks) 2011
- Social
- Technological
- Economic
- Political/legal
- Social - kids don’t like toys anymore, play on PS instead
- Technological - more advanced toys have become popular e.g. electronic board games
- Economic - recession means lower spending
- Political - new regulations
Why is marketing important?
It secures, serves and retains customers by getting the right message to the right customer segment via the right methods
Peter Drucker said:
‘Because its purpose is to create a customer, the business has two basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs’
a) Draw the product life cycle. [3 Marks]
b) Do you consider this model to be helpful when thinking about the development of a new business? Why or why not? [5 Marks]
2010
a) Introduction -> Growth -> Maturity -> Decline
b) It is..
Different stages of a product’s life call for explicitly different strategies. This can help to guide entrepreneurs
The framework prepares management for changes of strategy. (A useful spur given much management inertia)
It isn’t
Time spans vary and can be unpredictable
It varies for different types of products and the environment at the time. For example fashions will peak and fall much earlier than the traditional PLC shape. An entrepreneur could interpret their product as the traditional PLC whereas it is actually a fashion or fad product. In essence, it is only a guide and it may be wrong.
There is the danger that the PLC becomes a self-fulfilling prophecy. If entrepreneurs stick too closely to its theory and act accordingly then it may become reality. This could work to the detriment of the entrepreneur for example rigid adherence to PLC means management can prematurely end the life of a product
Define market segment
A market segment consists of a group with similar needs or wants who reference eachother and may share geographical location, purchasing power and buying attitudes
Outline the Diffusion of Innovation and why it may be useful to a marketing strategy
Innovators
- like risk
- want to be at the forefront of technological development
- Innovators are key because they are gatekeepers; therefore first key to any high-tech marketing effort
Early adopters
- visionaries
- provide info to other potential adopters
- Visionaries represent opportunity, early in a product’s life cycle to generate a burst of revenue and gain exceptional visibility
Early Majority (pragmatists)
- adopts just ahead of the average population
- lengthy decision making process
- pragmatic
- link the early adopters with the bulk of the population
Late Majority
- succumb to innovation from pressure/economic necessity
- conservative
**Laggards **
- most skeptical
- isolated
Why is it useful?
Predicts the rate of diffusion of an innovation and the pattern
May inform marketing strategy e.g. during the innovator stage, strategy is to stimulate trial of product
However, only a framework and should be used as a guide
Crossing the chasm presents a difficulty - transition from early adopters to early majority because it involves bridging the gap between visionaries and pragmatics
Identify the advantages and disadvantages of trying to capture a first-mover advantage.
2011 - 8marks
Advantages
* No competition
* Customer loyalty
* Space/location
* Brand genericization e.g. hoover. iPhone
* Patents, protection
* Learning curve
Disadvantages
* Copy first mover but avoid negatives
* Less risk
* easier to get finance
* Shifts in customer needs
* Incumbent inertia - locked into specific technology
* Cannibalise existing products - taking your own market share
Give the stages of the Adopter Curve
Innovators
Early adopters (visionaries)
Early majority (pragmatists)
Late majority (conservatives)
Laggards
Geoffrey Moore on the Adoption Curve
Geoffrey Moore
Along the technology adoption cycle, firms will need to target different groups of customers with distinctive needs and motivations; this requires different marketing approaches.
Early adopters like a “radical discontinuity between the old and the new”
Early majority want “productivity improvements” and are looking to minimise discontinuity
Therefore you must market to them in radically different ways
How could an entrpreneur ‘cross the chasm’?
Target a niche.
Force your competitors out of the niche
Use that for a base for broader operations
Eg Palm Pilot built a niche with targetting the management teams of high tech enterprises.
They simplified the product and lowered the price
The passion carried over into the next segment of consumers
The chasm was crossed!
What are the differences between a product and a service?
What are the problems and solutions associated with them?
Intangible –services have no tangible element
Inseparable – production and consumption occur simultaneously
Variable – high human contact leads to higher variations
Perishable – services cannot be stored and perish immediately
Problem: Periods of excess supply and demand
Solution: Manage supply and demand explicitly (e.g. differential pricing, part time personnel)
Name and explain two pricing strategies
Price skimming
Start with a high price for early adopters, then reduce the price progressively (good for inelastic demand)
Price Penetration
Penetration Go for maximum market penetration by adopting a low price strategy to attract the largest number of new buyers early on
What is operating leverage?
It is a measure of how revenue growth translates into growth in operating income.
It ismeasure of leverage, and of how risky (volatile) a company’s operating income is. a
Making pricing decisions
Some people are less price sensitive than others
Some products are more price elastic than others
The key to a good pricing strategy is identifying and charging a higher price to those who are less price sensitive and reduce prices of price elastic products
This is called price discrimination
Conditions for effective price discrimination
The firm can control what is offered to particular buyer groups
The firm can prevent the re-sale of the good from one buyer group to another
Works well for perishables e.g. customisable coffee as wealthier individuals pay higher price for drink that costs similar amount to make
Another example, Food manufacturing Large retailers with huge volumes are given lower prices than small corner shops with low volume
Also services - business class airfare vs. economy
