Business 1 Flashcards
What is a mass market
— where a business targets a large population of the market with a generic product
— compete with many other business in the markets
Advantages of disadvantages of mass market
Advantages
— potential of economies to scales= products and services can be produced and distributed at a larger scale= lower production costs= higher profit margins
— lower price = greater affordability and higher sales volume= high revenue, able to invest in more r and d, easier to afford larger advertising campaigns
— wide potential customer base= large market= more likely to attract many customers= build strong brand recognition = customer loyalty = market share
Disadvantages
— lots of competition = due to MM attract many business a there’s less risk= customer have choice= competition with customers = price wars= lower profit margin
—product so similar= must be differentiated through marketing or else won’t survive= however is expensive
— high volume production= not flexible to demand changes
What are niche marketing
— targets small population of the market with specialized products.
— identify and satisfy demand of a small group of consumers
Advantages and disadvantages of niche marketing
Advantages
— less competition in a specific market= higher survival rate= less chance of business failure
— able to charge higher prices= higher profit margin as its specific to consumers needs and wants, there will be more willing to pay more of the expertise
— consumer tend to be more loyal= inelastic PED= repeated purchase
Disadvantage
— high prices= products less affordable = lower sales volume
— less competitive but fewer customers= less profit
— vulnerable to market change= risk over dependence on a single product
— likely to attract attention if successful
What are sales volume
Is the number of products sold ( total quantity
Sales revenue= price x quantity sold
What is market share
— is the proportion of a particular market held by a business. Use as a measure of success
Sales of a business/ total sales in the market x 100
What is a brand
— is a name, image, logo which helps one p/s stand out from its competitors
— one way to achieve product differentiation
— it adds value, makes product more desirable to consumers
—business operating in MASS market= use branding to stand out
— NICHE use branding to communicate their offspring to small group of consumers
—strong brand = able to charge higher prices
— improves customer loyalty and brand recognition
— strong increase in demand= reduce marketing cost
What is a dynamic market
— is a market that subject of rapid and continuous changes
— many market becoming more competitive and change is inevitable
— those that don’t adapt= less likely to survive in the long run
— business with monopoly power= might not face the same dynamic pressure as a business in more competitive markets
Factors that determine type and pace of change
— changing customer taste and preferences e.g. consumers desiring electric vehicles
— impact of technology
— change in economic environment ( economic growth)
— legislation s.g. Laws around environmental standards can create new market
— innovation
Static market = not dynamic
Implication of dynamic market
— often greater need for innovation
— involve higher cost= business needs to adapt to recognize and adapt to changes quickly
How successful business adapt in dynamic market
— investment in new tech— online retailing
Advantages
— provides business access to more customers internationally
—cheaper, lower fixed and variable cost = don’t need stores
— business can collect data by tracking consumer behavior = helpful primary research
— open 24 hours
Disadvantage
—high cost for maintenance, website development, promotion
—online retailing dominates market by larger business that are well know e.g. Amazon
— high levels of competition= expensive to stand out through differentiation
What is innovation
— involves the adaption or improvement of existing products e.g. improved video cameras on laptop
— carrying better market research to have a better understanding on customer needs
How competition affects market
Definition:competition = when 2 business are providing g/s to the same target market
high level of competition:
— lost of choice
— cheap= good value for money
— incentive to innovate
Low levels of competition:
— high price
— poor service= don’t care about customer needs as much
— limited choice
— little incentive to innovate
The difference between risk and uncertainty
— risk can be calculated and prepared for/ uncertainty can’t as they are unexpected events
— risk is the potential threat to a business success= exist as entrepreneurs commit resources that could be loss s.g loss of key staff
— uncertainty is when outcome difficult to predict
— exist as business operate in ever changing environment e.g. recession
One way to adapt
— changing needs of customers by carrying out market research= able to find what prices they are willing to pay and the most popular
= ensures products are in high demand= may involve adapting to trends
What is market research
Definition— involves gathering and analyzing qualitative and quantitative data about the market
A key indicator of:
— anticipating the future needs and wants of customers
— to identify consumer demand
— reduce risk when launching new products
What are primary research and the advantage and disadvantage
Definition: is the research collected first hand= comes directly from consumers in the target market
Such as observation surveys
— gathering info that’s new
Advantages
—info gathered is specific to needs of the business
— more up to date= reliable
— business can get in depth info from respondents such as the reasons behind certain behaviors
Disadvantage
—sample size may be too small= unrepresentative for all consumers= unreliable result
— bias= respondent may answer question in a particular way, also researcher can guide respondents = inaccurate
— expensive and time consuming = may need to hire specialists
Secondary research and the advantages and disadvantages
Definition: involves the gathering and analysis of data that already exist
Such as websites, market research reports, newspapers
— conducted by another organization
Advantages
— easily accessible= good starting point= suitable for start up business
— is cheaper to collect= lower cost compared to primary research
— often better if you want qualitatively data
Disadvantage
—info may not be up to date or specifically tailored to business needs
— detailed reports can be expensive to purchase
— may not be factually correct e.g. Wikipedia
What is Sampling and evaluation of it
— it involves selecting a representative group of people from a target population
— bigger the sample= more representative
— quicker and easier than collecting research from everyone
What is product orientation and evaluation of it
— product differentiation is an inward looking approach to marketing that focus on characteristics of products rather than the needs of the consumer
— focus on creating a product first then finding a market
Advantage
—potential EOS for maximum efficiency at lower cost
— focus on regular innovation, quality= can attract customers= able to compete
Disadvantage
— neglects consumers need and wants= low demand= increase risk of business failure
— expensive to conduct research and development
— lead to wastage and increase cost
What is market orientation and evaluation in that
— outward looking approach focus on the need of customers and used this info to develop products that need customers needs
Advantages
— benefit from increase demand= increase profit= value brand image as its products more desirable
— repeated customer = improve long term profitability
Disadvantage— product less likely to be unique= more competition
— challenges to responding to market changes= may not be sustainable in the long run
Evaluation
— more successful business tend to have MO= business can only succeed in competitive market= if they meet customer needs better than rivals
— however PO more appropriate when there little competition or info available
How can the use of ICT support market research
— company website- allow buskers to collect primary data more cheaply e.g. tracking consumer searches and analyzing customer reviews
Also collect secondary data about rivals e.g. prices
— databases -used to store large amount of customer info e.g. Tesco loyalty cards= effective in collecting customers email so they targeted customers can be surveyed later via email
— social networking- gathering info about consumers via online social channels e.g. twitter= useful running surveys, tracking opinion= so able to see trends
What is market segmentation
— is the process in which a single market is divided into sub markets that reflects different customers needs and wants
- firms often segment their market according to factors:
—age
— income
— location
— gender
—lifestyle
— culture and ethnic origin
— occupation
The advantage and disadvantage of market segmentation
Advantages
— identified and satisfy the needs of a specific group of customers= targeted more precisely = helps make the marketing mix more effective such as better targeting for promotion
— develop and build its brand= new product development = may increase loyalty if consumers feels that their needs are being met= repeated purchase
—differentiate itself from its competitors
Disadvantage
Markets are increasingly dynamic and fast changing so too are the segments
— segment may be identified but it may be too small and unprofitable to cater
— require detailed market research = costly
What is Market positioning
— refers to the process business goes through when launching a new product or service.
— involves deciding on the nature and characteristics of the p/s it sells and who its target market is. Based on quality, price and branding
Market mapping, analysis and evaluation
Definition- a tool for identifying position of a product within a market in comparison to rival products based on 2 relevant characteristics
—market map analysis:
- if there’s no space left in market map= market is saturated= completion very high= profit low
— however existence of a space on map met indicate existence of a market niche
— needs to be research carefully
Advantages
— market gaps can be identified which may enable a business to come up with new products
— useful as a market research tool to gain understanding of customer perception
Disadvantage
— gap in the market may exist due to it not being profitable to fill
— mapping a market may require primary research= expensive
— only 2 criteria can be chosen = too simplistic
Definition of competitive advantage
— refers to feature of a business and its products that are perceived as superior to its rivals by customers
— it’s how firm product is made both distinctive and defensible
Sources of competitive advantage
— price
— reliability
— brand image and reputation = hard to compete
— quality
— ethical stance
— customer service
— design
Also include innovation, building stint relationship with stakeholders, price leadership
What is product differentiation
— is an attempt by a business to distinguish its products from those of competitors
Can be achieved through:
— developing unique brand characteristics and features = help stand out
— offering price that undercuts competion
Strong product differentiation= develop its competitive advantage
— helps firms to create a USP( something that makes a business distinguishable)
— successful pd= increase demand for its product = increase brand loyalty
— also business can charge higher prices
E.g. fair trade
What is adding value
— is the difference beteeen the price of the finished product/s and the cost of input involved in making it
Methods of adding value
— packaging = create exciting opening experiences for customers
— marketing g and branding= build awareness and customer loyalty = able to charge high price
— speed of service
— USP= allows firm to charge a high price for its products = increase added value
— good customer service
— customization— allowing customers to design and create their products= allows firms to charge a higher price
HOWEVER adding value = raise cost but worth it if the increase in selling price outweighs the cost
What is a marketing mix
A framework for business to create and implement successful marketing strategies
— key elements:
Product- refers to the design and features/ should meet consumer needs/wants ( product life cycle, Boston matrix)., price( refers to how much consumer will pay),( price skimming , penetration
place, - how the product gets to the customer( retail, online, channel of distribution) - is it accessible
promotion- how you communicate your g/s
— 4 component work together to satisfy needs and want of a target market
- analysis / evaluation
Depends on competition, time, technology
What is a design mix
— refers to combination of element that make up a product design. Includes function, aesthete and cost
— balancing will help the product design be cost effective
Functions— refer to the intended purpose and specific tasks its design to perform
Also refer to its benefits it provides
It’s the most important aspect as it determines how well product will meet the needs
Features they successfully emphasize function in the design mix
- longer product life cycle
- build a reputation for quality based on reliability
- lower promotional cost
- features may create a USP= competitive edge over rivals
Aesthetic— refers to the appearance, the style of the product, include the shape, color and texture
Important for attracting customers creating brand loyalty
- high added value
- attracts imitation = need for design protection
- effective way to differentiate product
- needs to fit the segment that business is targeting e,g high income segment= high quality components and packaging
Cost— cost of production
Well designed product should balance cost and value = ensuring customer product is valuable enough to justify the cost while maintaining profitability
However Cutting cost could have an effect on design
How can social trends impact product design mix
— social trends refer to changes in attitudes, behavior and lifestyle of people
Change as a result of resource depletion:
- customers became aware of need to conserve natural resources and reduce waste
- the product design mix may change for waste minimization, recycling, produced products sourced ethically
Resource depletion is the consumption of resources quicker than they can be replenished
What are ethical source
— products are produced without exploitation of workers or environmental damage such as 100% slave free
- business only use materials and services from suppliers who care and respect the environment
— paying workers fair wage
Sustainability involves making a product without affecting the long term supplies of the input into product
-Source input that are not supplied by damaging environment
- minimize waste in production
- enable recycling or re-use
-sustainable supply chain
Benefits of adapting to changes in social trend
- in long term =waste minimization such as use of automation in production process=cost cut, more effort use of resources, improve quality, lower defects
- re cycling - many customer placing increasing importance on reusable products
- reflecting social trends= likely to sell large quantities= positive reputation = adds value to their product and service = willing to pay high prices
- social trend can be used as a USP to differentiate p/s
HOWEVER
There’s a trade off between ethic and profit
- being ethical= lower profit= no longer exploiting producers = increasing cost
- lower profit= increase prices= could lead to low sales may be to law of demand= less sales= less revenue
BUT
If ethical- lead to more customers, attracts attention from ethical investors
It depends on
- target market, consumers could be environmentally conscious
- it depends on the finance- may not have the finance= may need to find a source= but may not achieve profit max
-
What is promotion
— key method business will use to communicate with its customers and potential customers
— crucial role in generating customer awareness, interest
— also helps build loyalty= repeat purchase
There’s above the line promotion- involves any form of advertising through media such as tv, billboards, newspapers, radio
- includes mass communication platforms that target the general population
Below the line- include any form of promotion that’s targets specific audience with digital media assets such as sales promotion, public relations, packaging, email marketing
Types of promotion)
(Advertising, direct marketing, sales promotion and digital communications)
Advertising— promotion occurs through paid channels such as tv, radio and mags
✅ reach large audiences = brand awareness. Since reaching large audience, want to stand out, gains attraction= better quality products
✅ persuade customers= showing the benefits= increase Sales and demand
❌expensive
❌ many customer ignore ads = not cost effective
❌ only showing benefits= not satisfied at the end= bad reputation
Direct marketing— communicating directly with customers through email, message, social media
✅ business can personalized their message to specific customers= increase brand loyalty as you are catering to hit needs= maintain clients in the ongoing run
✅ also measurable= enabled to track results( in who open the message)and adjust strategy= then able to improve customer satisfaction
❌ not effective- unwanted spam emails= customer may find it irritating= harm brand loyalty
❌ limited reach - depend on budget
Sales promotion- marketing technique- encourages purchase of a product/service by offering temporary discounts such as free sample, coupon, loyalty cards
✅ quickly gain sales= demand or customer engagement = revenue
✅ helps clear out stock or promote new product
❌ can attract deal seeking customers= not loyal to the brand = customer are more price sensitive= short term
❌ may reduce sales of full priced products
❌ Amy range brand image= customers may anticipate further promotion
Digital communication- communication delivered electronically such as social media
✅ wider reach, increase brand awareness and feedback from customers
❌ easily ignored by customer
❌ significant investment in tech or will suffer faults
❌ increase in competition
Types of promotion
( personal selling, sponsorship and PR)
Personal selling— when a salesperson interacts with potential customers one to one
✅ allows to build relationship with customer = understood their specific needs= higher revenue= build customer loyalty
✅ enables business to provide personalized advice, guidance
❌ expensive due to cost of hiring, training staff
❌ limited impact= difficult to scale to large audience
Sponsorship- agreement which company provide financial support to event, team or organisation in exchange for exposure
✅ build brand awareness= attract media attention, create emotional connection with the target audience
✅ support specific business objective such as entering new markets or reaching new customers
❌ can be expensive may not directly drive sales= so no guarantee success
❌ may be subject to negative publicity if sponsored entity experience scandal= negative brand image
PR- . This is how info about company I shown to public.business seeks to build relationships with the public, manage their reputation.
✅ enhance business reputation= strengthen brand image== increase loyalty and sales= cost effective
✅ attract investors
❌ qualitative = time consuming
❌ difficult to measure direct impact of PR activists on profit
Influences on promotion
- technology— helps business reach to the right people
Subscription service allow buskers to target customers with Elena’s message and irrelevant info
— promotional budget- determines method, geographical reach
— target audience
— message e.g. sponsoring a sporting event could encourage association of healthy eating
Importance of branding
— establishes recognition and identity
— differentiates
— build customer loyalty = generates emotional connection with customers = generate repeat purchases
Types of branding
Manufacturing branding- refers to use of company name and logo to promote all the products or services offered by company. E.g. nestle, apple
✅ create a strong brand recognition and reputation = customer loyalty
✅ more easily introduced new products= reduce marketing cost= increase profit
❌if company reputation damage by a product = can have a negative impact on all product offered under the brand
❌ company may face intense competition= affect sales of the products
Product branding- refers to the use of a unique name, design or symbol to promote specific produc such as as Coca Cola, McDonald Big Mac
✅ creates a distinctive identity from the products = helps differentiate = increase brand loyalty
✅ helps build customer loyalty and trust by associating product with a specific quality and benefit
❌ cost of creating and promoting a new brand for each product can be expensive
❌different products within the brand may have different levels of quality = affect customer satisfaction
Own brand product- refers use of retailers name to promote a specific p/s and is often used by supermarkets
Such as Asda chocolate, Tesco finest
✅ helps retailers differentiate themselves from competitors by offering unique products
✅ build customer loyalty by offering exclusive product that’s not available elsewhere
✅ allows retailer to offer products at a lower cost than branded products= increases demand and sales= profitability
Disadvantage
- own brand products may have lower perceived quality than branded products which affect customer loyalty and trust= lower demand
The benefits of branding
— strong branding= add value to a product by creating a perception of quality, reliability and trust= makes it desirable
— able to charge premium prices= willing to pay more to product associated with well established brand= perceive higher quality
— strong branding = reduce price elasticity of demand= less entice as customer who are loyal to brand= more likely to continue to purchase even if price increase= repeated purchase = customer loyalty increase in long run
Ways to build brand
— USP- feature that… e.g. apple known for its innovative products
— advertising— create compelling acts that resonates with their target audience= raise brand awareness = creating emotional connection with audience= inspire brand loyalty
—sponsorship- partnering with ____ to gain exposure= build reputation by aligning with positive association
— social media- gold a loyal following= building a community
Changes in branding and promotion to reflect social trends
Viral marketing- a strategy where business use online platforms to promote their products by creating content at specific times= easily shared and commented
Emotional branding- building strong emotional connection with customers by appealing to values, beliefs
Such as a good cause- commitment for environmental and social care
Social media- promoting brand on social media= attract followers, e.g. insta, tiktok
Pricing strategies
Cost plus— a business based a price on the unit cost and then adds a % as a markup
The markup covers the COP plus the business desired profit margin = therefor effective
This pricing strategy is simple, commonly used by manufacturers that produced standardized goods e.g. washing machine
Price skimming— the business sets a high price for a new P/S when its first introduced to markets
- it’s in high demand= effective when established brand brand introducing new product or service such as apple phone
— high price= help recover its development and marketing cost quickly
— business then gradually lower price to ensure sales continues
Penetration— business sets a low price when first introduced
Effective when they want to capture market share, attract price sensitive customers= once gained enough customers= the business start to raise price
E.g. perfume launch
Predatory pricing— business sets low price that drives out competition out of the market, business may make a loss until the competitor fails.
This strategy considered anti- competitive = harms consumers by reducing choice in the market
Competitive— business set its prices based on its competitors prices
, effective when a business is in a highly competitive market, wants to maintain its market share
Business must continually monitor its competitors price, adjust its price to remain in competition
Psychological pricing— business based prices below the next whole number to trick consumers into thinking the prices are lower. E.g. 9.99 psychologically appear cheaper than 10 pounds = so this strategy takes into account how customer belief and attitude towards p/s
Factors influencing the choice of pricing strategy. ( base CCP)
— amount of differentiation= products with many USP= high differentiation = can charge premium prices
— price elasticity
business should set low prices if produces price elastic
Business shouldn’t higher prices if products price inelastic
— level of competition
High competitive market= set prices low to remain competitive e.g. budget airline
— strength of brand= strong brand with loyal customer base can command higher prices e.g. Nike allow to charge premium prices
— cost and need to make a profit= prices must cover the COP and provide a reasonable profit margin
E.g restaurants must consider cost of ingredients, labour rent. When setting nee price
— stages in product life cycle= in introduction stage= penetration pricing more appropriate = attract customers= builds market share
- growth stage = prices can increase as there’s increase in demand for the product
— maturity stage, prices may need to be lowered again
Adapting prices to reflect social change
Subscription pricing— business charges customers monthly fee to use a service. Suitable for online services
Personalized pricing— technology online databases collect customer info= allow business to target them with personal prices
Price comparison sites- such as triage makes it easier for customers to compare prices and choose best deal. Business have to remain competitive
What is distribution
Is the delivery from the producers to consumers
— traditional channel is the 4 stage distribution = producers, wholesaler, retailer, Consumer
Commonly used for groceries
— two stage distribution( direct channel) producers to consumers. Commonly used for products that’s sold online
— 3 stage distribution channel— often used for products with high profit margin= manufacturer can afford to sell directly to retailer and still have more profit.
Or products just have high demand
( producers to retailers to consumers)
Multi distribution - involves a business using more than one type of distribution channel
Changes in distribution to reflect social trends
— the growth of e commerce
Online distribution has become increasingly popular due to accessibility it offers to consumers
Many business now use drop shipping = allows them to sell products without holding stock ( direct channel) shipped directly from producers to consumers
- reduce cost, complexity for distribution
- easier for business to sell online
— many business now generate bulk of their sales like selling on Amazon
Increase service based business— distribution for service based business involves delivering service to customer directly through mobile app or websites
Such as Uber delivers or taxi service though all.
Service distributed directly to customers without need for wholesalers or retailer = reduce cost=increase profitability
