Business Studies Marketing

Question 1

What is the strategic goal of marketing, and its major goal?

Answer 1

The strategic role of marketing: is the long-term process of implementing a market mix which includes product, price, place and promotional strategies to satisfy the needs and wants of present and potential customers which will enable the business to increase sales and market share and achieve long term profit maximization.

Marketing’s major goal is: Profit maximization: occurs when there is a maximum difference between total revenue coming into the business and the total costs being paid out.

Question 2

What is interdependence?

Answer 2

Interdependence refers to the mutual dependence that the key business functions have on one another.

Question 3

What is the production approach?

Answer 3

The production approach allows for businesses to focus on improving the production methods used to make goods and services. The Industrial Revolution created huge consumer demand for goods that production could not keep up with so as long as businesses made the product, the consumer bought it. There is little regard for consumer needs and selling was now secondary. Under this approach, marketing consisted of simply taking orders and delivering products.

Question 4

Selling approach?

Answer 4

The selling approach emphasises selling due to increased competition in the marketplace. During the time of depression, there was overcapacity, supply > demand, lots of competition, this resulted in the hard sell approach. Focus was on promotion and less emphasis on quality products and efficient financing. This approach emphasised persuasive sales techniques to convince the consumer to purchase the business’s products.

Question 5

Marketing approach?

Answer 5

The marketing approach focuses on finding out what consumers want through market research. An increase in discretionary income has meant businesses can focus not just on customers’ needs BUT also wants. Businesses must now identify customer wants before production. There are 3 focuses on the marketing approach:
- Corporate Social Responsibility: growing public concern over the environment has meant marketing managers must ensure products meet ecological expectations while promoting this.
- Customer orientation: involves collecting customer information and using this to create efficient and effective strategies.
- Relationship marketing: Is the development of long-term and cost-effective relationships with individual customers.

Question 6

Types of markets?

Answer 6

Resource market
Consists of individuals or businesses engaged in all forms of primary production e.g. mining, agriculture, forestry

Industrial market
Includes industries and businesses that purchase capital goods.

Intermediate market
Consists of wholesalers and retailers who purchase finished products and resell them to make a profit e.g. furniture stores

Consumer market
Consists of individuals who consume or use goods and services.

Mass market
The seller mass produces, distributes, and promotes one product to all buyers.

Niche market
A specialised market segment with specific needs.

Question 7

Psychological factors affecting consumer choice?

Answer 7

Psychological Influences
Definition: Psychological factors are personal factors within an individual that affect their decisions and preferences.
* Perception is the process through which people select, organise, and interpret information to create meaning. Marketing managers are extremely aware that they must create a positive or favourable perception about their product in the mind of the consumer – they will not normally purchase a product that they perceive as inferior.
* A motive is the reason that makes an individual do something – these include: comfort, health, safety, ambition, taste, pleasure, fear, amusement, cleanliness, and the approval of others. Advertising attempts to motivate the customer to buy the product.
* An individual’s personality is the collection of all the behaviours and characteristics that make up that person.
* An individual’s self-image relates to how a person views himself or herself – we all have an image of who we are, and we reinforce this image through our purchases.
* Learning refers to changes in an individual’s behaviour caused by information and experiences. Successful marketing strategies may assist customer learning that encourages brand loyalty (favourable attitude towards a single brand resulting in repeat sales).

Question 8

Sociocultural factors affecting consumer choice?

Answer 8

Definition: Sociocultural influences are forces exerted by other people and groups that affect an individual’s buying behaviour.
* Social class or socioeconomic status refers to a person’s relative rank in society, based on his or her education, income, or occupation. Social class influences the type, quality and quantity of products a customer buys.
* Culture is all the learned values, beliefs, behaviours, and traditions shared by a society – these influences buying behaviour as it determines what people wear, what and how they eat, and where and how they live.
* Different family roles influence buying behaviour – e.g., most women still make buying decisions related to healthcare products, food, and laundry supplies.
* A reference or peer group is a group of people with whom a person closely identifies, adopting their attitudes, values, and beliefs. The rest of the group may influence an individual’s buying behaviour. Alternatively, if friend buys expensive clothes, so will you.

Question 9

Economic factors affecting consumer choice?

Answer 9

Economic forces influence a business’s capacity to compete and a customer’s willingness and ability to spend.
* A boom is a period of low unemployment and rising incomes and therefore businesses increase their production lines and attempt to increase their market share. Customers are willing to spend and therefore marketing potential is large during this time.
* A recession sees unemployment reach high levels and incomes fall dramatically. This means that customers reduce their spending – and therefore marketing plans should stress the value and usefulness of product.

Question 10

Government factors affecting consumer choice?

Answer 10

The government implements a variety of policies at different times to influence the level of economic activity. These policies directly or indirectly influence business activity and customers spending habits. Laws such as the Competition and Consumer Act 2010 (Cwlth), Sale of Goods Act 1923 (NSW) and the Fair-Trading Act 1987 (NSW) – all influence marketing decisions. Governments also play an important social role in influencing customers’ purchasing behaviour. Age restrictions on the purchase of alcohol and tobacco and censorship warnings on television programs and films reflect the government’s role in promoting social responsibility in the community.

Question 11

What are consumer laws

Answer 11

Definition: Consumer Laws are laws that influence the marketing practices of businesses by setting clear standards for interaction with customers and the promotion of products, such as the Australian Consumer Law (ACL) which regulates business practices and consumer transaction.

Question 12

What is the Competition and Consumer Act?

Answer 12

The Competition and Consumer Act 2010 protects consumers against undesirable practices, such as misrepresenting the contents of products, their place of production, and misleading and deceptive advertising, and regulates certain trade practices that restricts competition. It is enforced by the Australian Competition and Consumer Act (ACCC) and the Australian Securities and Investments Commission (ASIC). Businesses must make sure they are up to date with the current laws and that they apply them to them to all marketing practices. Any breaches of any consumer protection provisions can result in the ACCC taking civil or criminal proceedings against the business. The maximum penalties for companies per breach of the ACL were increased to $10 million or 10% of annual turnover in the preceding 12 months. Penalties against individuals under the ACL also increased to $500,000 per breach.

Question 13

Deceptive and misleading advertising?

Answer 13

Definition: Deceptive and Misleading Advertising is false or misleading claims in advertising. When a business makes any representation, the business must ensure that the representation is not untrue or false and is not likely to mislead the type of consumers at which the advertisement is targeted. Even though illegal, a number of methods are still used by some businesses.

Question 14

Price discrimination

Answer 14

Definition: Price discrimination is the setting of different prices for a product in separate markets. Can occur legally as long as the different prices are for legitimate reasons. The difference in price is possible because:
* The markets are geographically separated.
* There is product differentiation within the one market.
This prohibition also applies to discounts given, credits, rebates, services, and payment arrangements. This means that a business cannot give favoured treatment to some customers. It is enforced by the ACC.

Question 15

Implied conditions?

Answer 15

Definition: Implied conditions are the unspoken and unwritten terms of a contract. The Australian Consumer Law established consumer guarantees, providing customers with rights to certain remedies from retailers and manufacturers where goods purchased fail to comply with the consumer guarantees provisions in the ACL.
* Most important implied term is acceptable quality - products that are safe, lasting and with no faults, look acceptable and do all the things someone would normally expect them to do.
* Fit for purpose means that the product is suitable for the purpose for which it is being sold.

Question 16

Warranties?

Answer 16

Definition: A warranty is a promise made by a business that they will correct any defects in the goods that they produce. The law requires businesses to clearly state the terms and conditions of the warranty. False or misleading statements concerning the existence, exclusion or certain conditions of the warranty are prohibited under the ACC. Also regards refunds and exchanges.

Question 17

Ethical marketing?

Answer 17

Definition: Ethical Marketing is honest, transparent, and morally responsible marketing practices.
* Ethical issues: moral factors that affect marketing decisions beyond legal requirements.
* Critics of marketing argue that it lacks a strong code of professional conduct and sometimes blurs the lines between what is ethically right and wrong.

Question 18

Situational analysis?

Answer 18

Definition: Situational analysis is the use of SWOT and product life cycle to determine where a business is positioned compared to its competitors.

Question 19

SWOT analysis?

Answer 19

Definition: A SWOT analysis involves the identification and analysis of the internal strengths and weaknesses of the business, and the opportunities in, and threats from, the external environment.

Question 20

Product life cycle?

Answer 20

Definition: The product life cycle consists of the stages a product passes through introduction, growth, maturity, and decline.

Question 21

Product life cycle stages?

Answer 21

Introduction Stage: The business tries to increase consumer awareness and build a market share for the new product.
* Product brand and reliability are established.
* Price is often lower than competitors.
* Promotion directed at early buyers – and communication educates potential customers.
* Distribution is selective – consumers form an acceptance of the product.

Growth Stage: The producers of the product actively pursue brand acceptance and market share.
* Product quality is maintained and improved, and support services may be added.
* Price per unit of production is maintained - increased customer demand and market share.
* Promotion now seeks a wider audience.
* Distribution channels are increased as the product becomes more popular.

Maturity Phase: Sales plateau as the market becomes saturated:
* Product features and packaging try to differentiate.
* Price may need to adjust downwards to hold off competitors.
* Promotion continues to suggest the product is tried and true – the best.
* Distribution incentives may need to be offered to encourage preference over rival products.

Decline Stage: Sales begin to decline as the business faces several options:
* Product maintained with some improvements or rejuvenation.
* Price is reduced to sell the remaining stock.
* Promotion discontinues.
* Distribution channels reduced and product offered to a loyal segment of market.

Question 22

Market research

Answer 22

Definition: Market research is the process of systematically collecting, recording and analysing information concerning a specific marketing problem. There are three main steps of the market research process:
* Determining information needs
* Data collection (primary and secondary)
* Data analysis and interpretation.

Question 22

Marketing data?

Answer 22

Marketing data refers to the information – usually facts and figures – relevant to the defined marketing problem.

Question 23

Types of marketing data?

Answer 23

Primary data are the facts and figures collected from original sources for the purpose of the specific research problem.
* Surveys involve the gathering of data by asking or interviewing people.
o These include personal interviews, focus groups, electronic methods of collection and questionnaires. The benefit of a survey is that it gathers customers’ opinions.
* Observation involves recording the behaviour of customers – the actions of the customers are systematically observed.
* Experiments involve gathering data by altering factors under tightly controlled conditions to evaluate cause and effect.

Secondary data comprises information that has already been collected by some other person or organisation.
* Internal Data is information that has been already collected from internal sources.
* External Data is published data from sources outside the business.

Question 24

Statistical interpretation analysis?

Answer 24

Statistical interpretation analysis is the process of focusing on the data that represents average, typical or deviations from typical patterns.

Question 25

Marketing objectives definition?

Answer 25

Definition: Marketing objectives are the realistic and measurable goals to be achieved through the marketing plan. These objectives should be closely aligned with the overall business goals, but more-customer orientated than the goals for the entire business. Objectives should be SMART – Specific measurable, achievable, realistic, timely.

Question 26

Examples of common marketing objectives (x3)?

Answer 26

Increasing Market Share
Market share refers to the business’s share of the total industry sales for a particular product. Increasing market share is an important marketing objective for businesses that dominate the market, because small market gains often translate into large profits.

Expanding the Product Mix
The product mix is the total range of products offered by a business. Businesses wish to expand their product mix as this will increase profits in the long term due to changing customer tastes and preferences, and demand for a particular product may decrease. Each item in a product line should attempt to satisfy the needs of different target markets.

Maximising Customer Service
Customer service means responding to the needs and problems of the customer. High levels of customer service will result in improved customer satisfaction and a positive reaction from customers. This leads to a solid customer base and possibility of repeat purchases. The strategies a business could use to maximise customer service include and establishing and maintaining long term relationships with customers, encourage employees to focus their attention on the customer’s needs (customer-oriented) and not just on making a sale (sales-oriented).

Question 27

Target market? and primary and secondary target markets?

Answer 27

Definition: A target market is a group of present and potential customers to which a business intends to sell its product. A primary target market is the market segment at which most of the marketing resources are directed. A secondary target market is usually a smaller and less important market segment.

Question 28

Three types of marketing approaches?

Answer 28

Mass Marketing Approach
In a mass market, the seller mass-produces, mass-distributes, and mass-promotes one product to all buyers. The mass marketing approach assumes that individual customers in the target market have similar needs. One type of product is produced with little to no variation, with one promotional program aimed at everyone, one price, and one distribution system used to reach all customers.

Mass Segmentation Approach
Market segmentation occurs when the total market is subdivided into groups of people who share one or more common characteristics. Segmenting a market enables a business to design a marketing plan that meets the needs of a relatively uniform group.

Niche Market Approach
In a sense, the niche market is a segment within a segment, or a ‘micro-market’. For example, an exclusive fashion boutique can carve out a niche market and, therefore, avoid direct competition with large department stores.

Question 29

Marketing strategies definition?

Answer 29

Definition: Marketing strategies are actions undertaken to achieve the business’s marketing objectives through the marketing mix.

Question 30

Implementing and monitoring?

Answer 30

Definition: Implementation is the process of putting the marketing strategies into operation. It involves the daily, weekly, and monthly decisions that have to be made to make sure the plan is effective.

Monitoring
Definition: Monitoring means checking and observing the actual progress of the marketing plan. The information collected during the monitoring stage is now used to control the plan.

Question 31

Controlling?

Answer 31

Definition: Controlling involves the comparison of planned performance against actual performance and taking corrective action to make sure the objectives are attained.

Developing a financial forecast
* requires a cost and a revenue estimate.
* comparison allows the marketing manager to evaluate the effectiveness of the marketing plan.
* A financial forecast is the business’s predictions about the future and details the costs and revenues for each strategy.
* By measuring the sales potential and revenue forecasts (benefits) for each strategy and comparing these with the anticipated expenditures (costs), a business is in the best position to decide how to allocate its marketing resources.

Comparing actual and planned results
Performance indicators are the means by which a business can measure its performance and evaluate the degree to which the business is achieving its objectives. Sales analysis, market share analysis, and marketing return on investments are the three key performance indicators used to measure the success of the marketing plan.

Sales analysis refers to comparing of actual sales with forecast sales to determine the effectiveness of the marketing strategy. Strength - sales figures are relatively inexpensive to collect and process. Weakness – data for sales revenue do not reveal the exact profit level.

By undertaking a market share analysis, a business is able to evaluate its marketing strategies as compared with those of its competitors - reveal whether changes in total sales have resulted from the business’s marketing strategies or have been due to some uncontrollable external factor.

Marketing ROI measures how much revenue a marketing campaign is generating compared to the cost of running that campaign.

Revising the Marketing Strategy:
Once the results of the sales, market share and profitability analysis have been calculated, the business is now in a position to assess which objectives are being met and which are not. Based on this information, the marketing plan can be revised. There are three different ways to revise the marketing strategy. The marketing mix will constantly need to be revised. Changes that could be introduced include product modifications, price modifications, promotion modifications, and place modifications.

New Product Development:
If a business wants to achieve long-term growth, it must continually introduce new products.

Product deletion is the elimination of some lines of products. Outdated products may create an unfavourable image and this negativity may rub off on other products sold by the business. When a product is in the decline stage, a decision will eventually have to made to either delete or redevelop the product

Question 32

Market segmentation?

Answer 32

Definition: Marketing segmentation occurs when the market is subdivided into groups of people who share one or more common characteristics. The main aim of market segmentation is to increase sales, market share, and profits by better understanding and responding to the desires of the different target customers.

Question 33

Types of marketing segmentation approaches

Answer 33

The consumer market can be segmented according to four main variables.
* Demographic segmentation is the process of dividing the total market according to particular features of a population, including the size, age, sex, income, cultural background, and family size. E.g., energy drink Monster is targeted at 15–35-year-old males.
* Geographic segmentation is the process of dividing the total market according to geographic locations. Different geographical locations have different needs, tastes, and preferences.
* Psychographic segmentation is the process of dividing the total market according to personality characteristics, motives, opinions, socioeconomic group, and lifestyles. A business would research a consumer’s brand preferences, favourite music, radio, and television programs, reading habits, personal interests and hobbies, and values.
* Behavioural segmentation is the process of dividing the total market according to the customers’ relationship to the product. A total market, for example, may be divided into users and nonusers. Users can then be classified as heavy, moderate, or light. To convince light users to purchase the business may have to redesign the product, set special prices, and implement special promotion activities.

Question 34

Product differentiation?

Answer 34

Definition: Product/Service differentiation is the process of developing and promoting differences between the business’s products and services and those of the competitors.

Question 35

Examples of product differentiation?

Answer 35

Consumers expect a high level of customer service. Customer service also includes the presentation of the premises, the atmosphere, or the range of products that set a business apart and capture the consumer’s interest. People are becoming more concerned with ‘quality of life’ issues, especially the physical environment. Businesses that create pollution may risk losing customers. Because today’s consumers are busy, they will often select products that are convenient to use. For example, businesses have introduced frozen meals because many consumers do not have a lot of time for meal preparation. Ethical consumerism provides businesses with opportunities to satisfy the demands of this growing number of consumers. Consumers appreciate if products or brands do not exploit workers, producers, or the environment.

Question 36

Product/service positioning?

Answer 36

Definition: Product/service positioning refers to the technique in which marketers try to create an image or identity for a product/service compared with the image of competing products or services.

The business will decide on the image it wishes to create for a product/service and will use other elements of the marketing mix to shape and maintain this image. This will be achieved through the product/service’s name, price, packaging, styling, promotion, and channels of distribution.

Question 37

What are products?

Answer 37

Definition: Products are goods or services that can be offered in an exchange for the purpose of satisfying a need or want.

Question 38

Product branding - what is a brand?

Answer 38

Definition: A brand is a name, term, symbol, design, or any combination of these that identifies a specific product and distinguishes it from its competition.

Question 39

Benefits of branding

Answer 39

Branding helps consumers identify the specific products they like, evaluate the quality of products, reduce their level of perceived risk of purchase, and gain a psychological reward that comes from purchasing a brand that symbolises status and prestige. Branding helps businesses gain repeat sales because consumers recognise the business’s products, introduce new products onto the market because consumers are already familiar with the brand, with their promotional activities because the promotion of one product indirectly promotes other products with the same brand, and encourage customer loyalty.

Question 40

Symbols and logos, and branding strategies.

Answer 40

Some businesses encourage the instant recognition of their brand symbol rather than their brand name. This includes a brandmark logo (a solitary graphic e.g. apple), a wordmark logo (the logo is the name of the business e.g. Coca Cola), letter mark logo (the company’s initials e.g. Gucci), combination mark logos, and an emblem.

Branding Strategies
Brands are usually classified according to who owns them. When a manufacturer owns a brand name, it is referred to as a national brand. These brands have a high appeal with customers as they are recognised across the country, are widely available and offer reliability with constant quality. A private or house brand is one that is owned by a retailer or wholesaler – e.g., Myer sells products from its own label, including Reserve, Blaq, Urbane, etc. Generic brands are products with no brand name at all – e.g., Home Brand, Select (Woolworths).

Question 41

Packaging definition + build

Answer 41

Definition: Packaging involves the development of a container and the graphic design for a product. Well-designed packaging will give a positive impression of the product and encourage first-time customers. Packaging can attract customers, protects the product, assists with the display of the product, and makes transportation and storage easier. Apart from performing these practical functions, packaging also acts as a form of communication.

Question 42

Labelling definition + build

Answer 42

Definition: Labelling is the presentation of information on a product or its package. Marketers can use labels to promote products or to encourage proper use of products and therefore greater consumer satisfaction with products.

Question 43

Price definition + build

Answer 43

Definition: Price refers to the amount of money a customer is prepared to offer in exchange for a product. A price set too high could lead to lost sales, and a price set too low gives customers the impression that the product is ‘cheap and nasty’. Businesses attempt to gain some control over the price by differentiating their products.

Question 44

3 pricing methods definitions +build

Answer 44

Cost based pricing is a pricing method derived from the cost of producing or purchasing a product then adding a mark-up. This pricing method is mainly used by wholesalers and retailers. The major drawbacks are the difficulty in accurately determining an appropriate mark-up percentage, and the product is priced after production and associated costs are incurred without considering the other elements of the marketing mix or the state of the market.

Market-Based Pricing is a method of setting prices according to the interaction between the levels of supply and demand. It is difficult to apply as the levels of supply and demand constantly change. When demand for a product is greater than its supply, there will be a shortage in the market, forcing up the price. As the price rises, consumers are less willing to purchase. When the supply of a produce is greater than its demand, then there is a surplus in the market, and thus the price drops.

Competition-Based Pricing is where the price covers costs and is comparable to the competitor’s price. This pricing strategy is mainly used when there is a high degree of competition from businesses producing similar products. Once a business has established a base price, it can then decide to choose a price either below, equal to, or above its competition. The business will choose to price its product below competition if it wishes to break into an established market. The business will choose to price its product equal to that of competitors if it wants to avoid undertaking market research to find out what customers would actually pay. The business will choose to price its product above competition if they want to appeal to status-conscious buyers, where their products are seen as superior.

Question 45

Price skimming?

Answer 45

Price skimming occurs when a business charges the highest possible price for the product during the introduction stage of its life cycle. The objective is to recover the costs of research and development as quickly as possible before competition enters the market. Consumers are willing to pay a high price for a product’s novelty features because of the prestige and status that ownership gives.

Question 46

Price penetration

Answer 46

Price penetration involves charging the lowest price possible for a product at either on or below cost price in an attempt to achieve a large market share for a product. The objective is to sell a large number of products during the early stages of the life cycle and thus discourage competitors from entering the market. The main disadvantage of this is that it is more difficult to raise prices significantly than it is to lower them. Although, as the business gains customer loyalty and awareness, prices can be revised, increasing the profit margin of the business.

Question 47

Loss leader

Answer 47

A loss leader is a product sold at or below cost price. By advertising selected products at a loss, customers will be attracted to the business. Customers will purchase the product due to its low price and will also be exposed to other products within the business and are highly likely to make additional purchases. This will increase sales, enabling the business to recover the loss on the low-price item. This strategy is often used when the business is overstocked or a product is slow to sell, wants to increase the traffic flow in the expectation of gaining customers, or wants to build a reputation of having low prices.

Question 48

Price points

Answer 48

Price points is selling products only at certain predetermined prices. This strategy is used by retailers, especially clothing stores, and boutiques. Using this strategy makes it easier for the customer to find the type of product they need. It also makes it easier for the business to encourage the customer to ‘trade up’ to a more expensive model. The price will be set regardless of how much they cost at wholesale.

Question 49

Promotion definition + build

Answer 49

Definition: Promotion is the methods used by a business to inform, persuade, and remind a target market about its products. Promotion attempts to attract new customers by heightening awareness of a particular product, increase brand loyalty by reinforcing the image of the product, encourage existing customers to purchase more of the product, provide information so customers can make informed decisions, and encourage new and existing customers to purchase new products.

Question 50

Promotion mix?

Answer 50

The Promotion Mix is the various promotion methods a business uses in its promotional campaign.
Advertising, personal selling, relationship marketing, sales promotion, publicity, public relations

Question 51

Advertising

Answer 51

Advertising is a paid, non-personal message communicated through a mass medium. Essential for successful marketing, which can result in increased sales and profit. The purpose is to inform, persuade, and remind. The six main advertising media includes mass marketing (television, radio, newspapers, and magazines), direct marketing catalogues (mail), telemarketing which is the use of the telephone to personally contact a customer, e-marketing which is the use of the internet to deliver advertising messages, social media advertising, and billboards. The type of advertising media a business selects depends on the type of product and its positioning, the size of the target market and its characteristics, the business’s marketing budget, the cost of the advertising medium, and the product’s position on the product life cycle. An extensive advertising campaign may be undertaken to create a saturated coverage of a wide target market.

Question 52

Personal selling

Answer 52

Personal selling involves the activities of a sales consultant directed to a customer in an attempt to make a sale. The main promotional strategy for businesses offering expensive, complex products. Advantages of personal selling are that the message can be modified to suit the individual customer’s circumstances, the individualised assistance to a customer can create a long-term relationship leading to repeat sales, and the sales consultant can provide after-sales customer service. By listening to the customer’s needs and then offering informed recommendations, customer satisfaction is increased, resulting in repeat business, and building a good reputation. The disadvantages of using this strategy include the high costs, and the small target market.

Question 53

Relationship marketing

Answer 53

Relationship marketing is the development of long-term and cost-effective relationships with individual customers. The ultimate aim is to create customer loyalty by meeting the needs of the customers on an individual bases. For example, a highly successful relationship marketing strategy is loyalty programs – a rewards-based program offered by a business to customers who frequently make purchases. This creates a reason for the customer to use the product or service again which increases sales. It is also a strategy that can create a competitive advantage, by giving personalised services that goes beyond consumer expectation, can involve personalised communication where relationships are renewed or extended and can be used to gain information about a customer buying behaviour, including repeat sales, and value of transactions. The disadvantages for the business include that it is time consuming and may be costly and in some cases may bring up privacy issues for customers, but most business operations would see the advantages far outweighing the disadvantages. It also focuses on existing customers, thus restricting the business’ promotion to new customers, limiting expansion of geographic markets.

Question 54

Sales promotion

Answer 54

Sales promotion is the use of activities or materials as direct inducements to customers. Sales promotion techniques are used primarily to increase the effectiveness of other promotion activities, especially advertising. Examples of special promotions include coupons, premiums, refunds, samples, and point-of-purchase displays.

Question 55

Publicity

Answer 55

Publicity is any free news story about a business’s products. Most businesses use publicity and public relations as a means of increasing sales and, therefore, profits. Though it could possibly lead to negative publicity. The main aims of publicity are to enhance the image of the product, raise awareness of a product, highlight the business’s favourable features, and reduce any negative image that may have been created.

Question 56

Public relations

Answer 56

Public relations are those activities aimed at creating and maintaining favourable relations between a business and its customer. There are four main ways in which public relations activities can assist a business in achieving its objective of increased sales; promoting a positive image reinforces the favourable attitudes and perceptions consumers have regarding the business’s reputation, effective communication of messages using advertising, sales promotion, publicity and personal selling to convey information about the business and its products, issues monitoring, and crisis management. Although it does not guarantee an increase in sales.

Question 57

The communication process

Answer 57

An opinion leader is a person who influences others. Opinion leaders are used as information outlets for new products and to endorse an existing one. Customers would want to buy the product as a celebrity is promoting and/or using the business’ product.

Word of Mouth communication is when people influence each other during conversations. Consumers tend to trust their friends because recommendations can be a powerful influence, especially when there are many competing products.