Ch 20 Marketing planning (A Level)

Question 1

Define marketing plan

Answer 1

A marketing plan is a detailed, fully researched written report on marketing objectives and marketing strategy to be used to achieve them
A marketing plan should be a part of a strategy to achieve corporate objectives

Question 2

How marketing plan differs from marketing mix? (4)

Answer 2

Because it includes:

The marketing objectives and how they help the business achieve its overall objectives
The resources required to achieve marketing objectives
The research required to achieve the marketing objectives and how the results of this research may change the objectives
How the elements of the marketing mix can be used to achieve the marketing objectives

Question 3

Key contents of typical marketing plan (6)

Answer 3

Purpose of the plan and the mission of the business
Where the firm is now - situational analysis
Where it aims to get to - marketing objectives and marketing strategy
Turning strategy into appropriate tactics - marketing mix
The budget
Summary and time frame

Question 4

What should situational analysis cover? (5)

Answer 4

Current product analysis
Target market analysis - consumer profiles and segmentation
Competitor analysis
Economic and political environment - PEST analysis
SWOT analysis

Question 5

Marketing strategy (4) (4)

Answer 5

Strategic decisions include:

Mass marketing or niche marketing
Market segmentation
Development of new products
Market research methods
Marketing strategy depends on:

Situational analysis
Company’s mission and objectives
Competitors
Resources

Question 6

What is a marketing budget?

Answer 6

The marketing budget sets out how much money is allocated to the marketing function and how it is intended to spend it.

Question 7

Factors affecting size of marketing budget (4)

Answer 7

The financial position of the business
Competitor actions
The demand for and prices for marketing services
The responsiveness from marketing spending

Question 8

Benefits of marketing plan

Answer 8

Convince potential investors or entrepreneurs that the proposal is ound and potentially profitable
Reduces the risk of failure, especially when designing a new product or entering a new market
Clear directions to keep and gain consumer

The situational analysis would identify key competitors and considers their strengths and weaknesses

If the plan is drawn up in collaboration with other departments, such as finance and operations, then there is more chance of having a suitable budget to meet marketing objectives and being able to produce the output to meet sales targets

Question 9

Limitations of marketing plan (5)

Answer 9

Complex
Costly
Time consuming
Lack of skilled management to produce a good plan
Can be out of date quickly due to the changing nature of business environment

Question 10

Factors influencing elasticity (4)

Answer 10

Consumer incomes
Price of the goods
Price of related goods
Promotional spending

Question 11

Define income elasticity of demand

Answer 11

measures the responsiveness of demand for a product following a change in consumer incomes
% change in demand/ % change in incomes

Question 12

Indicators of income elasticity (3)

Answer 12

Negative - inferior goods because quantity demand rises as incomes fall and vice versa. e.g. cigarettes, frozen foods
High positive - luxury goods/normal goods because demand rises when income rises and vice versa. e.g. wine, smartphones, cars
Low positive - necessity. e.g. salt

Question 13

Define promotional elasticity of demand

Answer 13

measures the responsiveness of demand for a produt following a change in the amount spent on promoting it
% change in demand/ % change in spending

Question 14

Indicators of promotional elasticity (4)

Answer 14

> 1: demand = elastic
=1: demand = neutral
<1: demand = inelastic
=0: no effect on demand

Question 15

Define cross elasticity of demand

Answer 15

measures the responsiveness of demand for a product following a change in price of another
% change in demand for good A/ % change in price for good B

Question 16

Indicators of cross elasticity (2)

Answer 16

Negative => two goods are complements to each other, they are often bought together
Positive => two goods are substitues and are competing against eac other

Question 17

Weaknesses of elasticity methods (3)

Answer 17

State (levels of growth/spending/GDP) of the economy - recession, unemployment and disposable income, increased consumer spending
Seasonal demand could change: Christmas, Thanksgiving
Competitors action: scandals from rivals, promotions
=> misleading results

Question 18

Define AIDA

Answer 18

a model that explains the successive stages a customer passes through in buying a product
Attention -> Interest -> Desire -> Action

Question 19

How AIDA works?

Answer 19

Attention - does sales promotion/ advertising capture attention of potential consumers
Interest - keeping potential consumers interested in the product after initial awareness
Desire - combination of benefits and price should create a desire in the consumer to purchase
Action - company must make it easy to buy - payment methods, location

Question 20

Define DAGMAR

Answer 20

a process of establishing goals for a promotion campaign so that it is possible to determine whether it has been successful or not. Defining Advertising Goals for Measured Advertising Results

Question 21

What does DAGMAR emphasise?

Answer 21

The communication task of advertising
Importance of setting a clear and measurable goal for advertising such as AIDA
E.g. unaware -> aware -> comprehension -> conviction -> action

Question 22

Define new product development (NPD)

Answer 22

is a series of steps that includes the conceptualisation, design, development and marketing newly created or newly rebranded goods or service

Question 23

Steps of product development (7)

Answer 23

Generate new ideas
Idea screening
Conceptual development
Business analysis
Product testing
Test marketing
Commercialisation

Question 24

Sources for generating new ideas (6)

Answer 24

Company's own R&D
Adaptation of competitor's idea
Market research, such as focus groups
Employees
Salespeople who have close contact with final consumers
Teamworking

Question 25

What is idea screening?

Answer 25

Eliminate those ideas that stand the least chance of being commercially successful

Question 26

Concept development and testing (5)

Answer 26

Ask key questions about what features of the product should have and the cost needed to make the product
Most likely consumers?
Specific benefits?
Most cost effective methods to manufacture?
How will consumers react to it?

Question 27

Business analysis (5)

Answer 27

Considers the likely impact of the new product on company’s cost, sales and profits
Is finance available to develop this product?
Can it be patented? offer monopoly rights
Will it fit in with the existing product mix?
Impact of changes in econ environment on sales

Question 28

Product testing (4)

Answer 28

Concerned with technical performance and if it will meet consumer’s expectations, it includes:

developing a prototype of the product or working model of it
testing the product in typical use conditions
using focus groups to gather opinions
adapting product as required after testing

Question 29

Define test marketing

Answer 29

the launch of the product on a small-scale market to test consumer’s reaction to it

Question 30

Benefits of test marketing

Answer 30

actual consumer behaviour can be observed and measured
feedback from consimers will enable a final decision for full launch
risks associated with a product failing after full-scale launch are reduced
weaknesses in the product can be identified and moderated

Question 31

Limitations of test marketing

Answer 31

Expensive

Competitors are able to observe a firm’s intention and react

Question 32

Commercialisation (4)

Answer 32

Refers to full scale launch of the product
Corresponds to the introduction phase of product life cycle
Promotional strategy will be put in place
Distributional channel will be filled up

Question 33

Define research and development

Answer 33

the scientific research and technical development of new products and processes

Question 34

How do governments encourage R&D? (2)

Answer 34

Provide legal security to inventors and designers by allowing them to ‘patent’ and ‘register’ => prevents unauthorised copying of new idea or design
Provide financial assistance to businesses. Done by either tax-reduction incentives, or by offering grants to firms to be spent on specific projects

Question 35

What are the factors that influence spending on R&D? (4)

Answer 35

The nature of the industry: rapidly changing technologies and consumer expectations in pharmaceuticals, defence, computer or software products and transportation lead to the need for substantial investment. Other industry such as hotels, food and hairdressing need to spend much less
R&D spending plans of competitors: it is essential to spend as much or more than competitors if market share and technical leadership are to be maintained
Business expectations
Risk profile or culture of the business: affect sums that business can inject into R&D, attitude of management to risks
Government policy: grants to businesses and universities

Question 36

Rewards of R&D (4)

Answer 36

Develop USP

Competitive Advantage

High added value (Premium Pricing)

Established reputation

Question 37

Risks of R&D (5)

Answer 37

Time consuming
Resource intensive
No guarantee of success
Potential loss of focus on core
Potential damage to brand image/ reputation

Question 38

Reasons why R&D can fail? (4)

Answer 38

Inadequate market research
Poor marketing support or inappropriate pricing
changes in technology, product becomes out-dated
competitors release a product that consumers prefer

Question 39

Define sales forecasting

Answer 39

Predicting future sales levels and sales trends. It is a quantitative technique that aims to anticipate a business’s level of sales at a particular future time period.

Question 40

Key factors affecting the accuracy and reliability of sales forecasts (3)

Answer 40

Consumer trends:
Demand in many markets changes as consumer tastes & fashions change
Affects both overall market demand & the market shares of existing competitors
Economic variables
Demand often sensitive to changes in variables such as exchange rates, interest rates, taxation etc.
Overall strength of the economy (GDP growth) also important
Competitor actions - Hard to predict, but often significant reason why sales forecasts prove over-optimistic

Question 41

Benefits of sale forecasting (4)

Answer 41

The production department would know how many units to produce and what quantity of materials to order and would hold the correct level of stocks
The marketing department would be aware of how many products to distribute and whether changes to the existing marketing mix were needed to increase sales
Human resources workforce plan would be more accurate, leading to the appropriate level of staffing
Finance could plan cash flows with much greater accuracy.

Question 42

Limitations of sales forecasting (3)

Answer 42

Inaccuracy of predictions: Attempts to look into the future are speculative and often the forecasters biases and subjectivity can be influential in determining the result. For example, a manager who would like to keep staffing costs down may choose a lower estimate of forecast sales to justify to staff lower wage rises.
Limited information: Sales forecasting is an estimated prediction based on trends in past data. Estimates are only as good as the quality of the data and information available at the time.
External influences: There are so many factors outside of a firm’s control that can influence sales at any time. The economy may suddenly boom benefiting all, the exchange rate may rise hurting exporting firms, or a competitor may launch a great new product and capture market share. The external environment can be significant.

Question 43

Circumstances where sales forecasts are likely to be inaccurate (6)

Answer 43

Business is new – a startup (notoriously difficult to forecast sales)
Market subject to significant disruption from technological change
Demand is highly sensitive to changes in price and income (elasticity)
Product is a fashion item
Significant changes in market share (e.g. new market entrants)
Management have demonstrated poor sales forecasting ability in the past

Question 44

Methods of sales forecasting (5)

Answer 44

Sales force composite
Delphi method
Hunch
Consumer surveys
Jury of experts

Question 45

Define sales force composite

Answer 45

A method of sales forecasting that adds together all of the individual predictions of future sales of all the sales representatives working for a business

Question 46

Define Delphi method

Answer 46

a long range qualitative forecasting technique that obtains forecast from a panel of experts.

Uses experts not directly employed by the business

Question 47

Application of Delphi

Answer 47

There is little accurate or predictable historical data available (e.g. in the case of a new product launched into a new market)
Where a market is subject to wide fluctuations in demand (e.g. unexpected surges or shocks)
Where a market experiences significant change (e.g. shortened product life cycles, rapid changes in technology)

Question 48

Define jury of experts

Answer 48

The jury of experts are people who use the specialists within a business to make forecast for the future

Question 49

Define correlation (quantitative methods)

Answer 49

Correlation looks at the strength of a relationship between two variables.

Question 50

Define seasonal fluctuations

Answer 50

Regular and repeated variations that occur in sales data within a period of 12 months or less.

Question 51

Define cyclical fluctuations

Answer 51

Variations in sales occurring over periods of time of much more than a year – they are related to the business cycle.

Question 52

Define random variations

Answer 52

May occur at any time and will cause unusual and unpredictable sales figures, e.g. exceptionally poor weather or negative public image following a high profile product failure

Question 53

Advantages of moving average sales forecasting method (3)

Answer 53

Useful for identifying and applying seasonal variation to predictions
Accurate for short term in stable economic conditions
Identifies the average seasonal variations for each time period -> assist in planning

Question 54

Disadvantages of moving average sales forecasting method (3)

Answer 54

Fairly complex calculation
Inaccurate for long term. External environmental factors can change
Long term would require the use of more qualitative methods that are less dependent on past result