Chapter 17 - The Nature Of Marketing

Question 1

Define the term “marketing”

Answer 1

The management task of identifying and meeting the needs of customers profitably by getting the right product at the

Question 2

Define the term “corporate objectives”

Answer 2

Well defined and realistic goals that are set for the whole company.

Question 3

To be effective, marketing objectives should: (3)

Answer 3

1. Be linked to corporate objectives. Help business achieve overall targets
2. Be determined by senior management

3/ Be realistic, motivating, achievable, measurable and clearly communicated to other departments.

Question 4

Explain why marketing objectives are important (4)

Answer 4

1. Sense of focused direction for marketing department, help business achieve overall corporate objectives
2. Business success can be measured against targets set by objectives
3. Marketing objectives can be broken down into regional and product sales targets
4. Marketing objectives form the basis of marketing strategies

Question 5

State examples of marketing objectives (8)

Answer 5

an increase in:

1. market share
2. total sales (value/volume)
3. average number of items purchased per customer visit
4. frequency of shopping by loyal customers
5. customer loyalty
6. Number of new customers
7. Customer satisfaction
8. Brand identity

Question 6

Explain the term “demand”

Answer 6

The quantity of a product that consumers are willing and able to buy at a given price in a specific time period.

Question 7

Explain the term “supply”

Answer 7

The quantity of a product that firms are prepared to supply at a given price in a specific time period.

Question 8

Describe the normal relationship between price and demand for a product

Answer 8

The quantity bought rises with a price fall and falls with a price increase.

Question 9

Describe the factors that change the level of demand for a product (6) (determinants of demand)

Answer 9

1. Price of product
2. consumers incomes
3. prices of substitute goods and complementary goods
4. population size and structure
5. fashion and taste
6. advertising and promotion spending

Question 10

Describe the normal relationship between price and supply of a product

Answer 10

Businesses will be more willing to supply more of a product if the price rises and will supply fewer/less of a product as the price falls.

Question 11

Describe the factors that change the level of supply for a product (7) (determinants of supply)

Answer 11

1. Price of product
2. costs of production
3. government taxes imposed on suppliers, raising their costs
4. government subsidies to suppliers, reducing their costs
5. Weather conditions and other natural factors
6. advances in technology which lower the cost of production

Question 12

Define the term “equilibrium price”

Answer 12

The price level at which demand is equal to supply.

Question 13

Define the term “market segment”

Answer 13

A subgroup of a whole market in which consumers have similar characteristics.

Question 14

Define the term “industrial market”

Answer 14

The selling of products by businesses to other businesses. also known as B2B. Include specialist machines, trucks and office supplies.

Question 15

Define the term “consumer market”

Answer 15

The selling of products by businesses to the final end user, also known as B2C. Include mobile phones, holidays and fashion clothing.

Question 16

Explain the term “consumer (or market) orientation”

Answer 16

Requires market research and market analysis to measure present and future demand. Consumers and their needs come first. The business will attempt to produce what consumers want to buy. (Research before developing a product)

Question 17

Explain the advantages of “consumer orientation” (3)

Answer 17

1. Chances of new product failing is reduced.
2. Products based on consumers needs will have longer lifespan and be more profitable.
3. Market research never ends. Constant feedback allows product and method of marketing to be adapted to changing tastes before competitors.

Question 18

Explain the term “product orientation”

Answer 18

Assume there will always be a market for the products they make. Focus on making products that can be made - or have been made for a long time - and then trying to sell them. Concentrate efforts on efficiently producing high quality goods. Believe quality valued over market fashion.

Question 19

State three reasons why market size is important

Answer 19

1. it allows marketing manager to assess whether market worth entering or not
2. It allows a business to calculate market share
3. Growth or decline of market over time can be identified

Question 19

State the two ways in which market size can be measured

Answer 19

1. By the quantity of sales (units sold)
2. By the value of products sold (revenue)

Question 20

State the factors that affect the rate of market growth (6)

Answer 20

1. a country’s rate of economic growth
2. changes in consumer incomes
3. development of new markets and products
4. changes in consumer tastes
5. technological sales, can boost market sales following new innovation
6. whether the market is saturated because most consumers already own the product.

Question 21

Explain the implications of increased market growth (4)

Answer 21

1. sales will increase if market share remains the same
2. possible to increase prices and profit per unit
3. increased sales could lead to cost savings.
4. More businesses might want to enter market, so increase in level of competition

Question 22

Explain the implications of reduced market growth (4)

Answer 22

1. sales will increase more slowly even if market share is same
2. Competitors might reduce prices to increase sales
3. Lower prices = lower profit per unit
4. Businesses might consider expanding into faster growing markets.

Question 23

Define the term “brand leader”

Answer 23

the brand with the highest share of the market

Question 24

Explain the implications of an increase in market share (4)

Answer 24

1. Sales rising faster than competitors. Higer profits 2. Retailers keen to stock best selling brands 3, Business producing brand leader may be able to reduce the discount rate to retailers. Higher profitability 4. Can be used in advertising / promotional material.

Question 25

Explain the implications of a fall in market share. (4)

Answer 25

1. Sales fall unless rapid market growth 2. Retailers less keen to stock and promote product 3. Large discounts to retailers might have to be offered 4. Promotions no longer state that product is brand leader

Question 26

What categories are consumer goods often classified into (3)

Answer 26

1. Convenience - purchased frequently, on impulse, large target market e.g. sweets 2. Shopping products - require planning and research before purchased e.g. washing machines 3. Speciality products - bought infrequently expensive, strong brand loyalty e.g. cars

Question 27

What categories are industrial products often classified into (3)

Answer 27

1. Materials and components 2. Capital items - equipment, machinery, vehicles 3. services and supplies - business services and utilities

Question 28

Explain the main differences between selling to businesses rather than consumers (5)

Answer 28

1. Industrial products more complex, specialist sales employees and support services more important 2. Industrial buyers have more market power, better informed. Need to be sold products by well trained and experienced sales employees 3. Industrial buyers rarely buy on impulse. Business selling B2B needs regular contact with customers. 4. Traditional mass media advertising and sales promotion techniques not used in most industrial markets. Trade fairs, or direct contact. 5. mass marketing in consumer markets is common but in Industrial markets, fewer buyers, Products adapted to meet needs.

Question 29

Define the term "mass marketing"

Answer 29

Seling standardised products in same way to large market. High sales levels allow for high level of production. Low price is often key element. E.g. market for toothpaste

Question 30

Explain the advantages of mass marketing (3)

Answer 30

1. Can lead to lower average costs of production 2. Cost advantages lead to lower prices for consumers 3. mass marketing can result in extensive publicity, clear brand identity

Question 31

Explain the disadvantages of mass marketing (3)

Answer 31

1. lack of differentiated products/marketing does not appeal to consumers 2. focus on low prices does not establish premium brand image 3. Technological or other changes could lead to fall in demand for product. Overdependence risky strategy.

Question 32

Define the term "niche marketing"

Answer 32

Identifying and exploiting a small segment of a larger market by developing differentiated products to suit segment. Market research often necessary to establish customer's special needs.

Question 33

Explain the advantages of niche marketing (3)

Answer 33

1. small businesses survive and thrive in markets dominated by larger firms 2. Unexploited niche has no competitors. High prices, high profit margins. 3. Niche market products used by large firms to create status and image.

Question 34

Explain the disadvantages of niche marketing (4)

Answer 34

1. do not allow economies of scale 2. limited scope for business growth 3. business vulnerable to market changes if only operates in one niche market. Risky strategy. 4. if selling profitable, attract competitors. Lead to lower prices and profitability.

Question 35

Define the term "market segmentation"

Answer 35

The identification of different groups of customers with common needs within a market and the marketing of different products or services to those consumer groups. e.g. Coca cola makes standard cola drink for mass market but also Diet Coke for weight conscious consumers.

Question 36

Define the term "consumer profile"

Answer 36

A quantified picture of a business's consumers, showing data about their age groups, income levels, location, gender and social class.

Question 37

Describe the different methods of market segmentation (3)

Answer 37

1. Geographic differences. Consumer tastes vary between different geographical areas 2. Demographic differences. Demographic factors such as age, gender, income, family size, social class and ethnic background. 3. Psychographic factors. Differences between people's lifestyles, personalities, values and attitudes.

Question 38

Explain the advantages of market segmentation (5)

Answer 38

1. Can define target market precisely. Design, produce goods aimed at groups, increased sales. 2. Identification of haps in market and groups not being targeted. 3. Differentiated marketing strategies focused on different target markets. Avoids wasting money on whole market. 4. Small firms unable to compete in whole market, specialise in market segment. 5. Price discrimination between consumer groups used, increase revenue and profits.

Question 39

Explain the disadvantages of market segmentation (5)

Answer 39

1. research and development and production costs high 2. Promotional costs high. Different advertisements and promotions needed for different segments. 3. Production and inventory holding costs. 4. Excessive specialisation could lead to problems if consumers change purchasing habits excessively. 5. Extensive market research needed to identify market segments and needs.

Question 40

Explain the term "customer relationship marketing (CRM)

Answer 40

Using marketing activities to build and establish good customer relationships so that loyalty of existing customers maintained. Develop customer loyalty. More expensive to gain new customers than keep existing ones.

Question 41

Explain ways that effective long term relationships with customers can be achieved. (CRM) (4)

Answer 41

1. Targeted marketing. Giving each customers products they've indicated they most need. 2. Customer service and support. After sales service, effective call centres. 3. Communicate regularly with customers. 4. Using social media. Track and communicate with customers.

Question 42

Explain the costs of CRM (4)

Answer 42

1. IT Systems, software needed. Employees need to be trained to respond to customer feedback. 2. Effective campaigns may require use of external marketing consultancy at high cost. 3. Needs existing customer base before investing in CRM. Costs will not lead to high sales. 4. Costly to respond to each customer's feedback, especially if special requests/requirements

Question 43

Explain the benefits of CRM (4)

Answer 43

1. For businesses with existing customer base, CRM proved cost-effective. Higher sales always exceed costs. 2. Sustainable strategy creating long-term customers. 3. Loyal customers recommend business to friends and family. Additional marketing benefit at no cost. 4. Costs less per customer than trying to attract new customers.