IGCSE BS Section 3 - Marketing Flashcards
What is a market?
A market refers to all the consumers and potential consumers with the ability and willingness to buy a product or service
What is a target market?
A particular group of consumers that a business decides to produce the products to
What is marketing?
Marketing is a process of identifying customer needs and wants and satisfying those needs and wants by developing a product profitability
What is the role of marketing? (Activities)
- Identifying and satisfying customer needs
- Maintaining customer loyalty
- Building customer relationships
What are the factors affecting consumer spending on goods & services?
- The price of the product
- The price of competitors products
- Changes in consumer income
- Changes in population age and size
- Changes in tastes and fashion
- Spending on advertising and other promotional activities
Why do some markets become more competitive?
- Government intervention in markets
- Growth of free trade between countries
- Development of E-Commerce and Social Networks
Why does government intervention in markets make markets become more competitive?
Legal controls of monopoly, selling off public sector firms to the private sector, deregulation (removal of government controls from an industry), subsidies to new, local, small to medium-sized firms
Why does growth of free trade between countries make markets become more competitive?
Reduced barriers to trade between countries
Why does development of E-Commerce and Social Networks make markets become more competitive?
Online sales through websites, even on Facebook, etc
How do businesses respond to changing spending patterns (needs) and increased competitions?
- Product development
- Improve efficiency
- Increased promotions
- Look for new markets
Explain product development on businesses responding to changing spending patterns (needs) and increased competitions.
Developing new products to satisfy the changing needs and wants of consumers
Explain improved efficiency on businesses responding to changing spending patterns (needs) and increased competitions.
Efficient use of resources to reduce average costs
Explain increased promotions on businesses responding to changing spending patterns (needs) and increased competitions.
To persuade consumers to buy our products and not that of competitors
Explain looking for new markets on businesses responding to changing spending patterns (needs) and increased competitions.
Markets with less competition and consumers are more likely to buy the product
What is niche marketing?
Niche marketing identifies the needs of a small part of the whole market and then develops products to satisfy those needs (e.g. target rich people)
What is mass marketing?
- Mass marketing is where a business sells the same product to the whole market
- Most companies now differentiate their products to each segments to recognise that consumers do not all want the same product
What are the benefits of niche marketing?
- Small firms with small capital can survive and earn profits in markets which are dominated by larger firms •Less competition in niche markets
- Firms can change high prices and earn high profits for exclusive products that gives consumers high status
What are the limitations (drawbacks) of niche marketing?
- The opportunity to earn high profits may attract competitors that will reduce price and future profits
- The small market means that economies of scale are unlikely to be achieved (lower cost in large quantities)
- Small changes in a consumer spending can have a big impact on firms in niche markets
What are the benefits of mass marketing?
- Requires large scale production that enable large firms to benefit from economies of scale which reduces costs per unit
- Has the potential for high sales and for profit
- Reduce the risk of failure of firms as they sell to a mass market
What are the limitations (drawbacks) of mass marketing?
- Many and more competition which lowers prices and profit margins
- Not all markets are large to support mass marketing
- Reduced scope for mass marketing as consumers today often look for differentiated products
What is market segmentation?
Market segmentation is about dividing the whole market into segments by consumer characteristics and then target different products to each segment
What are the methods of market segmentation?
- Geographic segmentation
* Demographic segmentation
Explain geographic segmentation.
- Dividing consumers in the market by geographical areas
* Can be different regions within the same country and different regions or countries in the world
Explain demographic segmentation.
Dividing consumers in the market by factors such as age, gender income, ethic background and social class
What are the benefits of market segmentation to businesses?
GIISM
• Goods and services can be designed to meet the specific needs of consumers in each segment
• It identifies consumers with specialised needs which present an opportunity for niche marketing
• It is possible to charge higher prices in one segment than in other e.g. air travel (business, economy & first class)
• Small firms can operate more or two markets (niche market)
• Marketing strategies can be better targeted at each segment, this reduces the waste of scarce resources (e.g. targeted marketing)
Which method of market segmentation should we choose?
Depends on the type of product that a business wants to offer to the market e.g. a holiday company might use family size to segment the market consumers, consumers with children will look for a different holiday from a single person or a retiree
What is market research?
Market research is the process of collecting, recording & analysing data about customers, competitors and markets for a product
What are the benefits of conducting market research to a business?
FIDIKEP
• Find out what customers like/dislike about its products
• Identify people’s tastes and preferences
• Decide on the best promotion, packaging and distribution methods
• Identify the main competitors and the specialty of their products
• Know the market size
• Explain the reason for sale of its current products
• Predict now the product demand may change in the future
In today’s business world, most firms are ________.
Market orientated
What does market-orientated mean?
What to produce is based on consumers demand for the product as identified by market research
What are the benefits of market-orientated businesses?
- Reduced risk of failure of new products as consumer needs are first identified through market research
- Market-orientated products last longer in the market than product orientated ones where businesses decide, leading to higher sales and profits
What are the uses of market research information/data?
DHIIM
• Discover the current & future market size of the product
• Help predict changes and trends in consumer tastes and fashion that can affect future demands for the product
• Identify consumer needs
• Identify the strengths and weaknesses of competitors products
• Market research data can be decided on effective price, promotion and distribution of the products
What is secondary research?
- Research using information already available in the organisations existing records or in published forms
- It is also called Desk Research
What is primary research?
Research conducted by the researcher to obtain original info for specific needs
What are the sources of secondary research?
MBLING • Market research agencies • Business records • Libraries • Internet • Newspapers & magazines • Government publications
What are the methods of primary research?
- Quantitative research
- Qualitative research
- Focus groups
- Observation
- Test market
- Consumer surveys
- Sampling
What is quantitative research?
Collection of numerical data that can be presented in the form of tables, graphs & charts, then analysed using statistical techniques
What is qualitative research?
The collection of info about consumer behaviour and their opinions about the product
What are focus groups?
- Consist of selected customers to advise businesses on their products
- They meet regularly to discuss new products, packaging, brand names, advertisements, price and services offered
What does observation mean?
Market researches secretly observe and record the consumer behaviour as consumers select their products from the many options available
What is a test market?
Promoting and selling the product in a limited geographical area and then recording consumers reactions and sale figures
What are consumer surveys?
Interviews, postal questionnaires, online surveys, etc
What is sampling?
- Select a sample from the total market
* The sample represents the whole population
What are the benefits of primary research?
- Up-to-date data
- Relevant for a specific purpose
- Confidential, leading to a competitive advantage
What are the limitations of primary research?
- Costly (expensive) to collect
- Time consuming
- Risk of inaccuracy such as wrong sample
What are the benefits of secondary research?
- Fairly cheap to collect
* Easier and quicker to obtain
What are the limitations of secondary research?
- Not up-to-date
* Not reliable and relevant as data is not collected for specific purposes
What are ways of presenting & analysing market research results?
- Tables
- Bar charts
- Pie charts
- Pictograms
- Line graphs
What are the benefits and drawbacks of tables?
+ Easy to extract numerical data
- Can be difficult to understand
What are the benefits and drawbacks of bar charts?
+ Easy to see the importance of each piece of data
- Can be difficult to compare different parts if they are similar
What are the benefits and drawbacks of pie charts?
+ Shows the relative importance of each part of the data
- Difficult to see importance with many slices
What are the benefits and drawbacks of pictograms?
+ Attractive or eye catching
- Difficult to show exact quantities using pictures
What are the benefits and drawbacks of line graphs?
+ Shows trends
- Can be difficult to draw and inaccurate
What is marketing mix?
- Marketing mix refers to 4 marketing decisions needed for the effective marketing of a product
- It is also called or referred to as the “Four P’s” which means the right Product at the right Price with the right Promotion in the right Place
Why do businesses develop new products?
- Change an existing product to meet the changing taste of consumers
- Change an existing product to enter a new market
- To ensure survival and continued success
What are the benefits of developing new products?
- Meets the changing consumer needs and thus, survival and continued success
- Brings a competitive advantage over rivals and this can change high prices and get higher sales and profits
- Spreads risks with more products
- May help to bring growth and economies of scale
What are the costs of developing new products?
- Expensive market research
- Often requires large capital spending
- No guarantee of success
What is a brand?
A brand is a name, image or symbol that distinguishes a product from competitors products
Why can brand image increase sales?
- Consumers recognise their products more easily
- Can be priced higher than less well-known brands
- Easier to launch new products with the brand that consumers already know and trust
What are the role (benefits) of packaging?
- To protect the product
- To provide information about the product
- To help consumers recognise the product
- To keep the product fresh, especially for food and drink products
What is product differentiation?
• It is where a product is given features that makes it different from similar products (e.g. products with unique/different features although serving the same purpose)
What is a unique selling point (USP)?
Where a feature stands out sufficiently to be a reason for customers to buy that product rather than others
What are ways to differentiate products?
- Branding
- Packaging
- Feature
What is branding?
- It is where a product is given a unique identity by giving it a special name called a brand name
- A brand name may be identified with the manufacturer’s name (e.g. coca-cola) or may be made up names but interesting, easy to remember and easy to pronunce
What does the success of a brand name depend on?
The quality of the product and how well it meets the requirements and expectations of the customers
Why is packaging important?
Customers may look for a particular shape and colour of package when having a particular product
What are the uses of packaging?
Protecting the product, enabling it to be handled and used easily, carrying specific instructions for notices about safety and ingredients by law
What does by feature mean in differentiating products?
A unique feature that makes it different from similar products
What is the product life cycle?
It is the pattern of sales of a product from introduction to its withdrawal from the market
What are the reasons why markets change resulting in product moving to another cycle?
- Change in consumer tastes & preference
- Change in people’s lifestyle
- New technology
- Changes in the structure of the population in the change in the needs of the society
All products go through a _______.
Life cycle
For most products, the product life cycle contains four phases:
- Introduction
- Growth
- Maturity
- Decline (withdrawal)
•NOT all products go through each stage, unsuccessful products with little demand may be withdrawn from the market even before they reach the age of maturity
Businesses must respond to changes in the market for their products to maximise sales and profits by:
- Becoming more competitive
- Extending the life of a product
- Stimulating demand through promotion
- developing new products, when appropriate
What is the introduction stage in product life cycle?
- New products is launched
- Strong marketing to stimulate demand for the product
- Low sales generate low income but profits are negative as costs of making and launching the product must be recovered
What is the growth stage in product life cycle?
- Demand for the product continues to rise as marketing activities continue
- Sales are increasing which leads to higher profits as initial development costs are covered
What is the maturity stage in product life cycle?
- Demand for and sales of the product are at the highest
- Low costs of production due to economies of scale
- High profits and continued marketing to maintain sales
What is the decline stage in product life cycle?
- Demand falls as consumers taste change and/or alternative products become available and fashionable
- Finding a new unique USP in a different market or market segment may be introduced
- If the products life still cannot be extended, the business may prefer to develop a new product
Businesses try to keep their products in the most profitable style (maturity style) by:
- Finding new markets for the products e.g. foreign markets
- Finding new uses for the products
- Redesign the packaging to give a fresh and up-to-date appeal
- Increased advertisements and offer promotional activities
Define price.
The amount paid by customers when buying goods and services
List the pricing methods.
- Market skimming
- Penetration pricing
- Competitive pricing
- Promotional pricing
- Cost-plus pricing
What is market skimming?
Setting a high price for a new product that is unique or very different from other products e.g. google glasses
What is penetration pricing?
- Setting a low price to attract customers to buy a new product
- The low price is to build up customer loyalty and raise the price once done
What is competitive pricing?
- Setting a price similar to that of competitors products which are already established in the market
- It is used for pricing both new and existing products with a good brand image and loyal customers
What is promotional pricing?
- Loss-leader pricing
- Buy one get one free pricing
- Discounting the normal price
What is loss-leader pricing in promotional pricing for?
Selling some products below the normal price even at a loss to attract customers who will also buy other products at normal prices
What is buy one get one free pricing in promotional pricing for?
To create product awareness and develop customer and brand loyalty
What is discounting the normal price in promotional pricing for?
To create awareness customers loyalty or sell off the surplus stock
What is cost-plus pricing?
- Based on the cost of making the product or buying the product for resale to the final consumer
- Cost + Mark-up for profits in % or in monetary value
What are the uses of market skimming?
Used for unique, new products different from other products
What are the benefits of market skimming?
High prices can help recover R & D costs, can create a quality image
What are the limitations of market skimming?
- May attract cheaper competitor products
* High prices may lower demand leading to a loss of sales
What are the uses of penetration pricing?
Used for new products competing with similar products in established markets
What are the benefits of penetration pricing?
- Lower prices attract customers
* Can increase market share quickly
What are the limitations of penetration pricing?
- Lower prices can cause loss of revenue
* Can’t recover development costs quickly
What are the uses of competitive pricing?
Used for new products with a good brand image and loyal customers
What are the benefits of competitive pricing?
Similar prices enable firms to compete on other things such as quality or customer service
What are the limitations of competitive pricing?
Need to follow the market leaders price
What are the uses of cost-plus pricing?
Used for deciding the final price charged to customers
What are the benefits of cost-plus pricing?
- Quick and easy
* Price covers the cost
What are the limitations of competitive pricing?
May be set higher than competitors or more than customer expectations leading to reduced sales and profits
What are the uses of promotional pricing?
Used to create brand awareness and customer loyalty or to sell off surplus stocks
What are the benefits of promotional pricing?
- Sell off unwanted inventory
* A good way of increasing short-term sales and market share
What are the limitations of promotional pricing?
Lower revenue leading to lower profits
List the factors to choose pricing method.
- A new or existing product
- Is the product unique
- Heavy or light competition
- Does the business have a brand image and loyal consumerists
- How much are the costs
- What are the marketing objectives of the business
What is price elasticity of demand?
Price elasticity of demand measures by how much demand (sales) for a product changes when prices change
What does price inelastic mean?
•It means percent (%) change in demand is lower than percent (%) change in price e.g. rice
•Basically:
Inelastic P.E.D. —> Increase Price —> Increased Revenue
What does price elastic mean?
•It means percent (%) change in demand is greater than percent (%) change in price e.g. cinema tickets
•Basically:
Elastic P.E.D. —> Decrease Price —> Increased Revenue
How to calculate revenue?
Price Per Good X Number of Goods Sold
Place involves a business in deciding:
Marketing Mix
- How to get the goods from the producer to the final consumer, known as THE CHANNEL OF DISTRIBUTION
- The place where the consumers will be able to buy the goods or service as a shop
Goods are distributed from the producers to customers through a _____________.
Channel of Distribution
Traditionally a channel of distribution involves a ______ and _____.
- Wholesaler
* Retailer
What is the wholesaler?
A business that buys goods in bulk from the producer and resell them in smaller quantities to a retailer
What is break bulk?
Splitting bulk purchases into smaller quantities
What is a channel of distribution?
A group of individuals and organisations that direct the flow of products from producers to consumers
What is the major role of channels of distribution?
To make products available at the right time and at the right place in the right quantities
Some marketing channel are _____.
Direct
What are direct marketing channels?
That is from producer straight to consumer, but most channels have marketing intermediaries
What is a marketing intermediary?
Also known as middleman which links producer to other middleman or to ultimate consumers through contractual arrangements or through the purchase and reselling of products
How many types of channels/methods of distribution are there?
Four
What is Channel A?
•Movement:
Producer —> Consumer
• E.g. companies selling their products on the internet
What is Channel B?
•Movement:
Producer —> Retailer —> Consumer
• E.g. Walmart
What is Channel C?
•Movement:
Producer —> Wholesaler —> Retailer —> Consumer
• This channel is appropriate when a single producer sell to hundred of thousands of customers through thousands of retailers
What is Channel D?
•Movement:
Producers —> Agents (introduce to wholesaler) —> Wholesaler —> Retailer —-> Consumer
• This channel is suitable for products intended for mass distribution
• E.g. processed food like crackers
What are the factors to choose a method of distribution?
- Cost
- Nature of the product
- The market
What does cost mean in the factors of choosing a method of distribution?
Cheaper cost of transporting goods to the customer
What does the nature of the product mean in the factors of choosing a method of distribution?
Some goods such as frozen food need special conditions for delivery, others are fragile which needs to be handled with care, others like milk needs to be transported as soon as possible, etc, bulky, liquid
What does the market mean in the factors of choosing a method of distribution?
Markets that cover a wide geographical area are best served through wholesalers who buy the product in bulks and break it down into smaller units for retailer shops
What is transportation?
- The movement of products from where they are made to where they are used
- On-time deliveries give a firm a competitive advantage
What are the types of transportation?
- Rail roads
- Truck
- Water ways
- Airplanes
- Pipelines
What are retailers?
Retailers are shops and outlets that sell goods and services to the final consumers
What are the types of retailers?
- Shops
- Department stores
- Chain stores (branches of stores spread throughout the country)
- Discount stores (selling a range of goods at cut prices)
- Superstores and Supermarkets (buy in bulks, sell in low price)
- Specialist retailers (e.g. computers)
What are the advantages of Channel A?
- Earn all the profits
- The quickest method suitable for perishable goods
- Direct contact with the consumers
What are the disadvantages of Channel A?
- Consumers can’t see or try the product if bought online
- High delivery costs
- Producers pay all storage and promotional activities cost
What are the advantages of Channel B?
- Can see and try the products first
- Cost of stock and promotional activities are paid by retailers
- Retailers are conveniently located for consumers
What are the disadvantages of Channel B?
- Less profit for producers
- Pay delivery cost for retailers
- Retailers also sell competitor products
What are the advantages of Channel C?
- Wholesaler advertise and promote the products to retailers
- Wholesaler pay for the transport and storage
- Distribution through wholesalers help producer sell their goods
What are the disadvantages of Channel C?
- Wholesaler take some profit away
* Producers lose some control over marketing mix
What are the advantages of Channel D?
Agents have specialist knowledge of the market, especially foreign markets
What are the disadvantages of Channel D?
Another middleman takes further profits from the producer
