igcse business section 3 Flashcards
Marketing
identifying customer wants and satisfying them profitably
customer
a person, business or other organisation which buys goods or services from a business
the sales team
responsible for sales of product, may have an export team
the market research section
responsible for finding out customers needs
the promotion section
organises the advertising, and decide a marketing budget
distribution section
transports products
the role of marketing
-identify customers needs
-satisfy customers needs
-anticipate changes in customers needs
-maintain customer loyalty
-build relationship to gain info abt customers
customer loyalty
when existing customers continually buy products from the same business
customer relationships
communicating with customers to encourage them to become loyal to the business and its products
market share
percentage of total market held by one brand or business
a successful marketing department should be able to
-maintain or improve business image
-develop new products or existing products
-increase revenue and profitability
-increase or maintain market share
-target a new market or market segment
-enter new markets at home or abroad
-raise customer awareness
consumers
buys goods or services for personal use not to re-sell
why customers’ spending patterns change
-change in tastes and fashions
-change in technology
-change in income
-ageing populations
why some markets became competitive
-globalisation
-internet/ e-commerce
-transportations improvements
how can businesses respond to change in spending patterns
-maintain good customer relationship
-keep improving existing products
-bring out new products to keep customers’ interests
-keep costs low to maintain competitiveness
mass market
a very large number of sales of a product
adv of mass market
-high total sales
-economies of scales
-opportunities of growth
-risks can be spread
disadv of mass market
-high level of competition
-high costs of advertising
-standarised products may not meet specific needs of customers
niche market
small usually specialised segment of a much larger market
adv of niche market
-high levels of customer loyalty and good customer relations
-reduces competitions
disadv of niche market
-relatively small so limited sales
-if product is no longer in demand, business will fail
market segment
an identifiable sub- grp of a whole market in which customers have similar characteristics or preferences
adv of market segmentation
-cost effective by making a product which will meet wants
-higher sales and profits
-offers opportunities to increase sales
ways of segmenting a market
-age
-region/ location
-gender
-lifestyle
-use of product
-socio-economic group
which method of segmentation should be used
-detailed analysis of the market and size of segment
-company and brand image
-costs of entering segment
market research
process of gathering, analysing and interpreting info abt a market
market research finds out the answers to..
-would customers be willing to buy my products?
-what price would they be prepared to pay?
-where would they be most likely to buy my product?
-what feature of my product do customers like or dislike?
-what type of customer would buy my product?
-what type of promotion would be effective?
-how strong is competition and who are the main competitors?
product- oriented
business whose main focus of activity is on the product itself
market- oriented
a business in which carries out market research to find out its customers wants before a product is developed and produced
marketing budget
financial plan for marketing of a product or product range for some specified period of time
primary research
collection and collation of original data via direct contact with potential or existing customer
secondary research
uses info that has already been collected and is available for use by others
advantages of primary research
-up to date
-first hand
-help a specific problem
-not available to other businesses
limitations of primary research
-expensive
-takes time
questionnaires
set of questions to be answered as a means of collecting data for market research
online surveys
requires the target sample to answer series of questions over the internet
interviews
involves asking individuals a series of questions, often face to face over the phone
focus group
a group of people who are representative of the target market
process of primary research
1.purpose?
2. decide best method
3.decide size of the sample
4.carry out research
5.collate data and analyse results
6.produce a report
adv of questionnaires
-detailed info can be gathered
-can obtain customer’s opinions
-can be online
-can encourage ppl by vouchers and prices
disadv of questionnaires
-not very accurate, can be misleading
-takes time and money
-analysing is also time consuming
adv of online surveys
-faster
-cheaper
-easy to complete
-can be quickly presented
disadv of online surveys
-absence of interviewer
-cannot reach those who dont have internet access
-scope for fraud
adv of interview
-interviewer is able to explain any questions
-detailed info can be gathered
disadv of interview
-time consuming and expensive
-interviewer could lead the interviewee to answer in a certain biased way
adv of focus groups
-detailed info
-interaction can help understand people’s opinions
-quicker and cheaper than individual interviews
disadv of focus grouos
-time consuming and expensive if conducted by specialist agency
-could be biased if ppl are influenced by others
-can be dominated
sample
the group of people who are selected to respond to a market research exercise
random sample
people are selected at random as a source of info for market research
quota sample
when people are selected on the basis of certain characteristics as a source of info for market research
adv of secondary research
-often cheaper
-to access info that cannot be obtained by primary research
-newspaper may carry vital economic forecasts
-quicker
disadv of secondary research
- may be out of date
-available to all businesses
-may not be completely relevant
internal sources of secondary research
-sales department
-finance department
-customer service department
-opinions of distribution and public relations personnel
external sources of secondary research
-newspapers
-governments statistics
-online sources
-trade association
-market research agencies
factors influencing accuracy of market research
-size of sample
-age of info
-bias
-sample selected
-the wording of the question
-who carried the research
-how the questions were phrased
-how carefully was the sample drawn up
ask yourself the following questions when designing a questionnaire
-who i need to ask?
-what i need to find out
-where will i carry my questionnaire
writing questionnaire questions
-no more than 12 questions
-short and clear with simple answers
-give choices
-avoid open ended questions
-don’t lead interviewee
carrying out questionnaire
-how many people to ask?
-what time of day to carry out?
-where to carry out questionnaire?
marketing mix
describes all of the activities which go into marketing a product or service, also summarised as the 4 Ps
types of products
-consumer good
-consumer service
-producer good
-producer service
what makes a successful products
-satisfy consumers wants and needs
-stimulates new wants
-right quality
-not expensive to make
-design is very important
-be distinctive and different
product development
1.generate ideas
2.further research
3.decide if the company will be able to sell enough to be successful
4.prototype
5.test the market
6.full launch
benefits of developing new products
-USP to be first in the market
-diversification
-expand into new markets
-expand into existing markets
disadv of developing new products
-costs of carrying market research
-costs of producing trials and wasted material
-lack of sales if target market is wrong
-risk of company image loss
brand name
unique name of a product that distinguishes it from other brands
brand loyalty
consumers keep buying the same brand again and again instead of choosing a competitor’s brand
brand image
image or identity given to a product which gives it a personality of its own and distinguishes it from its competitor’s brands
branding
-brand loyalty
-creates a brand image
-unique/ brand name
-needs advertising
-higher prices
-higher quality
-assured quality
-unique packaging
packaging
physical container or wrapping for a product, used for promotional and selling appeal
role of packaging
-protects the product
-easy to transport
-easy to open and use
-suitable to fit in
-eye catching
-carries info
-promotion
the product life cycle (definition)
describes the stage a product passes through from introduction, through growth and maturity and finally decline
stages of the product life cycle
1.developed: -prototype tested -market research -no sales
2.introduced: -slow sales growth -no costs covered
3.grows: -grows rapidly -prices are reduced -profit cover costs
4. maturity: -sales increase slowly -intense competition -profits at its highest
5.saturation : -profits fall -high competition
6.decline: -unprofitable
how stages of the product life cycle influence pricing
-introduction: sold at high prices, low prices could give wrong message
-growth: prices higher than competitors
-saturation/ maturity: prices reduced, as competitors may launch their own products
-decline: discounts if business does not plan to extend its life
how stages of the product life cycle influence promotion
-introduction: more spending on promotion
-later stages: advertising reduced
-if business uses extension strategy, then promotion may be increases
extension strategy
way of keeping a product at the maturity stage of the life cycle and extending the cycle
how to extend product life cycle
-introduce new variation
-sell into new markets
-make small changes
-advertising campaign
-introduce new, improved, versions of old products
-use different retail outlets
why adopt new pricing strategies
-try to break into a new market
-increase market share
-increase profit
-make sure all costs are covered and profit is earned
cost plus pricing
the cost of manufacturing the product plus a profit markup
(total cost/output x markup)
cost plus involves..
-estimates production of units
-calculate total cost of production
-adding a percentage markup
cost plus pricing benefits
-easy method to apply
-used in different markets
-each product earns profit
limitations of cost plus pricing
-could lose sales if selling price is higher than competitors
-profit will only be made if sufficient units are sold
-no incentive to reduce costs, any costs will be passed on as high prices
competitive pricing
when the product is priced in line with or just below competitors’ prices to capture more of the market
benefits of competitive pricing
-prices are at a realistic level
-avoids price competition so it reduces profit for all business
-often used when it is difficult for consumers to tell he difference between products of different businesses
limitations of competitive pricing
-if costs of the business is higher, it could lead to loss
-higher quality products need to be sold at a higher price
-needs detailed research which takes time and money
penetration pricing
price is set lower than a competitors prices to be able to enter a new market
benefits of penetration pricing
-used for newly launched products
-should ensure that sales are made
-market share should build up quickly
limitations of penetration pricing
-product is sold at a low price so profit per unit is low
-customers may get used to low prices and reject high prices
-not appropriate for some branded products
price skimming
high price is set for a new product on the market
benefits of price skimming
-can help establish the product as being of good quality
-costs can rapidly be recouped
-if product is unique then profits will be made before competitors
limitations of price skimming
-high prices may discourage some potential customers
-may encourage competitors to enter market
promotional pricing
when a product is sold at a very low price for a short period of time
promotional pricing benefits
-to get rid of unwanted inventory
-renew interest in a product
promotional pricing limitations
-lower revenue
-price competition
dynamic pricing
businesses change product pricing, usually when selling online, depending on the level of demand
impact of Psychology on price decisions
-high price could be a statue symbol
-0.99 creates the impression that it is cheaper
-low prices on daily base products
-repeat sales made when price reinforces consumers’ perception of the product
price elastic demand
consumers are very sensitive to changes in price
price inelastic demand
consumers are not sensitive to changes in price
distribution channel
means by which a product is passed from the place of production to the consumer
distribution channel 1
producer ——– consumer
distribution channel 2
producer —-retailer—- consumer
distribution channel 3
producer –wholesaler –retailer– consumer
distribution channel 4
producer –agent–wholesaler –retailer– consumer
advantages of distribution channel 1
-very simple
-suitable for products sold directly from the farm
-lower prices to customers
-can be sold by mail or internet
disadvantages of distribution channel 1
-impractical if consumers dont live near factory
-not suitable for products that cannot be sent by post
-not cost effective, post can be expensive
advantages of distribution channel 2
-sells large quantities to retailers
-reduced post costs
disadvantages of distribution channel 2
-no direct contact
-price is higher, need to cover retailer costs
advantages to distribution channel 3
-saves storage space and reduces storage costs
-retailer can purchase small quantities of fresh products as they have a short shelf life
-Wholesalers may give credit to customers
-wholesaler may deliver to retailer so it saves transport costs
-wholesaler can give advice to retailer
disadvantages to distribution channel 3
-maybe more expensive for small shops
-wholesaler may not have full range of products to sell
-takes longer for fresh to reach
-price is often higher than direct selling
advantages to distribution channel 4
-manufacturer may not know the best way to sell in other markets
-agent will be aware of local conditions
disadvantages to distribution channel 4
-producer has less control
agent
an independent person or business that is appointed to deal with the sales and distribution of a product or a range products
methods of distribution
-department stores
-chain stores
-discount stores
-superstores
-supermarkets
-independent retailer
-direct sales
-mail order
-internet
selecting distribution channel
-what type of product
-is the product technical
-how often is the product purchased
-how perishable is the product
-where are the customers located
-where do competitors sell
promotion
where marketing activities aim to raise awareness of a product or brand, generating sales and help create brand loyalty
aims of promotion
-create brand image
-improve company image
-compete with competitors products
-increase sales
-introduce new product
-inform people about particular issues
advertisings
paid for communication with potential customers about a product to encourage them to buy it
informative advertising
where the emphasis of advertising or sales promotion is to give full info abt the product
persuasive advertising
trying to persuade the consumer that they rlly need the product and should buy it
the advertising process
1.set objectives
2.advertising budget
3.advertising campaign
4.select media to use
5.evalutae effectiveness
target audience
refers to people who are potential buyers of a product or service
sales promotion
incentives aimed at consumers to achieve short term increase in sales
advantages of sales promotion
-promote sales at times when sales are traditionally low
-encourages new customers to try an existing product
-encourages new customers to try a new product
-encourages existing customers to buy products more often to increase consumers loyalty
-encourages customers to buy your products instead of a competing brand
what type of promotion to use
-stage of the product life cyle
-nature of the product
-nature of the target market
-cultural issues involved in international marketing
social media marketing
a form of internet marketing that involves creating and sharing content on social media netweorks in order to achieve marketing and branding goals
viral marketing
when consumers are encouraged to share info online about the product of a business
e-commerce
the online buying and selling of goods and services using computer systems linked to the internet and apps on mobile phones
benefits of using social media
-targets specific demographic grp who will share using viral
-target customers will see advert
-cheap
-reaches grps that are difficult to reach
-info can be updated regularly
disadv to business advertising on social media
-can isolate customers if they find the adverts annoying
-business have to pay for advertising is using pop ups
-potential customers may not use social media
-lack of control
-messages may be altered in a bad way
adv of a business using their own website
-no extra cost
-full control
-can update adverts quickly
-interactive, attractive
-provide more info by linking to other pages
-attracts funds and payments from other companies
disadv of having own website
-may not see the website and be hidden by other search results
-relies on customers finding it
-design costs
opportunities of ecommerce to business
-can promote worldwide cheaply
-orders sent directly to warehouse
-attractive and easy so encourages customers
-businesses can also make online purchases of supplies(B2B)
-easier to use dynamic pricing so higher revenue
opportunities of ecommerce to consumers
-convenience
-can make comparisons between prices and products easily
-credit or debit card is easy
-can access business located abroad
-prices are much lower
-can buy without addition of retailers profit margin
-packaging and transport costs reduced bcs of competition
threats of ecommerce to business
-high competition as consumers can easily find alternatives
-clear and attractive design can be expensive and need updates
-no face to face feedback
-transport costs are higher than traditional bcs packaged and delivery paid separately
-not suitable to sell personal services
-a large warehouse and efficient inventory
-legal rights to reject goods, returns can add to costs
threats of ecommerce
-needs internet access
-system failure or week internet can be frustrating
-products cannot be touched or tried on
-no face to face so difficult to find more info
-identity theft or fraudulent, security risks
marketing strategy
plan to combine the right combination of the four elemnts of the marketing mix for a product or service to achieve particular marketing goals
marketing objectives
-increase sales by selling in new or existing markets
-increasing sales by improving product
-acheive target market
-increase market share
-increase sales in niche market
-maintain market share if comp is high
recommend and justify marketing strategy
-objective
-budget
-target market
-balanced marketing mix
legal controls
-weights and measure
-tradr description
-sales of goods
-supply of goods and service act
-illegal to make misleading pricing claims
-consumer contract regulation
opportunities of entering foreign markets
-trade barriers lowered
-wider choice of location
-new markets gives chance of higher sales
-may have greater growth potential
problems if entering foreign markets
-lack of knowledge
-cultural difference
-import restrictions
-increased risk of non payment
-increased transport costs
methods to overcome problems from entering foreign markets
-join venture: management conflict, profit sharing
-licensing: inexperienced licensee, licensee can become competitors
-international franchising: quality problems, training and support needed
-localising existing brands: may be less successful, expensive to change promotion and packaging
