market segmentation Flashcards
market segmentation definition
dividing market into groups of buyers
consumers in each segment share one characteristic e.g age, income
names of different segments
demographic segments-age, gender
geographic segments-neighbourhood, city, country
income segments-lower income vs higher income customers
behavioural characteritsics-lifestyle, hobbies and interests e.g into gym so want high protein content
makret mapping
measuring two extremes
adv-can reveal gaps in market
adv-can see how much consumers are willing to pay
adv-can see who closest competitors are
dis-subjective, what one person sees as high quality another may not
dis-simply things too much,e.g not mentioning locations within map
competitive advanatge
condition which allows firm to be more profibatble than its rivals
ways in whcih businesses can gain competitive advantage
USP/product differentiation
good customer services
innovation
advertising and branding
after sales services
lowerr costs
added value
increasing the differene between how much the product is sold for ahe price customers pay
added value=price porduct sold for-cost of making product
supply
quantity of a product that suppliers are willing and able to supply to a market
demand
quantitiy of a product that consumers want and are able to buy in given price at given time
factors affecting demand
substitutes-porducts that replace another product e.g increase in price ofo margarine, increase in demand for butter
advertising and branding-allows consumers to be loyal and make repeated purchases to stop demand falling
demographics-changes in population e.g increase in healthcare means increase in demadn as people living till older
fashio tastes and advnaces in technology
a
consumer income-lower income will increase demand for cheaper goods, high income will increase income for expensive products
external shocks-risk of flooding increases demand for sandbags
factors affecting supply
cost of prodcution-if cost of production rises to make product becomes more expensive to manufacturer prodcut, business will want to make less, reduce supply
indirect taxes-tax is placed on good, makes it more expensive to produce, reducing supply
subsidies-if subsidies given, increase demand as have more money
new technology-more efficient so cheaper, increase supply
external shocks-e.g war, spend more on efforts of war so reduction in supply
d
price elastic products
when price elaticity of demand is greater then 1
changes in price have big effect on demand e.g luxury products
price inelastic products
when price elastcity of demand is less than 1
changes in price have little effect on demand e.g neccessity
how do you calculate sales revenue
selling price x sales volume
income elasticy of demand calculation
percenatge chnage in quanity demanded divided by percenatge change in income
what type of income easlticy of demand do neccesity have
have postive income elasicy of demand which is less than 1
design mix
function-whether its fit for purpose
aestethics-does it look good
costs-is it costly to produce
promotion
part of marketing mix
used to help persuade consumers to buy products
what is viral makreting
when businesses get users to pass on adverts to their freinds e.g through social networking platforms e.g email
what are sales promotion
using free gifts, special offers, buy 1 get 1 free
direct marketing
marketing sold through post to consumers
what are the 3 types of branding
cooperate branding-how a business presents itself to customers
adv-trust will assume products are of a high quality
product branding-inidividual prodcts that the cooperate brand makes
adv-people willing to pay for a trusted well known brand
dis-expensive to pporcue and people may not be willing to pay high price its charged at
own branding-bradning from in house
adv-reduces costs, cheaper to produce as no distinctive logo
adv–cheaper alternative for consumers
dis-people may associate low price as being low quality, losing sales
dont get same sense of wellbeing as they do when getting own brand product
what is rebranding
changing design, promotion and pricing of existing brand
adv of creating strong brand
adds value to product allowing business to charge highe prices
makes product less price elastic
people become more loyal to brand
assume its higher quality
what are ways to build a brand
have a USP e.g prodcut differentiation advertsing
sponsorships
emotional branding
where business matches bradning of product with values, inspiratiosn of tagret audience to trigger an emotional response
what are the 6 methods of pricing stregties
price skimming
penetration pricing
cost plus pricing
predatory pricing
competive pricing
psychological pricing
price skimming
first use high initial price then slowly reduce price after year or so
adv-can quickly recover makreting and development costs
adv-people may associate the high price as being higher quality so are willing to pay price
adv-feel of being the first one, see it has having lots of value, boosting products image
dis-poeple may not be willing to pay high price
dis-those that payed initial high price may be furstarted that peole are now getting iit for cheaper price
less liely to purchase agin
sales are lost
penetration pricing
when products are sold at low price when reach makret, then sloly increased
adv-low prices attract lots of consumers and gain market share
dis-hard to keep consumers in long term as may not be willing to pay the higher price now charged/may lsoe customerrs
dis-may damage how the brand image is perceived
cost plus pricing
when firm adds a percenage mark up to costs of making or buying a single product
unit cost plus unit cost divied by 1– timees mark up
predatory pricing
where firm delibertly lowers there cots to push another firm out and then increases the prices back up again
illegal in EU laws
compeitive pricing
firm monitors prices of competitiors tand their reduces their pirces to below or eual to comeptiors to gain comeptive advanatge
psychological pricing
using 1.99 as seen as lot cheaoer then 2 porund
chrage higher prices as people associate as being higher quality
changes in social trends affecting pricing strategies of firms
businesses may need to make themselves more price competitve sas easier for customers to comapre prices and pick cheaper price
distribution
route a product takes from maufactuer to consumer
two stage channel-direct selling
direct selling or ecommerence
manufacturer-consumer
indirect selling-3 stage channel
manufactruer-retailer-consumer
conveint stores
indirect selling-4 stage channel
manufacturer-wholesaler-retailer-consumer
what does wholesaler do
buy goods from manufactruer in large bulk then sells it to retailers in smaller quantities
adv of wholesalers
used as storage cupboard
make distribution quicker adn SIMPLIER for retailer-as dont haev to make individual trips, cuts down number of journeys and paperwork
manufacturers are paid straigth away rather then having to wait for retailers to sell the product
can store more goods then retailers can-storage cupboard
dis of wholesalers
need trusted relationship with wholesaler to assure will get goods in time
multi stage channel of distribution
where business uses several channels of distribution at once e.g direct selling e.g ecommernace and selling in reatil shops
advnatge-gives flecxibility
online distribution
where goods and services are streamed and downloaded rather then a physical good brought
adv of online retailing
enviroment-no travelling
no package costs
consumer gets service rigth away, immediate distribution
any issues, much easier to update
acroynm- custard pie
customers get cheaper price then normal
p
immediate distrubution/gets it striagth away
e
dis of onlien retailing
high in IT skills, may need extensive training which can be expensive
product life cycle
devlopment stage
introduction stage
growth stage
maturity stage
decline stage
development stage
research and development stage
high costs and sales not yet being made to cover costs
high failure rate as oftne not enough demand
introduction stage
stage where product is lauched
high costs being made on promotion and advertsing product to make sales
sales go up, but sales reveue had to pay for fixed costs of development costs before prodcut can make profit
competition is limited
growth stage
sales grow fast ‘increase in new customers and repeated customers
competition is attrcted to makret
maturity stage
sales reach peak
enough sales been made to cover fixed costs of development
lots of compeittion
at saturation, where market is full andd reached full growth, sales may begin to drop
decline stage
where product sales decline, product does not appeal to customers anymore
what are extension stragies
way to increase products life cycle for longer
e.g product development, reforming or redesigning a product
changing design of packaging,making it more up to date etc
boston matrix
compares makret growht and makret share
question marks-all new products. have high market growth but low makret share
are not yet profitbale and need heavy marketing to give them a chance
cash cows-high market share but low makret growth. at maturity phase of porduct life cycle
already been promoted so sold in higvolues
bring in lots of money
stars-high market share and high makret growth. at growth stage
dogs-low makret share and growth, lost cause
mass marketing strategies
needs to appeal to whole market instead of individual makret segments
product needs to have mass appeal
expesnive advertising campiagns
sponsorphips
prodcut endorsemtn deals
niche marketing strategies
more emphasises on making a product whcihc is difefrentiated or unqiue compared to what is avaliable in mass market
may need more effective makret research to find out what customers want
B2B marketing
business sells product to another business
e.g surgical gloves are sold to doctors
B2C marketing
business selles to consumer
e.g ready meals to consumers in shops
customer loyaly
having good before and after sales is key
after sales service is important to custpmers, able to get any help with any porbelms with their product after buying it
saver schemes
collect points based on amount they spend
e.g tesco clubcard
loyalty cards
help tie customer to partcilaur service e.g getting stamp ach time vist
after serval visstics, get free drink
good as makes repeated customers
how are employees an asset to a business
bring in skills nad knowledge into a business
how are employees costs of a business
paid wages or salarys which costs money to business
what is a wage
paid to worker based on amount of work they do
what is a salary
fixed amount that is paid monthly
what is dissimisal
contract of employmeent ends-choice of employer not employee
redundancy
persons job is no longer needed
in other words, fired
could then cost money to business for reducnacy payments to employees who been in business for over 2 years
zero hour contracts
no guanterred hours
adv-more flexible so can commit to other things
dis-little finanical security
dis-no obligation to work so may be hard for business to find people in busy times
outsourcing
where one business outsources business acivit/task to another busines
recuritment
finding best person for job
selection process
interviews-one to ine wither face to face or online
assessment days-they have to do actvities such as group exercises
in tray exercises-given scenroi to member of staff be given list of tasks to complete
candidate has to put tasks in order in terms of importance and say what action should be taken place for each task
internal recuritment
recuriting someone from within the business
external recuritment
recurting someone from outside the business
adv of internal recurimten
cheap and quick
know person gets along with members in business
makes people more motiavted to gte promotion
dis of internal recurtiment
may cause resentment between workers if dont get chosen
leave one vacancy that then needs to be filled
adv of external recuritment
brings new ideas into business
may have business knowledge from other buisnesses
more choice of candiates
dis of external recuritment
expensive
long process
make take longer as have to have introduction phas/ longer induction process
recurmtent has costs
epensive due to cost for vacancys etc
induction training
introdcuing person to wrokfocre and their new role
if bad introduction training, may not know what they are doing
not enjoy new jobe
more likely to leave
on the job training
traning inside the business
off the job training
traini g outside of business
adv of on teh job training
job specific
lower costs
dis of on the job training
may slow down production as not fully prodctuve durng trainers
not expertise
no new ideas brought into business
adv of off the job training
brings in new ieads
people are experitise
dis of off the job training
not job specific
no actual benefit to business
expensive
what is chain of command
path of communcation and authoirty up and down the heriarchy
tall structures
have lots of levels in their heirarachy
long chains of command-meaning can negatively impact communcation and efficiency
getting communcating too and from can be very time consuming
narrow span of control
adv of tall strcutures
lots of layers of management so lots of chances for promotion, can be motivating for employees
flat organisations
few levels in heiarchy
poeple are given more freedom and responsbility
wide span of control
centralisaed organisations
where senior manager makes all decisions (at top of business)
adv of centralised organisations
have high level of experinece
means decisions are made qucikly as dont have to consult anyone
good if workers are not skilled
dis of centralised organisations
may be demotiavting for employees as dont have say
dont spend much time on shop floor so slow to notice consumer trendds
decrentralised organsiations
authorty is shared out to more junior employees
adv of decentraisedd organisations
may have more knowledge on their department/sector
can be motivating for staff as get a say/may feel more valued
day to day decisions can be made quickly without having to ask senior managers
dis of decentraised organsiations
may not have enouvgh experince at making decisions
may not be able to see overall situation and needs of organisation
taylors scientific managemtn
belived people motivated by money
believed people do minimum amount of work when left to own devices
favoured division of labour-breaking work down into small repeative tasks
paid workers according to quanitty they produced
adv-fewer workers needed due to increased productivity
dis-reduce quality, may become boring, demotivating
herzbgers two factor theory
two motivating factors
hygeine factors
motivating factors
mayo human relations theory
one group working conditions stayed same
other gorup workign conitions consistently changed e.g number of rest breaks
foudn that group with working conditions consistemyl changing were the most productive
hwoever, not because of chanhe of working conditions its due to changed in management and teams
non finanical motivation
job enlargemnt-give employee greater range of work to do at same level
job enrichement-giving workers more challenging work
job rotation-moving tasks from one to another r
what is peiceowrk
workers are paid per unit produced
commisiom
money paid to worker for compelting task
what are the 4 types of leadership styles
autocratic-where leader makes decisions on their own
adv-good if workers are unskilled
adv-decisions are made qucikly/have lots of experince
dis-staff dont have say so can be demotivating
patternalistic-softer from of autocratic style where consult workers about decisions being made and help peraude them that decsions are in their interest
democratic-leader encourages workers to partcipate in decision making process
they discuss issues with workers and delegate responsiabilty
adv-motiavting
dis-time consuming
lasissez faire-hand off form of leadership. leader might offer employees little cupply but barely interfer with running of the business
adv-motivating
dis-haev little experince so may make wrong decsisions putting running of business at risk
transformational leadership-wher a business needs to dramtically change
has ideas of changes and needs to inspire staff to make these changes
entrepreneur
one or two people who set up a business
roles of entrerenurs
creating and setting ,up a business
running and developing business
brining innovation to business world
barriers to entrepreneuship
may lack money
often occurs when business idea has large start up costs e.g initial investment of large machinery
way to overcome barrier-raising capital e.g getting a loan
lack in confidence
can overocme this by strongly believing they can do it
characteristics of entrepreneurships
hard wroking-may need to work over hours day and night
self confident-needs to beleive in tehri own abailities and judgment for business idea
risk taker-needs to willing to try things that culd potentaially gace a negative outcome
what specific skills do entrepreneurs need
communicator with many different people
good team working skills
solving problems
what are the financial motives of setting up a business
profit maximisation-means making as much profit as possible
profit satisfying-means making enough profit, not pushing to maximise it
may make enough to haev happy liestyle and no more
means shareholders are satisfied but no more
non finanical motives of being an entrepreneur
work from home-flexible hours
your own boss, have freedom to pursure own ideas can be motivating
what does an entrepreurn have to prepare for when movig from a entreprenur to a leader
delegate responsibility-develop trust that these people can carry out task as well as them
may find it easier if hire peole with similar beliefs, prinicples and visions
develop emoitonal intelligence-be able to recognise emoitons of others and respond to them appropriately
important to keep them motivated
become less reactive-need to make decisions slower and consider and consult other staff
would have made decisions much quicker when alone
private limited companies
business owned by shareholders, each protected by limited liability
adv of private limited companies
limited liability (can only lose out on what they invest in)
own personal growth is protected
making it attractive to potential investors
easier to raise capital
take on new shareholders and number of people, gives them chance to bring in new shareholders
therefore, brining in money
reputation-trust worthy and reliable and larger in scale
help attract customers
dis of private limited companies
shared profits-have multiple shareholders, profits will be split either ways
public limited companies
business owed by shareholders
shares are traded publicly
shares are sold publicly during a process as a stock market flotation
adv of public limited company
large amount of capital raised (flotations)
benefit from greater media exposure and may be seen as more prestigious and reputable
dis of public limited company
stability of a PLC is vulnerable to changes in sahre price
directors are accountable to thousands of shareholders
exam hint question: should a private limited company consider becoming a public limited company
