Marketing Flashcards
What is the purpose of marketing?
- to identifying needs
- to promoting products and services or contributing to brand development
- set pricing of the brand
- to promote the brand by various means
- distributing the brand in the right locations or by appropriate means (online)
Types of marketing objectives?
- sales volume and value
- market size
- market and sales growth
- market share
- brand loyalty
Internal influences on marketing objectives
- corporate objectives
- finance
- capabilities of the workforce
- resources
- nature of the product
- production issues
External influences on marketing objectives
- market factors
- competition actions
- technological change
- suppliers
-environmental factors - ethical factors
- PEST factors
Benefits of marketing objectives
+ specific objectives can be set
+ all members of the department have a common goal
+ objectives can be measurable
+ they can be prioritised
+ can be motivating for staff
Drawbacks of marketing objectives
- external changes are not always easy to predict
- internal changes affect them
- marketing objectives could conflict with each other
- they may be too ambitious
- the business may not have resources or budget to achieve the objectives set
Definition - market research
market research is the collection and analysis of data and information to inform a business about its market
Why should a business conduct market research?
- helps to identify problem areas within a business
- allows a business to understand the needs of existing and potential customers
- a business can make well-informed market decisions
- increases the understanding of a particular subject
- clearer grasp on competitors
Definition - primary research
Can be called field research and involves the collection of data on a first hand basis, this data did not exist previously and is therefore original data
Examples - primary research
- Surveys
- Questionnaires
- Interviews
- Focus groups
- Observations
Definition - secondary research
Can be called desk research, this is research that has already been undertaken by another organisation and therefore already exists
Examples - secondary research
- National and local government e.g. office for national statistics
- Market research organisations e.g. Mintel
- Academic organisations e.g. universities
- Newspapers and magazines
- The internet
Definition - qualitative research
Based on opinions, attitudes, beliefs and intentions
Benefits of qualitative research
- essential for important new project development and launches
- focused on understanding customers needs, wants, expectations = very useful insights for a business
- can highlight issues that need addressing e.g. why customers don’t buy
- effective way of testing elements of the marketing mix e.g. new branding , promotional campaigns
Drawbacks of qualitative research
- expensive to collect and analyse , requires specialist research skills
- based around opinions , always a risk that sample is not representative
Definition - quantitative research
is concerned with data and addresses questions such as “how many?”, “how often”, “who?”, “when?” and “where?
Benefits of quantitative research
- data relatively easy to analyse
- numerical data provides insights into relevant trends
- can be compared with data from other sources (e.g. competitors, history)
Drawbacks of quantitative research
- focuses on data rather than explaining why things happen
- doesn’t explain the reasons behind numerical trends
- may lack reliability if sample size and method is not valid
Definition - sampling
gathering data from a group of respondents whose views or behaviour should be representative of the target market as a whole
What will the value of sampling depend on?
- the sample technique used
- how the sample was carried out
- the size of the sample
What factors will the size of the sample depend on?
- the budget available
- the importance of accuracy
- degree of confidence in results
Definition - random sampling
a sample is selected for study from a population where each individual is chosen entirely by chance and has an equal chance of being selected
Definition - quota sampling
the population is first segmented into subgroups before a judgement is made in selecting respondents that are representative of that subgroup
Definition - stratified
the population is first segmented into subgroups before respondents are randomly selected form within that subgroup
Benefits of sampling
- can be used flexibly
- gives a good indication of a whole market
- reliable info can be gathered of a cross section
Drawbacks of sampling
- may be unrepresentative
- may be bias in the questions
- consumer takes constantly change
Definition - extrapolation
uses trends established from historical data to forecast the future
Benefits of extrapolation
- A simple method of forecasting
- Not much data required
- Quick and cheap
Drawbacks of extrapolation
- Unreliable if there are significant fluctuations in historical data
- Assumes past trend will continue into the future – unlikely in many competitive business environments
- Ignores qualitative factors (e.g. changes in tastes & fashions)
Definition - correlation
a statistical technique used to identify the strength of a relationship between two variables
Definition - independent variable
the factor that causes the dependent variable to change
Definition - dependant variable
the variable that is influenced by the independent variable
Definition - positive correlation
the 2 variables move in the same direction
e.g. as temperature goes up ice cream sales go up
Definition - negative correlation
the 2 variables move in opposite directions
e.g. as road tax prices go up the sales of new 4x4s goes down
Definition - zero correlation
there is no relationship between the factors
e.g. average rainfall and sales of textbooks
Definition - strong correlation
means that there is little room between the data points and the line
Definition - weak correlation
means that the data points are spread quite wide and far away from the line of best fit
Definition - confidence levels
the probability that the research findings are correct
What do confidence levels depend on?
- size of sample
- population size
- how the sample was carried out
Definition - confidence interval
the plus or minus figure used to show the accuracy of statistical results arising from sampling
helps a business evaluate the reliability of a particular estimate
Examples of confidence intervals
Quality management - percentage reliability of machines
Market research - statistical estimates for sales forecasting
Risk management and contingency planning - risks of sales forecast not being achieved
Budgeting and forecasting - sales forecasts to support new product launches
Definition - elasticity
measures the responsiveness of demand to a change in a relevant variable – such as price or income
Price elasticity of demand
measures the responsiveness of demand after a change in a product’s own price
Definition - price elastic
means that a change in price will lead to a change in demand i.e. demand is sensitive to price changes
Definition - price inelastic
means that a change in price will lead to a less than proportional change in demand i.e. demand is not so sensitive to changes in price
Calculate - PED (price Elasticity demand)
% change in quantity demanded / % change in price
Calculate - YED (income elasticity of demand
% change in quantity demanded / % change in income
Definition : income elasticity of demand
Responsiveness of quantity demanded to changes in consumer incomes
What does a negative YED show
Demand falls as income rises
What does a positive YED show
Demand rises as income rises
Definition : target market
Set of customers sharing common needs and wants that a decides to target
Definition : market segmentation
Dividing up the market into distinct groups
4 segmentation methods
- demographic
- geographic
- income
- behavioural
Benefits of market segmentation
+ advertising can be targeted at specific market segments so advertising spends are more effective
+ most and least profitable customers can be identified
+ helps a firm improve existing products and customers service
Drawbacks of market segmentation
- companies can ignore the needs of potential customers
- difficult to break the market into segments
- difficult to find ways of marketing to specific demographics
What influences targeting
- missions and objectives
- degree of competition
- nature of product
- understanding the needs and wants of a specific segment
Definition : niche marketing
When a firm targets a small subsection of a market
Advantages of a niche market
+ less competition as large companies aren’t attracted to small markets
+ cost effective as they do not produce as many varieties of products
+ tailor made products to meet the specific needs of customers
+ easier to target customers as there are less of them
Disadvantages of a niche market
- lower profits as they don’t sell a lot of products
- can be vulnerable to changes in demand
- larger businesses may be attracted into the market if interest from customers is high
Definition : mass marketing
When a firm targets the whole of a market rather than specific segments
Advantages of mass marketing
+ large scale production can reduce costs as they bulk buy
+ high revenues as they sell large range of products
+ allows for research and development
+ increases brand awareness
Disadvantages of mass marketing
- high fixed costs
- vulnerable to changes in demand
- high competition
- difficult to appeal directly to individual customers because the products are designed to suit all customers
Definition : positioning
A marketing strategy that positions the product in relation to rivals in order to appeal to target segments, can be achieved by changing elements of the marketing mix
What is positioning influenced by
- budgets
- creativity and innovation
- degree of competition
- state of the economy
Definition : market mapping
Illustrates the range of positions that a product can take in a market, depending on features that are important to customers
Why use market mapping
- analyse customers buying habits and preferences
- can identify what segments of the market are under provided for and look at producing a product to fill that gap
- products can be compared to competitors
- gives a firm the insight into the competition in the same market
Advantages of market mapping
+ clearly displayed
+ shows the whole market
+ y and x axis are adaptable
+ simple and visual
+ shows how competitors are doing in contrast to you
Disadvantages of market mapping
- not accurate / specific
- based on opinions
- no time basis
- easy to misinterpret
Definition : marketing mix
Combination of marketing elements to enable a business to meet the needs and expectations of customers
What are the 7 marketing P’s
- place
- price
- promotion
- product
- people
- process
- physical environment
Features of an effective marketing mix
- achieves marketing objectives
- meets customer needs
- balanced and consistent
- creates a competitive advantage
- consistent with the chosen target market and positioning
Definition : product
A good or service - anything that is capable of satisfying customer needs
Examples of consumer products
- convenience
- shopping
- specialty products
What are convenience products
- bought frequently
- little planning to buy them
- low customer involvement
Features of convenience products
- price = lower
- place = widespread distribution
- promotion = mass promotion
What are shopping products
- Bought less frequently
- Customers are more cautious
Features of shopping products
- Price = higher
- Place = selective distribution
- Promotion = advertising by producers and resellers
What are specialty products
- Unique characteristics or brands
- Buyers make a special effort to
Features of specialty products
- Price = high
- Place = exclusive distribution
- Promotion = carefully targeted
What are the two types of products
- consumer
- industrial
What are industrial products
- bought for further processing or for use in conducting a business
- bought by businesses not consumers
Examples of industrial products
- materials and parts
- capital items
- supplies and services
Examples of capital items
- industrial products, IT systems, buildings infrastructure
Definition : product portfolio
Range of products a business sells
Why do large companies have a large product portfolio
- Spreads the risk
- Helps a business to collect revenue from different markets
Benefits of a large product portfolio
- product innovation
- identify/fill market opportunities
- gives regular cash flow
Drawbacks of a large product portfolio
- increased research and development costs
- bad publicity of one product may affect sales of all products
- high marketing and advertising costs
The Boston matrix
- used to analyse product portfolios
- shows product market share and growth
- helps with marketing decisions
Cash cows (Boston matrix)
- high share of a slowly growing market
- mature stage of product life cycle
- little potential for growth
- positive cash inflow
Rising stars (Boston matrix)
- high share in rapidly growing market
- require high marketing spending
Problem children (Boston matrix)
- low share of growing market
- cash flow is negative
- have potential but future is uncertain
Dogs (Boston matrix)
- products have failed or in decline phase
- low share, slow growing market
- no potential
Definition : product life cycle
a theoretical model which describes the stages a product goes through over its life
Uses of the product life cycle
- forecast future sales trends
- help with market targeting and positioning
- help analyse and manage the product portfolio
Weaknesses of product life cycle
- shape and duration varies for each product
- decisions can change the cycle
- difficult to recognise the exact position of product
- length cannot be reliably predictable
- decline is not inevitable
Features of development stage (PLC)
- research phase of product before introduced to marker
- no income for business
Features of introduction stage (PLC)
- first time that customers are introduced to product
- sales are usually low unless in high demand
Features of growth stage (PLC)
- consumers start to take action
- increased amount of sales
Features of maturity stage (PLC)
- competition is high as rivals have had time to introduce and develop their products
- sales slow
Features of decline stage (PLC)
- original need and want is diminished because other product innovation is on market
- sales have dropped
Extension strategies in product life cycle
- reduce price
- rebrand product
- reposition product
- increase market activity
- promotion
Factors affecting pricing decisions
- other marketing factors e.g. during heavy promotion price may be reduced
- costs of the business, the price needs to cover them
- must be acceptable to customers
- the stage of the life cycle the product is in
- price has to be in line with businesses objectives
- level of competition in the market
Pricing strategies
- penetration pricing
- price skimming
- cost plus pricing
- competitor pricing
- contribution pricing
- psychological pricing
Definition : penetration pricing
When they price the product lower than the initial price and increase the price slowly over time
Advantages of penetration pricing
+ win customers from competition
+ build brand loyalty
+ can adopt product in market
Disadvantages of price penetration
- poor expectation
- poor brand image
- inefficient in long term
When could you use penetration pricing
- gym member (first 3 months free)
- subscription
How is cost plus pricing produced
Product cost + profit margin = selling price
Which industry uses cost plus pricing
Retail companies
Strength and weakness of cost plus pricing
+ guaranteed a profit
- doesn’t consider market influences or competition prices
Definition : price skimming
Set price high when first launched as demand is high and competition is low
Advantages of price skimming
+ high profits cover research and development costs
+ maximise profits
Disadvantages of price skimming
- only works with inelastic products
- doesn’t work if you have competition in the market
What happen in the long term with price skimming
Price reduces as demand falls
What is psychological pricing
When the cost appears lower
An example of psychological pricing
Trainers being sold at £114.99 instead of £150
Definition : contribution pricing
Setting the price based on variable costs
Benefits of contribution pricing
+ allows flexibility in pricing
+ demand factors can be taken into account
When can contribution pricing be used
When the business needs to generate profit
Definition : competitor pricing
Set prices based on what competitors are charging
Strengths and a weakness of competitor pricing
+ increased market share
+ customer satisfaction
- limiting products
How may a business lose money with competitor pricing
If their prices aren’t unique in a market then customers may choose another business who has better customer service or better quality products
Why is place important
can be used as part of the strategy to establish a certain brand identity
Factors that influence the ‘place’
- convenience
- accessibility
- cost of access
- reputation
- localisation
Examples of point of sale
- similar products being places together
- brightly coloured, attractive displays
- impulse buys being placed by the checkout
- popular products being given greater shelf space
- daily essentials being placed at eye level
- complementary products being placed in close proximity
Definition : distribution
how to get goods to the customer
Traditional distribution channel
Produce - wholesaler - retailer - consumer
Modern distribution channel
Producer - retailer - consumer
Direct distribution channel
Producer - consumer
Definition : multi channel distribution
a business using more than one type of distribution channel
Benefits of a multi channel distribution
- allows more target market segments to be reached
- customers increasingly expect products to be available view more than one channel
- enables higher revenues e.g. if retail outlets have no stock customer can buy online
Drawbacks of a multi channel distribution
- potential for channel conflict e.g. competing with retailers by also selling direct
- can be complex to manage
- danger that pricing strategies becomes confused in the eye of the consumer
Definition : internet marketing
- many business have a large amount of products for sale online and in store with services such as ‘click and collect’
- some only sell online
Benefit : internet marketing
+ can offer low costs for businesses and markets to sell worldwide
Definition : promotion
To ensure that customers are aware of existence and positioning of products
Influences on promotional decisions
- Stage in product life cycle
- nature of product
- competition
- marketing objectives and budget
- target market
Definition: informative promotion
Intended to increase consumer awareness of the product and its features
Definition: persuasive promotion
intended to encourage consumer to purchase the product, usually through messages that emphasise its desirability
Main types of promotion
- branding
- advertising
- sales promotion and merchandising
- personal selling
- public relations / publicity / sponsorship
- direct marketing
- viral marketing / social media
What is branding
The process of developing a product with a unique character, design or image that is well recognised
Advantages of branding
- Higher prices
- retailers want to stock high selling brands
- customer loyalty
Disadvantages of branding
- Large amount of work and time in personal brand
- increased stress and pressure
- potential invasion of privacy
An example of a business that uses branding
McDonald’s: everyone recognises their logo
What is advertising
When a business draws attention to a product or service
Types of advertising methods
- TV and radio
- newspapers
- magazine
- cinema
- social media
- billboards
Advantages of advertising
- Wide coverage
- effective for building brand awareness
Disadvantages of advertising
- Expensive
- lacks flexibility
- consumers see loads of adverts every day so it’s hard to be noticed
Examples of businesses that use advertising
McDonald’s: use billboards
Sephora: Instagram adverts
What is sales promotion and merchandising
A tactical point of sale promotion to stimulate purchases
Usually a short-term incentive to increase sales
Advantages of sales promotion and merchandising
- Effective at achieving a quick boost to sales
- encourage customers to trial a product
Disadvantages of sales promotion and merchandising
- Effects may be short-term
- customers may expect further promotion
- possible damage to brand image
Examples of businesses that you sales promotion and merchandising
McDonald’s: monopoly
Cream egg: the white egg
What is personal selling
Promotion on a person to person basis
What does personal selling involve
Meeting with potential customers to disclose a sale by telephone, at meetings and by knocking on doors
Advantages of personal selling
+ high customer attention
+ adaptable
+ message is customised
Disadvantages of personal selling
- can only reached a limited number of customers
- high cost
Examples of businesses that use personal selling
Car sales person meeting with a potential customer to show different car models
What is PR / Publicity / sponsorship
Aims to achieve favourable publicity about the business
Advantages of PR / Publicity / sponsorship
+ increases reputation
+ builds brand image
Disadvantages of PR / Publicity / sponsorship
- little control
- difficult to measure
- no guaranteed results
Examples of a business that uses PR / Publicity / sponsorship
Dove - beauty campaign
What is direct marketing
Promotional material directed by mail, email, social media or phone to individual businesses
Advantages of direct marketing
+ focus limited resources on promotion
+ can personalise the message to maximise interest
Disadvantages of direct marketing
- response rates vary
- consumers could see it as junk email creating a bad brand image
Examples of businesses that use direct marketing
Amazon
Kitkat
Most food companies
What is viral marketing / social media
Strategy that relies on individuals to spread a message
Advantages of viral marketing / social media
+ cost effective
+ requires minimal investment
Disadvantages of viral marketing / social media
- unpredictable
