MARKETING Flashcards
what is a market
any place where buyers and sellers can meet to conclude a transaction e.g. amazon.co.uk or a shopping mall
Different markets have different characteristics and are affected differently by changes
what is the aim of marketing
to help identify, anticipate and satisfy consumer needs and wants profitably
Needs are considered to be essential e.g. shelter or food
Wants are desires which are non essential, even if consumers consider them to be essential e.g Nike trainers
what is market research
the process of systematically gathering data from consumers which can be used to influence the business decisions
how is market research essential
the process of systematically gathering data from consumers which can be used to influence the business decisions
what is product orientation
an approach to marketing that focuses on the characteristics of the product rather than the needs of the consumer
The emphasis will be on creating a product first and then finding a market
The business has a belief that the product is superior i.e. it will sell itself
One problem with being too product orientated is that over time your business may move further and further away from what the market is looking for, thus increasing the risk of business failure
E.g. Gillette’s razors can be classed as a product oriented business as the business focuses on the quality of its products and regular innovations aim to increase sales
what are the tools of product orientation
- product research
- product testing
- product focus
what is market orientation
an approach to marketing that focuses on the needs of consumers and uses this information to design products that meet customer needs
Consumers are at the centre of marketing decisions
Products will be developed which respond to consumer needs
The result of market orientation is that the firm will benefit from increased demand, increased profits, and a valued brand image as its products become more desirable
E.g. Universities often develop new courses based on the feedback they receive from students and employers
what are tools of market orientation
- market research
- market testing
- customer focus
what is the aim of market orientation
to develop products to meet consumer needs identified during the market research process
niche markets
products are aimed at a subset of the larger market e.g. gluten free products
Niche marketing occurs when businesses identify and satisfy the demands of a small group of consumers within the wider market
Production usually happens on a small scale
mass markets
products are aimed at broad market segments e.g Kellogg’s Corn Flakes is an example of a breakfast cereal aimed at the mass market
Market segments are groups of consumers who share similar characteristics e.g. age, lifestyle, etc.
Mass marketing occurs when businesses sell their products to most of the available market
Production usually happens on a large scale
characteristics of niche markets
Products are more specialized and unique as they are aimed at narrow market segments
High average costs due to small scale production
They do not benefit from economies of scale
High prices make products less affordable and lead to lower sales volumes
High prices can allow businesses to earn higher profit margin
Louis Vuitton is an example of a fashion company that aims its products at a niche market
characteristics of mass markets
Products are less unique as they are aimed at broad market segments
Low average costs due large scale production economies of scale
Low prices lead to greater affordability and higher sales volumes
Low prices lead to lower profit margins
Primark is an example of a clothing company that focuses its product on the mass market
how can the size of a market be measured
through sales volume or sales value
sales volume
is the number of products sold i.e the physical number of units sold
how to calculate sales revenue
price x quantity sold i.e the financial value of the units sold
what is market share
the proportion of the total sales of a product/service as a proportion of the size of the market as a whole
E.g. Tesco has 26% of the UK grocery market
how can market share be calculated
(sales of a business/market size)x100
what does an increase in market share indicate
that a business has made effective use of marketing strategies to increase sales and gain customers from competitors
what is market growth
the increase in the overall size, value or volume of a market over a period of time usually expressed as a percentage
This metric considers the size of the whole market/industry as opposed to a single firm’s share of the market
ways of measuring market growth
sales revenue, sales volume or the number of customers
how is market growth calculated
( (this year’s market sales - last year’s market sales) / last year’s market sales ) x100
if the market growth rate is positive
the market is expanding
if the market growth rate is negative
the market growth rate is contracting
what does market growth provide
an incentive for businesses looking to expand, increase sales and generate higher revenue
reasons for market growth
- increased demand for products
- advances in technology
- population growth
- changes in tastes and preferences
- favourable economic conditions
- media attention
what is market leadership
a businesses ability to maintain the largest share of a specific market or industry
It can refer to a product, brand or organisation
It is a key way to measure business success
oligopolies
small number of large businesses that control a large portion of market share, dominating their industry
market concentration
measures how competitive these markets are
high market concentration
is where market leaders have a very high combined market share
These markets are not very competitive
Examples include energy supply and textbook publishing
low market concentration
is where market share is spread across market leaders and smaller competitors
These markets tend to be more competitive
Examples include UK supermarkets and travel agencies
advantages of market leadership
- brand recognition
- economies of scale
- innovation and resources
- distribution channels
- competitive advantage
- attractive to highly-qualified job applicants
marketing planning
is the process of formulating the marketing strategies and tactics that will help a business to achieve its marketing objectives
three tools of marketing planning include
Market segmentation
Market mapping
Market positioning
marketing plan elements
- objectives
- resources
- research
- marketing mix
marketing objectives
These are specific SMART (specific, measurable, achievable, relevant, time bound) goals and may include
Increasing market share
Maximising sales revenue in a particular region or for a certain product
Achieving distribution targets
Improving brand awareness
resources (marketing plan)
Planning which resources are required and where they will come from
This may include finance, staff time and expertise as well as the capital expenditure required to achieve the marketing objectives
research (marketing plan)
Marketing research identifies the factors expected to impact upon the marketing plan such as
Market size and growth
Market segments
Competitor positioning
Customer tastes, preferences and views
The nature of distribution channels
marketing mix
This involves planning the medium- and short-term marketing activities the business intends to undertake and who is responsible for them including
Pricing strategies and tactics
Promotional activity
Distribution and logistical plans
Product specifications, features and packaging
Physical evidence such as branding
How people and process are developed to support delivery of the rest of the marketing mix
marketing segmentation
the process in which a single market is divided into sub markets or ‘segments’
Each segment represents a slightly different set of consumer characteristics
Firms often segment their markets according to factors such as social status, geographical location, religion, gender, or lifestyle
A target market is one or more market segments at which a product or service is primarily aimed
demographic forms of market segmentation
- age
- gender
- religion
- family characteristics
- ethnic grouping
- sexuality
geographic forms of market segmentation
- countries, continents, regions
- climate and weather conditions
- tourism
psychographic
- social status
- economic status
- values and beliefs
- political allegiance
advantages of market segmentation
- Recognizes that consumers are not all identical - consumer groups do not all share the same tastes and preferences
- Products and marketing activities can be altered to meet different needs of different groups of consumers and targeted more precisely
- Less expensive and wasteful than marketing products at wide market segments
- May increase loyalty if the consumer feels that their needs are being met which can lead to repeat purchases
disadvantages of market segmentation
- Not everyone within a segment will behave in the same way
- May be difficult to identify a segment and consumers can belong to multiple segments at the same time
- Segmentation requires more detailed market research which can prove costly (but beneficial) to the business
- A segment may be identified but it may be too small and unprofitable to cater for
market positioning
refers to the process a business goes through when launching a new product or service
The business decides where they want to position the product in the market with regard to price, quality, branding, and customer perception
marketing mapping
is a tool for identifying the position of a product within a market
A market map refers to a two-dimensional diagram that shows the attributes or characteristics of a product in comparison to rivals’ products
Market maps are sometimes called perception maps
Only two criteria can be chosen e.g. price and quality, age and income, etc.
if there are no spaces left on the map
Indicates that the market is saturated
- This means that there are no opportunities to exploit a market niche in the market
- Competition is likely to be high and profits low
if there is evident space left on the map
may indicate the existence of a market niche
This needs to be researched carefully before the business commits e.g. it looks like there is a gap in the market in high price / low quality area in the map above
This gap does not represent a worthwhile market as the business would find it impossible to build and maintain a loyal customer base
usefulness of market mapping
Market gaps can be identified which may enable a business to come up with ideas for new products
Comparisons can be made between a business’ products and those of its rivals - where are the business’ products positioned about its rivals?
Market maps are simple to construct and offer a visual illustration of the position of a product in the market
limitations of market mapping
A gap in the market may exist because it is not profitable to fill
Mapping a market may require primary research which can be expensive
Only two criteria can be chosen which may prove too simplistic
Markets are often dynamic and a market map only provides insight at a specific point in time
unique selling point
is a distinguishing factor or characteristic of a product, service or brand that sets it apart from its competitors
how does the USP help businesses
The USP helps a business to differentiate itself and give customers a reason to choose one product or service over others because it offers something distinct and valuable
range of reasons as to why businesses develop USPs
Developing a brand identity
Achieving a competitive advantage over rivals
Effective communication with customers
The attraction and retention of customers
Achieving power over pricing
Encouraging innovation and adaption
product differentiation
is an attempt by a business to distinguish its products from those of competitors
This involves creating functions or features of the product (or firm) which help it to stand out from its competitors
Strong product differentiation helps the firm to develop its competitive advantage
The development of product differentiation often helps a firm to create a unique selling point for its product which can be used in marketing
Product differentiation may be tangible (clearly visible) or it may be intangible (a perception) that is created about the product in the consumer’s mind
methods used by businesses to differentiate products
Marketing and branding activities
Eye-catching packaging
Attractive functions and features
Product customisation
Excellent customer service
sales forecasts
predict future revenues based on past figures, including
The volume and value of sales
The size of the market
Sales as a result of promotional activity
Sales as a result of cyclical factors
Sales forecasts are an important tool to support planning and can improve the validity of cash flow forecasts
Businesses use sales forecasts to determine resource requirements
market research for constructing effective sales forecasts
Can include primary and secondary research sources
May rely on test marketing to understand customer reactions
Sample size needs to be sufficient to provide high data confidence
extrapolation for constructing effective sales forecasts
Using historical data to identify and extend trends to predict future sales
Typically uses a line of best fit to make predictions
Requires strong correlations between data sets such as spending on promotional activity and sales revenue
time series analysis for constructing effective sales forecasts
Identifying underlying trends from past sales figures recorded at regular intervals
Must take into account seasonal, cyclical and random variations
factors which can influence the reliability of a sale forecast
Consumer trends
Changing economic variables
The actions of competitors
Consumer Trends that Require Sales Forecasts to be Adjusted
- seasonal variations
- fashion
- long term trends
Changing Economic Conditions that Require Sales Forecasts to be Adjusted
- economic growth
- inflation
- unemployment
- interest rates
- exchange rates
Changing Economic Conditions that Require Sales Forecasts to be Adjusted
ACTIONS OF COMPETITORS:
Sales forecasts must consider short-term actions of competitors such as sales promotions as well as longer-term strategies such as changes to product ranges and expansion plans
Competitor actions are difficult to predict so the use of past data to predict future sales may be limited as a result
E.g. UK Company Marks and Spencer announced plans to open twenty new high street stores in 2023, partly in response to the closure of several key competitors including Debenhams
difficulties of sale forecasting
Sales forecasting usually involves the use of past data to predict the future
In the short-term, sales forecasts are likely to reflect the recent past
Longer-term sales forecasting is often more problematic as several factors affect its reliability
Effective sales forecasting requires skill, time and the accurate use of timely data
Smaller businesses in particular may lack the experience or specialised personnel to construct, analyse and interpret sales forecasts
It is difficult to avoid experience bias (e.g. opinions of the future based on experiences in the past)
Businesses may face problems in constructing sales forecasts that ignore the priorities of key stakeholders
the future seldom repeats occurrences of the past
Sales forecasts will rarely reflect the full range of external influences that can affect future inflows such as fashions, trends, the actions of competitors
too much data blurs the analysis
Internal data such as previous sales figures will be a key source of information when constructing forecasts
Selecting the most appropriate external data is extremely challenging and requires careful evaluation
