marketing

Question 1

Market-led (or Customer-led) Businesses

Answer 1

Market-led (or Customer-led) businesses carry out market research to:

determine the kinds of products that a consumer wants, and
identify those consumers most likely to purchase its existing or planned products.
They then create new products (or change existing products) to satisfy those consumer preferences. A market-led marketing strategy asks, ‘What does the customer want? How can we satisfy this want?’

The business will adopt a marketing strategy designed to reach and engage those customers. It may segment the market using demographics such as income, age, gender and occupation. The business then chooses specific segments to target and uses the ‘four Ps’ of the marketing mix (product, price, promotion and place) to reach and engage the target group of consumers.

Question 2

Advantages of market/consumer led

Answer 2

Responsive to the needs of its target audience, which can boost brand identification, loyalty and trust.
Responsive to changing customer preferences and trends in the market.

Question 3

Disadvantages of market/consumer led

Answer 3

Relies heavily on market research which can be costly and time consuming.

Question 4

Product-led Businesses

Answer 4

Product-based businesses focus on making all customers aware of their products, rather than targeting any particular customer or segment of the market. Such businesses concentrate on researching and developing the product to:

produce it at the lowest unit cost
make it better or more appealing to customers than those of its competitors
Product-based businesses assume that customers are already looking for products and they use the ‘four Ps’ of the marketing mix (product, price, promotion and place) to let ALL potential customers know about its products. An example of this would be toilet paper – all segments of the population are potential customers for toilet paper, so target marketing is much less effective.

Question 5

Advantages of product led

Answer 5

The business is always looking to refine and improve its products to make them the best on the market, so the consumer benefits from better, safer products.
The quality of the product made by a production-oriented company may be superior to that of a marketing-oriented company.

Question 6

Disadvantages of product led

Answer 6

Little or no market research is carried out before production begins.
A competing business may produce a better cheaper product that will be difficult to compete with.
Not responsive to changes in consumer tastes or market trends.

Question 7

The Importance of Consumer Behaviour in Marketing

Answer 7

Consumer behaviour is the series of behaviours or patterns that consumers follow before making a purchase. It starts when the consumer becomes aware of a need or desire for a product, then concludes with the purchase transaction.

Businesses study consumer behaviour so they can better understand why customers purchase certain products and the factors that influence their purchasing decisions.

Question 8

Routine/habitual Purchases

Answer 8

Routine purchases require little involvement by the customer and are often made automatically, eg, fuel, hair products, chocolate bars. A good example might be a consumer who goes around a supermarket with a shopping of products to buy. He or she simply follows the list, probably purchasing the same products and brands as they did on their last shopping visit.

Certain marketing strategies can influence routine purchases, such as money off vouchers or buy-one-get-one-free (BOGOF). However, because many customers have brand loyalty to particular products, sales promotions such as these may have a limited impact.

Question 9

Informed Purchases

Answer 9

In the case of products that the consumer will have for a longer period, such as smart phones, jewellery or cars, the consumer usually takes time to investigate the product. They will consider alternative products on offer and research the specifics of the product they are interested in.

Question 10

Impulsive Purchases

Answer 10

Impulse purchases occur when the consumer buys on the spur of the moment without prior planning or thought. Impulse purchasing often happens because a product has caught a customer’s eye, such as a soft drink on a hot day placed at the checkout. Effective point of sale displays can influence impulse purchasing, such as chocolate bars placed near supermarket checkouts.

Question 11

How Consumers find out about Products

Answer 11

Personal sources: family, friends, neighbours, work colleagues and through trusted social media.
Commercial sources: advertising; sales people; retailers; dealers; packaging; point-of-sale displays.
Public sources: online information, social media, newspapers, radio, television, consumer organisations and specialist magazines.
Experiential sources: by handling, examining, using the product.

Question 12

Focus Groups

Answer 12

Focus Group - usually a small group taking part in discussion which is used to highlight the opinions, feelings and preferences of group members.
Detailed feedback can be given to the organisation.
Participants are more likely to give better feedback as they have agreed to take part.
Good qualitative information is generated through group discussion.
The sample size tends to be small and respondents may be too positive as they feel obliged to give favourable opinion.
Qualitative information can be difficult to analyse.

Question 13

Personal Interviews

Answer 13

Face to Face interviews conducted personally by an interviewer to individual, or multiple, respondents.
Interviews allow the organisation to directly gain the views of customers.
Provides first-hand information about opinions, feelings and attitudes.
Questions can be asked to aid or clarify understanding.
Can be time consuming to carry out the interview.
Respondents may lie to get through the interview quickly.
Can be expensive, researchers have to be trained.
Can be difficult to analyse qualitative information.

Question 14

Telephone Survey

Answer 14

Interviews conducted personally by an interviewer over the telephone.
Telephone surveys mean instant feedback can be given.
Sometimes gains a hostile response from the person being called.
Can be difficult to analyse qualitative information.

Question 15

Postal Survey

Answer 15

Market research using questionnaires sent in the mail.
The survey can be sent to many customers (wide geographical area).
Can target customers in selected areas.
Customers can compete the survey at a time that suits them.
Low response rate as surveys are often viewed as ‘junk mail’.
Inexpensive and no formal interviewer training required.
Questions must be simple and easy to answer.

Question 16

Test Marketing

Answer 16

Respondents get to try out or test a product or service and give feedback.
Relatively inexpensive to carry out.
Feedback can be gathered instantly on a product or service.
As customer is giving feedback directly, they may not want to give a negative response.
Once feedback is received changes can be made to the product prior to launch.
Not representative of the wider market as only a small area gets to test the product.

Question 17

Observation

Answer 17

Researchers watch the behaviour and actions of consumers.
Observation provides accurate quantitative information.
Customers will act naturally as they do not know they are being watched.
There is no direct contact with customers to ask about their actions.
Demonstrates real life behaviour and actions by consumers.
Samples are often random and not representative of all consumers.
Observation only deals with actions and does not explain attitudes or motivations.

Question 18

Social Networking Websites

Answer 18

Can gather large amounts of information quickly.
Can only gather information from those who use social media.
Comments are ‘public’ so anyone can read reviews including competitors.

Question 19

Internet/Online survey

Answer 19

A questionnaire is conducted via the Internet.
Customers can be surveyed across a wide geographical area.
Identifies customer trends and influences.
Covers a large sample size.
Buyers can be classified within market segments and demographics.
Software enables easy analysis of the results.
Some people regard online surveys as interference.

Question 20

EPOS (Electronic Point of Sale)

Answer 20

A computerised system used in shops, restaurants and other retail outlets to let people pay for goods or services.
Gathers information about consumer behaviour, eg, what is bought, how they react to changes in price or promotions.
Promotions can be tailored to the individual customer.
Expensive to set up.
If money-off vouchers are offered, it may lower profits.

Question 21

Newspapers

Answer 21

Using information that has been gathered for another purpose.
Easily accessible as the information already exists.
Information may be biased or inaccurate.
Since information has been gathered for an alternative purpose, it may not be directly useful.

Question 22

Primary (or Field) research

Answer 22

gathers first-hand information for a specific purpose. Examples are face-to face interview, postal survey, hall test, observation, online surveys.

Advantages: Only the organisation that collects data has access to it. Information is targeted and very specific.
Disadvantages: Expensive and time consuming to gather.

Question 23

Secondary (or Desk) research

Answer 23

uses information that has already been collected by someone else and is used by another organisation. Examples are industry sales figures, websites, newspapers, commercial publications and government reports.

Advantages: Saves time, usually inexpensive and widely available.
Disadvantages: Not specifically gathered for the business, it may be out of date and it may contain bias.

Question 24

Random Sampling

Answer 24

Random sampling does not target any specific consumers or segments of the market. Every member of the population has an equal chance of selection and those taking part are selected by random.

Question 25

advantages of random sampling

Answer 25

Less chance of bias as respondents are chosen randomly
Simple to design and interpret

Question 26

disadvantages of random sampling

Answer 26

Tends to be less accurate than other forms of sampling
May not accurately reflect the target market
Tends to be more expensive to administer because a larger sample size is needed

Question 27

Quota Sampling

Answer 27

The aim of quota sampling is to obtain a sample that is representative of the overall population. The population is divided (stratified) by the most important variables such as income, age and location. The required quota sample is then drawn from each segment.

Question 28

advantages of quota sampling

Answer 28

Quick and easy way of obtaining a sample
Cheaper as fewer respondents are required
Detailed information can be gathered about different segments of the market

Question 29

disadvantages of quota sampling

Answer 29

Risk of bias because the interviewer decides who to question (ie, it’s not random)
Need to have a very detailed understanding of the different market segments

Question 30

Elements of the marketing mix

Answer 30

The marketing mix is the combination of factors which, together, maximise the chance a product will be recognised and bought by customers.

Product: The item or service being sold must satisfy a consumers need or desire.
Price: An item should be sold at the correct price for consumer expectations; neither too low nor too high.
Promotion: Consumers needs to be informed and persuaded about the product and its features to understand how it meets their needs or desires.
Place: Where and how the product may be purchased is important for optimizing sales.
People: Members of staff who are in contact with customers can influence levels of customer satisfaction and perception of the business.
Process: Systems that are in place to deliver goods or services to the buying public.
Physical evidence: The physical environment experienced by customers, such as the design of a store or the layout of the company’s website.

Question 31

Product life cycle

Answer 31

During their lifetime all products go through different phases or stages, which is known as the product life cycle. The number of sales and the length of a product life cycle might be different for different products, but all products share a general pattern of growth and decline. This cycle can be shown on a graph of sales over time.
Development – Research and development and testing take place. Prototypes are built and modified before a product is ready for launch.

Introduction – Product is launched on the market. Advertising costs will be high in order for the product to get noticed.

Growth – Sales rise and a profit may be made if research and development and advertising costs have been recouped.

Maturity – Sales are at their highest and profits are maximised.

Decline – Sales begin to fall, sometimes as a result of new competitors, or the new products, changes in fashion or lifestyle.

Question 32

Extending product life cycle

Answer 32

When a product reaches the Decline stage, a business can take action to extend its life cycle and continue to grow or maintain sales.

change the product in some way
change the price, usually reducing it
change the place it is sold – find new markets for the product
change the way it is advertised or promoted
change the packaging
change the name

Question 33

Benefits of a Product Portfolio

Answer 33

Spreads the risk - if one product fails there are others to rely on – meaning that there is less chance of business failure.
Maximises sales because the business is covering different market segments, so profits are higher.
Can raise the profile of the business because it has a wider range of products.
Consumers see a variety of products with the same brand, so brand recognition is high.
Easier to launch new products due to greater brand awareness.
Consumers are often loyal to a brand – someone who has an iPhone is more likely to buy other Apple products.

Question 34

Drawbacks of a Product Portfolio

Answer 34

Higher research and development costs for multiple products.
Higher marketing and advertising costs to cover multiple products.
Bad publicity incurred by one product may affect sales of all products.

Question 35

Boston Matrix

Answer 35

Marketing teams use a tool called the Boston Matrix to analyse the success of different products a portfolio and then decide which marketing approaches are best for the different products. This categorises products based on:

Question 36

Stars

Answer 36

are high growth products competing in markets where they are strong compared with the competition. Often Stars need heavy investment to sustain growth. Eventually growth will slow and, assuming they keep their market share, Stars will become Cash Cows.

Question 37

Cash Cows

Answer 37

low-growth products with a high market share. These are mature, successful products with relatively little need for investment. They need to be managed for continued profit.

Question 38

Question Marks

Answer 38

products with low market share operating in high growth markets. This suggests that they have potential but may need substantial investment to grow market share at the expense of larger competitors. Management need to decide which ones to invest in and which to allow to fail or shrink

Question 39

Dogs

Answer 39

refers to products that have a low market share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in. Dogs are usually sold or closed.

Question 40

Pricing considerations

Answer 40

The nature of the market: will there be few or many competitors in the market?
Competitors: what are the prices for competing products in the market?
Public perception: how might the price of a product affect a customer’s perception of its image and quality?
Production cost: is the cost of making the product reflected in the price?
Profitability: what is the intended profit on each unit of the product?
Pricing strategy: which pricing strategy will be adopted at the introduction and over the period of the life cycle?

Question 41

Price taker

Answer 41

A business has no option but to charge the ruling market price.

Question 42

Price maker

Answer 42

The business has a strong enough competitive position to be able to fix its own price - either higher or lower than the competition.

Question 43

Price leader

Answer 43

A price leader is often a market leader whose market share is so strong that its price changes are closely followed (and often copied) by rivals.

Question 44

Price follower

Answer 44

A business that just follows the price-changing lead of the market leader (ignoring the rest of the competition).

Question 45

Cost-based Pricing

Answer 45

The product costs £5 to produce, the business adds £5 margin to make the selling price £10.
Different prices are charged for the same product, depending on time, age, etc.

Question 46

Penetration Pricing

Answer 46

Low price at the start to gain access to the market.
Often used when there are close competitors.
Price is raised over time.

Question 47

Promotional Pricing

Answer 47

For example a January sale: prices are reduced for a short period of time.
Vouchers/offers/discounts are used to encourage customers to buy.
Used to quickly sell inventory and aid cash flow.

Question 48

Dynamic Pricing

Answer 48

Prices will vary, low when demand is low, high when demand is high.
eg, cheap flights at different times of the year.
eg, Uber - price of a Uber fare is higher during times of the day when there is high demand (surge).

Question 49

Destroyer Pricing

Answer 49

Prices kept very low to eliminate the competition.
Illegal in the UK.

Question 50

Skimming Pricing

Answer 50

Setting a high initial price for the product when it is new or there are few competitors, then lowering it gradually over time.
High profit margins during the introduction stage help recover costs.
Effective for new product launches with few competitors.

Question 51

High/Premium Pricing

Answer 51

Using a high price deliberately to signal luxury or quality/exclusive image.
Sales will be lower but there will be a high profit margin on each sale.

Question 52

Market/Competitive pricing

Answer 52

Long term pricing strategy setting the price at the same level as competitors and rivals. The business will then compete on other factors such as convenience, customer services or after sales service.
Requires ongoing promotion/advertising.

Question 53

Low/Value Pricing

Answer 53

Long term pricing strategy setting the price below the market price in order to attract customers.
Customers will often look for the product that is cheapest as a way of saving money.

Question 54

Psychological Pricing

Answer 54

A price which makes the consumer think that a product costs a lot less for example 99p instead of £1.

Question 55

Loss Leader

Answer 55

Price of one item is set much lower than that of competitors.
Often a pricing tactic used by supermarkets.
A loss is made on this product but brings customers into the shop to buy the products where they are then enticed to buy other full priced items.
Can be used in advertising campaigns to attract customers to come into the organisation.
Creates customer loyalty − as customer may be more likely to stay with the organisation rather than going to its competitors.

Question 56

distribution

Answer 56

A distribution channel provides a link between the producer and the consumer. A distribution channel might have just two layers (producer and consumer), but it might have other layers, such as a retailer and a wholesaler.

Question 57

wholesaler

Answer 57

typically buys and stores large quantities of several producers’ goods and then breaks into the bulk deliveries to supply retailers with smaller quantities. For small retailers with limited order quantities, the use of wholesalers makes economic sense.

Question 58

Retailers

Answer 58

are commonly found in consumer markets such as clothing and electrical goods. Producers such as Sony, Panasonic, Canon sell their goods directly to large retailers and e-retailers such as Amazon, Tesco and Carphone Warehouse who then sell onto the final consumers.

Question 59

Direct marketing

Answer 59

has no intermediary levels. The manufacturer sells directly to customers. An example of a direct marketing channel would be an Adidas factory outlet store. Apple High street stores are another example of direct marketing. Many holiday companies also market directly to consumers online, bypassing a traditional retail intermediary - the travel agent.

Question 60

E-commerce

Answer 60

is the term give to the purchase of products and services online. An outdoor clothing company such as Mountain Warehouse has high street retail outlets but increasingly it will sell its products to consumers online through its own website and via third party websites such as Amazon and E-bay.

Question 61

benefits of e-commerce

Answer 61

Access to more customers thus chances of increased market share/profit.
Access to customer information, thereby allowing the organisation to target products/marketing to those most likely to buy.
Can gain customer feedback thereby can change things to gain better customer satisfaction.
Customers can shop 24/7 which gives the organisation maximum time for customers to buy.
Can show entire product line thereby increasing customer choice.
Reduces costs as fixtures and fittings for shops are not required.

Question 62

Choosing a channel of distribution

Answer 62

Type of product - different products will require different forms of transportation and storage depending on product durability. For example, perishable goods such as frozen food, flowers, dairy, and livestock need to reach the consumer quickly so a shorter channel of distribution is required.
Finance available - if finance is limited, producers might need to use wholesalers to break bulk or retailers to stock its products and sell to the public.
Image of product - the channel should reflect the quality of the product, eg, high quality distributed through exclusive, up-market retailers.
Legal restrictions - some products can only be sold in certain ways/places. For example, eg cigarettes, alcohol and medicine.
Product life cycle stage – as it progresses through growth to maturity a product needs to be more widely available to the market, for example through a network of national retailers.
E-commerce – many products can be bought over the internet and shipped directly to the consumer using mail delivery services. Clothing, books and electrical goods are distributed by companies from their own websites or through third party retailers such as Amazon. A wide range of delivery sources may be used including Royal Mail and independent drivers.

Question 63

Types of advertisements

Answer 63

TV advertising
Advantages: Can reach wide geographical audience; demonstrations can be shown.
Disadvantages: Very expensive and viewers may not watch when the adverts come on.
Billboard advertising
Advantages: Usually in busy locations. Can be cheaper than other forms of advertising. Consumers will see the adverts repeatedly over a long period of time. Can promote a business in a geographical location.
Disadvantages: May be ignored by passers-by. Can only include limited information. No demonstrations possible. only reaches a specific geographical area.
Online advertising
Advantages: Relatively cheap, can reach a very large audience. Can be targeted to specific websites or an individual’s browsing interests. Demonstrations can be given using other media such as video.
Disadvantages: high competition, need a good ranking in search engines to be effective. Technical problems can occur. Products cannot be handled before purchase.
In-app advertising
Advantages: Products can be targeted at specific customer groups. Relatively cheap method of advertising. Customers don’t need to be online to see ads.
Disadvantages: Limited to smartphone and tablet users. Customers may be irritated by ads which interrupt game play or other activity.
Email advertising
Advantages: Products can be targeted at specific customer groups. Relatively cheap method of promotion.
Disadvantages: Email may be treated as spam and not reach customer’s inbox. Email can be easily deleted or ignored without reading. Worry about viruses in attachments can put people off opening email.
SMS/text advertising
Advantages: Products can be targeted at specific customer groups. Text delivered instantly. Reaches wide audiences with just one message.
Disadvantages: Need to have the customer’s mobile number. Frequent texting can annoy customers. Texts can only contain a very limited amount of information.

Question 64

Into the Pipeline

Answer 64

Manufacturers need to promote their products to retailers to encourage them to stock their products. This is known as ‘into the pipeline promotion’.

Point of sales displays
Sale or return
Dealer loader
Promotional gifts
Training staff

Question 65

Out of the Pipeline

Answer 65

Retailers then need to promote the product to customers to encourage them to buy the product. This is known as ‘out of the pipeline promotion’.

Special offers and discounts on price
Buy One, Get One Free (BOGOF)
Vouchers and money-off coupons
Demonstrations of products - let customers see/try new product before buying
Credit facilities allow customers to buy and pay back over a period of time
Free gift with purchase of the new product
Free delivery with purchase
Loyalty cards
Free gifts
Free entry into competitions

Question 66

Public relations

Answer 66

Public relations is a term used to describe marketing activities that build awareness of an organisation and create positive publicity for its activities or products. The aim is often to attract free media coverage. Approaches to public relations include.

Generating press releases and holding press conferences, for example to announce a new product or to manage bad publicity.
Sponsorship, for example providing funds to a football club in return for having the name of the company on the team’s strip.
Promoting corporate social responsibility by supporting the local community or by demonstrating activities that protect the environment.
Donating to charity – helps to project the business in a positive light and encourage consumers to purchase their product over rival companies.

Question 67

Maximising customer satisfaction

Answer 67

Members of staff who are in contact with customers can influence levels of customer satisfaction and perception of the business.

If customers are satisfied with a product or service, they are likely to use that product or service in the future. If customers are not satisfied the business will sell less, profits are reduced, and the business may have to stop trading.

Customer satisfaction can be maximised through:

Excellent after-sales service and staff training.
Having a customer care strategy applied consistently throughout the organisation.
Providing guarantees or warranties.
Effective handling of customer complaints.
Having a time limit for responding to customer enquiries.

Question 68

Benefits of good customer service

Answer 68

ncreased Customer Loyalty: If customers receive a good quality service, they will be more likely to return. This will lead to increased sales and profits. Customers are less likely to go to a rival competitor.
Improved Reputation: Customers who have received a good service are likely to recommend the company to family and friends. A good reputation may attract new customers meaning a larger market share for the company.
Motivated Workforce: Working for a business that provides a high level of customer satisfaction can be very motivating for employees. They are also likely to have fewer complaints to deal with. A business with a good reputation is likely to attract a higher calibre of employee.

Question 69

Risks of poor customer service

Answer 69

Reputation will be harmed.
Customer loyalty will diminish.
Customers will go elsewhere.
Lower staff morale.
Sales and market share will decline.
Profits will decline.

Question 70

Optimising the marketing process

Answer 70

The Process element of the marketing mix refers to systems in place to deliver goods or services to the buying public. This might include the role of wholesalers and retailers, as well as buying online.

The following are important aspects of optimising Process.

Efficient delivery service: for example, being able to book delivery slots, same or next day delivery (such as Amazon Prime) and tracking of online orders.
Effective communication: for example, telephone queries, live chats online and FAQs on the company’s website, acceptable response times for complaints.
Handling complaints effectively: having processes in place to respond to complaints about products or services such as a returns policy and timelines for getting back to customers.
Accessibility: making sure that customers are able to access services easily and efficiently, for example, stores that are easy for customers to find their way around, accessible for people with disabilities, and websites that are easy to navigate online.

Question 71

Optimising physical environments

Answer 71

Physical evidence refers to the physical environment experienced by customers, such as the layout and design of a shop or restaurant, or the layout of the company’s website for customers who are shopping online.

The physical shopping environment, influences the customer’s perception of the goods that they are buying and the image of the business.

In physical environments such as shops, stores and restaurants the following considerations are important:

The premises is clean and tidy.
Levels of lighting and temperature are adequate.
There is a sufficient number of staff on hand to help customers.
There are sufficient levels of inventory available.
The shopping area is easy to navigate and customers can find what they are looking for.
There is sufficient space to move between displays.
Displays are eye catching and situated in the right areas (eg, point-of-sale displays).
Displays should be refreshed and updated regularly.
Parking and toilet facilities are adequate.

Question 72

Optimising online environments

Answer 72

In digital or online environments such as the company’s website, the following considerations are important:

Websites should be easy for customers to navigate and move backwards and forwards between pages.
The language should be user friendly.
Products or services should be clearly displayed and important information such as how to order highlighted.
Special offers such as sales and discounts should stand out.
Key information about the business, its customer service, returns policy, FAQs, etc should be clear and easy to find.
There should be an effective search feature.
Websites should be accessible for people with disabilities
Ways that customers can contact the business or ask questions should be highlighted.
Websites should be linked to social media.
The design should use colours, text and images that reflect the business.

Question 73

Technology used to support the marketing function

Answer 73

The use of computers, along with dedicated software assists a wide range of marketing functions such as:

Online surveys through the company’s website.
Databases for storing information about customers and market profiling.
Online marketing through the use of video and web-based communication.
Social media platforms enabling businesses to contact customers personally via smart phones and tablets.
In-app advertising and promotion.
Electronic Point of Sale (EPOS) - enabling businesses to gather information on customer buying habits.