Marketing Flashcards
What is market segmentation?
Market segmentation involves putting potential customers into groups based on specific criteria or characteristics
How can a business segment its market?
Age - consumers are divided into groups based on age brackets e.g. 18+
Gender - consumers are grouped together based on their gender which is commonly used in the cosmetic and cornering markets
Income level - consumers are grouped together based on how much disposable income the have
Lifestyle/hobby - consumers who have a particular lifestyle or hobby are grouped together e.g. vegans or gamers
Religion - consumers are grouped together based on their religious or cultural beliefs
What is a target market?
A target market is a specific group of people or customers that a business aims to reach and engage with through its marketing efforts
By knowing the preferences and characteristics of their target audience, businesses can develop and offer products or services that align with their specific needs and desires
Advantages of market segmentation:
-Provides deeper insights into customers diverse needs, preferences and behaviours allowing business to understand their audience more effectively
-Businesses can tailor their marketing efforts to specific segments, developing messages and positioning their products more effectively to appeal to the needs and wants of each segment
-It helps a business direct its marketing efforts and resources towards the most promising segments resulting in a higher return on investment
-By understanding and targeting specific segments, businesses can differentiate themselves from competitors and gain a competitive edge in the market
Advantages of target marketing:
-Products will be better suited to the target markets needs or wants leading to improved customer satisfaction
-Businessss will choose appropriate pricing that appeals to the target markets leading to an increase in sales
-Businesses will sell their products in appropriate places where the target marjet shops leading to an increase in sales
-There is a decreased chance of product failure leading to the likelihood of a reduction in wasted investment by businesses
What is market research?
Market research is the process of gathering, recording and analysing data about customers, competitors or market trends. Conducting market research allows a business to make better informed decisions relating to the marketing of their product
Why do businesses use market research?
-Identifying what the target markets should be for the product/service
-Finding out what the target markets needs/wants are so as to design products that satisfy them
-Finding out how much the target market would be willing to pay for products so as to set appropriate pricing
-Gathering information about competitors allowing them to gain competitive advantages
What are the two types of market research?
Field and desk research
What is field research?
Field research involves a business gathering brand new information themselves using methods such as face to face interviews and focus groups
This type of research collects PRIMARY information
What is desk research?
Desk research involves the use of pre-existing data that has been gathered by someone else
This type of research collects SECONDARY information
Advantages of field research:
-Data collected is brand new and up to date
-Data is not available to competitors
-Research is tailored to the specific requirements of a business meaning the data gathered is highly relevant
Disadvantages of field research:
-It can be an expensive method of research compared to desk
-It can be a time consuming process, meaning that decisions can’t be made quickly
What is a personal interview?
The researcher conducts a face-to-face interview with the respondent using a questionnaire containing standardised questions. Personal interviews allow the
researcher to clarify questions for the respondent
HOWEVER they are a relatively time consuming method of carrying out field research
What is a telephone survey?
The researcher conducts an interview with the respondent over the telephone using a questionnaire containing standardised questions. Telephone surveys allow
a large number of respondents to be surveyed at relatively little expense
HOWEVER many people see market research calls as a nuisance and will refuse to take part
What is a postal survey?
A questionnaire is sent through the post to respondents who mail it back upon completion. Postal surveys can cover a wide geographical area and can target specific target markets based on postcode
HOWEVER they have a very low response rate as many people view it as junk mail
What is an online survey?
A questionnaire is hosted on the internet for respondents to complete. Many online surveying tools such as Survey Monkey will provide automatic analysis, graphs and summaries of the data collected
HOWEVER this method relies on people having internet access
What is a hall test?
Respondents are given a sample of the product to try and their feedback is gathered. This method allows the researcher to gather high-quality, qualitative feedback instantly
HOWEVER respondents might feel compelled to give a positive response out of politeness
What is a focus group?
A group of volunteers from a target market are brought together to discuss a product. The researcher will record what is being said. The respondents have actively volunteered to be part of the focus group, which means they should have lots of opinions to share
HOWEVER organising focus groups is a relatively expensive and time-consuming method of research
What are common sources of desk research used by businesses?
-Government reports and statistics (such as census data)
-Reports produced by market research companies such as Mintel
-Competitors websites
-Trade magazines and journals
-Reputable newspapers
Advantages of desk research:
-It is a relatively inexpensive way of gathering and obtaining data
-It is relatively quick compared to field research, meaning decisions can be made quicker
-Large amounts of information and data are available at little to no cost
Disadvantages of desk research:
-The data gathered could be out of date, leading to poor decisions being made
-The same information is also available to competitors
-The information may contain bias
What is the marketing mix?
Product, price promotion and place
What are the 6 stages of research and development?
- Conduct market research to find out what consumers need/want in a new product
- Generate an idea based on the data collected from the market research
- Generate a prototype (a basic model which shows the product looks and functions)
- Test the market by giving consumers a basic model of the product to try and gather feedback
- Make changes based on tests and feedback gathered from consumers
- Put the final product into production
What are the 4 stages of the product life cycle?
Introduction, growth, maturity and decline
Stages of the product life cycle: Introduction
-The product is first launched onto the market
-Sales are low and slow as very few customers are aware of the product
-Heavy advertising will be required to make customers aware of the product
-Most products make a loss due to low sales and high advertising costs
Stages of the product life cycle: Growth
-Sales begin to rise quickly as more customers become aware of the product and have been persuaded to buy it
-Heavy advertising is still required
-Most products being to be ok profitable by the end of this stage
Stages of the product life cycle: Maturity
-The product has been on the market for a while and has an established customer base
-Sales of the product have reached their peak
-As the product is now well established less advertising is required
-Due to high sales and a reduction in advertising costs profits will reach their peak
Stages of the product life cycle: Decline
-Sales of the product fall quickly as the product has been on the market for a long time and newer products have been released which consumers are buying instead
-Profits fall due to decreasing sales, the business will withdraw the product from the market before it starts to become unprofitable
Advantages of branding:
-Consumers tend to perceive branded good as being of a higher quality
-Customers will become brand loyal meaning they will buy that brand often
-Customers are often willing to pay a higher price for branded goods
-Costs and risks of launching a new product and reduced as consumers are already aware of the brand
Disadvantages of branding:
-Establishing a brand can be a very expensive and time consuming process
-The entire brand could be damaged by one poor product in the range
-Branding goods makes them easy to copy for counterfeiters
Why is packaging a necessary cost for a business?
-Protects products from being damaged
-Helps keeps products fresh
-Provides legally required information e.g. nutrition values
How do businesses use packaging in the marketing of a product?
-Packaging will be designed to reflect product branding e.g. choice of colours or fonts
-Packaging will be designed to appeal to the target market e.g. choice of images and materials
Factors to consider when pricing a product
-Cost of raw materials : the business will have to ensure the price is high enough to cover costs when making products to make sure profit is made on each product sold
-Amount of profit : the business will price the product higher or lower depending on the level of profit it wishes to make
-Competitors price : the business needs to consider whether to match the price charged by competitors or choose a different strategy to stand out from the crowd
-Quality of product : the price set by a business reflects the quality of the product if they charge a high price for a poor product customers satisfaction will decrease
-Target market : the business must choose a price acceptable to their target market otherwise they will struggle to persuade people to buy it
-Government restrictions : government legislation restricts the minimum or maximum amount a business can charge for the product e.g. minimum unit pricing of alcohol
What are long term pricing strategies a business may use?
-Premium pricing
-Low pricing
-Competitive pricing
-Cost plus pricing
What is premium pricing?
A business will set the price of their product higher than that of their competitors. It is used to give customers the perception of quality and luxury. To justify the high price businesses must ensure their product is of a high quality
Example: Apple or Gucci
What is low pricing?
A business will set the price of their products lower than that of their competitors. Low price is effective if markets where there is little brand loyalty and customers place price about all other decision making factors
HOWEVER some customers will see low price as an indicator or poor quality and will be put off buying the product
Example: Aldi or Ryanair
What is competitive pricing?
This strategy involves setting the price of the product at the same level as that of competitors. As there is no difference in competitive prices businesses will then need to compete on other factors such as customer service and product quality to convince customers to buy from them
What is cost plus pricing?
A business first calculates the cost of making or buying one unit of the product. They then add a percentage mark up to the cost price to calculate the selling price
For example a business which adds a 25% mark up on a product which costs £1 to make will sell the profit for £1.25
Cost plus pricing ensures a profit is always made on any products sold as the selling price will always be higher than the cost price
What are short term pricing strategies a business may use?
-Price skimming
-Penetration pricing
-Promotional pricing
-Psychological pricing
