Marketing: 4.1 - 4.3 Flashcards
What is the overarching function of the marketing department?
takes care of anything related to the relationship between the company and the customer
What is a market orientation approach?
a business approach that prioritizes identifying the needs and desires of consumers and creating products/services that satisfy them
What is a product orientation approach?
a business approach where companies focus on their products, then focus on selling them
Why is a patent a good motivator?
a business can earn large revenues as the only seller of the good, leading to USP
Pros of product orientation
- monopoly power and patents
- higher product quality and USP
- lack of competition
- continuous innovation, as you would be the 1st in the new industry
Cons of product orientation
- risky to overlook customer’s needs and may lead to product failure
- costly - research and development, investment
Pros of market orientation
- low risk, as it is more likely that customers will buy
- customer satisfaction and loyalty
- social enterprises to solve human, real problems
Cons of market orientation
- no USP, greater competition
- market research must be right
- agility and ability to respond to changes in the market
Difference in resource allocation for product/market oriented companies
product oriented - R&D
market oriented - market research and testing
Difference in key departments involved for product/market oriented companies
product oriented - R&D, production, quality control
market oriented - market research, sales, advertising
Difference in synergy for product/market oriented companies
product orientation requires a stronger synergy between operations and marketing
Difference in core areas of business for product/market oriented companies
strong operations dpt. required for PO
strong marketing dpt. required for MO
What is market share?
the value of a single company’s sales/revenues compared with the sales of all businesses in a market
What are the two calculations for market share?
market share = product sales/total market sales x 100
market share = number of units sold by the company/total number of units sold in market x 100
What is market growth?
the increase in sales revenues or sales volume in an individual market over time
Market growth formula
market growth = (total market sales T2 - total market sales T1)/total market sales T1
Why is market growth desirable for a business?
it is easier to sell many products and earn revenue
however may attract more competitors
What are the advantages of being a market leader?
- more revenue
- more brand awareness/recognition, increasing revenue
- more flexibility and control in changing prices and determining the market, price leadership
- easier to distribute due to better brand image, which can create a positive feedback loop
- economies of scale
What are network effects and their pros/cons?
- product becomes more valuable the more people use it
- large business may continue to dominate and abuse power in networks
Why is price control for market leaders good/bad for customers?
- business may be able to lower price for customers
- business could take higher profits and “scam” customers
Why is innovation control for market leaders good/bad for customers?
- large businesses have enough profit for investment and R&D
- there could be little incentive to innovate due to dominance
What are some disadvantages of market leadership for the business, the economy, the society and the environment?
- less incentive to innovate
- lobbying of political leaders to weaken environment, labor, antitrust laws etc
- lobbying for support of MnA
- resisting trade unions
- tax loopholes
What are market growth prime numbers?
HIGH - more than 10%
MID 5-10%
LOW less than 5%
What is a marketing plan?
a document that outlines the entire marketing process of a business
- marketing objective
- marketing budget
- segmentation and target market
- market research
- marketing strategies
- control tools
What is segmentation?
splitting prospective buyers into groups of people with similar needs/characteristics who respond similarly to marketing actions
What does segmentation involve?
splitting a population into groups of people with similar needs/characteristics
What is a target market?
the consumer segment at which a business aims it marketing messages
What is the relationship between STP and competition?
S and T - not dependent on competitors
P - dependent on competiros
Main methods of segmentation used by businesses:
geographic
demographic
psychographic
behavioral
What is demographic segmentation? How can it be obtained?
based on observable, people-based differences
eg age, gender, income, nationality…
obtained by asking your own customers or 2nd party data
What is psychographic segmentation?
divides according to lifestyle, emotional, personal aspects - more mental
What is geographic segmentation?
based on a customer’s location
What is behavioral segmentation?
what you do - behaviour of consumers, knowledge/attitude/response to a promotion
How can one implement market segmentation?
- define market
- segment market
- define which segment you will target
What is a niche market? What is a mass market?
niche - a small segment of a larger market, oversegmented markets
mass - little segmentation, targets larger segments of the markets, goods produced in volume
How are niche market customers?
they have specialised needs/wants different from the larger market
Advantages of niche markets
- although sales volume is low, lack of competition means customer loyalty
- can charge higher prices
- focused business efforts
- easier brand loyalty
- easier marketing efforts
- small businesses
What is USP?
unique selling point - what is special about your marketing/price/product/promotion/place…?
Which promotional technique are niche/mass companies most likely to use?
niche: below the line eg direct marketing
mass: above the line eg television, sponsoring global sporting events
Why are goods sold in mass markets less expensive than in niche markets?
economies of scale
How is the marketing mix in mass markets?
same marketing mix to target all customers
Advantage of mass markets
- if successful, can lead to incredibly high quantities of sales/revenues
- economies of scale, mass production and one marketing mix
Disadvantages of mass markets
- attractiveness and size of market means intense competition
- competition may lead to price competition and low profit margins
- high cost, above the line promotion
Disadvantages of niche markets
- high per unit cost
- less reach, smaller profits due to less goods
- little growth potential
Why is USP important?
gives the customer reason to select a company’s brand over a competitor’s
What is differentation?
differences between a product/service and its rivals
What comprises a good USP?
add value to the consumer
difficult to copy
may come from any part of its marketing mix
What is “attribute ownership”?
a way that businesses try to differentiate their products by a trait
eg volvo is safe, silk from china is high quality…
What are methods to differentiate your product?
- good for product oriented
- first mover advantage - first in a new market
- patents
- attribute ownership
- designing/updating a product to appear relevant
What is differentiation by price USPs?
- companies with lowest operating costs
- significant economies of scale
- most difficult USP to maintain due to competition
- could be premium pricing to signal quality/exclusivity
What is differentiation by promotion USPs?
- good promotion can lead to customer loyalty
- long term positive brand image
What is differentiation by place USPs?
- store in convenient locations or offering global distribution network
- placing a product in convenient/correct distribution channels
What is differentiation by people USPs?
- good employees and customer service
- result of high employee motivation
What is differentiation by physical evidence USPs?
- physical environment of the business
- eg sephora’s layout of makeup to allow easy comparison
What is differentiation by process USPs?
- efficient process like excellent customer service/speed of service
- good refund process, short shipping times, easily accessible customer service
What is sales forecasting?
a quantitative technique used by businesses to predict the levels of sales that they may expect in future years
How can sales forecast be measured?
quantity of products or in total revenue earned
Benefits of a correct sales forecasting
- effective future planning
- based on past data, validity
- better ability to decide
- if sales are set to grow, business can ensure extra demand is met
- if they feel they cannot meet demand, they can increase prices
- may choose to reduce production
- may choose to increase marketing budgets to fight off decline
- evaluate staff performance and set employee goals
Limitations of sales forecasting
- cannot always predict the future accurately
- is only quantitative, not qualitative analysis
- lack of information to make forecasts
- rapidly changing markets
three types of sales forecasting methods
- causal models
- time series analysis
- qualitative techniques
causal models
the relationship between a variable (external or internal) and sales, then a line of best fit to understand their relationship, then extrapolation
time series analysis and moving averages
identifying trends in historical data, such as sales revenue in previous years, to forecast the future
when there are significant variations, data needs to be smoothed out by plotting moving averages, then given a line of best fit
3 main types of variation in data
seasonal, cyclical and random
seasonal - higher sales at certain times of the year
cyclical - sales affected by economic cycle
random - unpredictable events
qualitative analysis and market research in sales forecasting
forecasting buying preference and consumer behaviour
can use market research before sales forecast
What are product positioning maps?
visual representations of how various competitors might attempt to position their brands in the eyes of the consumer
usually displays two attributes
Uses of product positioning maps
- identifying market segments whose needs and wants are not fulfilled
- establishing gaps and opportunities in the market for launching new products
- helping a business understand their closest competitors/threats are, and to use this information to target the market appropriately
