Marketing Analysis Flashcards
What is Price Elasticity of Demand?
PED is the measure of the responsiveness of quantity demand towards a change in price
How is PED calculated?
% change in QD / % change in Price
How can businesses use PED?
- Pricing Decisions
- Wage increase decisions
What is Income Elasticity of Demand? [YED]
YED is the measure of responsiveness in demand followed by a change in consumr incomes
How is YED calculated?
% change in QD / % change in income
How can businesses use YED?
Production decisions during economic growth or economic downfalls
What is Promotional Elasticity of Demand?
It measures the responsiveness of quantity demanded of a product followed by a change in the amount spent on promoting it
How is Promotional Elasticity of Demand Calculated?
% change in QD / % change in promotional spending
How can businesses use Promotional Elasticity of Demand?
- Decisions on increasing spending on certain products with high promotional elasticity of demand
- Drafting a more effective promotional campaign for products with inelastic promotional elasticity of demand [perhaps it was targeted towards wrong customer groups - investigation needed]
What are the limitations of using PED?
- Assumes ceteris paribus
- Calculations can become outdated due to the dynamic business environment
- Data can be old for some products, new market research may be needed for better estimated figures
- Competitor actions
- Misleading figures, sales could have occured due to economic conditions
Define New Product Development [NPD]
The design, creation and marketing of new products and services
What is required for a NPD scheme to be successful?
- It should have a USP [sufficiently differentiated]
- Desireable features for consumers
- Marketed effectively
What are some factors a business should consider over the importance of NPD?
- Competition in the market [i.e MNCs]
- Customer incomes and needs
- External Environment in terms of Economic growth, investment, ease of finance
- Cost of R&D
- Integration in product portfolio, marketing mix
- Size of Firm
Define Test Marketing
The launch of the product on a small scale market to test consumer reactions to it
What are the benefits of Test Marketing?
- Consumer behaviour can be obsereved
- Consumer feedback can be retireved which can be used to improve the product or fix any weaknesses
- Risks of product failure or poor publicity are lower and sunk costs can be saved
What are the limitations of Test Marketing?
- It can be expensive
- Competitors can observe the product and copy the idea
- Free sample strategies may be more cost effective and less public
Define Research and Development
The scientific research and technical development of new products and processes
What is the importance of R&D?
- It can help create a USP
- Businesses can charge premium prices through successful profitable innovations
- It can increase competitiveness in a dynamic market
- It can keep consumers interested in the business
Evaluate R&D in terms of success for the Business
- Innacurate market research makes R&D wasteful
- Poor marketing mix [pricing, promotion]
- Competitors can release a product consumers prefer
- Highly dynamic markets into technology can make products outdated
Hence, R&D does not gurantee success unless marketed successfully
What are some factors that influence the level of R&D in a business?
- Nature of the industry / market
- Business expectations
- Level of spending by competitors
- Risk taking culture in the business [Principle-Agent Problem]
- Government policies, like grants
Define Sales Forecasting
Predicting future sales levels and sales trends
What are some benefits of sale forecasting to a business?
- Capacity planning / Rationalisation / Inventory management can be better estimated by the operations department
- Workforce planning by HRM
- Financial planning and better estimates of cash flows
- Marketing department can estimate better distrubution methods
- Can be prepared for unforseen demand
What are some drawbacks of sale forecasting?
- Dynamic Environment needs to be considered
- Ignores qualitative factors
- Inaccuracy
- Moving averages are based on past data
What are some evaluative points to consider for Sales Forecasting?
- Four quarter moving averages may be useful as it can give more reliable results as there are clear seasonal variations
- The longer the time frame, the less useful the forecast as external economic conditions can change
- Competitor threats in the market can alter predictions
- Might be beneficial to consider profitability in the analysis
- Are managers using the sales forecast to make decisions?
Define Qualitative Sales Forecasting
A method of sales forecasting that bases predictions of future sales using expert judgement rather than numerical analysis
