Module 3. Industry And Markets Flashcards
Definition of marketing (by The Chartered Institute of Marketing)
The management process responsible for identifying, anticipating and satisfying customer requirements profitably
What are the factors in the marketing mix? (The 7 Ps)
Product (or service) - the item consumers demand
Price - how much a consumer is prepared to pay for a product / service
Place - consumers access to a product / service (how our customers get it from us)
Promotion - marketing communication (making people aware of the product)
Physical evidence - the physical location of where the customer received the good / service
People - the people who interact with the customers
Process - refers to the end-to-end process that customers go through from first contact to sales, delivery, customer support and after-sales service
Order of the Life Cycle
Start up
Growth
Shakeout
Maturity
Decline
What is the start up stage of the Life Cycle
Where the industry is new
It’s products and services will be innovative
High unit costs
High overhead costs
Low sales volume, confined to few marker segments
Few businesses - low competition
Low price sensitivity among customers, with more focus on uniqueness as a basis for competition
High prices
Low profit (or making losses)
Characteristics of the growth stage in The Life Cycle:
Decreasing costs due to economies of scale
Significant increases in sales volume due to products gaining in popularity
Increasing levels of competition
Competition often still based around differentiation with leading brands emerging
Falling prices
Growing profit
What happens in the shakeout stage
This is where established market leaders cement their position and other businesses with weaker branding etc lose out
Characteristics of the Maturity Stage:
Costs low due to economies of scale and relatively low development costs
Maximum sales volume and so product variation or discounts / rebates may be required to encourage sales
Customers primary focus is cost and so cost-cutting measures are sought
High profits for market leaders with dominant brands
Continuing consolidation through mergers and acquisitions
Characteristics of the Decline stage:
Decreasing costs (e.g., less advertising costs)
Decreasing sales volume
Market saturation
Intense pressure on prices due to market saturation and perception of product / service as inferior
Falling profits
Continuing market exit due to falling profits
7 P’s of the marketing mix
Product
Price
Place
Promotion
Physical evidence
People
Process
Barriers to entry? (For businesses)
Capital
Differentiation
Advertising
Switching costs
Distribution channels
Supply channels
Intellectual property
Taxes
Laws and regulations
Retaliation
Compliance with laws and regulations can be a challenging barrier.
What are the costs related to this barrier?
Administrative costs
Legal and professional fees
Fines and penalties (due to non-compliance)
Potential loss of business licenses (due to non-compliance)
What are some of the key legal considerations for a small start-up business?
Employment
Company formation
Taxes
Trading laws (trading standards)
Advertising laws
With market segmentation
Start up businesses will often target:
A narrower range of segments, reflecting their limited resource
Segments under-served by existing market participants
Bases of segmentation:
When segmenting consumers how can we put them into different groups?
Demographic
Socio-economic
Geographic
Personality and lifestyle
Circumstances of purchase
Customer priorities
Purchasing style
Launch costs that may arise for a small business:
Equipment
Property
Raw materials
Company formation
Employment
Promotions
Models that can be adopted for internet-based businesses:
Free and without adverts
Free and with adverts
Free basic service with a charge fir premium service (‘Freemium’)
Up-front charge
In-app purchases
Advantages and disadvantages of the “Free and without adverts” model
Maximise market share and build good will
No money is made (other than donations)
Advantages and disadvantages of the “Free and with adverts” model
Maximise market share and generate income from ongoing adverts
Adverts may negatively impact image - adverts could be seen as annoying
Advantages and disadvantages of the “Free basic service with a charge for premium service (‘Freemium’)” model
Lack of cost to the basic user promotes growth in market share. Premium services monetises enthusiasts
Limited demand for premium services if the basic service is adequate
Advantages and disadvantages of the “Up-front charge” model
Reliable monetisation if enthusiastic customers providing there is a clear and uncomplicated offer to users
Charging a price limits demand
Advantages and disadvantages of the “In-app purchases” model
Promotes growth in market share
Relatively steady income
Low pricing may encourage regular purchases
Potentially exploitative (if targeted at children)
An entrepreneur may come up with several ideas - before proceeding with any of them as a business opportunity. The entrepreneur should go down two main processes:
Screening
A go / no go decision
What is a screening process with potential business ideas
Deciding which idea or ideas have the greatest potential
What is a go / no go decision process with potential business ideas?
Where the entrepreneur makes a final decision about whether to commit to their idea, given the risks and rewards of doing so
The screening process of potential business ideas should involve (not the stages)
Gathering information
Analysing this information
Deciding on the approach to take to each proposal
Is passing the screening process for potential business ideas sufficient to make a final decision to launch a business, product or service?
No
What are some factors that the entrepreneur may consider in making the go / no-go decision?
Whether they could be a successful entrepreneur
Whether they can overcome some of the barriers to entrepreneurship
Is screening a higher level assessment of whether a proposal might work in principle (not brilliant question)
Yes
Does a go / no go require more detailed, specific and action-orientated information? (Than screening)
Yes
What is the order of screening and go / no go
Screening -> go / no go
Order in which an entrepreneur might do things? (Always an exam question)
Come up with idea -> Marketing mix -> Life-cycle analysis -> Barriers to entry -> Market segmentation -> Launch costs and monetisation -> Screening and go / no go
