The nature of marketing 3.1

Question 1

Define the term “Marketing”

Answer 1

The management task that links the business to the customer by identifying and meeting the needs of customers profitability - it is done by getting the right product for the right price at the right time.

Question 2

What are the management functions?

Answer 2

• Market research
• Product design
• Advertising
• Distribution
• Customer service
• Packaging

Question 3

Define the term “Marketing objectives”

Answer 3

The goals set for the marketing department to help the business achieve it’s overall objectives.

Question 4

Define the term “Marketing strategies”

Answer 4

Long-term plan established for achieving marketing objectives.

Question 5

List 3 examples of marketing objectives.

Answer 5

Answers may include :

• Increasing market share
• Increasing total sales (value or volume - or both)
• increasing average number of items purchased per customer visit
• increasing the frequency that a loyal customer shops
• Increasing the percentage of returning customers
• Increasing number of new customers
• Increasing customer satisfaction
• Improving brand identity

Question 6

What are the links between the marketing and finance department?

Answer 6

1. The finance department will use the sales forecast of the marketing department to help construct a cash flow forecast and operational budgets.
2. The finance department will have to ensure that the necessary capital is available to pay for the agreed marketing budget, for example for promotion expenditure.

Question 7

What are the links between the marketing and human resource department?

Answer 7

1. The sales forecasts will be used by the human resources to help devise a workforce plan for all of the departments likely to be affected by a new marketing strategy, for example additional staff may be needed in sales and production.
2. Human resources will also have to ensure that the recruitment and selection of appropriately qualified and experienced staff are undertaken to make sure there are sufficient workers to produce and sell the increase in sales planned for by the marketing department

Question 8

What are the links between the marketing and operations department?

Answer 8

1. Market research data will play a key role in a new product development.
2. The sales forecasts will be used by the operations department to plan for the capacity needed, the purchase of machines that will be used and the stocks of raw materials required for the new output level.

Question 9

Define the term “Market Orientation”

Answer 9

An outward-looking approach basing product decisions on consumer demand, as established by market research.

Question 10

Define the term “Marketing Strategies’”

Answer 10

Long-term plan established for achieving marketing objectives.

Question 11

Define the term “Asset-led marketing”

Answer 11

An approach to marketing that bases strategy on the firm’s existing strengths and assets instead of purely on what the customer wants.

Question 12

Define the term “Product orientation”

Answer 12

An inward-looking approach that focuses on making products that can be made - or have been made for a long time - and then trying to sell them.

Question 13

Define the term “Societal Marketing”

Answer 13

This approach considers the demand of consumers and the effects on all members of society involved in same way when firms meet these demands.

Question 14

Define the term “Consumer Market”

Answer 14

The selling of products by businesses to the final end user. (B2C)

Question 15

Define the term “Demand”

Answer 15

The quantity of a product that consumers are willing and able to buy at a given price in a time period.

Question 16

Define the term “Supply”

Answer 16

The quantity of a product that firms are prepared to supply at a given price in a given time period.

Question 17

Define the term “Equilibrium price”

Answer 17

The market price that equates supply and demand for a product.

Question 18

Define the term “Market size”

Answer 18

The total level of sales of all producers within a market.

Question 19

Define the term “Market growth”

Answer 19

The percentage change in the total size of a market over a period of time.

Question 20

Define the term “Market share”

Answer 20

The percentage of sales in the total market sold by one business.

Question 21

Define the term “Direct competitor”

Answer 21

Businesses that provide the same or very similar goods or services.

Question 22

Define the term “Unique selling point (USP)”

Answer 22

The special feature of a product that differentiates it from competitors products.

Question 23

Define the term “Product differentiation”

Answer 23

Making a product distinctive so that it stands out from competitors’ products in consumers perception.

Question 24

Define the term “Niche marketing”

Answer 24

Identifying and exploiting a small segment of a larger market by developing products to suit it.

Question 25

Define the term “Mass marketing”

Answer 25

Selling the same products to the whole market with no attempt to target groups within.

Question 26

List 2 Advantages of Niche/Mass markets

Answer 26

1. Small firms may be able to survive and thrive in markets that are dominated by larger firms.
2. If the market is currently unexploited by competitors, then filling a niche can offer the chance to sell at high prices and high profit margins.
3. Niche market products can also be used by the large firms to create status and image - their mass-market products may lack these qualities.

Question 27

List 2 Disadvantages of Niche/Mass markets

Answer 27

1. Small market niches do not benefit from economies of scale
2. Mass-market strategies run fewer risks than niche strategies. As niche markets contain relatively small number of consumers, any change in consumer buying habits could lead to a rapid decline in sales. This is a rapid decline in sales. This is a particular problem for small firms operating in only one niche market with one product.

Question 28

Define the term “Market segment”

Answer 28

A sub-group of a whole market in which consumers have similar characteristics.

Question 29

Define the term “Market segmentation”

Answer 29

Identifying different segments within a market and targeting different products or service to them.

Question 30

Define the term “Consumer profile”

Answer 30

A qualified picture of consumers of a firm’s products, showing proportions of age groups, income levels, location, gender, and social class.

Question 31

List 2 Advantages of market segmentation.

Answer 31

Answers may include :

• Businesses can define their target market precisely and design and produce goods that are specifically aimed at these groups, leading to increased sales.
• It enables identification of gaps in the market - groups of these might then be successfully exploited.
• Differentiated marketing strategies can be focused on target market groups. This avoids wasting money or trying to sell products to the whole market.
• Small firms will be unable to compete in the whole market and are able to specialize in one or two market segments.
• Price discrimination can be used to increase revenue and profits.

Question 32

List 2 Limitations of market segmentation.

Answer 32

Answers may include :

• Research and development and production costs might be high as a result of marketing several different product variations.
• Promotional costs might be high as different advertisements and promotions might be needed for different segments - marketing economies of scale may not be fully exploited.
• Production and stock holding costs might be higher than for the option of just producing and stocking one undifferentiated product.
• By focusing on one or two limited market segments there is a danger that excessive specialization could lead to purchasing habits significantly
• Extensive market research is needed

Question 33

List 2 Advantages of customer orientation.

Answer 33

Answers may include :

• The chances of newly developed products failing in the market are reduced. Effective market research helps to prevent product failures. With the huge cost of developing new products, such as cars or computers, most businesses use the customer-oriented approach to reduce the risk of failure.
• Products based on consumers’ needs will have a longer lifespan and be more profitable than those that are sold using a product-led approach.
• Market research never ends. Constant feedback from customers will allow the product and the method of marketing it to be adapted to changing tastes before competitors get there first.