Theme 1 Flashcards
Mass Market
This is a market that is aimed at the general population eg regular toothpaste
Niche Market
This is the subset of the main market and addresses a specialists need eg sensodyne toothpaste
Mass Market Characteristics
.A product is sold to all consumers in the same way to please all consumers eg: Coca Cola
. Many products can be sold on a global scale with merely a few language tweaks eg: Disney films,Microsoft software,Oreo Cookies
Mass Market Examples
Types of cars such as Ford,Volkswagen and Skoda
Toothpaste such as Colgate
Advantages of operating in a mass market
Large Scale production means economies of scale and lower average unit costs
Large Volume of Sales means high revenue
Disadvantages of operating in a mass market
Constant fierce competition
Struggle with flexibility as they are making 1 type of product which need to be differentiated to keep demand high increasing costs
Why is branding important
Branding is important as it helps instil loyalty in customers
Niche market characteristics
A subset of the main market and caters to a particular segment of the market that is not being met by other providers
Niche Market Examples
SuperCars eg Ferrari Lamborghini Koenigsegg
Advantages of niche market
Easier to target customers
Charge Premium price
Small scale production allows flexibility
Disadvantages of niche market
Very risky as demand may not be constant
Higher unit costs so no economies of scale
Market Share Equation
sales of x/total sales in the whole market x 100
Market Size
The size of the market is the TOTAL of all the sales of all the producers in that market
E-Commerce
Is the process of buying and selling products using the internet
Effect of competition on a business
Production of a higher quality product or service otherwise customers will purchase elsewhere
Effect of competition on a homogenous market
Firms will have to compete on non-price factors such as promotions,deals and bundles
Risk
The possibility a business will have lower than anticipated profits or experience a loss rather than a profit
What is risk influenced by
Raw material cost,competition, the overall economic climate and government laws
Uncertainty
When businesses are unable to predict external shocks of future events eg COVID 19
Product Orientation
When a business looks only at its products and production process to think of a new product or what to make next
When is Product Orientation appropriate
When there is little competition in the market
When there is limited consumer knowledge
When funds are limited and customers buy what’s available
Examples of Product Orientation
Apple. Creates iPhones and iPads and create innovative without taking into consideration what consumers want
Market Orientation
When a business has a sensitivity to customers requirements
Benefits to business of effective market research
Reduced risk
Understand consumer behaviour
Quantify potential consumer demand for a product
Understand how much consumers are willing to pay for a product
Identify potential competitors
Benefits to a business of researching their market
Reduces risk and cost of poor decision
Help develop marketing plan
Help a business react to and prepare for changes in the market
Primary Research
Primary research is the process of finding out intel first hand that does not exist in secondary research
What is primary research
Primary research is when an individual or a business sets out to find information on their own without the use of the internet and external sources
Methods of primary research
Questionnaires
Observation
Customer interviews
Test Marketing
Focus Groups
Questionnaires
A method that consists of asking a customer questions that are specific to you and monitor their responses to come to a conclusions
Observation
Is the process of subtly observing customers and to identify marketing tactics and behaviour of customers
Customer interviews
The process of getting customers face to face and asking them straightforward questions about upcoming business plans and their thoughts on the matter
Test Marketing
When businesses sample a product or service and have customers try them out to see their reactions
Focus Groups
The process of gathering different customers into one place and have them discuss among themselves future plans of the business and whether they want them or not
Secondary Research
Secondary research is the process of finding and using information that already exists
Methods secondary research
Government Sources
Trade Publications
Market Reports
Internet Sources
Newspapers/Magazines/TV/Radio
Government Sources
Are government issued sources. Things such as the ONS-Office of National Statistics which provide news and updates that concern the nation as a whole
Trade Publications
A source that feeds news to a specialist industry.
Market Reports
Is the process by which smaller companies purchase a market report in order to achieve their marketing objectives
Internet Sources
Sources such as blogs,social networks and media as well as articles based on news that concerns a business
Newspapers/Magazines/TV/Radio
Most of these sources concern the local community. It consists of local news as well as local economic issues that may concern a business and its activities
Qualitative Research
Research that consists of a group or individual’s feelings,thought and opinions
Quantitative Research
Research that consists of mathematical statistics such as graphs and charts and numerical values
Sampling
Is the process of choosing the right people to be part of the research
Bias
Is when results cannot he trusted because of the way the research was carried out
Types of Bias
Interview Bias
Biased Questions
Respondent Bias
Websites
Websites use many pop-up adverts in an effort to sell their product to consumers. Pop ups literally pop up while you’re on any website that may not even be related to the product. Another way firms use websites as market research is through emails. When you purchase an item off a website they require an email address which then late is used to send promotional offers,flyers and news about their items in hopes you purchase from them again
Social Networks
Twitter can be used as market research through the use of hashtags which can get that particular product name trending. It can also help a brand or company to gather quantitative information about customers
Business Databases
Business databases are online systems used by supermarkets such as Sainsbury’s to target a previous customers orders by recommending and reminding customers to purchase a particular product that they purchased previously. The company gathered this data along the way and stored it in a database
Market Segments
is an identifiable group of individuals or part of a market where consumers share one or more characteristics or needs
Segmentation by location
business may decide to sell its product in just one country, one region, or in an even smaller area depending on what type of product or service they provide
Market segment demographics
Statistical data relating to the population and particular groups within it
Segmentation by lifestyle
Customers can be grouped according to the way they lead their lives and the attitudes they share
Segmentation by income
The population can be segmented according to annual salary (e.g. £15,000, £30,000 etc.) or type of job and social class
Segmentation by age
Dividing a group of people based in their ages
Segmentation by gender
Dividing a population based on their gender
Market mapping
Market mapping is the process of finding the variables which differentiate brands in a market and then plotting them on a map
Examples of market mapping
Modern and Traditional
High Quality and Low Quality
Uses of market mapping
Could be used to identify a gap in the market
Can be used as a start up as to what a business should make
Tells a business who its closest competitors are
Competitive Advantage
An advantage a business has over its opposition
Way a business can achieve a competitive advantage
Added Value
Price
Quality
Reputation
Branding
Product differentiation
When a business variate in a type of product to attract customers
Methods of differentiation
Reputation
Customer Service
Value for money
Product features
Added Value
is the difference between the price that is charged to the customer and the cost of inputs required to create the product or service
How can a business add value
Design
Production
Marketing
How can value be added to foods
Processing
Additional Ingredients
Convenience
Packaging
Benefits of adding value
The more value that higher price that can be charged
Protection against competitors offering lower prices
Customer Loyalty
Demand
Is the amount of a good customers are willing and able to buy at a GIVEN price
How are price and demand linked
Price and Demand are linked. If the price for a product or service goes up, the demand will decrease because customers may not be willing to pay a higher price
Non-Price Factors affecting demand
Price of substitutes
Alternative brands
Price of compliments
Changes in consumer income
Trends fashions and tastes
Marketing Advertising and Branding
Population structure
Time of year
Weather and Climate
External Shocks
Price of Substitutes
A substitute is a product alternative. For example of a customer cannot afford to fly to a certain destination they may consider taking a ferry and train which would be cheaper. Another example is if coffee is too expensive then maybe buying tea could be considered
Alternative brands
If an alternative brand is available and the product is not available then this will affect demand. If customers are able to buy a similar product with a similar brand profile the demand for the main product may be affected
Price of compliments
A complementary product is one that needs to be used with another product. An example is buying the capsules for a coffee machine. As the price of the complimentary goods rise the demand for the main product falls
Changes in consumer income
As consumer incomes rise then demand for some products falls. For example microwaved meals will fall in demand as consumers will have more money to buy a fresher meal. Equally as consumer income rises consumers will have a higher disposable income to spend on luxuries and holidays.
Trends fashions and tastes
As trends in goods and services rise then demand for these products rise. Trends tend to be a change in consumer preference over time. Fads are short lived eg fidget spinners
Marketing Advertising and Branding
Marketing can also stimulate demand eg promotions can help to encourage sales. McDonald’s run the monopoly promotion every year. The marketing mix can help direct traffic to a certain sale or promotion. Advertising can stimulate demand and increase sales
Advertising can call the public’s attention to a product or service
It can also be used to launch new products, remind customers about how good established products are and build the image of the brand. Heavy branding on goods will help increase or keep demand stable
Population Structure
The UK population is getting older this means that different products and services will be in higher demand. Weddings are also going out of fashion which may mean that weddings cake demands fall
Time of year
Some products reach peak demand at certain times of the year
Christmas Tees during Christmas
Easter Eggs
Pumpkins at Halloween
Weather and Climate
Some products have a seasonality factor and may be affected by the weather and the climate
One example is an ice cream van’s Mr Whippy 99 ice creams
External Shocks
External shocks such as; terrorism, war, disease and health scares can change demand
For example after terror attacks in Tunisia travel agents have found it hard to sell holidays there
30 British tourists were killed on the beach
Supply
is measured in terms of the quantity of a goods or service a business is able and willing to make available for purchase on the market at a given period of time
How is price linked to supply
As a price paid by customers increase on a product or service businesses will want to supply more in anticipation of higher profits
Non Price factors affecting supply
Cost of production
Introduction of new technology
Indirect taxes
Government subsidies
External Shocks
Cost of production
If cost of production increases due to the rise of raw materials or an increase in minimum wage a business might:
.Produce less
.Increase price of product to increase revenue to previous levels
Introduction of new technology
New technology means that more goods can be supplied:
.mechanisation and automation of production process means supple can increase as more is being produced quicker
.Mass production methods improved to increase capacity
Indirect Taxes
When the government increases tax on goods such as petrol then supply will decrease
VAT/Customs Tax/Excise Tax are all indirect taxes and when applied to goods it makes supplying them less attractive. This can lead to a decrease in supply
Government Subsidies
This is a payment from the government to encourage more suppliers to enter the market and to supply more. With a subsidy there is an increase in supply because costs have been lowered thanks to the subsidy
External Shocks (supply)
External shocks may mean that the business may not want to supply at current levels, these shocks may be;
• Changes in oil price which can affect transport costs
• War, a business may not want to supply goods to a country which is at war
• Weather problems – particularly for crops
• Changes in labour laws (e.g. length of working week or minimum wage)
What does PED stand for
Price Elasticity of Demand
PED Formula
Final-initial/initial x 100 = % change in price
% change in quantity demanded/ % change in price
What does the PED value mean
Value more than 1=elastic
Value between 0 and 1=inelastic
Elastic Demand
Products and services that have elastic demand are responsive to a change in price
• This means if the business puts prices up, then demand will decrease
• If prices decrease then demand will increase. It stands to reason that if you make a product cheaper that more customers will want to buy it.
Inelastic Demand
Inelastic demand is for goods where if the price is changed the demand stays the same
• With inelastic demand there are few substitutes (e.g. insulin, petrol)
Factors influencing price elasticity of demand
Availability of substitutes
Frequency of purchase
Necessities
Luxury goods
What does YED stand for
Income Elasticity of Demand
What Is YED
A calculation used by business to estimate how demand will change in relation to income
Normal Goods
Normal goods are those for which consumer demand increases when income increases
•YED value would be >0 (a positive value)
Inferior Goods
Inferior goods are products where demand decreases as income increases
• YED value for an inferior good will be <0 ( a negative value)
• For example charity shop clothes might have a YED of -1.5
Luxury Goods
A luxury good is when an increase in income causes a larger increase in demand (it’s all about proportion)
• Yed value for luxury goods will be >1 positive
YED Formula
% change in quantity demanded/% change in income
Product and
Service design
The combination of factors needed in designing a product
What are the factors required in product and service design
Aesthetics
Function
Cost
Aesthetics
Style, design, aesthetics, look, appearance, elegance, class, charm, chic.
Function
Purpose, job, task, duty, ergonomics, usability, safety, reliability, functionality
Will the product or service be fit for purpose?
What does the product do?
How well does it perform?
Cost (economic manufacture)
What is the minimum cost that we can make this product for whilst retaining quality?
Can it be made efficiently?
Can it be produced for a lower cost
than the competitors?
Changes in the elements of the design mix to reflect social trends
Bespoke Design
Standard Design
Efficiencies
Design for waste minimisation
Re-use
Recycling
Ethical sourcing
Bespoke Design
Bespoke design means; custom made, custom built, tailor made to the consumer
.This could be a product such as a car or a service such as a wedding cake
Standard design
Standard design are products or services that are sold as standard, the customer cannot add any extra features or benefits
Efficiencies
Efficiencies in production can be achieved by changing the types of materials used or by updating the technology used in production
Design for waste minimisation
While waste is actually created by contractors on site, the decisions made by designers have a major influence on the type and amount of waste
Deciding what and how to build, whether to demolish or renovate, what materials to use and the design specifications for construction all impact on the waste created during a project
Re-use
Some products are made to be re-used, this gives consumers good value for money as they can use the product more than once
Recycling
Some products are made using recycled materials, this appeals to the green consumer and is good for the environment
Ethical sourcing
Ethical sourcing also means ‘ensuring that the products being sourced are created in safe facilities by workers who are treated well and paid fair wages to work legal hours. FSC AND FAIRTRADE
Promotion
The use of marketing tools to bring a product or service to the attention of potential buyers
Types of Promotion
Personal selling
Direct marketing
Above-the-line marketing
Below-the-line marketing
Public Relations (PR)
Sponsorship
Personal Selling
Is the process by which a salesperson interacts with the customers face to face on behalf of a business regarding a product or service
Direct Marketing
Highly focussed targeted mail based on what customers have bought before. Can be be mail,post or even a special offer to re-engage the customer
Above the Line advertising
Involves mass media methods for targeting larger and more general customers:
Radio
TV
Cinema
Print Adverts eg newspapers
Outside Adverts eg: billboards
Pros of ATL
ATL is tailored to reach a mass audience
Advert communication is repeated so the message is clear e.g. “simples” and “go compare”
Great for building brand awareness
Cons of ATL
Very expensive e.g. A radio ad on a national station can cost about £10,000 for a week
Below the Line advertising
Below-the-line (BTL) marketing is the same as direct marketing for reaching smaller but more targeted audiences
The main methods include:
• Public relations e.g. Ryanair PR stunts
• Search engines
• Events e.g. restaurant launch
• Social media marketing
Pros of BTL
Easy to measure if the campaign has reached an audience e.g. through number of website visits, conversion rates, click through rates
Easy and inexpensive to use social media to increase brand awareness
Cons of BTL
Extensive training on working social media and IT may be needed for marketing staff
Deeper understanding of customer or buyer behaviour is required e.g. what do they read, what websites do they visit
Public Relations
PR is unpaid communication about an organisation which appears in mass media
PR can include publicity stunts eg Felix Baumgartner from the Red Bull team
Sponsorship
Positive association of the product with a celebrity or a sport eg Selena Gomez with Pantene
Sales Promotions
BOGOFF
Price discounts
Money off coupons
Samples / giveaways
Special events
Point of sale
BOGOF
Stands for Buy One Get One Free
Pros of BOGOF
Very popular with shoppers
Encourages trial and use of the product
Cons of BOGOF
Loss of profit because there is an increase in costs, this will not be balanced by the increase in sales
Only useful in the short-term
Price Discounts
Price discounts means that the normal RRP of the product or service has been reduced
Pros of price discounts
Great way to clear old or out-of-date stock
Cons of price discounts
Customers may regard the business as a cheap option
Too many discounts and customers become suspicious e.g. the DFS sale that is always on
Money off coupons
Coupons can be used to capture new customers – to add an incentive
Coupons can also be used with existing customers to encourage an impulse spend
Pros of money off coupons
Coupons can help the customer feel they are getting better value for money
Coupons are available from websites, loyalty cards, store magazines and on the back of some packs to encourage repeat purchase
Cons of money off coupons
Reduced profits from the cost of running the promotion
Some customers may be waiting for the coupons before
they purchase
Samples/giveaways
This is where a business may send out or give customers free samples in order to persuade them to try the product for the first time
Pros of samples/giveaways
Ideal for new product launches
Works especially well with some products e.g.
shampoo, food etc.
Cons of samples/giveaways
Can be complicated to send in the post – needs a database of customers
Can be expensive as giving away some of the product for free
Special Events
Special events are activities that the business does to encourage consumers to try the product
Pros of special events
Encourages customers to attend
Rewards loyal customers with a
special event
Ideal for small businesses
Cons of special events
Can be expensive
Hard to measure how valuable this
marketing is
Point of sale
Point of sale display is usually a cardboard display stand located close to the till within a shop
Pros of point of sale
Ideal way to promote new products
Works best with products that have an event or
holiday tie in e.g. crème eggs for Easter
Cons of point of sale
Only successful if the product meets the needs of the customer
Needs to be designed and out to stores in time for the event / holiday
Digital Communications
Online adverts
Mobile communications
“Advergaming”
Social media
Consumer generated content
Viral strategies
Online adverts
banner and commercial classified adverts - including adverts within emails
pop-up adverts
Pros of online adverts
Potential to reach large markets of customers shopping online
Cons of online adverts
Customers may ignore the ads
Ads may get lost amongst all the content
and other ads
Click through ads can be expensive
Mobile communications
Mobile communications includes smartphones, androids, tablets and other devices used on the go
Pros of mobile communications
Mobile marketing can be used to extend the online reach so that customers can interact with the brand whilst on the move
Cons of mobile communications
Small screen the message may be lost or distorted
Security issues of conducting transactions online
Advergaming
An advergame is a video game which contains an advert for a product, service or business
For example in a car racing game the cars may pass billboards which are genuine adverts
Pros of advergaming
Customers will be concentrating on the game so are more likely to concentrate on the brand message
Many games are multi-player reaching huge audiences
Cons of Advergaming
If the game and the brand don’t make sense together the message is lost – wrongly targeting a game with car adverts for example
Many games are played by consumers too young to make a purchase decision
Social Media
The process of using social media platforms such as Instagram,Facebook, etc
Pros of social media
Customers can be kept informed of new products
Increases customer engagement with the brand
Can show customer service with a quick response
Cons of social media
Blogs, twitter, Facebook pages all need to be updated on a regular basis which means hiring committed staff – which is an additional cost
Consumer generated content
This means any form of
content such as video, blogs, discussion form posts, digital images, audio files, and other forms of media that was created by consumers
Pros of consumer generated content
Opportunities for consumers to read reviews before they make the purchase e.g. Trip Advisor
Positive responses to complaints can be very valuable marketing and reputation enhancement for the business
Cons of consumer generated content
Consumers have lots of ways of publicly complaining about a product or service ultimately having easy access to ruin a business reputation/image
Viral Strategies
Viral marketing describes any strategy that encourages customers to pass on a marketing message to others, creating the potential for exponential growth in the message’s exposure and influence. Eg: BLM
Branding
A brand is a characteristic name or symbol that distinguishes one product from another
Types of branding
Corporate Branding
Product Branding
Own Brand Products
Rebranding
Corporate Branding
Where one large business owns multiple brands. Such as Mars owning multiple chocolate brands.
Pros of corporate branding
Spreads the cost of marketing across all the individual brands
Awareness of the company can be worldwide e.g. Coca Cola
Cons of corporate branding
Takes a long time to build a solid brand image
Any unfavourable incidents e.g. a product recall and the whole brand suffers
Product Branding
A product branding strategy will aim to show the customer the features and benefits of a product which will differentiate it from other similar products in the marketplace eg Kitkat is Red
Pros of product branding
Branded products can command higher prices that non-branded
Good branding differentiates the product and creates customer loyalty
Cons of product branding
Product branding may require a high investment
Product branding may take many years to build up
Own Brand Products
Are home brand products such as Tesco may have its own version of coco pops
Pros of own brand products
Boosts customer loyalty to the supermarket
Competes with manufacturers brands
Cons of own brand products
Store brands are a mixed bag and can be made by numerous companies under the supermarket’s name, so ketchup might be great but cornflakes might taste like carpet tiles
Rebranding
Where a business changes is:
Name
Symbol
Term
Design
Or combination of the above
eg: Old Spice wanting to change business image to a younger audience
Benefits of strong branding
Added Value
Ability to charge premium prices
Reduced PED
Ways to build a brand
USP’s (Uniques Selling Point)
Advertising
Sponsorship
Social Media
USPS/Differentiation
These are the small details that makes one product or business different from another
Advertising
Brand awareness is a sense of loyalty between customer and the advertiser
Customers purchase from brands they are familiar with
Viral Marketing
is method of marketing whereby consumers are encouraged to share information about a company’s goods or services via the Internet
Emotional Branding
Emotional branding seeks to create a bond between the consumer and the product by provoking an emotional response to the advertising
Long lasting attachment to a product is a strong brand loyalty
Pricing
The process of a business choosing a pricing strategy in efforts to make profit or attract customers
Types of Pricing strategies
cost plus
price skimming
penetration
predatory
competitive
psychological
Cost Plus
Where the business sets a price to cover costs as well as a percentage on top to make profit
Pros of cost plus
Protects the profit margins of the business
Easiest method of pricing to apply
Easy to estimate profit levels
Cons of cost plus
This method of pricing does not take into account the prices of the competition
Price Skimming
Where the business sets a high price for a product on launch to cover costs of R&D. Usually used by businesses who have established a brand name
Pros of Price Skimming
A high starting price can establish an upmarket image
For innovative products it can be a great way to harvest high profits from early buyers who want the latest gadget / item / product and are prepared to pay a premium
Cons of Price Skimming
Cheaper imitations of the product may appear on the market too soon and take sales away from the product
Risky strategy as customers may be put off from buying due to the high price
Competitive Pricing
Where the business sets a price that rivals the competitors
Penetration Pricing
Where the business sets the prices low at launch to attract customers then raise the price gradually
Pros of Penetration Pricing
Works best with new products being launched to encourage consumers to try the product
Cons of Penetration Pricing
Consumers may have bought anyway, even without the low start price
Expensive as it eats into profits by reducing sales revenue
Predatory Pricing
Where a business sets a price that causes competitors to purposefully perish
Pros of Predatory Pricing
The intention with predatory pricing is to drive competitors out of the market place or set a barrier to entry to discourage new entrants to the market
Cons of Predatory Pricing
Depends on the price elasticity of the product, if it is low then a lower price won’t make much difference to customer demand
Psychological Pricing
Where a product is priced a penny lower to appear cheaper
Pros of psychological pricing
Ideal for products which want to project a premium image – the price might be part of the appeal
Cons of psychological pricing
Psychological pricing strategy can be high risk, if comparable products are available for a lower price consumers could be tempted away
Factors determining a price strategy
number of USPs/amount of differentiation
price elasticity of demand
level of competition in the business environment
strength of brand
stage in the product life cycle
costs and the need to make a profit
No. Of USPs
Is a unique selling point that differentiates a product from another
Price Elasticity of Demand (Elastic)
Homogenous markets have many alternatives therefore if price is too high customers will go to an alternative and price too low and customers will be put off
Price Elasticity of Demand (Inelastic)
Unique products which have few alternatives will be able to command premium prices as consumers will be unable to switch and therefore willing to pay the price
Level Of Competition
Little competition in a market will give customers little options therefore there will be a higher chance they purchase your product
Strength of brand
How well the brand name is known affects how much people are willing to buy it. Brands with a strong name and reputation sell the most
Stage in the product life cycle
Products will fluctuate in price depending where they are on the product life cycle. In the introduction pieces may be high however gradually lower as the product reaches the end of the product life cycle
Cost and the need to make profit
A business will want to break-even and make a profit, break-even is the point where total costs equal total revenue
Changes in pricing to reflect social trends
Online Sales
Price Comparison Sites
Online Sales
Websites can offer lower price for products than brick and mortar shops as they do not have overheads such as rent
Price Comparison Sites
Customers are now able to shop around and using these sites compare prices of insurance, where previously they would have had to phone a few companies to get quotes, this was time consuming and an expensive phone bill
Distribution
is the process of getting the right product or service to the consumer in the right place
4 Stage Distribution
Manufacturer
Wholesaler
Retailer
Consumer
3 Stage Distribution
Manufacturer
Retailer
Consumer
2 Stage Distribution
Manufacturer
Consumer
Changes in distribution to reflect social trends
Online Distribution
Changing from product to service
Choice of distribution channel
Online Distribution
The main benefit of the Internet is that niche products can reach a wider audience e.g. Low barriers to entry as set up costs are small
Can cater to a far greater geographically dispersed market than traditional local shops
Changing from product to service
This is the concept that you do not have to own something to be able to use it e.g. music – not a physical product like a CD but an experience like a song you sing to yourself
Choice of distribution channel
A. The nature of the product e.g. medicines need to be sold in a pharmacy under the careful eye of a fully trained pharmacist
B. The market
C. The nature of the business
D. The size of the business e.g. A small fledgling business may start with just an online business
Marketing
The management process of identifying, anticipating and satisfying consumer demands for profit
Marketing Strategy
The process by which the business chooses to promote its product or service to the market
Product Life Cycle Stages
Research and Development
Introduction
Growth
Maturity
Decline
Extension Strategies
updating packaging
adding more or different features
changing target market
advertising
price reduction
2 ways a product can be extended
A. Change the Product
B.Rebranding or Relaunch of the product
Product Modification
The process of adding things to a product to differentiate it from the original model eg: automobile industry such as the Honda Civic
Rebranding
Process of updating or changing the name or design of a product name to create a new clean slate for the product eg: CIF and KIA
Relaunch
Process where a product is withdrawn, altered and released in hopes to satisfy customers that time round eg: Burberry
Promotion Extension
The process of shifting advertising to a new audience and target group eg: North Face from mountaineers to teenagers
Boston Matrix
The Boston matrix is a marketing planning tool which helps managers to plan for a balanced product portfolio
Star Product
High market share
High market growth
Example: Apple Products
Question Mark
Low Market Share
High Market Growth
Cash Cow
High Market Share
Low Market Growth
Dog Product
Low Market Share
Low Market Growth
Uses of the Boston Matrix
The Boston matrix is a good starting point when reviewing an existing product line to decide future strategy and budgets
Limitations of Boston Matrix
Products may not be low or high market share they could be medium
High market share does not always lead to high profits, there are high costs also involved with high market share
B2B Marketing
The process of a business using another business rather than consumers
B2C Marketing
Means business to consumer. Where a business deals with the consumer directly.
Customer Loyalty
The process by which a business uses marketing strategies to retain customers for a long period of time
Ways a business can gain customer loyalty
Loyalty Cards
Saver Schemes
Loyalty Cards
Can help improve customer retention as well as collect important data on the consumer which they can use later
Saver Schemes
Where a customer can save money on future purchases depending on how many uses they have on the saver scheme
Staffing
Staffing is the process of hiring, training and supervising employees in an business
What are the different views of staffs
Staff as an asset
Staff as a cost
Staff as a cost
Cost of recruitment
Cost of training
Cost of paying minimum wages
Cost of paying staff salaries and wages
Cost of staff welfare
Cost of redundancy
Cost of recruitment
A business may carry out the recruitment themselves, costs add up, from the advert for the job to the employee time away from their job to carry out interview
Cost of training
Staff training is often viewed as a cost rather than adding value, however companies with innovative learning and development programmes are increasing sales revenue and retaining their staff for longer
Cost of minimum wage
Paying employees the lowest legal amount. If raised can increase costs for a business
Cost of staff welfare
Staff welfare is an umbrella term that can mean anything and everything from facilities and benefits, to working conditions and retirement pension rates
Cost of redundancy
When an employees job no longer exists eg through delayering have to be payed redundancy pay
Multi-skilling
This means having a workforce that can be moved around from one job to another
Pros of multi-skilling
Less staff are needed, those that are employed are used to capacity not standing around
More interesting jobs for the workers as there are a variety of tasks
Cons of multi-skilling
Workers become a “Jack of all trades master of none”
Businesses lose the benefits of having specialist staff
Types of work
Full Time
Part Time
Temporary
Permanent
Flexible
Zero Hour
Home working
Full-time
Working all the usual hours required of an employee; usually 35 hours or more.
Pros of full time
Employees are committed to the business and may be more productive
Loyalty to the business
Cons of full time
Less flexible than part-timers, no-one to cover late nights and weekends
Part-time
someone who works fewer hours than a full-time worker.
Pros of part time
Good way to keep costs down while a business is growing
Part-time jobs attract a wide pool of applicants with experience and skills who might not want a full-time job
Cons of part time
Employees might not give the business the commitment and loyalty that a full-time worker would
Temporary
is one where the employer only needs extra staff to cover a seasonal period
Pros of temporary work
Useful to meet seasonal demands, and work fluctuations
Useful to meet employee shortages
Cons of temporary work
Injury rates are higher in temp workers
All staff will need some kind of training to get them started, this costs time and money
Permanent work
an indefinite contract whereby you are employed by the company until either the employee leaves is fired or made redundant
Pros of permanent work
Higher staff morale as they know they have a secure job
Employees have loyalty to the business which reduces absenteeism and increases productivity
Cons of permanent work
Permanent staff can develop negative attitudes to work, or get involved in office politics and so may become lazy, uncooperative or disinterested in the business
Flexible hours
is a way of working that suits an employee’s needs
Pros of flexible hours
From a business perspective flexible working can keep valuable staff from leaving and can also cover busy periods
Can accommodate the work life balance needs of employees with busy lives and families
Cons of flexible hours
Can sometimes confuse suppliers or customers who may want to speak to the same member of staff
The business may need extra staff to cover unmanned periods
Zero Hour
Zeros hours contracts means that employees are “on call” to work when you need them, but they have no fixed hours of employment
The employer does not have to provide the employees with work
The employees can say no if the employer calls and offers them work that day
Pros of zero hour
Great for a business where work can be unpredictable
Ideal where staff are needed at short notice
Cons of zero hour
Employees might not give the business the commitment and loyalty that a full-time worker would
Employees may become unhappy with the zero hours and leave to find more permanent work
Outsourcing
where a business gets another business to produce or provide for it hired on a contractual basis
Functions that can be outsourced
Production
Payroll
Purchasing
Delivery
Dismissal
Where an employee is fired from their role due to:
Absenteeism
Gross misconduct (showing up
drunk)
Theft of company money or property
Trade Unions
is an organisation with members who are usually workers or employees. It looks after their interests at work
Attributes of a leader
Innovators
Motivates
Original
Creates Change
Attributes of a manager
Directs
Monitors
Problem Solves
Organises
Types of Leadership Styles
Autocratic
Democratic
Paternalistic
Laissez-Faire
Autocratic Style
This style is used when leaders tell their employees what they want done and how they want it accomplished, without getting the advice of their followers
Democratic Style
Where the the leader takes advice from his employees and workers on a majority rule
Paternalistic Style
Deriving from the word Peter meaning ‘father’. Is a parental style of management where the leader looks to rather than punish the employee but rather better them
Laissez-Faire Style
Style of leadership is where employees can carry out activities and make decisions freely
Entrepreneur
Is an individual who takes risks and sets up a business in hopes for high profits
Intrapreneur
An employee within a large business who thinks like an entrepreneur
Barriers to entrepreneurship
Entrepreneurial Capacity
Access to finance
Lack of training
Fear of failure
Lack of Confidence
Entrepreneurial Capacity
The knowledge, attitudes and mindsets which come with being an entrepreneur
Access to finance
The lack of finance or funding. This could pose an issue as they are not able to purchase the necessary assets and premises to start up a business.
Lack of training
Individuals may not be sure what is required of them to start up a business and how to run and manage the business itself
Fear of failure
The fear that the money invested will be lost or that the business set up will sink
Risk
The possibility of a business making less profit than anticipated
Examples of Risk
Financial Risks
Lack of Security
Uncertainty
When a business is unable to predict external shocks such as tsunamis, health scares, commodity price shocks and interest rates
Business Objective
A goal that a business has set to achieve. Usually SMART targets
Objectives of a business
Survival
Profit Maximisation
Sales Maximisation
Employee Welfare
Customer Satisfaction
Increasing Market Share
Survival
Usually for start-ups. Survival is also usually making enough sales and attracting revenues to keep the business running for a long period of time
Profit Maximisation
Where the business wants to make the most amount of profit possible with the resources at hand. Helps businesses recoup any costs from the R&D stage
Shrinkflation
Where the manufacturer keeps the price the same but makes the product smaller
Sales Maximisation
An objective by which a business wants to sell as much stock as possible/ have a good capacity utilisation
Business Forms
Public Limited Company
Private Limited Company
Partnership
Sole Trader
Limited Liability
Where the business has a separate legal identity for, the owner. The business is responsible for all the debts of the business. The owners assets are not used as collateral
Unlimited Liability
Where the business and owner are legally tied. The owner is responsible for any issues the business gets into and their assets can be used as collateral
Pros of sole trader
Easy to set up
Your own boss
Cons of sole trader
Unlimited liability
No economies of scale
Pros of partnerships
Partners have range of skills
Shared problems and decisions
Opportunity Cost
can be measured as the next best alternative
Trade-off
when the less of one thing is exchanged for more of another. There is a compromise
Skills that need to be learnt when transitioning from an entrepreneur to leader
Learning to delegate
Trusting others
Listen to others
Be less reactive
Develop emotional intelligence
Difficulties entrepreneurs may be face with when transitioning to leader
Stress
Sharing ownership and control
Recruitment
Is the process of finding and hiring someone for a job role. This has a lot of stages
Job specification
This is a document detailing the qualities and qualifications required for the job
How can a business assess candidates
Interviews
Assessment days
In-tray exercises
Internal recruitment
Is when a business recruits someone already in the business
External recruitment
Is when the business hires someone outside the business
Pros of internal recruitment
Candidates already know the business
Short and cheap process
Motivates workers to go for a promotion
Cons of internal recruitment
Leaves a vacant for another department
Can cause resentment and discouragement among colleagues who aren’t selected
Cons of internal recruitment
Leaves a vacancy in another department
Can cause resentment among colleagues who aren’t selected
Pros of external recruitment
Brings in fresh ideas and expertise
Wide pool of expertise and applicants
Cons of external recruitment
Long and expensive process
Will only have seen candidate at recruitment, business does not know what they are like
The costs or recruitment and training for a business
Cost of advertising
Cost of a specialist recruitment agency
Shortlisting and assessment done by existing staff eg cost of time
Induction training
This is where the new employees have a period of time where they are introduced to other members of staff, etiquette, the backgrounds and practices of the business
On the job training
This is training which occurs on the business site
On the job training
This is where training occurs on the business site
Off the job training
This is training which happens outside the business eg a college
Pros of on the job training
Easy to organise
Lower costs
Cons of on the job training
Bad practices are passed on
No new ideas are brought to the business
Pros of off the job training
Trainers are specialist
New ideas are brought into the business
Cons of off the job training
Can be expensive
Training may not be specific to the day to day job
Hierarchy
A series of levels each having different responsibilities for different people
Chain of command
This is the path of communication and authority up and down the hierarchy
Different structure of a business
Tall structure
Flat structure
Tall structures
Tall structures tend to have long chain of commands and narrow span of control. Tall structures can negatively impact communication and message may be distorted going down the chain and can take a long time however there are more opportunities for promotion and increased motivation
Flat structures
Have few levels of hierarchy and a wider span of control. This can be slow in communication as there are large amounts of people at each level
Span of control
Is the number of people who a manager is responsible for
Delayering
This is the removal of parts of hierarchy
Centralisation
All decisions are made by senior managers at the top of the business
Decentralisation
Where authority is more spread to the junior employees as well
Pros of centralisation
Business leaders have lots of experience in decision making
Can make decisions quickly as they do not have to consult anybody
Cons of centralisation
Excluding employees from decision making can be demotivating
Leaders are slow to notice consumer trends
Pros of decentralisation
Motivates employees
Employees have expert knowledge in their department
Cons of decentralisation
Employees may not have enough experience to make decisions
