theme 1 (in paper 1 & 3) Flashcards
marketing and people
what is a mass market?
the market for goods that are produced in large quantities.
what is a niche market?
a small, specialized market for a particular product or service.
what are the key characteristics of a mass market?
- Customers form the majority in the market.
- Customer needs and wants are more “general” & less “specific”.
- Associated with higher production output and capacity (economies of scale)
- Success usually associated with low-cost operation, heavy promotion, widespread distribution or market leading brands.
what are the key characteristics of a niche market?
- Less competition – the firm is a “big fish in a small pond”.
- Clear focus - target particular customers (often easier to find and reach too).
- Builds up specialist skill and knowledge = market expertise.
- Can often charge a higher price – customers are prepared to pay for expertise.
- Profit margins often higher.
- Customers tend to be more loyal.
how can you calculate market size?
Market size measures the total sales generated by selling a product on a market. It is measured by dividing sales by market share. This value is then multiplied by 100.
how can you calculate market share?
Market share refers to the proportion of a market that a business controls in order to satisfy customer needs.
Market share can be calculated by sales of one product divided by total market sales of that product multiplied by 100.
what is a dynamic market?
A dynamic market is one that is in a rapidly changing business environment.
what factors do u need to consider when looking at a dynamic market?
Online retailing
How markets change
Innovation and market growth
Adapting to change
what are the advantages of online retailing?
Provides business access to more consumers, including internationally
Enables longer trading hours as the business is open 24/7
Cheaper to run as it lowers fixed and variable costs compared to bricks and mortar retailers
Businesses can collect data by tracking consumer behaviour which helps with primary market research
Consumers can receive offers that they are more likely to benefit from
Consumers can shop at a time that suits them
what are the disadvantages of online retailing?
There may be high costs for website development, maintenance, and promotion
Online retailing is dominated by larger businesses that are more well-known
High levels of competition mean that it will be expensive to make a website stand out
There is a lack of personal contact with customers
Consumers may find it difficult to get the desired level of customer service
Consumers may find it difficult to return unwanted products
Online purchasing opens consumers up to credit card fraud
what leads to changes in the market?
Changing consumer tastes and preferences e.g. consumers desiring electric vehicles in place of traditional petrol/diesel.
Changing demographics e.g many developed countries have an increasingly older population who have different wants and needs to previous markets.
The amount of competition e.g. international trade means larger market sizes but also more competition between an increasing number of firms.
Competition can be direct i.e. the sale of similar products or indirect e.g. airlines compete with each other but also with other forms of transport such as trains.
Changing legislation e.g. laws around environmental standards create new markets.
what is product innovation?
Product innovation involves the adaptation or improvement of existing products e.g. improved video cameras on laptops.
what is market growth?
Market growth is the measurement of the change in the entire market, expressed as a percentage of the original size.
The businesses market share does not necessarily increase automatically as the entire market continues to grow.
what causes a market to grow?
Increasing population sizes can increase demand in certain markets.
Increasing incomes can increase demand in certain markets.
Changing tastes and preferences can cause the market to grow e.g. the growth in the electric car market.
how can business adapt to change?
Create flexible business structures, especially in terms of operations and people management.
Meet customer needs, by carrying out market research and communicating with customers.
Invest in staff training, new products and processes.
Innovate so as to gain the first mover advantage.
how does competition affect the market?
Competition can be direct or indirect:
Direct competition occurs when the business is targeting customers with the same product as a competitor.
Indirect competition occurs when firms sell different products but compete with each other for the customers disposable income e.g. cinema and theatre companies are in indirect competition.
Competition results in many benefits for the customer, such as:
- Businesses offer lower prices.
- Businesses produce better quality products.
- Businesses provide better customer service.
However, the absence of competition reduces incentives for businesses to innovate, be efficient or offer consumers lower prices.
what is the difference between uncertainty and risk?
Risk is the potential threat to business success.
Risks can be from inside the business (internal) or from outside the business (external).
Risks can be measured and prepared for using risk management.
Uncertainty is when outcomes are difficult to predict.
what is product orientation?
A product orientation is an approach to marketing that focuses on the characteristics of the product rather than the needs of the consumer.
The emphasis will be on creating a product first and then finding a market.
The business has a belief that the product is superior i.e. it will sell itself.
One problem with being too product orientated is that over time your business may move further.
what is market orientation?
Market orientation is an approach to marketing that focuses on the needs of consumers and uses this information to design products that meet customer needs.
- Consumers are at the center of marketing decisions.
- Products will be developed which respond to consumer needs.
The result of market orientation is that the firm will benefit from increased demand, increased profits, and a valued brand image as its products become more desirable .
what are the benefits of market research?
- reduces the risk when launching new products or entering new markets.
- Anticipates future needs and wants of consumers.
- helps understand consumer behaviour.
- identifies potential consumer demand.
- identifies how much consumers are prepared to pay.
- identifies competitors and gauge their potential strengths and weaknesses.
how does ICT help support market research?
Company websites
Websites allow businesses to collect primary data more cheaply e.g. tracking consumer searches and analyzing customer reviews as well as collecting secondary data about rivals e.g. prices and special offers. Pop-ups
Databases
These can be used to store large amounts of customer information. Databases are also effective in collating customer e-mail addresses so that targeted customers can be surveyed later via e-mail.
Social networking
Focuses on gathering information about consumers via online social channels such as Twitter and Facebook.
what is market segmentation?
Market segmentation is the process in which a single market is divided into sub markets or ‘segments’.
Each segment represents a slightly different set of consumer characteristics.
what are the advantages of market segmentation?
- May increase loyalty if the consumer feels that their needs are being met which can lead to repeat purchases.
- Less expensive and wasteful than marketing products at wide market segments.
- Products and marketing activities can be altered to meet different needs of different groups of consumers and targeted more precisely.
- Recognizes that consumers are not all identical - consumer groups do not all share the same tastes and preferences.
what are the disadvantages of market segmentation?
- Not everyone within a segment will behave in the same way.
- May be difficult to identify a segment and consumers can belong to multiple segments at the same time.
- Segmentation requires more detailed market research which can prove costly (but beneficial) to the business.
- A segment may be identified but it may be too small and unprofitable to cater for.
what is market positioning?
Market positioning refers to the process a business goes through when launching a new product or service.
The business decides where they want to position the product in the market with regard to price, quality, branding, and customer perception.
what is market mapping?
Market mapping is a tool for identifying the position of a product within a market.
A market map refers to a two-dimensional diagram that shows the attributes or characteristics of a product in comparison to rivals’ products.
Only two criteria can be chosen e.g. price and quality, age and income, etc.
what are the benefits of market mapping?
- Market gaps can be identified which may enable a business to come up with ideas for new products.
- Comparisons can be made between a business’ products and those of its rivals.
- Market maps are simple to construct and offer a visual illustration of the position of a product in the market.
what are the limitations to market mapping?
- A gap in the market may exist because it is not profitable to fill.
- Mapping a market may require primary research which can be expensive.
-Only two criteria can be chosen which may prove too simplistic.
-Markets are often dynamic and a market map only provides insight at a specific point in time.
what may give business competitive advantage?
- Quality
- Delivery times
- Low Price
- Reliability
-Ethical stance
-Design
what is the purpose of product differentiation?
- Product differentiation is an attempt by a business to distinguish its products from those of competitors.
- Successful product differentiation helps the business to increase demand for its products, increase brand loyalty, and allow the business to charge higher prices.
how can business add value to products/services?
Marketing and branding
Building brand identification and customer loyalty to the brand allows the firm to charge a higher price for its products.
Functions and features
Adding unique features allows the firm to charge a higher price for its products thus increasing the added value.
Customer service
Businesses that ensure they have a good reputation for customer service can charge a higher price.
Customization
Allowing customers to design or create their products allows the firm to charge a higher price.
Packaging
what factors affect demand?
- Change in the price of substitutes.
- Change in the price of complementary goods.
- Change in consumer incomes,
- Fashions, tastes & preferences.
- Advertising & branding.
- Demographics (population)
- Seasonality
- External shocks (unforseen events like covid)
what is demand?
- the amount of a good that consumers are willing and able to buy at a given price.
what is a complimentary good?
- a good bought alongside an item
- has a negative correlation
what is a subsitute good?
- change in price will cause consumers to switch to an alternative.
- an alternative good.
define supply.
- is the number of goods/services businesses are willing to sell at a given price in a specific time period
- As the price increases, the quantity supplied increases
- As the price decreases, the quantity supplied decreases
- At higher prices, businesses are incentivised to supply more of the product, hence the supply curve slopes upwards from left to right.
what factors affect supply?
- Price
- Indirect taxes
- New firms
- Technology
- Subsidies
- Weather
- Cost of production
whats PED?
- how responsive the change in quantity demanded will be to a change in price.
- always a negative value% change in quantity demanded
_…………………………………………………………
% change in price
what does it mean if PED is more than 1?
- elastic
- demand is more responsive to changes in the price.
what does it mean if the PED is between 0 & 1?
- inelastic
- demand is less responsive to changes in price
what factors effect PED?
- number of subsitute goods
- nature of the good i.e. luxury
- time
- addictiveness
- brand loyalty
whats the importance of PED?
- can adjust their pricing strategy to maximise their revenue.
- If inelastic (PED < -1), raising the price will lead to an increase in total revenue.
- Price skimming strategies are best employed for products that are price inelastic in demand
If elastic (PED > -1), lowering the price will lead to a rise in total revenue.
- Competitive pricing strategies are best employed for products that are price inelastic in demand
whats YED?
- how responsive the change in quantity demanded is to a change in income.
- % change in quantity demanded divided by % change income.
what does it mean if the YED is more than 1?
- luxury good
- Demand is responsive to a change in income
what does it mean if YED is between 0 and 1?
- normal good
- Demand is not very responsive to a change in income
what does it mean when YED is less than 0?
- inferior good
- Demand rises when income falls (negative income elasticity)
Demand falls when income rises
what factors affect YED?
- reccessions, economic growth
- minimum wage legislation
- taxation
- increased international trade
- nature of good i.e. inferior
whats the importance of calculating YED?
- production planning
can accurately predict changes in income, then it can plan whether to increase or decrease production - product planning
E.g. Tesco has its Finest, Standard, and Value range to appeal to all income segments of the market.
whats the design mix?
- refers to the combination of elements that make up a product’s design, these elements include function, aesthetics, and cost.
- Balancing the elements of function, aesthetics, and cost, helps the product design to be both functional and attractive, while also being cost-effective for both the manufacturer and the consumer
what are social trends?
- refer to changes in attitudes, behaviours and lifestyles of people, changes to any of these require companies to adapt their products to remain relevant to their customers
- Social trends can significantly impact the product design mix, especially about concerns over resource depletion and ethical sourcing
what are the types of promotional methods?
- advertising
- direct marketing
- sales promotion
- sponsorship
- PR
- digital communications
what is branding?
- the process of creating a unique and identifiable name, design, symbol, or other feature that differentiates a product or company from its competitors
why is branding important?
- Branding establishes recognition and identity
- Branding builds trust and credibility
- Branding differentiates a business from its competitors
- Branding creates an emotional connection with customers which helps to generate repeat purchases
- Branding supports marketing and advertising efforts
what are the different types of branding?
- product branding
- coperate branding
- own brand product branding
whats the advantages of corporate branding?
- Creates strong brand recognition and reputation for the company, which can increase customer loyalty and trust
- Allows the company to leverage its existing reputation and customer base to introduce new products more easily
- It helps build economies of scale by promoting multiple products under one brand, which can reduce marketing costs and increase profitability
whats the disadvantages of corporate branding?
- If a company’s reputation is damaged by a product, it can have a negative impact on all the products offered under that brand
- If the company faces intense competition in one market (e.g. smartphones), it may affect the sales of all the products offered across other markets
whats the advantages of product branding?
- Creates a distinct identity for the product, which can help to differentiate it from competitors and increase brand loyalty
- Allows the company to market different products to different segments of the market, e.g. Coco Cola and Coke Zero
- Can help to build customer loyalty and trust by associating the product with a specific quality and benefits, e.g. Dyson Vacuum Cleaners
whats the disadvantages of product branding?
- The cost of creating and promoting a new brand for each product can be expensive
- Introducing new products under different brands is difficult as the business must build a new brand for each product from scratch
- Different products within the brand may have different levels of quality, which can affect customer satisfaction
whats the advantages of own brand product ?
- It can help retailers differentiate themselves from their competitors by offering unique products
- It allows retailers to offer products at a lower cost than branded products, which can help to increase sales and profitability
- It can help to build customer loyalty by offering exclusive products that are not available elsewhere
whats the disadvantage of own brand product?
- Own brand products may have a lower perceived quality than branded products which can affect customer loyalty and trust
what are ways to build a brand?
- By developing unique selling points (USPs)
- Through advertising
- Through sponsorship
- Through the use of social media
