Topic 3 - Decision making to improve marketing performance Flashcards
The value of setting marketing objectives
- steer direction of the business
- more focused decision making
Examples of marketing objectives
- sales volume and value
- market size
- market and sales growth
- market share
- brand loyalty
Internal influences on marketing objectives and decisions
- new corporate objectives
- new innovative products
- new financial objectives
External objectives on marketing objectives
- changes in fashion and consumer tastes
- changing competitive pressures
- changing economic pressures
- changing natural environment
Primary research
Research done by the firm
Secondary research
Research done by 3rd party
Qualitative data
Opinions
Quantitative data
Data
Advantages primary data
- directly focused to research objectives
- up to date
- more detailed insights
Drawbacks of primary market research
- time consuming
- costly
- risk of bias
Advantages secondary research
- often free and easy to obtain
- good source of market insights
- quick to access and use
Drawbacks of secondary market search
- quickly becomes out of date
- not tailored to specific research needs
- quite expensive
Advantages of quantitative
- data easy to analyse
- provides insights into relevant needs
- can be compares
Drawbacks of quantitative research
- focuses on data rather than explaining
- doesn’t explain reasons behind numerical trends
- may lack reliability if same size is small
Benefits of qualitative
- essential to new launches
- focuses on customer needs, wants and expectations
- can highlight issues that need addressing
- test elements of marketing mix
Drawbacks of qualitative research
- expensive to collect and analyse
- sample may not be representative
What is market mapping
Plot two characteristics on the axis
Why use market mapping
- allows gaps in the market to be found
- allows effective market positioning
The value of sampling
- cheaper
- quicker
- insights
- flexible
Drawbacks of sampling
- biggest risk
- bias
- less useful in segments with changing tastes
Confidence intervals
Percentage probability that an estimated range of possible values includes the actual value
The value of technology in gathering and analysing data for marketing decision making
- allow quick analysis of big data
- allows constant analysis of new coming data
Price elasticity of demand
Higher than 1 - price elastic
- change in price causes a larger change in demand
Lower than 1 - price inelastic
Factors that influence PED
- degree of product differentiation
- availability of substitutes
- branding and brand loyalty
- necessity
- habit
- time
Income elasticity of demand
Price elasticity of demand formula
% change in quantity demanded
% change in price
Income elasticity of demand
% change in demand
% in real incomes
Analysis of income elasticity of demand
- more than one - income grows more spent
- less than one more than 0 - income grows less spent
- inferior goods - less than one - income rises demand falls
Value of price and income elasticity of demand on marketing decision making
sales forecasting
pricing strategy
certain products will do better in certain economic climates
The use of data in marketing decision making and planning
Planning
- predict future sales and manage stock levels
- see where to focus time and what sectors will grow
Decision making
- who to market to
The process of segmentation
- conduct research into customer types
- see if they have common tastes and habits
- identify the segment you wish to focus on
- conduct research
- devise a product
Value of market segmentation
- improves sales volume
- increase prices
- increase diversification and security
Ways you can segment a market
- demographically
- geographically
- income
- ## behavioural
Mass market
Aim to create products with a universal appeal marketing at the whole market
Niche marketing
Small segment of the mass market
influences on target market and positioning
- competition
- if someone has already captured that market
- growth in a market or sub sector
- other companies choices
- authenticity
- ability to research market
What are the 7 Ps
- product
- price
- promotion
- place
- people
- process
- physical environment
Influences on the marketing mix
Type of good - regular purchase - impulse purchase - emergency purchase Where the product is sold - online - face to face Target market - customers - businesses Stage of the life cycle Market research
Effects of changes on the marketing mix
Change in price - marketing - promotional mix Economic downturn - change in price - change in how to advertise - may switch to online to save costs
Convenience goods
Bought out of habit or impulse
Shopping goods
Careful selection process by the buyer
Speciality goods
One off process that require serious effort
Industrial goods
- bought by other businesses
- bought for further processing or for use in conducting business
Consumer products
- bought by final consumers
- differ in the way consumers buy them
What elements of the marketing mix are most important to convenience products
Price - low Place - widespread Promotion - mass promotion
What elements of the marketing mix are most important to shopping products
Price - higher Place - selective distribution Promotion - advertising by producer and resellers
What elements of the marketing mix are most important to speciality products
Price - high Place - exclusive Promotion - more carefully targeted
The value of the product life cycle
- plan marketing decisions
- alter marketing mix
- forecast sales trends
- analyse product portfolio
- focus investment in products
- market targeting and positioning
Boston matrix
Cash cow
Problem child
Rising star
Dogs
What is a cash cow
High market share of a low growth market
- generates high profits
- promotional costs low
- can milk cash and reinvest in different products
What is a problem child
High growth market but low market share
- may provide high future profits
- success is uncertain
- need high level of investment to promote
What is a dog
Low market share of a declining market
- will be stopped to remain profitable once break even output no longer reached
What is a rising star
High market share of a fast growing market
- may need protecting from competitors
- still need heavy promotion
Value of product portfolio analysis
- useful tool for analysing decisions
- snapshot of current position
- little or no predicted value
- does not take into account environmental factors
- flaws which assumptions are made off
How can product portfolio analysis be criticised
- market growth is a inadequate measure
- market share is an adequate measure
- ignored sustainable competitive advantage
- product life cycle varies
Stages in the product life cycle
- development
- introduction
- growth
- maturity
- decline
Describe the development stage of the product life cycle
- complex
- absorbs recourses
- may not be successful
- long lead time
Describe the introduction stage of the product life cycle
- new product launched
- low sales
- low capacity utilisation
- high unit costs
- heavy promotion
- negative cash flow
Describe the growth stage of the product life cycle
- much faster growing sales
- product gains market acceptance
- unit costs fall with economies of scale
- market grows, profits rise but attract the entry of new competitors
- cash flow may become positive
Describe the maturity stage of the product life cycle
- slower sales growth as rivals enter market
- low unit costs
- high profits for high market share
- weaker competition leaves market
- price falls
- cash flow should be strongly positive
Describe the decline stage of the product life cycle
- falling sales
- market saturation
- rapid fall in profits and weak cash flow
- more competitors leave the market
- excess capacity and rising unit costs
Criticisms of the product life cycle
- shape and duration of the cycle varies from product to product
- strategic decisions change life cycles
- hard to know where a product is in life cycle
- length cannot be reliably predicted
- decline not inevitable
Extension strategies
- targeting a new segment
- develop new uses for product
- increasing usage of product
- change product appearance
Influences on the value of new product development
- understanding of consumers within a market segment
- the creativity to be able to see issue and resolve
- enough resources to be able to develop an idea effectively and market it
How important are pricing decisions
- customer sensitive to price
- level of competitive activity
- the availability of the product
Price skimming
High initial price and lowered over time
Price penetration
Lower initial price to gain market share
Advantages of price skimming
- help establish a product as a must have
- early adopters will want exclusivity
- cover high research and development costs
Disadvantages of price skimming
- some customers may be put off by rip off pricing
- image may suffer with cut prices
- people who bought at high price may be annoyed
Advantages of price penetration
- low prices products may attract high sales volume
- high sales volume help to cut production costs per unit
- achieving high sales volume ensure shops will provide high distribution level
Disadvantages of price penetration
- may affect brand image and make the product look cheap
- hard to gain distribution in most upmarket
- pricing on the basis of value for money
The value of branding
- business can spend less on promotion
- customers are likely to repeat purchase
- easy to gain distributors
- other products can be promoted with same brand name
- customer loyalty and higher prices
Multi channel distribution
Business using more than one distribution channel
Benefits of multi channel distribution
- allows more target market segments to be reached
- customer expect to be able to buy in different ways
- higher sales
Drawbacks of multi channel distribution
- potential for channel conflict
- loss of profit margin to intermediaries such as retailers and distributors
- danger that pricing strategies becomes confused
Above the line promotion
- paid for communication in the independent media advertising on TV or in newspapers
Below the line promotion
Promotional activities where the business has direct control
What is the promotional mix
Variety of promotional methods used
Methods of promotion
- advertising
- public relations and sponsors
- personal selling
- direct marketing
- sales promotion
- product placement
- social media
Factors that influence the promotional mix
- type of product
- finance available
- competitors actions
- nature of the market
- target market
Reasons for promotion
- to create or increase sales
- to persuade customers to buy the product
- to create or change the image of a product
- to inform / remind customers about the product
Distribution channels
Different ways a business can distribute their products
