Topic 3 - Decison Making To Improve Marketing Performance Flashcards
What are departmental objectives known as ?
as functional objectives
What are some marketing objectives ?
Increase sales volume
Increase sales value
Increase market size for respective departments
Increase market share
Increase brand loyalty
What are ways to measure a businesses success ?
market growth
sales growth
market share
What’s market growth ?
Market growth describes when an industry grows in terms of either volume or value.
For example, the automotive industry in the United Kingdom is worth £77.5 billion in value. A 10% increase in market growth would mean the industry was now worth £77.5 billion x 1.10 which gives £85.25 billion
What is market share ?
Market share refers to the proportion of a market that a business controls in order to satisfy customer needs.
For example, if the BBC has a 29% market share of the UK television market, then it provides 29% of the TV watched in the United Kingdom
How do you calculate market share ?
Market share can be calculated: (sales of one product divided by total market sales of that product) multiplied by 100.
What is sales growth ?
Sales growth occurs when a business increases its sales in terms of volume or value.
For example, Netflix has 130 million active subscribers and if this increases in volume by 20%, there will be 130 million x 1.20 which gives 156 million subscribers.
If each customer pays £50 per year, then Netflix sales will rise by 26 million x £50 = £1.3bn.
What’s an example of how a coffee shop can increase brand loyalty?
Offer a free coffee for every 10th coffee bought
If Sky has 400 million subscribers globally and this increases in volume by 5% a year. How many subscribers will Sky have next year?
420 million subscribers
The coffee industry is worth £800 million in the UK. Starbucks’ sales are worth £250 million. What is Starbucks’ market share?
Calculate the proportion of total sales
250 ÷ 800 = 0.3125
Turn calculation into a percentage (market share)
0.3125 × 100 = 31.25%
What is market research ?
the process of collecting and processing information about the market that a business operates in
What are things that market research gathered information on ?
Demand
Competition
Target market
Why does market research focus on demands ?
Insights into customers’ wants and needs can help a business to improve the product, spot market opportunities and stay competitive.
Insights into overall demand trends can help a business to spot opportunities for growth and potential threats from new products/technology.
Why does market research focus on competition ?
Market research into competitors can help a business understand the major threats in the market and then prepare the business to deal with these threats.
Market research for established fashion labels like H&M would identify the threats that come from online platforms like ASOS or Boohoo.
Why does market research focus on target market ?
Market research into a business’ target market will give the business insights into their customers’ wants and needs and how they are changing over time.
What is qualitative market research ?
Qualitative research generally collects information about opinions and views rather than things that can be quantified.
For example, research into whether customers think the customer service at Waitrose is good is qualitative research.
What is quantitative market research ?
Quantitative research collects factual information on things that can be quantified and recorded easily.
For example, research into the number of cans of Coca Cola sold in the UK last year is quantitative research
What are the types of market research ?
Qualitative
Quantitative
What is market mapping ?
products mapped based on their price and quality
What is is the benefit of market mapping ?
Once businesses have segmented the market, they can use market mapping to identify a gap in the market by looking at what competitors offer.
Competitors products are mapped against different variables based on the features that they offer.
For example, products could be mapped based on their price and quality.
What is often used to perform market research ?
Sampling
Technology
What is sampling ?
Sampling occurs when a business selects a sample of the population to save collecting data from everybody in that population
Reduces marketing costs
What’s an advantage of sampling ?
Sampling reduces cost as a business can choose a cross-section of the population instead of collecting data from everybody.
What’s the disadvantage of sampling ?
Sampling may not accurately reflect the full target market if the sample is not chosen properly
How is technology used to analyse market research ?
By completing calculations and creating graphs and charts which can be used by managers and leaders
What is the primary benefit of sampling when conducting market research?
Reduced costs
What does price elasticity of demand (PED) measure ?
the responsiveness of quantity demanded to a change in price
What do businesses use PED to understand?
how the quantity demanded by customers will change in response to price
What is the formula for PED ?
PED = (% change in quantity demanded)÷ (% change in price
Why is the PED coefficient (number) usually negative?
as an increase in price will result in a decrease in quantity demanded and a decrease in price will result in an increase in quantity demanded
What does a large PED coefficient (number) indicate ?
the greater the responsiveness of quantity demanded to a change in price
What is a good known as if the PED is less then 1 ?
(whether positive or negative) then this is described as price inelastic.
This means that a change in price will lead to a change in quantity demanded which is proportionally less than the change in price
What is a good known as if the PED is greater than 1 ?
(whether positive or negative) then this is described as price elastic.
This means that a change in price will lead to a change in quantity demanded which is proportionally greater than the change in price.
Petrol has a PED that is relatively inelastic what does this mean ?
a change in price may not affect the quantity demanded of fuel as customers still need to purchase this product as it may be a necessity
A local café has increased the price of its cups of coffee by 20% and this has reduced in quantity demanded falling by 10%. What’s the PED
-0.5
What does income elasticity of demand (YED) measure ?
the responsiveness of quantity demanded to a change in consumer income.
Businesses can use income elasticity of demand to understand how the quantity demanded by customers will change in response to income
What’s the formula for income elasticity of demand (YED) ?
YED = (% change in quantity demanded) ÷ (% change in income)
What does a large YED coefficient (number) indicate ?
the greater the responsiveness of quantity demanded to a change in income
What does a positive YED coefficient (number) indicate ?
An increase in income will increase demand
A fall in income will decrease demand
What does a negative YED coefficient (number) indicate ?
An increase in income will decrease demand
A fall in income will increase demand
What is a YED less than known as ?
then this is described as inelastic. This means that a change in income will lead to a change in quantity demanded which is less than the change in income.
What is a YED greater then 1 known as ?
this is described as elastic. This means that a change in income will lead to a change in quantity demanded which is greater than the change in income.
What can we learn about the income elasticity of Nestle Instant Coffee if a 2% increase in income leads the quantity demanded to fall by 4%?
The income elasticity of demand is -4% ÷ 2% = -2.
An income elasticity of demand of -2 shows that the elasticity is elastic which means that any change in income will result in a greater change in quantity demanded.
The minus shows that an increase in one variable will decrease the other variable.
As income has risen, consumers are likely to have switched from instant coffee, which is an inferior product, to bean-to-cup coffee, which is a normal good.
What is market segmentation ?
the process of dividing potential customers into different groups based on characteristics like age, gender, income and much more
Why is market segmentation used ?
Choosing market mix
When choosing the product, geographic, promotional and price segmentation can help a business to understand its customers’ needs and wants.
For example, Next provides clothing aimed at infants and toddlers using its Next Kids range.
Choosing promotion
Advertising in a newspaper probably is not the best way to target teenage girls, but a teenage magazine like Bliss might be.
Segmenting a market can give businesses ideas about how best to promote their products.
Market mapping
Market mapping is a process to identify a gap in the market by looking at what competitors offer.
What are ways consumers can be segmented ?
Location
Income
Age
Gender
What are the two markets that businesses can be segmented into ?
Mass markets
Niche markets
What are the characteristics of a mass markets ?
The mass market tries to make products and/or services for all consumers.
The mass market will be larger and the types of products will be more generalised
What are characteristics of a niche markets ?
The niche market appeals to a much smaller segment.
The niche market will be smaller than the mass market.
The niche market provides products and/or services which focus on a specialist want or need.
In the fast food industry what are the examples of mass markets and niche markets ?
In the fast-food industry there are a few dominant players who appeal to the mass market - McDonalds, Burger King, Subway.
There is a smaller niche market for healthy fast food. This is addressed by businesses such as Leon
What are the benefits of mass markets ?
Having more customers.
Benefitting from economies of scale (due to higher output levels).
Can build a strong market presence