Topic 3: Marketing Management Flashcards
What is market segmentation?
Dividing a market into parts that reflect different customer needs and wants
Benefits of market segmentation (for small firms)
Offers a valuable strategy to break into a market
Benefits of segmentation for large companies
Methods of segmentation
Demographic segments
Geographic segments
Income segments
Behavioural segments
examples of behavioural segmentation
- by occasion
- usage
- loyalty
what is the process of segmentation
- conduct research into different types of customers
- see if there is any trend or correlation
- identify segment you wish to focus on
- devise a product
What is a target market ?
A set of customers sharing common needs and wants that a business decides
Influences on choosing a target market ?
depends on:
mission statement and corporate objectives
size of segments and level of demand
nature of the product
nature of competition
nature of market
What is mass marketing?
when a business sells into the largest part of a market
What is niche marketing?
business targets a smaller segment where customers have specific wants and needs
features of mass marketing
- general wants and needs
- higher production output so potential for economies of scale
benefits of niche marketing
- less competition due to fewer firms
- can charge a higher price
- loyal customers
- profit margins tend to be higher
downsides of niche marketing
- lack of economies of scale
- risk of over dependence, may go out of fashion
- can attract lots of competition of successful
what is market positioning/mapping
the range of positions that a product can take in a market based on two dimensions that are important to customers
advantages of market maps
identifies maps in the market
encourages use of market research
disadvantages of market mapping
- a ‘gap’ doesn’t mean there is demand
the values of segmentation
- improved sales volume
- increased prices
- increased diversification therefore security as you are appealing to multiple segments
what is a product?
anything that is capable of satisfying customer wants
what is brand extension?
business uses brand name on a new product e.g dove soap and dove shampoo
what is brand stretching
when a brand is used for a diverse range of products that aren’t connected
what is the boston matrix
a model that helps businesses analyze their portfolio of products
four categories of the boston matrix
stars
cash cows
question mark
dogs
dimensions of the boston matrix
market share and market growth
what are stars?
- high share of a growing market
- lots of competition
- need heavy investment to sustain growth
- will eventually become cash cows
what are cash cows?
- high share of a low growing market
- generates cash and profits for the business
- profit can be invested into other products
what are question marks?
- low market share of a fast growing market
- have potential to provide high profit but uncertain
- need high investment to promote them
what are dogs?
- low market share of a declining market
- hold little appeal
- will be killed off once sales reach below breakeven
uses of the boston matrix
- ## helps managers plan what to do with existing product portfolio
criticisms of boston matrix
- only a snapshot of current position
- market share is an inadequate measure of a products ability to generate cash
- product life cycle will vary for each product
what is the product life cycle
a theoretical model that describes the stages that a product goes through
stages of plc
- research and development
- introduction
- growth
- maturity
- decline
- rejuvenation
research and development stage of plc
-absorbs time and may not be successful
- can take a long time before product is introduced
- causes of elimination before launch: high costs, does not fit in firms product range
introduction stage of plc
- low level of sales
- negative cash flow
- needs heavy promotion
- strategies used at this phase: skimming or penetration pricing
growth stage of plc
- fast growing sales
- rise in capacity utilization
- positive cash flow
- costs fall with economies of scale
- strategies used in this phase: advertisng, continuing high promotional spending
maturity stage of plc
- slower sales
- high capacity utilisation
- prices and profits will fall
- strategies used at this phase: enter new segments ,need to defend position
decline stage of plc
- falling sales
- decline in profits
- strategies: maintain market share, price cutting, reduce prices, reposition product
extending plc
- change price
- change promotion
- change product
Layers that add value to product
Design
Brand Name
Quality
Features
Packaging
After-sale service
What is brand extension
When a business uses a brand name on a new product that has some of the brands characteristics.
e.g dove soap + dove shampoo
What is brand stretching?
Where a brand is used for a diverse range of products that are not necessarily connected
e.g virgin
Functions of packaging
protection of contents
distribution
selling - design provides info + conveys image
Roles of packaging
if product cannot be differentiated by its features then its important
help promote brand image
maintain quality standards
appeal to customers + distributors
Star Product
High Share of a Growing Market
Need promotion and protection as it is a competitive market
will become cash cows
How is the boston matrix categorised
Stars
Question Marks
Cash Cow
Dog
What is the boston matrix
Business model that helps businesses analyse their portfolio of products based on market share + market growth
Cash Cows
Market Share of a Low Growing Market
Mature + successful products
little investment needed
high profits that can be invested in newer products
Question Marks
Low Market Share in Fast Growing Market
high investment needed
they have potential but uncertain
Dogs
Low Market share of a declining market
hold little appeal
will be cut off if sales dip below breakeven
Criticisms of Boston Matrix
no predictive value
doesn’t take environmental factors into account
uses of plc concept
- forecast behavior of future sales
- aid analysis of product portfolio
- assist in marketing strategies
criticisms of plc concept
- decline is not inevitable
- difficult to identify where a product is in its life cycle
what is promotion?
the ways in which a business makes its products known to the customers
what is branding?
the process of developing a product with a unique character, for instance design or image, that is consistent and well recognised
advantages of having a strong brand
- inspires customer loyalty leading to repeating sales
- brand owner can charge higher prices
- retailers want to stock top selling brands
what is branding: logos?
- a logo is a symbol or picture that represents the business
- easy to recognise
different methods of promotion
- advertising
- sales promotion
- personal selling
- direct marketing
benefits of advertising
- wide coverage
- control of message
- repetition means message can be communicated effectively
drawbacks of advertising
- often expensive
- one way communication
drawbacks of personal selling
- high cost
- labour intensive
- can only reach a limited number of customers
benefits of personal selling
- high customer attention
- message is customised
- adaptable
benefits of sales promotion
- effective at achieving a quick boost a sales
- encourages customer to trial a product
drawbacks of sales promotion
- sales effect may only be short term
- possible damage to brand image
factors affecting pricing decisions
- PED
- costs
- competitors
- product life cycle
what is penetration pricing
- offer product at a low introductory price
- aim is to gain market share quickly
- price can be increased once target market is reached
what is price skimming
- high price to maximise product
- quick recovery of development costs
- mostly used in introduction stage
what is place ?
how a business gets its products to the customer
what is a distribution channel?
a distribution channel moves a product from production to consumption
what are intermediaries
organisations through which a product must pass between its point of production and consumption
what are short channels used for?
- expensive goods
- customised products
- services
- bulking products
what are long channels used for
- consumer goods
- small products
- simple goods
what is multi-channel distribution
involves a business using more than one type of distribution channel
benefits of multi-channel distribution
- allows more target market segments to be reached
- customers increasingly expect products to be available via more than one channel
drawbacks of multi-channel distribution
complex to manage
pricing strategy becomes confusing
people element of the marketing mix ?
refers to employees of a business who interact with customers or customer service
process element of marketing mix?
refers to procedures involved in a transaction
the physical environment element
the aesthetics of the shop or website
