Topic 4: Marketing

Question 1

What is a market?

Answer 1

1. A place where buyers and sellers come together or interact
2. A location
3. A type of product

Question 2

What is marketing?

Answer 2

Marketing is all the processes involved in identifying and satisfying a customers needs.

Question 3

Business to costumer (B2C) marketing

Answer 3

-Customer needs to be convinced to make a purchase in the short space of time between entering the physical or online store and leaving again

Question 4

Marketing Mix: What do the first four and all seven elements elements refer to in the marketing mix?

Answer 4

First four P’s (product, price, promotion, place)= marketing of goods
All seven P’s (… , people, processes, physical evidence)= service markets
NOTE: many businesses use the marketing mix (the seven P’s) to plan their marketing strategy

Question 5

What is the marketing mix (the seven P’s) used for, in a business?

Answer 5

Businesses use the marketing mix to plan their marketing strategy.

Question 6

What is a product oriented business (Product orientation)?

Answer 6

Companies/ businesses that priorities the research and development of high quality, specialized products (rather than prioritizing market research). These companies rely on their designers and engineers to come up with new ideas (to sell)

Question 7

What is a patent? (Falls under product orientation)

Answer 7

The legal right to be the only producer and seller of a good for a period of time

Question 8

What are the pros and cons of product orientation?

Answer 8

Pros:
-USP and quality: Distinguish a business from its competitors by providing high quality and uniques selling points (USP)
-Monopoly power: It is possible to get a patent for innovative products and designs (this means that a business that has a patent can earn large revenues as the only seller)
-Lack of competition: The businesses competitors can’t easily copy its ideas, new products= little or no competing in the market
Cons:
-High risk: No guarantee customers will want to buy the final product (leads to large amount if money invested in the product, lost)
-High costs: Requires larges sums for investment

Question 9

What is a market oriented business (Market orientation)?

Answer 9

Companies/ businesses that place the needs and wants of the customers above everything else. Market research is the center of all decision making.
NOTE: new products are only made when the business fully understands the needs and wants of the customers

Question 10

What are the pros and cons of market orientation?

Answer 10

Pros:
- Low risk: Increased revenues and profits
- Repeat customers: With a product- market fit (how much a product satisfies a strong market demand), customers continue coming back resulting in increased revenues and profits
- Social enterprises: Social enterprises will want to be product oriented to meet human needs or solve problems in society/ the environment
Cons:
- No USP (unique selling point): Other companies can carry out the same market research to find appropriate products, so competition will be graters
- Market research must be right: poor market research= poor product development
- Agility: Businesses must be responsive to changing market conditions (may be difficult for some companies)

Question 11

What is market share?

Answer 11

Market share measures the value of a single company’s sales or revenues compared with the sales of all businesses in a market (measured in a percentage of a whole market)

Question 12

How do you calculate for market share?

Answer 12

Revenue: MARKET SHARE= (product sales/total market shares)(100)= …%
# of products: MARKET SHARE= (#’s of units sold by the company/ total # of units sold in market)(100)= …%
NOTE:when calculating market share, you must specific the market you are referring to (for example: to a broad market= all restaurant, and to a narrower market= fast-food restaurants)

Question 13

What is market growth?

Answer 13

The increase in sales revenues or sales volume in an individual market over time.
NOTE:it is important to specify the market that is being examined (broad or narrower market) and the time period

Question 14

How do you calculate market growth?

Answer 14

-Market growth is represented in percentage change compared to a previous time period (T). The formula is:
MARKET GROWTH= (total market sales T2 – total market sales T1)/ (total previous market sales T1)(100)= …%
T1= smaller #
T2= greater #
NOTE:
-it is important to specify the market that is being examined (broad or narrower market) and the time period
-markets can grow or decline in size, generally businesses will want to sell products in markets that are growing

Question 15

What is market leadership?

Answer 15

The product or brand with the highest market share

Question 16

What are the pros and cons of market leadership (for customers)?

Answer 16

Pros:
- Accessing distribution channels
- Brand recognition
- Economies of scale (less per-unit production cost as a business grows)
- Price leadership
Cons:
- Consists of significant economic, social, and environmental threats (w/ large dominant companies)

Question 17

What is the Boston Consulting Group (BCG) matrix aka growth share matrix?

Answer 17

A tool that helps businesses that have multiple products decide on their marketing strategies. Products are placed Otto the matrix depending on market share and market growth. The BCG matrix can also be a reminder to businesses to build a diverse portfolio of products.

Question 18

What are the product classification in the BCG matrix?

Answer 18

ms= market share
mg= market growth
1. Cash cows (high ms/ low mg)- successful products in mature, slower-growing markets
2. Dogs (low ms/ low mg)- products that may be at the end of their life cycle
3. Stars (high ms/ high mg)- revenues should be growing strongly, requires significant investment to maintain growth, focuses on brand image (example: Netflix)
4. Problem child (low ms/ high mg)- often products that recently launched in response to rapidly growing revenues of competitors, considerable investment to gain market share= likely to have negative cash flow (example: Hulu)

Question 19

What are the pros and cons of BCG matrix?

Answer 19

Pros:
-Businesses can identify which products have the potential to earn the highest revenues
- Guide some investment decisions
Cons:
- BCG matrix must be used carefully along with other methods of analysis
- Without clear data in a products market share and growth, classification of products in the BCG matrix will be subjective

Question 20

What is marketing planning?

Answer 20

A document that outlines the entire marketing process of a business.
1. It begins with identifying corporate business goals= marketing objectives
2. Marketing budget
3. Target market (which market)
4. Market research
5. Market strategies
6. Control tools

Question 21

What are niche markets?

Answer 21

Small part of a larger market. Customers for niche markets have very special needs or wants that are different from the larger market (example: dietary products—gluten free)

Question 22

What are mass markets?

Answer 22

A market for goods that are produced in very large quantities. Because of economies of scale, products sold in mass markets are less expensive than niche markets (same marketing mix is used to target all consumers).
Mass products (from supermarkets) include:
- Lays chips
- Dove soap
- Oreo cookies
- Pantene shampoo

Question 23

What are the pros and cons of niche marketing?

Answer 23

Pros:
- Less competition
- Suitable for small businesses
Cons:
- High per unit cost
- Less reach (=smaller profits)
- Little (market) growth potential

Question 24

What are the pros and cons of mass marketing?

Answer 24

Pros:
- Large market (=potentially higher revenues)
- Lower per unit production and marketing costs (economies of scale)
Cons:
- High cost (to reach larger # of customers, businesses need to use the more expensive above the line promotion= higher upfront investment)
- More competition (more difficult to differentiate)

Question 25

Why do organizations carry out market research?

Answer 25

It allows companies to gain up-to-date and relevant information on their customers and competitors and on other external stakeholders who may affect them

Question 26

What are social enterprises?

Answer 26

Organizations that tend to focus on meeting human need. Social enterprises may carry out research to identify which human needs they should address through their work or how well their activities manage to meet the need.

Question 27

How do organizations carry out market research?

Answer 27

1. Primary market research- creating new information gathered by business through surveys, interviews, observations, focus groups, or other methods.
   -This aims to answer specific research questions
2. Secondary market research- uses information gathered by other (quick and can give a quick overview of market) these include market analysis, academic journals, government publications, media articles, and online content

Question 28

What is quantitative research?

Answer 28

Collecting numerical data or information that can be counted. This includes surveys and observations

Question 29

What is qualitative data?

Answer 29

Collecting non-numerical data, such as opinions. The key question in this type of data is WHY?

Question 30

What are sampling methods?

Answer 30

Sampling methods- a technique where each subject has the same chance of being selected. Characteristics as probability (random) and non-probability (nit random) sampling.

Question 31

What is random sampling?

Answer 31

Sampling method where everyone in the population has the same chance of being selected to take part in research.

Question 32

What is quota sampling?

Answer 32

Sampling method that involves first dividing the population into subgroups based on a given characteristic. A sample is taken from each subgroup, based on convenience (not random)

Question 33

What is convenience sampling?

Answer 33

Sampling method where the sample is made up of whichever people are willing to take part in the research. This form is not random and the least representative form of sampling. (Example: A researcher only asks those who happen to walk past him in the supermarket)

Question 34

What is cost-plus (markup) pricing? 7 Ps- Pricing

Answer 34

Method of pricing a product/ service where all total direct costs and some indirect costs are added together to determine the sales price to the customers.

Question 35

What is penetration pricing? 7 Ps- Pricing

Answer 35

Short term pricing method used to attract customers to the product/service. This method begins with low prices and once loyalty by customer has been established, prices are raised (this is usually used w/ repeatedly purchased products such as shampoo or cereal)

Question 36

What is loss leader pricing? 7 Ps- Pricing

Answer 36

Pricing method used to sell a product for a price lower than its production cost, in order to attract customers. This method can only be used by large businesses with variety of different (thing being sold)

Question 37

What is predatory pricing? 7 Ps- Pricing

Answer 37

Pricing method where a company sells a product/service at such a low price that other businesses can’t compete and as a result are forced to exit the market. When the competitions leave the market the company can begin raising its prices. (considered illegal in some places, and is a short term method)

Question 38

What is premium pricing? 7 Ps- Pricing

Answer 38

Pricing method that involves keeping the price of one of the products/services high in order to create a positive perception among customers. This sometimes makes the customer believe the products are of higher value.