Topic 5 Flashcards
What are customer needs?
The desires that a customer hopes to satisfy through the purchase of a product
What is marketing?
A series of business activities designed to ensure that customers recieve the correct products in the correct quantities and at the right time
Name some examples of customer needs
- value for money
- sufficient information
- after-sales (or post-sales) service
What is the marketing mix?
All the activities that influence whether or not a customer buys a product
What questions do entrepreneur’s ask themselves/others when selecting the correct marketing mix?
- Is the product the right one?
- Does the price represent good value for money?
- Do interested customers know about the product?
- Is the product easily available to customers?
How do businesses become competitive? (4)
- discover customers’ needs
- provide a good or service that meets those needs
- use the correct marketing mix
- increase SALES and become more COMPETITIVE
What does exchange mean in business?
An exchange occurs when someone gives up something in return for something else, e.g. a business exchanges a product for money.
What is a customer
A customer is someone who buys a product from a business
What is a consumer
A consumer is someone who uses goods and services produced by businesses
What is sales volume
Sales volume measures the number of items sold
What is sales value
Sales value measures the revenue generated
What is segmentation
Segmentation occurs when a market is divided into different groups of needs and wants
What is market research
The process of gathering, analysing and processing data relevant to marketing decisions
What is a target market?
The group of consumers to which a business intends to sell a particular product to
What is qualitative market research?
An approach to market research designed to uncover the attitudes and opinions of customers that affect their decisions to purchase goods and services
What is quantitative market research?
The collection of numerical marketing information that can be analysed statistically and stated in the form of numbers
What is primary market research
This research uses data gathered for the first time
What is secondary market research?
This research uses data that has been gathered already
What are focus groups?
A small group of people selected to give their views on a particular business issue, such as: brand image.
What are the four P’s (marketing mix)?
- price
- product
- promotion
- place
Why is price important for the marketing mix?
- Businesses can make a variety of decisions regarding the price at which they sell their products, including whether to charge a low price.
- They also decide on payment terms; for example an important part of a business’s selling proposition may be to let customers spread payment over a period of time.
Why is product important for the marketing mix?
- The term ‘product’ includes its design, features and functions.
- Many businesses try to create a perception of their products in the minds of consumers.
Why is promotion important for the marketing mix
- Customers will not buy a product if they do not know about it.
- It is essential to communicate with customers to inform them of the benefits that a product provides.
- Communication may be via adverts in newspapers, radio and television, sponsorship of an event, via the business’s website and social media.
Why is place important for the marketing mix
- Place is not just where products can be bought, although for some businesses their outlets are an important way of attracting customers.
- Place also refers to how products are distributed by businesses to their customers.
What is competitive pricing?
Matching the prices charged by competitors
What is cost-plus pricing?
A product is priced to cover the costs of it and a percentage profit is added on top.
What is a loss leader?
A product is priced to sell at a loss in the hope that customers will also buy other items from the business, snd it will make a profit on these
What is price penetration?
Launching a new product at a low price with the aim of achieving high sales
What is price skimming?
Setting a high price for a product when it first enters the market
What are some factors that influence the choice of pricing method?
- costs
- business reputation
- nature of the market
- whether the business has an objective of growth
- degree of competition
- product life cycle stage
What are some external influences on pricing?
- nature of market
- degree of competition
What are some internal influences on pricing?
- costs
- business’s reputation
- product life cycle
Why is price skimming used?
- Often used to launch a new product on the market.
- Prices are set high initially and then reduced over time (and as competitors’ products become available).
- Likely to be successful if a product is distinctive.
- Often used for technological products where a high price may not put off too many customers.
- It can provide a business with high levels of revenue, which may be needed to pay for the costs of developing the new product.
Why is price penetration used?
- Prices are set low when introducing a new product into the market to quickly generate high sales and achieve a greater market share than would otherwise be possible.
- High sales can enable a business to negotiate bulk purchases from suppliers, reducing costs and increasing profits.
- This approach is often successful if price is an important factor for customers - airlines often use this pricing method.
- It can be risky as stronger businesses may reduce their prices in response to protect their market share, so expected high sales of the new product may not materialise.
Why is competitive pricing used?
- Occurs when businesses match prices set by other sellers in the same market.
- It is common in markets where customers can easily compare prices, there are a limited number of sellers or the products sold are similar.
- Price comparison websites have encouraged the use of this pricing method.
- If a business sets a low price, competitors are likely to reduce their prices to match, which results in all businesses earning less profit.
Why is loss leader used?
- A very low price is set for one product and is heavily advertised.
- Although the business makes a loss from this product, customers attracted to it are expected to buy other, more profitable products from the business while shopping.
- This is commonly used in supermarkets.
Why is cost-plus pricing used?
- This ensures a business makes a profit from selling a product. It calculates the cost to make the product and adds an amount to that price - called a ‘mark-up’.
- It is a simple method of pricing often used by retailers.
- It can be profitable but often ignores what competitors are doing.
What are the thoughts behind developing new products?
- product design
- business image
- target market
What is a unique selling point (USP)?
An aspect of a product which makes it different from rival products that do not have it
What is a brand image
The use of a name, logo, symbol, sign or design to distinguish a business’s products
What is product differentiation?
The creation of a strong brand image by distinguishing a business’s products from those produced by competitors
What are some benefits of product differentiation?
- It allows business to promote products more easily due to it’s unique selling point (USP)
- It allows businesses to charge higher prices while maintaining fairly steady sales figures over time.
- Successful differentiation can increase sales and profits for a business.
What is a product life cycle?
Shows how the sales of a product may change over time as it goes through a number of stages from research and development to decline and eventual withdrawal from the market
What are the stages of a product life cycle?
- research and development
- introduction
- growth
- maturity
- decline
What are extension strategies?
Attempts to maintain the sales of a product and to prevent it from entering the decline stage of the product life cycle
What happens in the research and development stage of the product life cycle?
A business carries out research and development to create new products that it hopes will sell well, although many do not succeed and won’t even progress past this stage.
Unsuccessful products can be costly and do not earn any revenue for the business.
What happens in the introduction stage of the product life cycle?
- The product appears on the market. High spending on promotion at this point will ensure that retailers and customers know about the product and the benefits it offers.
- This is a period of risk as many new products do not survive this stage, but if successful, sales will rise steadily.
What happens in the growth stage of the product life cycle?
- Sales rise rapidly and the business should receive rising revenues and high profits at this stage if it uses price skimming.
- Problems may arise if products cannot be supplied in sufficient quantities, or if the business cannot find enough outlets to sell the product.
What happens in the maturity stage of the product life cycle?
The product’s sales reach a maximum. There is likely to be intense competition as rivals may have launched new competing products too. Competitors’ products may be superior in some ways, so the business may have to develop and promote improved versions of its product to maintain sales.
What happens in the decline stage of the product life cycle?
Sales may fall rapidly or decline steadily over time. It may be possible to delay the decline stage by redesigning the product or spending more on promotion - these are known as extension strategies. However, at some point the business will probably decide to cease production and withdraw the product from the market.
What are some examples of extension strategies?
- updating packaging
- adding new features
- changing the target market
- advertising
- price reductions
What is a product portfolio?
The collection of products that a business produces.
What is the boston matrix?
A way of analysing a product’s share and growth in its particular market
How do you calculate market share?
Individual companies sales - company sales / total market value x 100
What are the pros/cons of primary research?
Pros:
- specific to businesses needs
- up to date
Cons:
- time consuming
- expensive
- could be biased
What are some pros/cons of secondary research?
Pros:
- losts of information available
- saves time and money
Cons:
- may be out of date
- not collected for organisation’s needs
What are the pros and cons Questionnaires/surveys -> primary quantitative data?
Pros:
- answers can be catagorised and easily summarised
- can get a wide range of opinions
- questions can be catered to organisations needs
Cons:
- may not be able to ask follow up questions (for e.g.g why did u say 4/10?)
- may be opinionated/biased
What are the pros and cons of Interviews/focus groups -> primary quantitative data?
Pros:
- indepth information
- follow up questions can be asked
Cons:
- difficult to summarise
- limited amount of people can be sampled in depth
What are the pros and cons of internet research -> secondary research?
Pros:
- huge amounts of info available
- range of sources
- qualitative and quantitative data is available
Cons:
- may need to pay for up to date info
- not specific to company’s needs
- may be incorrect
What are the pros and cons of printed press (newspapers) -> secondary research?
Pros:
- large amounts of data available
- cheap to collect
Cons:
- may be biased
- may not be relevant to the company
What are the pros and cons of product enhancement?
Pros:
- improves brand image
- can charge higher prices for new products
- a source of USP
- can increase company’s longevity
Cons:
- can be expensive to develop new products
- no guarantee that products will sell
The boston matrix palces products into one of four categories, what is the ‘cash cow’ section?
- Products that are cash cows hold a high share of a market which is not growing and has probably reached its maximum size.
- Sprite is a cash cow for the Coca-Cola Company, for example.
- Such products are well known and do not need high levels of spending on advertising.
- High sales and low promotional costs result in higher profits for the business.
- This money can be used to develop other products.
The boston matrix palces products into one of four categories, what is the ‘stars’ section?
- These products have a high share of a market which is growing quickly.
- Dasani, a brand of bottled water produced by Coca-Cola, is an example of a star.
- These star products have the potential to become future cash cows, if a business continues to promote and develop them.
The boston matrix palces products into one of four categories, what is the ‘question marks’ section?
- These products have a small share of a market that is growing quickly, and might be worth investing in.
- Question marks could become successful in the future.
The boston matrix places products into one of four categories, what is the ‘dogs’ section?
- A dog has a low share of a market that is growing slowly.
- Many of these products have no possibility of generating high sales and profits.
- The best decision may be to cease production of the product.
- However, some dogs can be revived by careful management.
What is promotion?
Describes the ways in which a business communicates with its customers
What are public relations (PR)?
Describes actions used by businesses to arrange free media coverage of their activities or products
What is the point of sale?
The place where a product is sold to consumers, for example: in a shop
What are some examples of methods of promotion?
- advertising
- public relations (PR)
- sales promotions
- sponsorship
- social media
What is advertising?
- Advertising involves businesses paying to communicate with their customers.
- Advertising can take place via newspapers and magazines, television, radio and cinema, the internet, billboards and on vehicles such as buses.
What is the aim of public relations (PR) for a business?
The aim of PR is to present the business in a positive way and to therefore increase its sales.
What are sales promotion?
- Short-term incentives to boost sales
- For example: Two-for-one offers (buy one, get one free)
What are sponsorships?
Businesses often sponsor a range of events including sports fixtures and television programmes. The aim is to remind potential customers of the business and the products it sells.
What is social media?
It is common for businesses to use online platforms to bring new products, special offers or other matters of interest to the attention of their customers.
What are the pros and cons of advertising for promotion?
Pros:
- Can reach a large number of potential customers.
- Can be targeted at particular groups of customers.
Cons:
- Can be expensive, especially if using media such as television.
- Consumers face a lot of advertising and it can be difficult to create an effective advert.
What are the pros and cons of PR for promotion?
Pros:
- Can be a cost-effective means of promotion as often there are no fees to be paid.
- Can reach a large number of potential customers.
Cons:
- Is risky as the PR event may not receive coverage in the media.
- The business has little or no control over the coverage it will receive.
What are the pros and cons of sales promotion?
Pros:
- Can be very effective at boosting sales.
- May help to increase a business’s profile and sales of its other products.
Cons:
- Can be costly - for example, free gifts may have to be purchased.
- May reduce revenue from sales if price reductions have little effect on sales.
What are the pros and cons of a sponsorship for promotion?
Pros:
- Can quickly raise the profile of a business with its target audience.
- Can be targeted to reach the business’s actual and potential customers.
Cons:
- May be costly, especially if a number of businesses are interested in sponsoring an event.
- May not help improve the image of the business, for example sponsoring an unsuccessful sports team.
What are the pros and cons of social media for promotion?
Pros:
- Can be a relatively cheap form of promotion.
- Can be targeted precisely at target groups or enable new groups of customers to be reached.
Cons:
- Some smaller businesses may not have employees with the skills needed to use social media.
- If businesses do not respond promptly to customers’ queries or issues, they may suffer bad publicity.
What are some factors influencing the promotional mix?
- finance available
- actions of competitors
- nature of the product or service
- nature of the market
- target market
What are some reasons for promotion?
- to inform or remind customers about the product
- to create or increase sales
- to create or change the image of the product
- to persuade customers to buy the product
What is a distribution channel?
Describes how the ownership of a product passes from the producer to the final customer
What are retailers?
Shops that sell products directly to the customers
What are wholesalers?
These break bulk, which means they buy products in large quantities from a producer and sell to retailers
How do wholesalers work (in terms of distribution)?
- These buy large quantities of products from producers and sell smaller quantities on to retailers or to individual customers through
‘cash and carry’ stores. - Wholesalers may provide advice to retailers on issues such as storage and maintenance and may give retailers credit, that is a period of time before they have to pay for the products they have bought.
- Producers benefit from using wholesalers because it enables them to transport their products to fewer destinations.
How do retailers work (in terms of distribution)?
These buy smaller quantities of stock from a producer or wholesaler to sell on to customers. Retailers offer advice to customers and may provide credit to help customers buy expensive items.
What are telesales?
Selling products via. The telephone
How do telesales work (in terms of distribution)?
- This involves selling products using the telephone.
- Businesses may contact customers directly to persuade them to buy.
- Alternatively, customers may place an order over the phone which is then delivered to, or collected by, the customer.
How do e/m-commerce work (in terms of distribution)?
- E-commerce: Selling goods/services online.
- M-commerce: Sales via wireless devices (e.g., smartphones).
- Increasingly popular for consumers and businesses.
- Cost-effective distribution for retailers.
- Delivery or ‘click and collect’ options.
- Multi-channel: Offering both physical and online sales options.
What are some pros of businesses using e/m-commerce?
Pros:
- The business is able to sell to a much larger market than may be the case otherwise. For example, even small businesses can sell their products in international markets.
- E- and m-commerce allow businesses to sell all day, every day. Sales are not restricted to retailers’ opening hours.
- It can help to reduce the business’s costs as wholesaling and retailing costs are avoided. Prices could be reduced, increasing sales.
What are some cons of businesses using e/m-commerce?
- Competitors may use e- and m-commerce as well, making it easier for customers to compare prices. Prices may be lower as a result.
- Businesses may have to pay to distribute products to many different destinations. This can be difficult and costly to arrange.
- Many products may be returned as customers will not have been able to examine them in person before purchase and may be disappointed.
- The website must be secure with good levels of protection for customers’ data. This can be expensive.
How do businesses know how to choose the right channel of distribution?
- nature of the product
- cost of distribution
- managing how products are sold
