Topic 5: Marketing Flashcards
What is the marketing mix (4 P’s)?
Product - business must find customers needs or wants then come up with a product that fulfils them
Price - product must be good value for money
Promotion - product must be promoted so potential customers are aware it exists
Place - product must be sold in a place that’s convenient
Are all aspects of the marketing mix equal in importance?
It depends on the situation - e.g. there’s products some would travel an inconvenient way for
What is market research?
Finding out what customers want
What does market research allow a business to create?
A targeted marketing strategy
What can market research help identify?
Size of the market and the market shares of different businesses within that market
What is segmentation?
When people within a market are divided into different groups
What are examples of how a market can be segmented?
Age - e.g. teenage market
Gender - some scents and hygiene products targeted to different genders
Location - location depends on what people want e.g. a rich part of London may have a Gucci but Woking won’t
Income - the different amount people earn will affect how much they’re willing to spend on a product
Why is market research useful to businesses?
Helps a business understand its customers and competitors - helping them create a good marketing mix
Businesses are better able to identify their customers needs - more likely to produce a products that satisfies them
Helps a business to stay competitive and sell more of their product
What is a business able to do by identifying and satisfying a customers needs?
Increase sales - the demand for a product may show how to price product competitively and not make too much of it
Stay competitive - helps a business to show how they’re different and better than competitors
Create targeted marketing - business able to produce promotional material that’ll be effective
What can market research also be used to find in terms of opportunities?
Gaps in the market
What is quantitative data?
Anything you can measure or reduce to a number
E.g. seeing how much of a product people buy on average
What is qualitative data?
People’s feelings and opinions
E.g. if someone prefers one product or another
What are drawbacks of using qualitative data?
Harder to analyse
Harder to compare two people’s opinions
What are positives of using qualitative data?
Gives a greater depth of information
What does good market research use?
Both qualitative and quantitative data
What is primary research?
Doing your own research
What are examples of primary research?
Questionnaires
Phone surveys
Interviews
Focus groups
What are benefits of doing primary research?
Gets a possible customers view on products
Provides data that’s up to date, relevant and specific to the needs of the business
Can be specific to the target market
What are drawbacks of doing primary research?
Only have a sample of people - may not be an accurate representation
Can be expensive and time consuming
What is secondary research?
Using other people’s work
What are examples of secondary market research?
Government publications
Newspapers
Magazines
Articles
What are benefits of doing secondary research?
Gives access to a wide range of data - not just views of sample groups
Useful for looking at the whole market and analysing past trends to predict the future
Cheaper and faster
What are drawbacks of doing secondary research?
Not always relevant to needs
Not specific about a businesses products
Data can be out of date
What can businesses use sales data to analyse?
How well products sell and they may suggest what the issue is if it doesn’t sell well (if it’s price, the promotion, the place it’s sold or the product itself)
What are the stages of the product life cycle?
- Development
- Introduction
- Growth
- Maturity
- Decline
(maybe 6. Extension strategy)
What is the development stage of a product?
Develops an idea into a marketable product
Scientific research may be done in this stage
Aim is to find cost effective materials and methods to use
What is the introduction stage of a product?
When the product is launched and put on sale for the first time
Often backed up with a lot of advertising
Place is deeply looked at within this - released in areas the product is likely to sell in
What is the growth stage of a product?
Demand increases
The product becomes established
What is the maturity stage of a product?
When demand has reached its peak
Promotion becomes less important - product is still advertised but not as much
Towards the end of this phase, the market becomes saturated and there’s no room to expand
What is the decline stage of a product?
When demand eventually starts to fall
Rival products begin to take over
What can a product life cycle be represented on?
A graph
What happens with sales as the product cycle continues?
- First 2 stages, sales are low and it’s expected that the business will make a loss during these stages
- Next 2 stages, business will hope to make a profit as sales increase
- Decline, the business will lose sales and will make a loss, they will eventually pull the product
What can product life cycles show?
How the costs associated with products change during its life cycle
How demand changes over the cycle of a product and how that affects sales and revenue
What are extension strategies?
Things a business can do to keep their products selling after they start to decline
What does an extension strategy result in? (Positive + negative)
The product making profit for longer
More money is however spent on the product, taking money away from other parts of the business
4 examples of extension strategies?
- Adding more or different features to the product
- Using new packaging for the product
- Targeting new markets and promoting to them
- Lowering price of the product
What is a product portfolio?
The range of different products a business sells
What is the aim to have for a product portfolio?
For it to be balanced
To sell a variety of products to make the portfolio varied
What is the Boston Matrix?
A way for a firm to analyse its product portfolio
What does the Boston Matrix look like?
Stars Question marks
Cash cows Dogs
STAR = HIGH MARKET GROWTH, HIGH MARKET SHARE
QUESTION MARK = HIGH MARKET GROWTH, LOW MARKET SHARE
CASH COW = LOW MARKET GROWTH, HIGH MARKET SHARE
DOGS = LOW MARKET GROWTH, LOW MARKET SHARE
What does a question mark mean in the Boston matrix?
All new products are question marks
They have a small market share but a high growth
They aren’t profitable yet and need heavy marketing to make them successful
What does a star mean in the Boston matrix?
High market share and high market growth
They’re future cash cow
What does a cash cow mean in the Boston matrix?
Bring in plenty of money
High market share and low market growth
In their maturity phase
Costs are low as they’ve been promoted
What does a dog mean in the Boston matrix?
Low market share and low market growth
They’re a lost cause
The business will either discontinue them or sell them off
How does the Boston matrix help analyse a product portfolio?
Helps see if they have a balanced product portfolio e.g. using money from cash cows to invest into question marks so they can become stars
However, it’s not always accurate
What creates a balanced portfolio?
Products being at different stages of the product life cycle
Products being distributed in the Boston matrix
How can a product portfolio be broadened?
Adding products to an existing range by developing new products based on their current ones
Increasing their range of products by developing products that are different from their current ones
Why is having a broad product portfolio important?
To increase sales
Target a different segment
Compete with other companies
What is diversification?
Designing and producing more products
Benefits of developing new product?
Can increase overall sales of a business and may extend the product life cycle
May appeal to a new market segment so open business opportunities
Higher prices can be charged initially before their competitors bring similar products to the market
Risks of developing new products?
Can be costly and time consuming
Resources can be wasted if the product fails
If the product is of poor quality, reputation may be ruined
What are the components of having a good product?
Being market driven when marketing it
Having a good brand image
Make your product different from competitors
What is product differentiation?
Making your product unique compared to the other products that are similar and in the same market
What are the key parts of the design mix?
Function - product must be fit for purpose
Cost - low production costs will make the product cheaper
Appearance - must look attractive and distinctive
Why do businesses need to think about demand when setting prices?
If demand is low, prices should be low
If demand is high, prices can be higher
In both cases, a business will want to make a profit or break even
Why do businesses need to think about the size of their business when setting prices?
If a business grows and have got loyal customers and a good reputation, they can increase prices without demand falling too much
What is an economy of scale?
When the average cost of a making a product falls so they can lower their prices
Internal factors that affect pricing?
Aims and objectives
Internal costs - if they’re having to pay a lot for a section of the production process e.g. marketing or machinery
Where the product is in its life cycle
External factors that affect pricing?
The nature of the market - e.g. if it’s in a luxury marketing, it’ll have a premium pricing
If the market is competitive e.g. prices may be lowered to outcompete
If suppliers or external sources change the price of their services or goods
What are the 7 key pricing strategies?
- Price penetration
- Loss leader pricing
- Price skimming
- Competitive pricing
- Cost plus pricing
- Psychological pricing
- Premium pricing
What is price penetration?
When a firm charges a very low price when a product is new to get people to try it
It’ll then increase in price and so loyal customers will continue to buy it
What is loss leader pricing?
When the price of a product is below its cost
A profit isn’t made
What is price skimming?
Where a firm charges a high price to begin with (if they know there’ll be a high demand of it) and then lower it once it’s established
Used in established firms that have loyal customers
High price will allow for a higher revenue
What is competitive pricing?
When a business prices a product similar to its competitors
This may be done when a business wants to attract customers but don’t make a lot of profit
What is cost plus pricing?
The business will add up the cost of making the product and then add how much profit they want to make on top of that
What is psychological pricing?
When a customer is tricked into thinking the product is cheaper than it is, to make them think they’re getting value for their money
What is promotion?
When a business tries to persuade customers to notice a product and want to buy it
Why is promotion done?
To inform customers about products - they need to know it exists and what its USP is
To persuade customers to buy the product - to choose their product over their competitors
To create or change the image of a product
To create or increase sales - promotion can lead to more profit and a greater market share
What is advertising?
Any message that a firm pays for which promotes the firm or its products
What are the 6 different methods of advertising?
- Newspapers
- Magazines
- Poster and billboards
- TV
- Internet
- Leaflets
What are positives and negatives of newspapers?
can reach both a local and wide audience
however quality can be poor and less people buy them
What are positives and negatives of magazines?
Can target specialist markets in a wide area
Better quality than newspapers
BUT quite expensive
What are positives and negatives of posters and billboards?
Can be placed near a target audience
Stay in a place for a long time and can be seen by lots of people
But they can be ignored or not looked at for long
What are positives and negatives of leaflets?
Cheap to produce and distribute
Can be targeted at certain areas
Many people throw them away as junk
What are positives and negatives of TV as a form of advertising?
Can be seen by a wide audience
Can deliver long messages
BUT they’re very expensive to have
What are positives and negatives of using ads on the internet as a form of advertising?
Can be seen at any time by a large targeted audience
There’s a lot of them so many people ignore them or block them
When is advertising especially important?
In competitive markets
What is a sponsorship?
When businesses give money to an organisation or event to display their name
What are examples of sponsorship?
Sport
TV
Why is sponsorship done?
Another method of advertising
Can create a high profile for the business
What are positives and negatives of sponsorship?
Can create bran recognition
However can lead to bad publicity if the event has a negative reputation
What is PR?
Public relations - another form of advertising but gets a product noticed in the media
What are positives and negatives of PR?
Cheap and easy
Loads of people use social media so reaches a lot people
BUT, the PR may criticise the product and create a bad reputation
What is sales promotion?
Ways a business can boost sales in the short term
It introduces discounts and more to make people buy products
What are 5 examples of sales promotion?
2 for 1 offers
Free samples
Coupons
Point of sale displays
Free gifts
What are the advantages of sales promotion?
Can encourage new customers to buy products
Sometimes encourages to buy more than one product
Boost sales
Can increase customer locality and retention
What are the disadvantages of sales promotion?
Customers can get used to seeing reductions so may be reluctant to buy products if there isn’t one
May make a product feel less luxurious
Can waste time and money if it’s unsuccessful
Only short term fix
What is the aim of sales promotion?
To boost sales
What is a very modern way to promote products, that the younger generation use a lot?
Social media
What are the advantages of social media as a form of promotion?
Quick, easy, cheap
Information can be displayed on it
More people use it nowadays so can reach a lot of people
Works 24/7
What are the disadvantages of social media as a form of promotion?
Mistakes or negative comments can be seen easily and quickly
Risk of being hacked
Money must be spent to carefully monitor the social media of a business
What is a promotional mix?
Using a combination of different promotional methods to promote a product
What can influence a firms promotional mix?
What competitors are doing - may want to use the same methods as competition
Nature of the market - if a market is growing quick a business may want to spend more money of promotion
Target market - methods of promotion should be where the target market can see it
What is the marketing mix?
Product
Place
Price
Promotion
What is place about in the marketing mix?
Channels of distribution and how products get from manufacturers to consumers
Why do businesses need to choose the most suitable channel of distribution?
So that the products are available to consumers at the right place
Sometimes the channel of distribution can affect price of products
See where the target market is likely to buy the product
What are the 3 channels of distribution?
Selling to wholesalers
Selling directly to retailers
Selling direct to consumers
What is the selling to wholesalers route?
Manufacturers —> wholesalers —> retailer or consumers
What are the advantages of selling to wholesalers?
Manufacturer gets bulk orders so doesn’t have to store much stock
Can reach lots of people
Can make stuff cheaper as the products are bought in bulk
What are the disadvantages of selling to wholesalers?
Consumers can get low levels of customer service
What is the selling to retailers route?
Manufacture —> retailer —> consumer
What are the advantages of selling to retailers?
Can lead to better customer service - manufacturer can give retailer better info about product
Can lead to higher customer satisfaction
Retailer can help promote products with point of displays for example
Products can be sold to more customers in more places
What are the disadvantages of selling to retailers?
Can be hard for new businesses to have their products stocked in retailers
What is the selling to consumers route?
Manufacturer —> consumer
What are the advantages of selling to consumers?
Can be cheap - e.g. through telesales
Good for businesses who don’t have loads of customers
What are the disadvantages of selling to consumers?
Can be time consuming
The business must arrange delivery of goods - can be difficult and expensive if the consumers are in different places
What are examples of selling direct to consumer?
Tele sales
E commerce
What can the choice of channel of distribution affect?
Can affect costs e.g. costs of storage etc.
What is e commerce?
Selling/advertising goods or services on the internet
What is m-commerce?
Selling/advertising products on the mobile
Why are e commerce and m commerce becoming more important?
Internet is growing - more people have access to internet and it’s more reliable now
More people are using the internet to buy products - it’s efficient and easy
Customers expect to be able to buy products online - pressure for businesses to do e commerce
What are the advantages of e-commerce?
Internet can access wider markets including international markets - more potential of customers and more sales
Stores can be closed - saves money
Open 24/7
What are the advantages of m-commerce?
It’s growing - sales may increase as it’s easier to buy products
Easy and quick
What are the disadvantages of e-commerce & m-commerce?
Risk of being hacked or security threats
Specialists may need to be hired
People lose jobs if they don’t know how to use technology
Not all customers agree with buying products online
In general, what is the purpose of market research?
Helps with decision making
Reduces risk of failure
Identifies opportunities
What is product differentiation?
Methods that a business uses to make their products distinct from competitors
What are benefits of new product development?
May lead to more customers - more sales and more profit
May give businesses a competitive advantages
Can increase customer loyalty and satisfaction
What are risks of new product development?
Risk of failure
May have an impact on the brand name if it fails
May waste time and money
What is the product life cycle?
A model showing the lifespan of a products sales from launch to being taken off the market
What is price?
The money charged by a business for their products or services
What are factors that influence price?
Production costs of the product
The demand for the product or its position in the product life cycle
The quality of the products
When a product has a low price, what happens to its demand?
The demand will be high
When a product has a high price, what happens to its demand?
The demand will be low
What are telesales?
The selling of goods or services over the telephone
