Unit 2 - Management of Marketing Flashcards
Define marketing
the process involved in identifying, anticipating and satisfying consumers wants and needs profitably
What is a market?
a place where buyers and sellers meet.
What are the objectives of marketing?
- to increase sales revenue and profitability
- to increase or maintain market share
- to maintain or improve the image of the business, its brand or its product
- to target a new market or a new segment of the market
Explain what is meant by a product-led business
one that concentrates solely on the production process and the product rather than what the customer wants. High quality research and development are vital to the success of these organisations. Examples: pharmaceutical or technology.
What is a customer led organisation?
one which identifies what the consumer wants (through carrying out extensive market research) and tries to provide it. Have to be responsive to changes in the market. Examples: usually low-cost and high volume, clothes or make-up.
What is niche marketing?
Companies sometimes identify a niche (gap) in a certain market. They will aim their product/service at a small group or segment.
What are some advantages of niche marketing?
- A niche market may have been overlooked by other companies
- Gain competitive advantage by having a unique product
- Easy to apply appropriate marketing mix
Give some examples of disadvantages of niche marketing
- If successful, larger competitors may enter market
- Niche markets are smaller and may suffer more frequent swings in consumer spending
- Can not take advantage of economies of scale
What is market segmentation?
A market is made up of different types of consumers each with their own needs and wants. They are grouped into segments, so that companies can tailor products for each group.
Name the segments of the market (9)
- gender
- religion
- race
- area
- age
- education level
- social class
- political persuasion
- family structure
Describe some benefits of target marketing
- Products can be made specific to the customers’ needs.
* The promotion, price and place can be tailored to the target market and increase their chances of sales.
what are the aims of market research?
market research aims to find what customers want and what is happening in the marketplace. It also finds the following:
• Types of customers making purchases and habits
• Success of marketing/advertising campaigns
• ways to improve existing products
• what customers would like to see in the future
• customers reactions to different products, prices and promotions
what are the two types of market research?
field and desk research
define field research
gathering new information, first-hand and for a specific purpose (primary information).
give examples of methods of field research
interviews, observations, hall tests, focus groups and electronic point of sales
define desk research
looking at existing information (secondary information), this can be internal or external.
give some examples of methods of research
- websites
- newspaper articles and magazines
- government reports
- textbooks
what are some advantages of field research?
- relevant to the business’s needs
- new/more up to date
- accurate as it has been gathered first-hand for a specific purpose
what are some disadvantages of field research?
- expensive to carry out
- people need to be trained to gather this type of research, which can be costly for the business
- time consuming; could stop decisions being made quickly
what are some advantages of Desk Research?
- research already carried out, so it is easy to obtain
- decisions can be made quickly
- it is usually cheaper to obtain, which saves the business money
what are some disadvantages of Desk Research?
- as research was carried out for a different purpose, it is not as reliable and might not be as useful
- may be out of date and not relevant to today’s business environment
- may contain bias as it has been gathered by someone else, which could lead to a wrong or incomplete decision
what is quantitative information?
information that is definable, can be measured, usually expressed in figures
define qualitative information
information that is descriptive and may involve value judgements or opinions
define consumer behaviour
studying how individuals behave when making purchases and how this behaviour can impact on other individuals and wider society.
what are the four different types of buying behaviour?
habitual/routine purchases, limited decision making purchases, extended decision making purchases and impulse purchases
what are habitual/routine purchases?
these require little involvement by the buyer, are bought frequently and generally fulfil a basic want e.g. milk or bread.
what are limited decision making purchases?
these will require some consideration by the buyer. They are still relatively regular purchases but require greater participation in the buying process e.g. clothes.
what are extensive decision making purchases?
usually expensive, one-off long term purchases, which will involve detailed consideration by the buyer e.g. a car, house or holiday.
what are impulse purchases?
items bought without prior thought e.g. magazines, chocolate or crisps. It should be noted that items bought on impulse may include more expensive items - the disposable income of the consumer will have an impact on the type of item likely to be bought on a whim.
What is random sampling?
Producing a random list of individuals to survey. Those picked for inclusion in the sample could be generated randomly, using a computer.
Why is a random sample required when doing random sampling?
It is more representative of the whole population.
What are the advantages of random sampling?
Using this method of sampling reduces the risk of bias as people are chosen totally at random and are not selected from one particular market segment
What are the disadvantages of random sampling?
It may not be focused on any particular market segment and this assumes all members of the group are the same, which is not always the case. They chosen people must be interviewed which can be expensive and take time.
What is stratified random sampling?
This make a random group more representative of the population as a whole. the sample is divided up into segment based on how the population is divided up.
What is quota sampling?
a number of people who meet specific characteristics are chosen, for example, according to age, gender, income group. The researcher must find people to interview who fit these categories
What are some advantages of quota sampling?
Cheaper to operate than random sampling. Statistics showing the proportions of different groups within the population are readily available.
Compare random and quota sampling
- Random sampling does not target any specific market segment. Quota sampling chooses a group of people with certain characteristics.
- Random sampling is often more expensive than quota sampling as it requires a large group of people to be sampled. Quota sampling requires less respondents.
What must a product do?
Meet the needs and wants of the consumer/target market.
How can companies add value to their product?
adding additional features, improving after sales service, reducing delivery times or improving colour and packaging.
What are the stages of product development?
- An idea is generated
- Market research is undertaken
- A prototype is developed
- The prototype goes through market testing, where customers try out the products and give feedback
- Adaptations are made on the basis of market testing
- The product is launched
What are the risks that come with product development?
- Customers might not want the product – no demand
- Money wasted on an undesirable product may lead to poor cash flow
- Businesses reputation could be damaged if the new product is poor quality
- External (PESTEC) factors might prevent the product being a success
Define branding
Branding is a combination of a name, symbol and design given to a product, product range or company. For example, Nike or Adidas.
What are the effects on an organisation of successful branding of their products?
- Products in the market are instantly recognisable
- Repeat purchases increase sales
- Can save money on marketing
- Can charge higher prices
- Build loyalty with customers
- Customers may see brand as a guarantee of quality
- Easier to launch new products on to the market
What are the disadvantages of branding?
- Imitators and fake products are common
- One poor product/experience can affect the whole brand
- Brand names can be expensive and time-consuming to build up
Define a product portfolio
A product portfolio is the range of items sold by a business. A company like Sony has a product portfolio that includes computers, cameras, televisions, and games.
What are the costs of maintaining a large product portfolio?
- increased research and development costs due to multiple products being produced
- marketing and advertising costs may be high due to the promotion of a large range of products
- bad publicity incurred by one product may affect sales of all products within the portfolio
- resources may be spread too thin and this could affect the performance of existing cash cow products
What are the benefits of maintaining a large product portfolio?
- having different products can spread risk between markets. This mean there is less chance of a company making losses
- having a range of products can lead to greater brand awareness
- can encourage customer loyalty as customers are more likely to buy multiple products from the same brand
- easier to launch new products due to greater brand awareness
- can meet the needs to different market segments
- can allow for seasonal fluctuations
- allows for new products to replace products at the end of the product life cycle
- can increase profits from selling a range of different products
What is the Boston Matrix?
a method of categorising products within the organisation’s product portfolio
What two criteria are products in the Boston matrix categorised in to?
Market growth and market share
What is market growth?
How fast is the market for the product growing? The market may be declining, or it may be expanding. Sales of a product in a fast expanding market have a better chance of growing than a product in a stagnant or declining market.
What is market share?
this is the portion of a market controlled by a particular company or product. How strong is the product within the market?
In the Boston matrix, what are stars?
big market share and high market growth e.g. iPhone 11. These are the leaders in expanding industry and generate large profits. However, they require substantial investment to sustain growth.
In terms of the Boston matrix, what are question marks?
small market share in a high growth market e.g. google pixel phone. These have low market share in an expanding industry and needs substantial investment to improve position.
In the Boston Matrix, what are cash cows?
big market share in a low growth market e.g. Weetabix. These are leaders in mature or declining industry and can generate funds. They also maintain market share which ensures quality and customer loyalty.
In terms of the Boston Matrix what are dogs?
small market share in a market with low growth. A dog is usually about to go into decline. These will require heavy investment and effort to turn over profit.
What is the Boston Matrix used for?
A Boston Matrix is used to plot the range of products an organisation offers and also helps spot where products need to be introduced or changed.
What are the stages of the product life cycle?
Dogs - development In - introduction Greece - growth Make - maturity Sand - saturation Dirty - decline
What is the development stage of the product life cycle?
This is where a product is researched, designed and a prototype will be made. A large percentage of products will never progress beyond this stage.
What will sales and profits be like a the development stage?
- Sales - Zero. Remember: consumers don’t know about products that are at this stage - it’s impossible to buy something you don’t know exists!
- Profit - Zero. There are very high costs associated with the development of any new product - some of which may never be recouped.
What is the introduction stage of the product life cycle?
The launch stage of the new product into the market
What are sales and profits like at the introduction stage of the product life cycle?
- Sales - Initially low, as few consumers know about the product at this stage. However, some products will have little or no competition at this stage so high prices can be charged.
- Profit - Zero. There will be high advertising costs associated with this stage, as well as the development costs which need to be recouped.
What is the growth stage of the product life cycle?
Where consumers are becoming more aware of the product and competitors may start to enter the market.
What are sales and profits like at the growth stage of the product life cycle?
- Sales - Sales begin to increasing at their fastest rate due to consumer awareness
- Profits - Low. The outstanding development costs will be reducing, however there will still be high advertising costs against still modest sales levels
What is the maturity stage of the product life cycle?
The product has become commonplace on the market and competition will be increasing and established.
What are sales and profits like at the maturity
- Sales - Sales of the product will be high.
- Profit - Good levels of profit can be made at this point in the life cycle, as there will be little advertising required.
What is the saturation stage of the product life cycle?
There will be a large number of competitors and not all products will survive. Consumer tastes may change and demand falls.
What are sales and profits like at the saturation stage of the product life cycle?
- Sales - Sales will level out. Prices may need to be revised and lowered to ensure survival in a highly competitive marketplace.
- Profits - Profits will remain high, however the company will need to invest in additional advertising to remind consumers that the product exists.
What is the decline stage of the product life cycle?
The product is no longer desirable and is likely to have been replaced by a newer version or technology.
What are sales and profits like at the decline stage of the product life cycle?
- Sales - will fall until the product is withdrawn.
* Profits- Profits will decrease rapidly until the product is withdrawn.
What are the ways in which a business can extend the life of a product?
- Change name – if a product has suffered from bad publicity and sales are falling, a tried and tested technique is to simply change the name of the product.
- Advertising – try to gain a new audience or remind the current audience
- Price reduction – more attractive to customers
- Adding value – add new features to the current product
- Explore new markets – diversifying, selling abroad/different target market
- New packaging – brightening up old packaging, or subtle changes
Define price
the amount a customer is prepared to pay (and actually pays) for a product.
What does a producer need to take into account when setting a price?
- The cost of production
- How much profit the producer wishes to make
- The quality of the product
- The amount the consumer is willing to pay
- The amount being charged by competitors
- The target market for the product
- How much of the product can be supplied
- What stage is the product is at its life cycle
- State of the economy
What are the long term pricing strategies?
Market price Price discrimination Low prices High price Cost plus pricing
What is market price?
This long term pricing strategy relies on setting your price at the same level as competitors and rivals. The business will then compete on other factors such as convenience, customer services or after sales service.
What is price discrimination?
used when demand for a product or service may change due to changes in consumer demand. This means that you may pay different prices for the same product or service at different times of day or at different times of the year, in different locations or when different prices are charged for different customers. For example: a hotel in Spain can charge more for a room in August when more people are looking for a summer holiday in warm weather than it can in February when fewer people take a holiday and the weather is less reliable.
What is low price?
This long term pricing strategy is set below the market price in order to attract customers. Customers will often look for the product that is cheapest as a way of saving money. They will only do this if they see the product as value for money. Low prices can be associated with poor quality, even if this is not always the case. This might put some customers off buying a product.
What is high price?
Businesses that use a high price strategy deliberately have their price higher than rivals. This is to signal luxury or quality.
What is cost plus pricing?
This involves setting a price by calculating the average cost of producing goods and adding a mark-up for profit. This method of pricing is a quick and simple way of setting a selling price. It makes sure that the money generated from a sale will cover all costs and generate a profit; however, it does not take market needs into account.
What are the short term pricing strategies?
Penetration pricing Destroyer pricing Promotional pricing Psychological pricing Skimming Loss leaders
What is penetration pricing?
used to enter a new market. The price will be set lower than competitors to gain market share. Once a product becomes established the price will increase to be more like the market price. This strategy can be used to encourage customers to switch brands, although it does mean the company will not be making much profit during the initial launch of the product.
What is destroyer pricing?
used to eliminate competition. It involves a business setting a very low price in order to attract customers away from competitors, who will struggle to match the low price and may go bust. Usually only large businesses can use this strategy as they can withstand the losses for a longer period than small businesses can. This is illegal in the UK.
What is promotional pricing?
Prices are reduced for a period of time through discounts, special offers or the use of vouchers. This strategy is often used to attract a lot of media interest or to help clear old or obsolete stock, for example during January sales.
What is psychological pricing?
used to make customers perceive the price of a product is lower than it is. For example, charging £19.99 for a product instead of £20, the customer will perceive the product is less than £20 and that they are receiving a good deal
What is skimming?
a new product is launched at a high price. At this early stage, those people who must have it will buy the product despite its price. Once the sales start to slow, the business will begin to lower the price so that more customers can afford their product. This short term pricing strategy can only work when there are little or no competitors in the market.
What is loss leaders?
a method of selling certain products at a loss or below market value to encourage customers to come into a business. The hope is that they will buy other full price items. This method of pricing should increase sales of other full price products in the store. Loss leaders can be used to increase customer numbers and may create customer loyalty.
What is place in the terms of the marketing mix?
the process of getting a product from the manufacturer to the customer.
What are the factors to consider when choosing a location to product and sell products?
- Where the customer is
- Availability of a suitable premises
- Parking facilities
- Suitable infrastructure
- Government incentives and grants
- Market segment
- Employee availability
- Competition
- Environmental impact
What are channels of distribution?
the way in which the product gets from the manufacturer to the consumer. through any combination of manufacture > wholesaler > retailer > consumer
Define a wholesaler
a business that buys products in bulk from the manufacturer who then sells on smaller quantities.
What is a retailer?
a business that sells smaller quantities of product directly to consumers. They can either but products from the manufacture or from a wholesaler.
What are the reasons why businesses may choose specific channels of distribution?
Finance Image Legal Restrictions Product (perishable) Stage of product life cycle Size
What are the advantages of wholesalers?
- Reduces transport costs for manufacturer as wholesalers buy products in bulk
- Wholesaler takes on the risk and cost of storing the stock
- Wholesaler can repackage and label product in smaller quantities meaning less work/costs for the manufacturer
What are the disadvantages of a wholesaler?
- Manufacturer will lose some profit to the wholesaler
- Manufacturer loses control of how the product is sold and marketed
- The wholesaler may damage the reputation of the manufacturer if the product is not sold correctly
What are some benefits of retailers?
- Convenience – retailers are located close to customers
- The retailer displays and markets the goods for the manufacturer and offers after sales service
- Retailers can provide customers with information about the product
What are the costs of retailers?
- Manufacturer will lose some profit to the retailer
- Products in retailers are often displayed next to the competition
- Manufacturer loses control of how the product is sold and marketed
What are the different types of retailers?
- Supermarkets
- Discount retailers – non branded products at a cheap price. Other retailers have had to discount their own products to compete
- E-tailer – low overhead costs. Need large warehouses.
- Convenience retailer – ‘corner shop’ and usually an independent retailer. Prices higher than supermarkets.
- Multiple chain stores
- Department stores – offer a range of goods within different departments. Normally, specialise in premium brands e.g. Debenhams
- Franchises
- Door to door
What is direct selling?
where a product is sold directly by the manufacturer to the end consumer.
What are ways for direct selling to occur?
Mail order - Goods are sold via catalogues
Personal selling - Products are sold door-to-door or by telephone
TV shopping - This can take the form of detailed commercials known as ‘infomercials’ or through specialist channels
What is e-commerce?
buying and selling over the internet or using mobile technology such as apps.
What are the two categories internet selling/e-commerce falls into?
E-tailing and direct selling. Companies can use either or both of these methods to make their products available to consumers.
What is E-tailing?
the term used to refer to online retailers such as Amazon, who sell goods from a wide range of suppliers.
What are the advantages of using e-commerce?
- 24/7 availability
- Worldwide audience reached, greater number of potential customers.
- Information can be gathered about customers who leave details on website
- relatively cheap and easy to set up
- It is possible to allow customers to compare products and read customer reviews to encourage purchase.
- Special online only offers can be created.
What are the disadvantages of e-commerce?
- Products cannot be touched or actually seen prior to purchase, can put customers off
- Many customers dislike sharing personal information like credit/debit card details online.
- It is vital to have strong security procedures can be expensive.
- delivery times
- Relies on technology, so should their be any problems the sale may not be completed.
Define promotion in terms of the marketing mix
the way in which the consumer is made aware of the product and is persuaded to buy it.
What determines what promotion techniques a business uses?
- The type of product
- Type of market
- Budget avaliable
- Competitors mix
- Stage in the product life cycle
What are the main objectives of promotion a side from gain and retain customers?
- Increase sales
- Encourage loyalty
- Create awareness
- Remind
- Encourage customers to contact
- Create an image
- Improve position in the market
What is above the line promotion?
refers to mass media marketing. This is marketing which is designed to appeal to a very wide range of people and to be seen by a large number of people.
What is below the line promotion?
far more targeted and takes place through public relations, sales promotions and direct selling. This includes a wide variety of promotions through social media.
What are examples of above the line promotion?
- Advertising - TV and newspaper marketing, as well as the use of billboards,
- Celebrity/product endorsement - Where a celebrity agrees to promote an organisation or product.
- Product placement - This is where an organisation pays to have a product featured within a film or TV programme.
What are the advantages and disadvantages of above the line promotion technique - advertising?
Advantages of this include national coverage and reaches wide group, however it can be very expensive and may target the wrong market segment
What are the advantages and disadvantages of above the line promotion technique - Celebrity/product endorsement?
advantages of this include: o Gain a good image o Consumers buy to be like celebrities o Increases sales o Consumers associate products with that person disadvantages include: o High costs involved o any scandal or negative publicity occurring, could have a negative impact on the product
What are the advantages and disadvantages of above the line promotion technique - Product placement?
Advantages:
Reaches a wide range of audiences
Disadvantages:
Very expensive
What are examples of below the line promotion?
Consumer offers - special offers available to their customers.
Social media - Although some social media promotion is mass market, the majority is extremely focussed and targeted generated by Facebook, Twitter etc.
Sponsorship - Used in connection with a certain event or sports team. A company will pay a substantial sum to ‘brand’ an event or club.
Direct selling
Public relations
What is public relations?
a wide ranging set of activities with the aim of ensuring that relationships between a company and customers/the public remain positive and strong.
What are examples of activities the PR department do?
o use of press releases to share good news, or apologise for any problems
o hold a press conference which offers the opportunity for two-way conversation and answering questions
o give donations to charities or organise events to demonstrate CSR
o sponsor events locally and nationally to raise awareness
o give out company merchandise with branding to generate goodwill
What is into the pipeline promotion?
When Manufacturers promote their products to retailers to encourage them to stock their products.
What are examples of into the pipeline promotion?
Point of sales displays Sale or return Dealer loader Promotional gifts Staff training
What are point of sales displays?
found at the checkout. The point of sale display is most commonly designed to attract the customer to products that are new, for example the latest DVDs, books or video games. These materials are often offered for free to the retailer if they agree to stock the business’s products.
What is sale or return?
offered by manufacturer to retailers to reduce the risk for the retailer of stocking the manufacturer’s product. This method of promotion gives the retailer the right to return any stock that they do not manage to sell. This will encourage retailers to stock products that are new as they are able to return them if they do not sell.
What is dealer loader?
when the manufacturer will offer the retailer extra goods if they purchase a certain quantity of an item. For example, six boxes for the price of five. This will encourage retailers to purchase a higher quantity of stock from the manufacturer.
What are promotional gifts?
Manufacturers can provide retailers with promotional gifts for customers to encourage the sale of their product and attract customers into the retailer. For example, a food company could provide branded bowls with the purchase of selected cereals.
What is staff training?
Some manufacturers provide retail staff with training. This will increase their knowledge of the product therefore increasing the chance of sales.
What is out of the pipeline promotion?
When Retailers promote the product to customers to encourage them to buy the product.
What are examples of out of the line promotion?
Special offers Discounts But one, get one free Vouchers/money-off coupons Loyalty cards Free samples Free gifts Competitions
What is the people element of the extended marketing mix?
refers to any member of staff who is in contact with the customers of a business.
Finish this sentence: customer satisfaction relies on good ………………
Customer service
What may happen if customers receive a good quality service?
- they will be more likely to return (customer loyalty) which will lead to increased sales and profits
- It would also mean that customers do not take their business to competitors.
What are the ways a business can maximise customer satisfaction?
Staff training
After-sales service
Customer complaints procedures
Recruitment and selection
What does the process element of the extended marketing mix refer to?
the experience the customer has when purchasing a product.
How can businesses maximise customer experience?
Efficient delivery service
High quality information and communication throughout purchase
Good ability to deal with customer complaints
Able to access goods and services without you
Up to date with new technology
What does the physical evidence element of the extended marketing mix refer to?
the physical environment experienced by the customer. This could mean the design and layout of a shop or website.
What processes can be completed to ensure the physical environment gives a positive experience for customers?
- premises should be clean
- layout of the store is easy to navigate
- design of the premises should convey the image of the business
- eye catching displays
- appropriate parking and toilet facilities
What does a businesses website need to give a positive experience for customers?
- the site needs to be easy to navigate
- products should be clearly displayed with key information
- key information about the company and customer service should be clear and easy to find
- customers should be able to contact the company
- the design should use colours, text and images that reflect the business
What technology is used in marketing?
- E-commerce
- Internet advertising
- E-mail - This can be used to send surveys or marketing materials to customers. This method of marketing is quick and cost effective.
- Social media - can be used to interact with customers.
- Apps - Apps can be used to give customers easier access to products and services. customers can buy directly from the app without having to browse a full internet site. They can also be used to advertise products, for example ‘in-app’ advertising when playing games.
- Electronic point of sale -
What is an electronic point of sale?
EPoS is a huge database that can contain records about not only the products stocked by an organisation, but about their customers and suppliers, giving it a wide range of uses. Within the marketing department, the main function of EPoS is to provide highly detailed and quantitative market research and is designed to work alongside retailer loyalty cards.
