Unit 2- Management of Marketing and Operations Flashcards
Compare a Product-Led Organisations with a Customer-Led Organisation.
A product-orientated organisation is one that concentrates solely on the production process and the product rather than what the customer wants
Organisations which operate in this way are often pharmaceutical or technology based
A customer-orientated organisation is one which identifies what the consumer wants (through carrying out extensive market research) and tries to provide it
Organisations producing clothes, make-up and other low cost ‘consumer goods’ are most likely to operate in this way
define the term ‘consumer behaviour’.
consumer behaviour is about studying how individuals behave when making purchases and how this behaviour can impact on other individuals and wider society
Give the 4 types of purchasing and explain them
Habitual (routine) purchases - these require little involvement by the buyer, are bought frequently and generally fulfil a basic want e.g. milk or bread.
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.
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.
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.
Give the steps of the marketing process
Identifying
Anticipating
Satisfying
How do we research consumer behaviour
EPOS- The till, this gives us info such as what is sold, how much of that is sold and on which days.
This allows you to change the layout of the store to encourage people to buy more, know when to have stocks of certain items available
Loyalty Cards- Gives the demographic, where they live, what they do, date of birth, how often they come, when they come to the shops, their purchasing trends
Allows you to do targeted marketing, sending vouchers on birthdays, for items they frequently buy etc…
discuss the role of marketing in a business and its role in the achievement of business objectives.
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;
to develop new and improved products.
What are the 2 types of market research
Field (primary)- where a researcher obtains information first-hand e.g. by interviewing people or issuing questionnaires. This provides primary information which is up-to-date, collected for the specific purpose required and is not available to competitors.
Desk (secondary)- where a researcher uses secondary information which can be gathered from a wide range of sources - for example, from the internet, published research or the media. Secondary information is much cheaper to collect as it already exists, but because it has been collected for another purpose it may not be relevant to your needs. It may also contain bias, which could invalidate any conclusions drawn from the data.
What is the difference between a core product and an augmented product
A core product will satisfy the basic needs of the consumer.
But to make the product more competitive and attractive, additional features are often added. This is known as an augmented product.
Today’s customer looks for more in a product than the basic function it fulfils.
For example, shampoo comes in a wide range of variants. All shampoo cleans hair (Tesco Everyday Value shampoo will do this for a low cost).
However, there are many designer brands available which have been developed by well known stylists and these shampoos offer additional benefits - for coloured hair, for greasy hair, for dry hair and so on.
These augmented products allow the customer greater choice and command a higher price.
outline the level of sales and profitability that can be expected at each stage of the product life cycle
Development- 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.
Sales- Zero.
Profit- Zero.
Introduction- This is the launch stage of a new product. Sales- Initially low, as few consumers know about the product at this stage.
Profit- Zero.
Growth- Where consumers are becoming more aware of the product and competitors may start to enter the market.
Sales- Begin to increase due to increased consumer awareness.
Profit- Low.
Maturity- The product has become commonplace on the market and competition will be increasing and established.
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.
Saturation- There will be a large number of competitors and not all products will survive. Consumer tastes may change and demand falls.
Sales- will level out.
Profits- Will remain high, however the company will need to invest in additional advertising to remind consumers that the product exists.
Decline- The product is no longer desirable and is likely to have been replaced by a newer version or technology.
Sales- Will fall until the product is withdrawn.
Profits- Will decrease rapidly until the product is withdrawn.
describe how the product life cycle can be extended to prolong the life of a product
7 P’s
explain the importance of creating a product portfolio
This means that as you work on improving and developing the problem children and stars you can rely on your cash cows to prop up the business.
describe the role that ‘price’ plays in the marketing mix
Price is defined as the amount a customer is prepared to pay (and actually pays) for a product.
When setting a price, a producer has to take the following into account.
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
Low price
A price which is lower than that of similar products on the market. This is often seen in shops like Aldi, who claim a ‘no-frills’ approach.
Premium price
A price which is higher than that of similar products on the market. Used to project an image of quality or exclusivity by premium and designer brands.
Competitive price
Where prices are broadly in line with those of your competitors. This is usually seen with very price sensitive products/services such as fuel. Organisations use other methods of competition - for example, offering loyalty points for purchase.
Skimming
Where a high price is set initially probably for a unique, technologically advanced product.
This strategy is likely to be used only in the introductory or growth stages of the product life cycle.
The high price allows the company to recoup the initial investment in the product and become profitable relatively quickly.
Promotional pricing
Prices are lowered for a short period of time - this can be either on specific products sold within a store for a limited period of time, or a general ‘sale’ where the majority (or all) the products within a store are reduced - as seen in the Next sale for example.
Penetration pricing
Where a low price is initially set to enter a market where there are a lot of competitors. Once the product is established, prices can be raised to match those of the competitors.
This strategy is seen only in the early stages of the product life cycle.
Destroyer
An artificially low price is set to force competitors out of the market.
Only viable for larger companies who have reserves of capital to support the loss-making activity. This is an illegal practice.
Loss leader
This is where an organisation chooses a product to sell at a loss to encourage customers to use their shop/service.
The idea is that once the customer has entered the premises they will spend money on other things, allowing the organisation to make an overall profit.
for example, a restaurant offering a deal on 2 main courses hopes that the customers will order additional courses and drinks.
Channels of Distributions
Manufacture—–> Wholesaler—–> Retailer—–> Customer
Manufacture—–> Wholesaler—–> Customer
Manufacture—–> Retailer—–> Customer
Manufacture—–> Customer
Benefits of Wholesalers
Good distribution links and relationships with retailers.
By breaking up bulk and taking care of distribution problems they free the manufacturer to concentrate on production.
The wholesaler can bear the cost of storage - which in part is passed on to the retailer.
Disadvantages of Wholesalers
the wholesaler needs to make profit, so the retailer will pay more for the goods than they would by buying directly from the manufacturer.
the wholesaler is often described as the ‘middle man’ and many retailers would prefer to buy directly from the manufacturer if possible - however they cannot buy in large enough quantities to make this possible, hence the added cost of using a wholesaler.
Benefits of Retailers
Offering a range of complementary products to the public. For example, a convenience store will sell tea, coffee, milk and sugar - everything the customer is likely to need for their making a hot drink.
Providing information to consumers about products via displays, signs and trained staff.
Storage and display of goods.
Physically selling the goods to the public.
Organisations continually try to obtain primary information about the market in which they operate.
Describe the advantages and disadvantages of three types of field research an organisation could use to obtain primary information.
Personal interview
It allows two way communication and encourages answers.
Misunderstandings can be ironed out.
It can be an expensive method.
Home interviews tend to be unpopular with consumers.
Telephone survey
Is fairly cheap.
Response is immediate allowing large numbers to be surveyed quickly.
Hostility to the person making the call is common as people do not like being disturbed at home.
Postal survey
It is a cheaper method than street survey as it does not require trained personnel.
Questions need to be very simple and easily understood.
Response rate is very low.
Free gifts are used to increase the return rates.
High design costs.
Wide range of views and opinions.
Hall test
It gives consumers the chance to see or try a product and to be questioned on their opinions of the product.
It is often used in supermarkets and wholesalers.
Fairly cheap method.
It can be difficult to analyse qualitative information.
Consumers often give favourable replies simply to be polite.
Consumer audit
It can be accurate information on consumer buying patterns which can be used to predict consumer trends.
It is a very expensive method as many consumers receive payments to complete diaries.
Consumers get fed up quickly resulting in a high turnover of respondents and inaccurate data.
Consumers may not complete the journals accurately or on time.
Test marketing
Allows for the product to be amended or improved before national launch.
It saves the cost of a national launch if the product does not receive good reviews in the test market.
Regional tastes may not represent the nation as a whole.
Organisations continually try to obtain primary information about the market in which they operate.
Describe the advantages and disadvantages of three types of field research an organisation could use to obtain primary information.
Personal interview
It allows two way communication and encourages answers.
Misunderstandings can be ironed out.
It can be an expensive method.
Home interviews tend to be unpopular with consumers.
Telephone survey
Is fairly cheap.
Response is immediate allowing large numbers to be surveyed quickly.
Hostility to the person making the call is common as people do not like being disturbed at home.
Postal survey
It is a cheaper method than street survey as it does not require trained personnel.
Questions need to be very simple and easily understood.
Response rate is very low.
Free gifts are used to increase the return rates.
High design costs.
Wide range of views and opinions.
Hall test
It gives consumers the chance to see or try a product and to be questioned on their opinions of the product.
It is often used in supermarkets and wholesalers.
Fairly cheap method.
It can be difficult to analyse qualitative information.
Consumers often give favourable replies simply to be polite.
Consumer audit
It can be accurate information on consumer buying patterns which can be used to predict consumer trends.
It is a very expensive method as many consumers receive payments to complete diaries.
Consumers get fed up quickly resulting in a high turnover of respondents and inaccurate data.
Consumers may not complete the journals accurately or on time.
Test marketing
Allows for the product to be amended or improved before national launch.
It saves the cost of a national launch if the product does not receive good reviews in the test market.
Regional tastes may not represent the nation as a whole.
Describe the effect of each stage of the product life cycle on profits.
Introduction - profits will still be low, if any at all.
Growth - profits should start to rise at this stage.
Maturity - profits should be steady at this stage although the industry profits as a whole will be shared between many competitors.
Saturation - profits will remain high, however the company will need to invest in additional advertising to remind consumers that the product exists.
Decline - profits will start to fall unless efficiency is improved in distribution and production. May even be making a loss before the product is withdrawn altogether.
Describe the benefits of maintaining a product portfolio.
It allows an organisation to spread risk. If one product’s sales decline, another product’s sales could be growing.
The opportunity for increased sales/profits from selling different products due to customers having a number of products to buy from one brand.
Seasonal fluctuations can be evened out. The company may not struggle as much if they have products that are popular at certain times of year.
Organisations can meet the needs of different market segments.
Newer products at growth stage can replace those at the decline stage of the product life cycle.
Reference to analysis of Boston Matrix. Resources can be allocated from poorer performing products (‘dogs’) to income-generating products (‘stars’ or ‘cash cows’).
Discuss technology currently being used to benefit the marketing department.
The use of technology such as the internet and social media is a relatively cheap way to conduct advertising.
Social media and apps allow customers to interact with the company by posting comments and questions.
Customers increasing expect organisations to have an online presence and to have the opportunity to search and buy online.
Failure to offer this may result in lost sales.
The audience for social media is ever widening and an increasing number of older consumers are engaging with this format, meaning the potential audience reached is massive.
The company may find it very difficult to control images/text once it has been posted to the internet. This may mean that customers can edit and change the message.
Customers can complain to a wide audience through the use of the internet/social media, meaning potential bad publicity.
The internet can be used to collect information about customers quickly and without annoying them. Although emails which are sent to mass recipients are treated as spam by most customers.
EPoS can be used to create detailed customer profiles based on their buying habits.
This allows organisations to create tailored promotions.
Describe six pricing tactics that could be used when an organisation attempts to break into a new market.
High price - a price is set higher than competitors to give the image of quality and exclusiveness.
Low price - a price is set lower than competitors to attract customers to their product/service.
Skimming - a price is set high initially when no competition exists, when competitors enter the market price is lowered to market price.
Market/competitive pricing - a price is set at the same level as competitors, normally used for products that are identical.
Penetration pricing - a price is set slightly lower than competitors to attract customers, once a customer base has been created price is slowly increased to same as competitors.
Promotional pricing - a low price is set for a short period of time to boost sales in the short term, possibly even making a loss on the product.
Destroyer pricing - a price is set very low compared to competitors and once there is no competition in the market the price is then put back up to the previous level or higher, used mainly by larger organisations to destroy competition, must have large reserves to sustain this over any length of time.
Explain the impact that recent trends in retailing have had on organisations.
Increase in customers shopping at large retail parks have meant that organisations are moving from high street stores to retail parks.
Increase in large superstores have meant many small local shops going out to business.
Vast use of e-commerce has meant organisations now must have websites with access to online purchasing.
Changes to opening hours means many organisations have to pay overtime to staff to work on Sundays and late evenings.
Large supermarkets selling a wide range of products has meant customers needs can be catered for under the one roof.
Increase in discount stores selling products at discounted prices has meant competitor organisations have had to reduce prices in order to keep customers.
Discuss the importance of quality inputs in the operations process of an organisation.
Using high quality raw materials will lead to a quality product or service.
Highly skilled staff will result in good customer services.
Using up-to-date machinery will help standardise product quality.
It should result in:
- less products being faulty or not of a proper standard.
- less customer complaints.
- repeat sales.
- the organisation having a good reputation.
It may mean higher purchasing costs for raw materials.
It can result in high staff training costs.
