Unit 2 Marketing Flashcards
What are the objectives of the marketing department?
-Carrying out market research to identify customer needs
-Making decisions on the marketing mix (4p’s)
-Informing customers about their product and persuading them to buy it
Qualitative and Quantitative Data
Qualitative data- Related to attitudes opinions and feelings. Can be difficult to statistically analyse.
Quantitative data- Data related to numbers. This data can be added up and satistically analysed.
Advantages of primary research
-It is up to date
-It is collected for your specific purpose
-It can be trusted because you gathered it.
Disadvantages of primary research
-It can be very expensive to collect
-It can be time consuming to collect
Advantages of secondary research
-It is quick to collect
-It can be cheaper than primary research
-There is a wide range of research on the internet
Disadvantages of secondary research
-It could be out of date
-The source might be biased/untrustworthy
-The data might not be wholly relevant
Methods of market research
Questionnaire
Focus groups
Interview
Surveys
Trials
Websites
Magazine/newspaper article
Census data
What is market research and why is it important?
-Market research is how businesses collect information on whether or not their products or services will be bought
It is important as it will:
- help a business be clear on whether there is demand for their product/service
-avoids unnecessary investment
Different ways the market is segmented
Age
Gender
Income
Location
Lifestyle
Pricing Methods: Price Penetration
-When a business tries to enter a competitive market by starting off at a low price to make a customer base then returning to a normal price
Price penetration Adv + Disadv
Adv:
-New customers might be attracted to try the new product, and then continue to buy if they like it.
Disadv:
-However, the business might not make enough revenue to cover costs during this period
-A low price might present an image of low quality
-If brand loyalty is high, business might not attract customers.
Pricing methods: Cost-plus pricing
When a business see how much it costs to make/buy the product as well as any other costs, and then adds a percentage in order to ensure profit on a product.
Cost-plus pricing Adv + Disadv
Adv:
A good way to ensure survival and that products sold actually make a profit.
Disadv:
- Price may be too high compared to competition
-As costs change, time and money need to be spent changing prices
- Can be difficult to charge to cover all running cost of a business
Pricing Methods: Price skimming
Where the price of the product starts off high because the product is new/unique and gradually comes down to a normal price as demand falls.
Price skimming Adv + Disadv
Adv:
-Allows business to maximise sales whilst the product is in high demand
-Allows businesses to target lower income groups as demand falls, so that all target groups pay the most possible
Disadv:
-It might put consumers off if price is too high
-There will only be a very short period of very high demand
-Customers may simply wait until the price falls
Pricing methods: Competitor pricing
Where a business tries to match or beat their competitors’ prices
Competitor pricing Adv + Disadv
Adv:
Customers like to shop around for the best price so it can help attract customers away from competitors
Disadv:
-Lowering prices to match/beat competitors can slash profit margins
-Small businesses will find it hard to match/beat the prices of big competitors as they don’t have the benefit of economy of scales
Pricing methods: Promotional pricing
The short term use of price reductions and special offers to increase sales
Promotional pricing Adv + Disadv
Adv:
-A good way to increase sales in the short term
-Whilst buying products on promotions, customers might buy more profitable items in the shop
-Can create improved cash flow
Disadv:
-Some customers may only come to the store for the sales
-Each item is sold for less revenue than the initial price
-It costs money to advertise promotional offers
Four good features of a product
- It is innovative
-It is functional
-It is made to a good standard
-It meets the needs of the customer
Disribution Channels: Producer –> Customer
When the producer of a product sells directly to the customer (e.g Dell computers sell directly to customers)
Distribution Channels: Producer –> Customer Adv + Disadv
Adv:
-The business has complete control over brand image
-The business has direct contact with customer (useful for market research)
-The business can make a higher profit off each product
Disadv:
-The business will only sell one unit at a time, therefore admin costs will be high
-Customers may prefer the convenience of a local high street retailer
-As a business grows in size, it can be difficult to manage so many individual customers/sales.
Producer –> Retailer –> Customer
Where the producer sells their product in big batches to a retailer, which in turn sells to the customer
Producer –> Retailer –> Customer Adv + Disadv
Adv:
-The producer is able to send one large delivery to the retailer, rather than multiple smaller deliveries
-Many products sell better if placed in a convenient location for customers
-Customers might prefer to buy from “trusted brands”
Disadv:
-The producer will have to sell to the retailer at a lower price so they can get their ‘mark-up’
-Some larger retailers can bully smaller businesses into getting lower prices or longer credit terms.
Producer –> Wholesaler –> Retailer –> Customer
Where the producer sells one very large batch to a wholesaler, who then breaks down the batch into smaller units and sells onto smaller retailers. (breaking the bulk)
Producer –> Wholesaler –> Retailer –> Customer Adv + Disadv
Adv:
-one very large delivery reduces admin + delivery costs
-helps with convenience with customers (e.g corner shops)
Disadv:
-producer will have to sell their stock at a much lower price to allow wholesalers to add on their ‘mark-up’
-by the time the product reaches their customer, it may not be in perfect condition
What are digital distribution channels?
-Used to deliver goods via the internet, where no physical products exist (e.g e-books, digital music, films and TV programmes)
-Can be good as customers can receive their product immediately 24/7
-However, not all consumers have the internet and there may be technical issues.
The parts of the product life cycle
Introduction
Growth
Maturity
Decline
Introduction meaning
The stage where the product is launched. Sales will be low but will begin to rise steadily as a business will likely advertise it in a number of different ways to get off the mark.
Growth meaning
Sales show their most rapid growth. Advertising and other promotion support change slightly as product will be generally known. There is no need for special offers as it is in high demand.
Maturity meaning
Sales are towards their highest. Growth is slowing down. Extension strategy needed.
Decline meaning
Sales are falling. Customers see the product as old and switch to a newer replacement
Extension strategies for a product
-A business could lower its prices
-A business could redesign the packaging to make it more appealing
-Advertising the product to a wider audience
-Other markets may be developed (e.g sell in other countries or sell to a new target market)
