Unit 3 Flashcards
Identify potential marketing objectives
Sales volume
Sales growth
Increase market share
Increase market size
Brand loyalty
Explain the term ‘market share’
The percentage of total sales within a market
sales of business / total market sales X100
Identify the formula when calculating market size?
sales / market share X100
Identify the formula when calculate market growth?
Difference in total market sales / earlier sales X100
Subtract the market size for year one from the market size for year two to find the difference. Divide the result by the market size for year one and multiply by 100 to convert to a percentage.
Identify and explain potential external influences on marketing objectives
Competition: objectives will vary according to the actions of the competitors
Economic factors: consumer spending
Social factors: trends
Ethics: consumer may become more aware of environmental issues
Identify and explain potential internal influences on marketing objectives
Finance: operate within budget allocated
Human resource: Skill of workforce
Production capacity: is the work force physically able to achieve growth targets
Nature of product: innovative products have more scope for growth
Explain the difference between primary and secondary research. Use examples to support your answer.
Primary research: collection of information done directly by or for the business for the first time e.g. surveys, observation, focus groups, test marketing.
Secondary research: second hand research, gathering data that already exists e.g. published reports, internet.
Explain the term market research?
Gathering data on potential customers
Explain the difference between Quantitative and Qualitative market research. Use examples to support your answer.
Quantitative: numerical information on consumers views that is analysed statistically e.g. sales, market size, price
Qualitative: opinions of consumers that influence their purchasing behaviour e.g. product, packaging, branding, pricing
Identify the features involved in a market map
Price
Quality
Shaped as “+” (price across one line, quality on the other)
How is marketing data interpreted?
Market data is interpreted through the identification of correlation; the extent of a relationship between two variables e.g. level of sales and advertising expenditure
Positive correlation = / up
Negative correlation = \ down
Explain the term extrapolation
Extrapolation is using known data to predict future data. By looking at past data it may be possible to PREDICT future data (e.g. sales) by extending a trend line on a graph.
Identify a drawback of extrapolated data?
it ASSUMES/PREDICTS that the future will be similar to the past. e.g. there could be rapid change in fashion and technology
Explain what is meant by the term ‘elasticity’
Elasticity measures how responsive demand is to a change in a variable such as price or income.
Elasticity measures how responsive demand is to a change in either price or income.
Example: if this product’s price increased by 20% would i still buy it = price elasticity of demand
If my income changes, would i continue to purchase this product or find a cheaper/higher quality alternative = income elasticity of demand
What is market segmentation?
Dividing the market into sub markets with its own customer characteristics e.g. age, gender, income, social class, geographical location.
What is the marketing mix?
Combination of marketing activities to best meet the needs of its targeted market 7p’s
What is the difference between niche and mass marketing?
Niche: business targets a smaller segment of a larger market where customers have very specific needs and wants.
Mass: business sells to larger part of the market where there are many similar products offered by competition.
What factors influence growth?
Trends
Technology
Economic growth e.g. more money
social changes e.g. vegan
What are some examples of what a market can be segmented into?
Demographics = gender, little kids, social class
Geographics = McArabia
Phychographic = grouping customers according to attutude e.g. buying Nike shoes from Nike instead of sport direct because you think the quality is lesser for the same product
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Describe the product lifecycle
Product lifecycle is a theory that all products follow a similar pattern throughout their life.
Development - undertaking research Introduction - sales are zero Growth Maturity Decline
What are some extension strategies?
New market for existing product
Change appearance or packaging
What categories can a product be placed in when using the Boston Matrix?
Market growth (left) Relative market share (top)
Star (top left)
? (top right)
Cash Cow (bottom left)
Dog (bottom right)
What could market research involve?
- Study of market TRENDS and characteristics
- Sales forecasting for product
- Analysis of market share
What is a ‘sample’ and what are the different types?
Sampling: a sample representative of whole target market
- random sampling: each member of population has an equal chance of being included
- stratified sampling: separates population into segments (strata)
- Quota sampling: splits population into groups with common characteristics
Explain what is meant by a margin of error?
plus or minus figure used to show the accuracy from sampling
What are the benefits of market segmentation?
More effective marketing = specific to target group
Resources will be used more effectively
Sales and market share may increase as result of clear focus marketing
What are the drawback of market segmentation?
By targeting specific segments of the market a business may overlook a potentially profitable segment. It is possible that any changes in fashion could be overlooked
What variables make up a businesses marketing mix?
Place
Product
Promotion
People
Process
Physical environment
Product
What are the advantages and disadvantages of targeting a niche market?
+ may benefit price skimming
+ can be highly profitable
+ customer loyalty
- could attract competition if profitable
- may be difficult to generate profit
What factors should a manager take into account when designing the marketing mix for a product?
Technology
Finance: profit levels, cashflow
Nature of product
Market research
What are some influences on new product development
Technology
Competitors actions
Entrepreneurial skills of managers and owners
What is a USP and explain the importance of a unique selling point
USP: allows a business to differentiate its products from others in the market.
+ charge premium prices
+ brand loyalty
+ advertise difference between the product and its rivals
Briefly explain the first 3 stages of a products lifecycle
Development: business undertakes research and develops new product. Expensive stage as business is ‘testing’ the product
Introduction: Products initial appearance on the market. sales are ZERO and the product has negative cash flow. Sales should begin to rise = some revenue. Promotion is expensive therefor cash flow is still negative. Price might be high to make up for high initial launch costs.
Growth: Sales rise rapidly and cash flow improves. Profit per unit sold are likely to improve. May start with price skimming. The products success will depend on how competitors react to it.
Briefly explain the last 2 stages of a products lifecycle
Maturity: sales curve peaks and begins to decline. Cash flow and profits decline. Competitors emphasise the difference and improvements of their version of the product.
Decline: Sales fall rapidly. Promotional efforts will be cut too.
What is the Boston Matrix?
The Boston allows a business to undertake product analysis based on its market share and market growth
What two variables are involved in terms of the Boston Matrix?
Market share and market growth
What is price elasticity of demand (PED)
The percentage change in demanded of a product over the percentage change in price.
PED: extent to which the level of demand for a product is sensitive to price changes.
How do you calculate price elasticity of demand?
PED = % change in quantity demanded / % change in price
Give an example of PED
an increase in price is almost certain to reduce demand, while price reduction can be expected to increase levels of demand.
What is promotion?
bringing the consumers attention to a product or business
Why should one promote?
- attract new customers
- retain existing customers
- improve position of business in market
- to ensure survival and growth
- increase awareness of product
What are the types of promotion and give exapmles
Above the line: advertising through media e.g. television, internet, instagram
Below the line non media methods of promotion e.g. celebrity endorsement, sponsorships
What are the elements of the promotional mix and briefly explain them
Advertising = using media to communicate with customers
Sales promotion = offers designed to increase short term sales
Merchandising = visual representation of a product to the consumer
Personal selling = a sales representative selling directly to a customer
Branding = establishing the product and distinguishing it from competition
Public relations = promoting the product through a favourable public figure - for example through sponsorship.
Direct selling = selling directly to final customer
What do we need to consider when selecting the appropriate promotional mix?
Types of product
size of market
cost
competition
What are some influences on the promotional mix?
Objective of firm: new product promoted through a launch or tv
Costs: depends on size of marketing budget
Competitors actions: e.g. rivals engage in heavy advertising = likely to respond the same way
Briefly explain the elements of the marketing mix
Product - product consumer is buying
Price -
Place - how the product is distributed
Promotion - how the customer is persuaded to buy the product
Physical environment - elements of the physical environment the customer experiences
People - people who make contact with customers in delivering the product
Process - the process that deliver a product to a customer
What makes an effective marketing mix?
Achieving marketing objectives
Meet customers needs
Balanced and consistent
Creates competitive advantage
Consistent with chosen target market
What is the distribution of a product
range of activities necessary to make the product available to customers
Identify and describe the types of distribution channels?
- Traditional = producer > wholesaler > retailer > consumer
- Modern = producer > retailer > consumer
- Direct = producer > consumer
retailer
Explain the term market share?
proportion of market that the business controls
How do you calculate market share?
sales / total market sales x 100
Explain the term ‘marketing’
Marketing is the link between the business and the consumer
Identify the benefits and drawbacks of primary and secondary research
Primary: directly related to the specific needs of a business, however, it is expensive and takes long to undertake.
Secondary: fast, easy and cheap to gather, however, findings may be outdated and inaccurate.
Identify what a market map enables a business to do
Market mapping enables a business to identify the position of its product in the market.
Identify and explain the methods in which information from potential customers can be collected
Random sampling: each member of the population has an equal chance of being included, randomly selected.
Stratified sampling: population divided into a strata/segment avoiding dias.
Quota sampling: population split into shared common characteristics.
Explain the reasons to conducting market research
Through market research a business can identify:
- declining/growing markets
- customer buying patterns
- identify potential for success
Explain how price elasticity of demand (PED) can be interpreted
Elastic: change in demand is more than the change in price, tend to be luxuries, PED value of 1+,
Inelastic: change in demand is less than the change in price, tend to be necessities, PED value of less than 1
Unitary: change is demand is equal to change in price
Give an example of a product with a PED of 1+
Price elastic products have a lot of alternatives e.g. food, (if Cadbury increase prices, then an alternative can be found - Nestle)
Give and example of a product with a PED of > 1
Price Inelastic products have habitual consumers e.g. tabaco or a train fair (you have no other option)
How is PED calculated?
PED = percentage change in demand / percentage change in price
What factors need to be evaluated before changing price?
Brand loyalty
Competitors actions
Consumers trends
Substitutes/alternatives
Describe a business that have adopted a multi channel of distribution
A business that uses more than one type of distribution channel.
Explain what is meant by the term ‘advertising’
Advertising is a form of communication using mass media to influence the buying behaviour of consumers.
Identify the types of advertisement
Informative advertising: providing factual information to increase consumers awareness.
Persuasive advertising: attempt to get the consumer to purchase a particular product by claiming its better than others.
Explain what is meant by the term ‘merchandising’
In store promotional activity done by manufacturers at the point of sale.
Identify and explain important aspects that should be considered when advertising a product
Packaging - attractiveness to customers
Branding - establish a good identity for product
Personal selling - sales representatives
Public relations - promoting a product through a favourable public figure - for example sponsorships
