Unit 3

Question 1

Marketing

Answer 1

• Mutually Beneficial Exchange process where a business provides a god or service in exchange for something else (Usually money)
• Business gain profit - customer gains satisfaction
• Provides the link between customer and business

Question 2

Relationship Marketing

Answer 2

An approach to marketing in which a company seeks to build long term relationships with its customers by providing consistent satisfaction. It focuses on customer retention rather than one off sales.

Question 3

Market Analysis

Answer 3

involves examining the particular characteristics of a market such as market size and growth.

Helps managers understand the nature of the market they are operating in

Question 4

Decision Making to Improve Performance in Marketing

Answer 4

Process Involves:

• Setting Marketing Objectives
• Understanding what customers want and can afford
• Understanding the conditions in the market
• Understanding what the capabilities and strengths of the business are relatives to competitiors
• Understanding how to best deliver benefits that customers are willing to pay for in ways where the business earns suitable returns
• Implementing Marketing Decisions
• Reviewing

Question 5

The Marketing Process

Answer 5

Regularly go back and forwards

Set Marketing Objectives
|
Analyse Marketing data
|
Make marketing decisions
|
Implement Decisions
|
Review

Question 6

Ethics and Marketing

Business Ethics refers to whether the actions of a business decision are percieved as morally right or wrong.

Answer 6

Like all decisions, marketing decisions involve ethical issues:

• Should a business promote products at children? - pester parents to buy
• Should they produce and promote harmful products such as alchohol or cigarettes
• Should a buisness distribute sweets near schools due to obesity rates

Question 7

Marketing Objectives

a measurable and time specific target set for the marketing function; for example, to increase sales by 10 per cent within 3 years

Answer 7

1) Sales Value and Sales Volume targets

Sales Value - Measures the level of sales in a given period in terms of amount spent e.g. sales of £30 000

Sales Volume - Measures the level of sales in a given period in terms of units sold e.g. 5 million cans or 200 000kg worth.

2) Sales Growth Targets
- percentage change in sales volume or value over a given period
- Measure how much they are increasing

3) Market Share
- Measures the sales of one brand or business as a percentage of total market sales in a given period
- Sales of this Product
———————————- X100
Total Market Sales

4) Brand Loyalty
- Retaining Customers is an important aspect
- Keeping customers is easier than attracting new ones
- Brands are valuable - can sell company for more

Question 8

Internal Influences On Marketing Objectives

Answer 8

• Operations
• Existing Position
• Finance
• Human Resources
• Overall strategy and business objectives

Question 9

External Influences on Marketing Objectives

Answer 9

• Political
• Human Resources
• Social
• Technological
• Competitve

Question 10

Globalisation

Answer 10

Refers to the increasing trade between countries and the growing internationalisation of businesses

Pros:
Economic Growth
- Access to Labour
- Access to Jobs
- Access to Resources
Increased Global Co operation (work together)
Increased Cross - Border Investment
- enhance well fair on both sides of equation

Cons:
Increased Competition
Disproportiante Growth
- Increasing Migration (increasing gross domestic product)
Environmental Concerns

Question 11

Market Research and Decision Making

Market Research - involves gathering and analysing data relevnat to the marketing process. According to the American Marketing Association ‘ Marketing research specifies the information required to address marketing issues, designs the method for collecting informaiton, manages and implements the data collection process, analyse the results and communicates the findings and their implications.’

Market Research

Who (buys, e.g. parents buy food, clothes, shoes)
What (Perfumes as present, newspapers or news)
Where (how to distribute)
What influences (Personal, Economical, Social, Technical)
Why (e.g. people buy chocolate as reward)
When (Seasonal Products)

Answer 11

Analysis

Planning;
Considering what activites to undertake

Implementation;
Deciding how best to undertake the activites

Control;
Reviewing the success of marketing activities

Market Research Can be used for:
- Analyzing existing position of business e.g. size of market, trends in sales and strength of competitiors
- Deciding marketing objectives
- Identifying possible actions that could be taken
- Assessing how effective marketing decisions have been

Marketing Researching Process:
- Identify and define what it is a business wants to find out
- Decide how to gather data (Amount of money, amount of time it will take, how accurate findings will be)
- Gather data
- Analyse Data
- Interpret findings and present them to inform decision making

• Gather data

Question 12

Market Research and Competitiveness

Answer 12

Competitiveness - measures the extent to which a business offers good value for money relative to competitors. A business is competitive if it offers better value for money than rivals

Primary Marketing Research - collects and analyses data for the first time to use for marketing purposes

pros: Specific to business
Relevant up to date
Detailed
Cons: Expensive
Time consuming
difficult to collect

Secondary Marketing Research - collects and analyses data that already exists for markeitng purposes

Pros: Cheap
Quick to access
Cons: Not detailed specifically

Question 13

Sampling

Answer 13

Interview target population (cant measure the whole target population due to it being too expensive and take too long therefore they must sample)

A sample - a group of people or items selected to represent the target population

Target Population - all the items or people that are relevant to the market research being undertaken. For example, a business might be interested in all 16 to 18 year olds in the UK

Value of Sampling depends on how it is conducted
- People or items selected
- Questions asked
- Sample Size

Question 14

Types of Data

Answer 14

Quantitative provides data in numerical form (sales increase by 30%)

Qualitative provides data that is not in a numerical form and is descriptive - often describing why things have happened

Question 15

Market Mapping ( ON paper)

Answer 15

analyses market conditions to identify the position of one product or brand relative to others in the market in terms of given criteria

Question 16

Extrapolation

Answer 16

Making an estimation or conclusion by assuming that the existing trends will continue or a current method will remain applicable

E.g sales have grown 2 percent a year for the last five years a business may work on this assumption and ‘extrapolate’ sales forward on this basis

Valid way of forecasting sales, assuming conditions do not change.

E.g number of kids aged 11 in five years can be extrapolated from the number of kids aged 6 now however in every market there is disruptive changes that alter conditions

Question 17

Confidence Levels and Intervals

Answer 17

Confidence Level - the probability that the research findings are correct
Confidence Interval - the possible range of outcomes for a given confidence level. For example, you might have a 95 per cent confidence level that sales will be between £500 000 and £700 000

the degree of confidence will depend on factors such as;
- The size of the sample, the bigger the sample the more likely it is that the findings will reflect the population
- How the sample was constructed; for example, were the people involved selected randomly

Question 18

Price Elastictity of Demand

measures how responsive demand is to changes in the price, all other factors constant

Price and demand have inverse relationship
Elasticitity is how much less or how much more are they buying

If graph is perfectly horizontal that means it is perfectly elastic and if the price were to change no one would buy (infinite)

If the graph is perfectly vertical it is perfectly inelastic meaning the increase in price would not affect the demand for the product (0)

Unit elastic is when they go up or down the same and leads to a (1)

Answer 18

Price Elasticity of Demand
= % change in quantity demanded
————————————————
%Change in price

• Answer to the price elasticity of demand equation is usually because a price increase (+) leads to fall in quantity demanded (-) and vice versa; this gives negative answer overall
• The size of the price elasticity (i.e. the size of the number ignoring whether it is negative or positive) shows how responsive demand is to price

Inelasticity:
- E.g. Petrol
When petrol prices increase the demand falls but just a little and when it decreases the demand rises by just a little bit thereofre unresponsive to a change in price, this is because these types of products have very few subsitutes and is a necessity. This means the co efficient is <1

Factors Affecting Price Elasticity Of Demand:

Heavily branded product (more price inelastic)
Unique selling proposition (more price inelastic)
Patent Or Trademark (more price inelastic)
Expensive or difficult to switch to another supplier ( more price inelastic)
More substitutes available (more price elastic)
Over time (more price elastic)

Other influences on the price elasticity of demand:
- Time Period - over time customers will be able to search for more alternatives and so demand becomes more price elastic
- How expensive the product is. If it is cheap to begin with then customers may not be very sensitive to price as customers will still be able to afford the product.
- Who is paying for the product - if flights paid for by your company demand for flights is less sensitive to price than if you had paid yourself

Question 19

Key Terms

Answer 19

A Brand - is a promise of an experience and conveys to consumers a certain assurance as to the nature of the product or service they will recieve

A patent - protects new inventions and covers how things work, what they do, how they do it, what they are made of and how they are made

A trademark - is a sign which can distinguish the goods and services of a business from those of its competitiors (a business may refer to its trade mark as its ‘brand’)

Question 20

Income elasticity of Demand

measures the sensitivitity or responsiveness of the quantity demands of a product to a change in its price

Answer 20

Income elasticity of demand

%change in quantitiy demanded
————————————————-
%change in consumer income

Income elasticity:

Positive - ‘Normal’ products; an increase in income increases the quantity demanded
Negative - ‘Inferior’ products; an increase in income decreases the quantity demanded.
Less than one - Inelastic; the percentage change in quantity demanded is less than the percentage change in income
More than one - Elastic; the percentage change in quantity demanded is less than the percentage change in income

Question 21

Value of tech in gathering analysing data for marketing decision making

Answer 21

Big data - refers to large and complex data sets. These have been difficult to analyse in the past but improvements in tech is making the use of big data more feasible

Question 22

How Market Research affects other areas of business

Answer 22

Sales Forecast

• Cashflow Forecasting
• Marketing Budgets
• Staffing Levels
• Production Levels

Question 23

Sales Forecast

Answer 23

an estimate of expected sales revenue within a specific time frame, such as quarterly, monthly, or yearly.

Affects decisions by;
- Allows them to effectively get their affairs in order to benefit them in the future
- Make informed decisions based on future data

Question 24

Why Marketing Research can go wrong

Answer 24

Marketing Research can provide invaluable information to help marketing managers make decisions, however this does not gurantee success. Research helps reduce risk but does not remove it because;
- Changes in the markets - information may become outdated
- Way information is gathered - secondary data may not be in the format required / use samples that dont reflect the target population accurately
- Lack of Information

Question 25

Segmentation

Value of Segmentation:
- helps companies minimize risk by figuring out which products are the most likely to earn a share of a target market and the best ways to market and deliver those products to the market.

Answer 25

occurs when similar customer needs and wants are grouped within a market

Market Segments - Are the groups of similar needs and wants within a market

Targeting occurs when a business decides which segments it wants to operate in

Demographic Segmentation:
- refers to characteristics of the people in target population
- Based on age, gender.

Geographic Segmentation
- Based on geographical area in which customers are based
- Types of houses required in Iceland and Nigeria vary

Income Segmentation
- Based on high income - low income
- High income more likely to be in saving and investing

Behaviorial Segmentation
- Based on waht customers actually do
- When they buy
- How much they buy
- Brand loyalty
- How they benefit from the product

Question 26

Influences on Choosing the Target Market

STP process

Segmentation
|
Targeting
|
Positioning

Answer 26

A business will target segments where it thinks:
- There is sufficient demand - potential profit
- Where they have the ability to be competitive and gain sales

Question 27

Niche Marketing

Answer 27

Focusing on a particular segment of the market
E.g. a clothes retailer focusing on just dwarfs or small people
- Smaller than others but have identifiable needs and wants

Value is that by focusing on a niche it may be possible to compete in a bigger market such as fashion or the media without directly taking on the bigger businesses and therefore not being seen as a threat

On the other hand a niche market may not be very big and may be vulnerable to losing a few customers - total profits may be relative low
It the niche does grow and become popular it will attract the bigger businesses in as they can see the profits are becoming worthwhile. Niche may become mainstream over time.

Question 28

Mass Marketing

Answer 28

Approach aims to provide products that meet some of the needs of a large proportion of the market

Question 29

Positioning

Answer 29

Identifies the benefit and price combination of a product relative to competitors

Positioning based on

• Image
• Product
• Services
• Price

Question 30

Marketing Mix (7 p’s)

Price
Product
Place
Promotion
People
Physical Environment
Process

Answer 30

the combination of the marketing choices that can be used by a business to influence consumers to buy products

The PRICE:
- Price Charged for different versions of the product
- Payment Terms

The PRODUCT:
- Includes physical features and specifications of the product (what does it do, what it looks like, reliability, durabiliity and gurantees provided)

The PROMOTION:
- Refers to the way in which a business comunicates about the product
- Advertising, Public Relations, Sponsorship Deals, Sales Promotions, Sales Teams
- Promotional Mix - Branding - Sponsorship - Advertising paid for communications - Public relations unpaid for communications - Sales Promotion e.g. special offers

The PEOPLE:
- Involved in transaction
- People who take your enquiry if you ring up
- People who serve you in a shop

The PROCESS:
- Refers to how you buy the product
- A customers satisfaction with a good or service is affected by the process that is involved in buying or paying for it.

The PHYSICAL ENVIRONMENT:
- Refers to the physical premises of the business
- (E.g. if you go and buy a car, look around the showroom)

Changes in the Marketing Mix

Occur due to internal or external influences. Intermal Influence may include;
- Changes to financial position - might affect investment in new product development or promotion.
- Changes to staff bringing about new marketing opportunities. New singings at Liverpool may improve the team while leading to greater promotions or higher priced tickets
- Changes to operations - greater efficiencies leads to wider range of products being offered
- Changes to objectives - new managers or owners may set new targets for the business

External influences can be analysed using the PEST - C framework;
- Political and Legal
- Economic
- Social
- Technological
- Competition

Question 31

Types of Products

Answer 31

Consumer Products - Goods bought for consumption by the general public
- Convenience
- Shopping
- Speciality

Industrial Products - Goods bought for use in business processes
- machinery, manufacturing plants, raw materials,

Question 32

Analysis of Product Design

Answer 32

The product lies at the heart of the marketing mix
A produt consists of:
The core benefit it provides, for example, a washign machine provide clean clothes
The Tangible Product - refers to features such as its specifications, its reliability and its design
The Augmented Product - refers to extras such as the brand name, the delivery and any gurantee

Question 33

Product Life Cycle

Answer 33

Stages:

Development - where the product is being developed. There is investment into research and development, products will be tested to see if they are worth launching. Investments into product development but given there are no sales, cash flow is negative

Introduction - when a product is launched on to the market. Sales may be relatively slow as awareness can take time to build. High levels of investment may be required to promote. Cash flow still negative

Growth - when sales begin to increase at a relatively fast rate. Customes are increasingly aware of the product and sales are building. Managers continue investment to keep sales growing but by this stage cashflow should become positive

Maturity - when rate of growth of sales beging to slow; this could be because competitiors are entering the market taking away potential sales - sales may be high, it is just they are not increasing rapidly, possibly because they are so high already

Decline; this is when sales ae falling (growth rate is negative), perhaps because new and better products are now on the market

Value of the Product Life Cycle

• Shows stages product goes through from conception to its withdrawal from the market

Question 34

Price

Answer 34

Introduction:
- May enter with low price to gain sales or high price if demand is high

Growth:
- May be able to maintain a relatively high price

Maturity:
- Likely to consider cutting price to sustain sales

Decline:
- May cut price to boost sales

Question 35

Product

Answer 35

Introduction
- Likely to be limited number of versions of the product as it is just launched

Growth
- May develop other varieties/models

Maturity
- May start to focus on best sellers as demand is not growing fast any longer

Decline
- Focus on the most profitable models

Question 36

Distribution

Answer 36

Introduction
- May be limited as the product is not yet established

Growth
- Will become wider as more businesses will want to sell the product

Maturity
- May focus on best selling distribution channels

Decline
- May find it more difficult to maintain distribution as stores may drop your product for more popular brands (this is called delisting)

Question 37

Promotion

Answer 37

Introduction
- May focus on raising awareness of the product

Growth
- Continuing to raise awareness

Maturity
- Focus on benefits of this product compared to rivals

Decline
- Reduced to focus on the most cost effective methods

Question 38

Extension Strategies

Answer 38

Occurs when a business attempts to prevent sales of a product from falling and avoid or delay the decline stage of the product life cycle. For example, a business might

• Increase promotional expenditure to renew interest in the product or to increase usage of the product
• Revamp the product in some way, for example, new packaging, new flavours
• Find new target market segments for the product, for example, new countries to sell it in or target a new age group with the product
• Find new usage occasion, for example cereal companies are keen to try and increase consumption at other times in the day apart from breakfast

Question 39

The Boston Matrix

Helps managers categorise their products and take a view on what they shoudl do next. E.g:
- If all the products are cash cows managers might worry aboutthe future success of the organisation because sales growth is slow - managers may decide to invest to build some question marks and stars to help ensure future sales.
- If all products are dogs managers would definetly worry because they all have low market shares in slow growth markets - lead to drastic action being taken.

Answer 39

analyses all of the firms products in terms of their market share and the growth of the market

Dogs
- Relatively low share
- Slow growth market
- Marketing managers must either invest to revitalise these products or let them decline and eventually remove them

Cash Cows
- Well established
- Relatively High market share
- Slow growth market
- Mature and therefore not growing fast anymore
- Do not need promoting as heavily as some others because they are well known and given their relatively high sales they generate a high level of funds for the business

Problem Children / Question Marks
- Fast growth market (therefore appealing)
- Not established
- Relatively small market share
- Question Marks because they may turn out well but equally may not
- Manager may want to invest to protect and grow these products

Stars
- Fast growth market
- High Market Share
- Leading brand in a new type of app
- Managers will need to keep investing in, promoting and gaining more distribution for these products to ensure they remain stars.

Question 40

A balanced portfolio

Answer 40

an appropriate mx of products in terms of market shares and market growth

Question 41

Analysing Pricing Decisions

Answer 41

-Price elasticity of demand - if demand is price inelastic - possible to increase revenue by increasing price - because price increase leads to a smaller percentage fall in quantity demanded.
- If demand is price elastic it is possible to increase revenue by reducing the price - because the percentage increase in quantity demanded is greater than the cut in price in percentage.
Business will consider the price elasticity of demand before making price changes

• Costs - want to make profit - must ensure that over time the price more than covers the cost per unit.

Question 42

Pricing

Answer 42

Penetration Pricing:
- Occurs when a business charges a low price to gain market share
- Suitable when demand is senstiive to price (price inelastic)
- A low price can gain sales and enable the business to benefit from producing on a large scale
- E.g. may be able to gain lower prices from suppliers if it is buying materials on a large scales

Price Skimming:
- Occurs if a relatively high price is charged when a product is first launched
- Most appropraite when demand is price inelastic e.g. heavily branded
- For example when a iphone is first released and there are often queues outside stores

Dynamic Pricing:
- Occurs when prices are changing rapidly in response to changing demand conditions.
- For example, airlines and hotels can track the number of enquiries at any moment and the number of seats or roomsleft and change the price accordingly.
- This means there is no ‘one’ price for a ticket or room

Question 43

Analysing Promotional Decisions

Answer 43

• The target audience
• The promotional budget
• the message
• technology

Social Media - refers to the social interaction among people where they create, share or exchange information and ideas in virtual communities

Viral Marketing - is a marketing technique that uses social media and networks to raise brand awareness and boost sales by getting users to recommend the promotional campaign (such as a blog or advert) to others.

Question 44

Analysing Branding Decisions

Answer 44

Brand represents a promise made by the business to provide a specific set of benefits.
- Brand is recognised by customers and has various associations for them. A brand has a promise of an experience
- The values of a brand are not created immediately; the associations and trust tend to build over time.

If Brand is Strong May Mean That:
- Demand is more likely to be price inelastic
- Customers may become brand ambassadors, telling others abou the brand and convincing them to try it
- Customers may be more open to other products launched under the same brand name
- It may be difficult for other brands to enter the market or gain market share

Question 45

Analysing Distribution Decisions

Multichannel Distribution - means that customers can buy the product in several ways, for example, in store, online or ‘click or collect’

Answer 45

The Degree of Coverage:
- Does the business intend to target customers globally, nationally or locally.
- Broader the spread of customers more a business may try to use intermediaries to reach them rather than try to distribute directly to them

The Costs of Different Distribution Strategies:
- Setting up own distribution network may be exoensive and take time however online sales opportunities mean businesses can now be global easily rather than having to open stores around the world

The Nature Of the Product:
- If you have a high value product that sells in relatively low quantities it may be realistic to distribute these products direct to the customer
However is low value and sells in high quantities (chewing gum) a business is likely to use intermediaries such as wholesalers and retailers.

The Degree of Control a Business wants over the way its products are Priced and Promoted
- If an intermediary is used, for example, this business may gain ownership and therefore control how the product is displayed, promoted and priced. Some companies keep close control of the outlets that sell their products because they want to protect the brand.

How Customers Expect to access the product and what technology allows a business to deliver
- Increasingly, shoppers are expecting mulitchannel distribution. This means they want to access a product in many ways e.g. businesses such as tescos offers its products:
- In out of term hypermarkets and supermarkets
- In more local city stores
- Online

Question 46

The Importance Of An Intergrated Marketing Mix

Answer 46

• The position in the product life cycle; for example, in the decline stage the price may need to be lowered
• The Boston Matrix; there may need to be investment in more distribution for the star products, for example, to build on their success
• The type of product; the price must be competitive with rivals for shopping goods, for example, but it is possible to charge higher prices than rivals for speciality products provided the brand is strong enough
• The Marketing Objectives; for example, a desire to increase sales significantly may require more investment in promotion
• The Target Market; for example, the promotional mix may need to be digitally based for a youth market and use social media but these methods are unlikely to be as effective for buyers aged over 80
• Competition; for example, a business may want to differentiate itself from rivals and so developments in their products may require more investment in new product development to keep pace
• Positioning; for example, a busness such as IKEA wants to provide well designed furniture at low prices. This affects aspects of the marketing mix such as the product, the physical environment, the process and the people.

Question 47

The Value Of Digital Marketing and E-Commerce

E - commerce is the buying and selling of products through an electronic medium such as the internet

Answer 47

Development in technology have significantly affected most aspects of business not least marketing. For example, digital marketing has enabled businesses to:
- Gather more information - more effectively and quickly - provided more insight into markets and customers
- Build relations with customers more effectively by being able to track their buying habits and recommend other products they might like
- Target very specific segments - business can now set up online quite cheaply and focus on quite a small segment of the market
- Involve customers more in marketing process; customers can provide reviews of products to help other potential buyers; also contribute to designs and ideas online
- Target Global Markets 24 hours a day