Unit 3 Flashcards
What does marketing involve?
Identifying and understanding customer needs and wants.
Businesses can then provide products and services that meets these needs profitably. It is about understanding customers, not just selling.
Why do businesses bother marketing?
To reduce risk of product failure
Understand their customers
Communicate their products in a way which encourages customers to buy them
Keep up to date with market trends in order to meet customer needs
What’s the marketing process?
Market research undertaken to understand customers
Develop and test products and services
Communicate products and services to customers
What’s a market segment?
A group of customers in a market that have similar characteristics and needs.
E.g. You can segment the car market by the type of car a person drives e.g. Sports, people carrier etc and suit their needs.
What are the benefits of market segmentation?
It helps carry out market research
You can tailor products to customer needs
Promotions can be targeted at specific groups
What’s market research?
Gathering information about customers, competitors and market trends by collecting primary and secondary data.
This helps the business make decisions.
When reading a case study on market research, what must you consider?
Was the right type of research used?
How accurate is the research?
Is the research representative of the target market?
Is there any information the market research doesn’t show.
What are examples of qualitative market research?
Interviews
Consumer panels
Questionnaires and surveys
Focus groups
What’s a product trial?
When consumers buy a product for the first time to assess whether or not they want to buy it again.
If product trial is successful, it could lead to repeat purchases and customer loyalty where customers will buy a product more than once and keep coming back.
What increases product trial?
Low trial prices Advertising Public relations Free samples Viral marketing Reminder adverts Promotions Product innovations Loyalty schemes e.g. Cards
What’s the product life cycle?
A model showing the general sales of a product over time.
1) Introduction - product is launched
2) Growth - if launch is successful, sales increase sharply and profit is made
3) Maturity - sale growth slows but repeat customers continue and loyalty builds
4) Decline - the product eventually becomes outdated and sales fall
5) Extension strategies - adaptions/new products extend the life cycle and sales
What is a product portfolio?
The range of products or services a business sells.
How does a product portfolio help a business?
It helps make decisions regarding:
- What products to launch and when
- When to withdraw a product
- What products are doing well or badly now and in the future
- How to increase sales
What is the cash flow of the different stages of the product life cycle?
Introduction - negative (more money out than in)
Growth - positive but small
Maturity - positive
Decline - experience issues/fall in cash flow
What’s the Boston Matrix?
A product portfolio analysis tool used to plan development of products (which can be linked to the life cycle).
Problem child: should the business invest or divest?
Star: very successful but growth needs to be funded for demand and cash flow may be a problem.
Cash cow: little growth but is established and can support others
Dog: few prospects. Is it profitable?
What are the segments of the Boston Matrix?
Problem child / question: low market share, high market growth
Star: high market share, high market growth
Cash cow: high market share, low market growth
Dog: low market share, low market growth (these are often used to fund or be funded by other products. It may also be kept in case the product becomes more fashionable)
What’s a brand?
A named product, logo, symbol or design consumers can identify, differentiate and associate with.
What are the benefits of branding?
Consumers are more willing to trial products in the brand range.
Brands encourage customer loyalty.
Consumers trust brands, leading to repeat purchases.
Brands can often charge premium pricing.
Consumers have a greater awareness of brands.
Brands can lead to increased sales and market share.
There is very little difference between non-branded products, meaning there’s nothing to differentiate it by.
What’s market mapping?
Showing the difference between brands, products or businesses based on two variables.
What’s product differentiation?
How does it help?
Making the product different from others which helps:
Position their products and target different market segments
Gain an advantage over rivals
Consumers to see their needs are being met by one product rather than another
How can a product be differentiated?
Unique and catchy name Quality Design, formulation or function Packaging Customer service Marketing (product, price, place, promotion)
What’s the marketing mix?
A combination of factors which helps a business to take customer needs into account. This includes considering the 4 P's: Product Price Place Promotion
What does product (of the marketing mix) mean?
The product must meet the needs of the customer and must consider…
Who it's aimed at The range Unique selling point Brand Packaging
…when differentiating their product
What does price (of the marketing mix) mean?
What the business will charge consumers
This is important as it indicates the quality
Changes in price can influence demand
Branded products tend to have a higher price
What does place (of the marketing mix) mean?
Having the product available to customers when and where they want it.
This can be done in various ways:
Direct - sell directly to customers, made easier with the growth of internet sales
Retail - distribution through retailers which helps sell by improving the buying experience and customer service.
Wholesale - breaks down bulk supply of a product and distributes it to retailers. It’s suitable for businesses which produce large quantities of a product.
What does promotion (of the marketing mix) mean?
The way which a business makes consumers aware of the product for sale.
This is done because it: Creates awareness Communicates product benefits and features to customers Boosts sakes Builds a strong brand image
What are the types of pricing?
Premium / Price skimming - very high
Competitive pricing
Penetrative pricing - low
What is research and development?
Scientific research and development in order to find the most appropriate/best appearance, cost and function of the product.
Scientific research involves researching new technologies, techniques and processes, making prototypes and trialled and tested working models and testing the product for safety and durability.
How does the design mix help a product differentiate?
The design mix consists of the cost, appearance and function which is used to differentiate.
Function - how well it does what it’s meant to. For a laptop, this would be memory, processing speed and software performance.
Cost - businesses try to keep costs low but improved functionality and appearance increase cost. The better screen size as technology, the more expensive the laptop.
Appearance - style and elegance of the product. Modern laptops can be found in various colours and are thinner and lighter.
What does managing stock involve?
It’s about managing materials a business holds in the most efficient and effective way.
What’s stock?
The materials to be used, work in progress and finished product a business holds.
What’s the maximum stock level?
The maximum amount of stock a business is able to hold.
What’s the reorder level?
The point at which new stock will be ordered.
The difference between this level and the point at which stock increases is the time it takes for stock to arrive - this is called the lead time.
What’s the buffer stock?
A.k.a the minimum stock level, it is the lowest amount of stock the business will hold.
It’s a safety net in case there is a surge in demand or a late delivery.
What’s just in time stock control?
Stock management where stock is delivered only when it is needed by the production system, and so none is kept by the business.
For this to work, there must be good relationships with suppliers, a well-organised production system and regular demand.
What are the benefits and drawbacks of holding stock?
Benefits: Can meet unpredicted surges in demand Can replace damaged goods Can receive discounts for bulk buying Limited problems
Drawbacks: May go out of fashion Might have to sell off cheaply Expensive to store May go off
What are the benefits and drawbacks of holding little or no stock?
Benefits:
Costs reducing for not having to store stock
Less chance of damaged or stolen goods
Employees can focus on tasks other than managing stock
Reduce cost of production which makes pricing more competitive
Too little:
Miss out on sales
Customers may go to competitors
Can affect reputation may disappoint customers
What’s quality control?
A part of the chain of production - the method where the product is made then a quality controller will examine and/or test for quality. (If not good enough, it would be thrown away).
What’s quality assurance?
Focusing on quality at every stage of the production process.
Everyone is involved and responsible for contributing towards the achievement of a quality standard.
As a result, there should be no defects.
For quality assurance, the business must:
Focus on quality at every stage
Involve customers and suppliers at the design stage
Aim for zero defects
Meet a quality standard
What are the benefits of good quality products?
Can charge a premium price Builds a stronger brand image Closely linked to meeting customer needs Differentiates the product Less waste as the are fewer faulty products.
What is productivity?
Output per worker.
It measures how much each worker produces over a period of time and can be calculated by:
Total output/number of workers
Increasing productivity leads to a greater competitiveness and can be improved by increasing output or lowering costs of production (inputs) while maintaining output.
How can output be increased?
Train employees better Invest in better equipment Introduce more effective work practises Work overtime Motivate employees
How can costs be reduced?
Improved purchasing (cheaper suppliers) Better design of products Cheaper labour costs Cutting overhead costs Streamline the production process Relocation
What is meant by the term ‘competitiveness’?
Competitiveness is where a firm has some kind of advantage over a rival firm, such as higher productivity, that will allow it to gain customers from rivals.
What improves customer service?
Meet and exceed needs Provide high-quality products and services Innovation (keep moving forward) Spot problems Listen to customers Deal effectively and quickly with complaints Be on time Train staff in customer service
What are the disadvantages of poor customer service?
Poor customer satisfaction
Poor brand image
Inability to differentiate and gain a competitive advantage
Inability to charge premium pricing
Fall in sales and profits - sales lost to rivals
Fall in repeat purchase and customer loyalty
What’s the sale of goods act?
The consumer protection law that all products must:
Be fit for purpose
Be of merchantable quality
Match their description
What’s the trade description act?
The consumer protection law relating to how businesses deal with and sell to customers.
All businesses must not:
Give false information
Fail to give (withhold) important information
Act aggressively (force sale)
What are the benefits and drawbacks of consumer protection laws?
Benefits:
- Following the law makes the business less likely to receive fines or be sued by customers.
- Meeting the laws may improve or maintain a business’s image.
- Improved relationship with stakeholders.
- good publicity is followed
Drawbacks:
- Businesses need to know the laws and keep up to date.
- Laws can restrict a business operating as they wish
- Businesses have to comply with laws by changing their products and practises which may be costly.
- If the business doesn’t follow the rules, it may result in bad publicity.
What is financial management?
It’s about changing monetary variables such as cash flows to achieve financial objectives such as improved cash flow.
Businesses try to speed up/increase inflows and slow down/reduce outflow.
Why is cash important?
A business can still be profitable but run out of cash.
If a business’s outflows are greater than it’s inflows (or outflows at a faster rate) then it could run out of cash and trading will cease.
How can a business improve/reduce cash outflows?
Delay paying invoices
Leasing rather than buying
Reduce stock orders
Improve credit terms with suppliers
Use cheaper supplies
How can a business improve/increase cash inflows?
Increase sales revenue
De-stocking
Reduce credit terms with customers
Encourage customers to pay early - incentives
Short term sources of finance e.g. Overdrafts and loans
Why is improving profit not easy?
Cutting material costs leads to lower quality products.
Cutting labour costs leads to lower motivation of workforce.
Cutting investment leads to damages in long term competitiveness.
Improving products leads to expensive development costs.
Increasing prices leads to customers switching to competitors’ products.
