UNIT 3. Chap 14: What is marketing? (Part 2)

Question 1

Def. Equilibrium price

Answer 1

The market price that equates supply and demand for a product.

Question 2

How is equilibrium price determined?

Answer 2

When demand and supply are combined, where the 2 lines intersect is the equilibrium price.

Question 3

Def. Market location

Answer 3

Geographically where the market is located. Local markets would have limited sales potential e.g florist shops. Then regional markets have more, then national markets, then international markets that have the greatest sales potential.

Question 4

Def. Market size

Answer 4

The total level of sales of all producers within the market. It can be measured in two ways: The volume of sales (units sold) or the value of goods sold (revenue).

Question 5

Why is the size of market important?

Answer 5

• The marketing managers can assess whether a market is worth entering or not.
• Firms can calculate their own market share.
• Growth or decline of the market can be identified.

Question 6

Def. Market Growth

Answer 6

The percentage change in the total size of a market (volume or value) over a period of time.

Question 7

Def. Market share

Answer 7

The percentage of sales in the total market sold by one business. Market share % = (firm’s sales in time period/Total market sales in time period) x 100

Question 8

What are the benefits of high market shares?

Answer 8

• Sales are higher which could lead to higher profits
• Retailers will be more keen to stock and promote best selling brands
• Being a ‘market leader’ can be used as promotional material.

Question 9

How can a firm’s market share decrease even though its sales are rising?

Answer 9

The total market sales are increasing at a faster rate than the firm’s sales => the market share will fall.

Question 10

How can a business add value to a product/service?

Answer 10

• Create a luxurious retail environment.
• Using high quality packaging
• Promotion and branding
• Create a unique selling point (USP)- the special feature of a product that differentiates it from competitors’ products.

Question 11

Def. Niche marketing

Answer 11

Identifying and exploiting a small segment of a larger market by developing products to suit it. Usually sell expensive and high status products. E.g Channel.

Question 12

Def. Mass Market

Answer 12

Selling the same products to the whole market with no attempt to target groups in it. E.g Toothpaste.

Question 13

What are the advantages and disadvantages of niche markets?

Answer 13

Advantages:
• Small firms can survive in markets that are dominates by large firms
• With little to no competitors, they can have high pricing (monopoly).
• May be bought as status products instead for their performance.

Disadvantages:
• Do not allow economies of scale -> higher costs
• Any decisions could have a high risk because there is too little consumer potential.

Question 14

Def. Market segment

Answer 14

A sub-group of a whole market in which consumers have similar characteristics.

Question 15

Def. Market segmentation

Answer 15

Identifying different segments within a market and targeting different products or services to them. Successful segmentation requires a business to have a clear consumer profile.

Question 16

Def. Consumer profile

Answer 16

A quantified picture of consumers of a firm’s products, showing age groups, income levels, location, gender and social class.

Question 17

What are the 3 commonly used bases for segmentations?

Answer 17

• Geographic differences
• Demographic differences
• Psychographic differences

Question 18

What are geographic differences?

Answer 18

• Consumer tastes change depending on where they are located.
• Geographical differences may occur from cultural differences (e.g alcohol cannot be promoted in Arab Muslim countries) or climate (e.g considering heating or refrigerating products).

Question 19

What are demographic differences?

Answer 19

• Demography is the study of population data and trends.

* Demographic factors are age, sex, family size, ethnic background, social class…

Question 20

What are the psychographic factors?

Answer 20

• To do with differences between people’s lifestyles, personalities, values and attitudes.

Question 21

What are the advantages of market segmentation? (4)

Answer 21

• Businesses can define their target market to design and produce goods that would lead to increased sales
• Identifies gaps in the market to be fully exploited.
• Focusing on target groups to avoid wasting finance.
• Small firms can compete in smaller market segments instead of the whole market

Question 22

What are the disadvantages of market segmentation? (3)

Answer 22

• Research and development costs are high
• Promotional costs would be higher because of the variation of them
• Production and stock holding costs are higher because there’s more variation in products