Unit 3- Decision Making to Improve Marketing Performance Flashcards
what else are departmental objectives known as?
Departmental objectives are known as functional objectives
what are some examples of objectives that the marketing department may have?
- increasing sales volume/ sales growth
- increasing sales value
- increasing market size
- market growth
what is sales volume?
increasing the volume of goods sold.
what is sales value?
increasing the revenue generated through the sale of goods and services.
why would a business have an objective to increase market size?
The marketing department may have objectives involving market size, market growth and sales growth which refer to increasing the size of the market so that a business can try and increase its sales.
why would a business have an objective to increase market share?
The marketing department may have objectives involving market share which involves a business increasing its market share to attract customers from competitors.
why would a business have an objective involving brand loyalty?
The marketing department may have objectives involving brand loyalty which includes retaining customers and ensuring repeat customers.
why and how would Tesco be able to increase its market share?
As discount retailers gain popularity, Tesco may set market share objectives to try and increase its customer base by accessing Lidl or Aldi’s current market share.
what are some calculations that show the success of a business?
- market growth
- sales growth
- market share
what is meant by market growth?
Market growth describes when an industry grows in terms of either volume or value.
what is meant by market share?
Market share refers to the proportion of a market that a business controls in order to satisfy customer needs.
how do you calculate market share?
(sales of one product) / divided by total market sales of that product) * 100.
what is meant by sales growth?
Sales growth occurs when a business increases its sales in terms of volume or value.
The coffee industry is worth £800 million in the UK. Starbucks’ sales are worth £250 million. What is Starbucks’ market share?
- Calculate the proportion of total sales 250 ÷ 800 = 0.3125 - Turn calculation into a percentage (market share) 0.3125 × 100 = 31.25%
why is this possible?
In 2018, Amazon had a 49% market share of e-Commerce in the USA, but only had a 5% market share of total commerce.
market share depends on who you define ‘the market’.
- online retail
- total retail
what is meant by market research?
Market research is the process of collecting and processing information about the market that a business operates in.
what does market research gather information on?
- demand
- competition
- target market
how can market research into demand help a business?
- Market research into customers’ demands is important for business success.
- Insights into customers’ wants and needs can help a business to improve the product, spot market opportunities and stay competitive.
- Insights into overall demand trends can help a business to spot opportunities for growth and potential threats from new products/technology.
how can market research into competition help a business?
- Market research into competitors can help a business understand the major threats in the market and then prepare the business to deal with these threats.
- Market research for established fashion labels like H&M would identify the threats that come from online platforms like ASOS or Boohoo.
how can market research into target market help a business?
Market research into a business’ target market will give the business insights into their customers’ wants and needs and how they are changing over time.
what is meant by qualitative research?
- Qualitative research generally collects information about opinions and views rather than things that can be quantified.
- For example, research into whether customers think the customer service at Waitrose is good is qualitative research.
what is meant by quantitative research?
- Quantitative research collects factual information on things that can be quantified and recorded easily.
- For example, research into the number of cans of Coca Cola sold in the UK last year is quantitative research.
Having predominantly created toys for boys, Lego decided to conduct market research lasting four years to understand more about girls as a target audience. Give ONE benefit of conducting market research.
1 mark
- Understand customer needs
- Make better marketing mix decisions
- Avoid financial/ timely mistakes
- Reduce risk
- Identify gaps in the market
Many businesses have changed their decision on the ‘place’ element with an estimated 50 high street stores closing per day in early 2021. Define what is meant by the term ‘place’ with an example strategy.
Place describes the distribution channel used by the business. For example, retailers or e-commerce.
The cost of a product is often a key factor when deciding to purchase a product. Part of McDonald’s success is due to its Saver Menu and low prices. Identify and explain ONE pricing strategy.
4 marks
+Price skimming – entering the market with a high price which reduces over time
+Price penetration – entering the market with a low price
+Competitive pricing – pricing products similar to competitors
+Loss leader – below cost pricing to encourage customers to shop and buy other products
+Cost-plus – adding a percentage to the cost of the product to create a selling price
For £25 per month, Pret’s Coffee Subscription scheme gives customers up to five drinks per day. Explain ONE benefit to Pret from this scheme.
2 marks
- One benefit is increased sales as customers are likely to purchase other items, such as sandwiches or snacks, when they get a drink.
- One benefit is regular income as the loyalty scheme has a monthly payment.
how is market mapping carried out?
Competitors products are mapped against different variables based on the features that they offer.
For example, products could be mapped based on their price and quality.
what is the benefit of market mapping?
Once businesses have segmented the market, they can use market mapping to identify a gap in the market by looking at what competitors offer.
what is a benefit of sampling?
Sampling reduces cost as a business can choose a cross-section of the population instead of collecting data from everybody.
what is a disadvantage of sampling?
Sampling may not accurately reflect the full target market if the sample is not chosen properly.
how can technology be used to analyse market research data?
Technology can be used to analyse market research data by completing calculations and creating graphs and charts which can be used by managers and leaders.
what sample of the population would a business use when trying to perform market research for hearing aids?
it can perform sampling on a cross-section of the elderly population.
what does price elasticity of demand (PED) mean?
Price elasticity of demand (PED) measures the responsiveness of quantity demanded to a change in price.
what is the formula for PED?
PED = (% change in quantity demanded)÷ (% change in price)
is the PED usually positive or negative?
The price elasticity of demand coefficient (number) is usually negative
why is PED usually negative?
an increase in price will result in a decrease in quantity demanded and a decrease in price will result in an increase in quantity demanded
what does a larger PED mean?
The larger the price elasticity of demand coefficient (number) the greater the responsiveness of quantity demanded to a change in price.
what does a PED of less than 1 mean?
If the price elasticity of demand is less than 1 (whether positive or negative) then this is described as price inelastic. This means that a change in price will lead to a change in quantity demanded which is less than the change in price.
what does a PED of greater than 1 mean?
If the price elasticity of demand is greater than 1 (whether positive or negative) then this is described as price elastic. This means that a change in price will lead to a change in quantity demanded which is greater than the change in price.
give an example of a product or service that is price inelastic?
the price elasticity demand for petrol is relatively inelastic as a change in price may not affect the quantity demanded of fuel as customers still need to purchase this product as it may be a necessity
what can businesses use PED data for?
+Marketing managers can use price elasticity of demand and income elasticity of demand to forecast and predict the impact of changes in price and income on the quantity of the business’ goods demanded by consumers.
-Using elasticity of demand allows marketing managers to act, such as advertising, to target customers if they think quantity demanded is likely to decrease.
what is the coefficient of a product with a perfectly inelastic demand?
0
what is meant by income elasticity of demand (YED) ?
Income elasticity of demand (YED) measures the responsiveness of quantity demanded to a change in consumer income.
how can businesses use YED?
Businesses can use income elasticity of demand to understand how the quantity demanded by customers will change in response to income.
what is the formula for YED?
YED = (% change in quantity demanded) ÷ (% change in income)
what does a larger YED suggest?
The larger the income elasticity of demand coefficient (number) the greater the responsiveness of quantity demanded to a change in income.
what does a positive coefficient for YED suggest?
If the coefficient is positive, an increase in income will increase demand and a fall in income will decrease demand.
what does a negative coefficient for YED suggest?
If the coefficient is negative, an increase in income will decrease demand and a fall in income will increase demand.
what does it mean for the income elasticity of demand to be less than 1?
If the income elasticity of demand is less than 1 then this is described as inelastic. This means that a change in income will lead to a change in quantity demanded which is less than the change in income.
what does it mean for the income elasticity of demand to be greater than 1?
If the income elasticity of demand is greater than 1 then this is described as elastic. This means that a change in income will lead to a change in quantity demanded which is greater than the change in income.
is the YED for premium cars elastic or inelastic and what does this mean?
the income elasticity demand for premium cars is relatively elastic as consumers may decide they cannot purchase a new vehicle if their income reduced, so quantity demanded is likely to change by more than the change in income
What can we learn about the income elasticity of Nestle Instant Coffee if a 2% increase in income leads the quantity demanded to fall by 4%?
-what does the minus show?
The income elasticity of demand is -4% ÷ 2% = -2.
The minus shows that an increase in one variable will decrease the other variable.
An income elasticity of demand of -2 shows that the elasticity is BLANK which means that any change in income will result in a BLANK change in quantity demanded.
1 . elastic
2 . greater
As income has risen, consumers are likely to have switched from instant coffee, which is an BLANK product, to bean-to-cup coffee, which is a BLANK good.
1 . inferior
2 . normal
what is meant by market segmentation?
Market segmentation is the process of dividing potential customers into different groups based on characteristics like age, gender, income and much more.
why do businesses use market segmentation?
- choosing market mix
- choosing promotion
- market mapping
how can market segmentation help with choosing the marketing mix?
-When choosing the product, geographic, promotional and price segmentation can help a business to understand its customers’ needs and wants.
For example, Next provides clothing aimed at infants and toddlers using its Next Kids range.
how can market segmentation help with choosing promotion? give examples
- Advertising in a newspaper probably is not the best way to target teenage girls, but a teenage magazine like Bliss might be.
- Segmenting a market can give businesses ideas about how best to promote their products.
how can market segmentation help with market mapping?
Market mapping is a process to identify a gap in the market by looking at what competitors offer.
what are the different variables that customers can be segmented into?
- income
- gender
- location
- age
why would a business segment a market based on income?
-give examples
- Certain products (luxury products) need to be aimed at people who earn a certain amount of money.
- For example, high-end kitchens (priced at £20,000) are more likely to be effective advertising in magazines like Ideal Home or the Sunday Times because these magazines tend to have readerships with high incomes.
