Unit 3 - Decision-making to improve marketing performance

Question 1

Define MARKET SHARE

Answer 1

MARKET SHARE is the percentage of a market’s total sales that is earned by a particular company over a specified time period.

Question 2

Define BRAND LOYALTY

Answer 2

BRAND LOYALTY is when consumers become committed to a particular brand and make repeat purchases over time.

Question 3

What might marketing objectives include?

Answer 3

1) Sales volume and sales value
2) Market size
3) Market and sales growth
4) Market share
5) Brand loyalty

Question 4

What might the value of setting objectives include?

Answer 4

1) Target setting - this gives the business a focus and sense of direction
2) Motivation - Objectives can be motivating for those responsible
3) Evaluation performance - As with all objectives, they need to be SMART. All of the marketing objectives outlined above are quantified and therefore measurable. As a result, they can be used to judge performance.

Question 5

What are the possible calculations for market share, sales growth, market growth, and market size?

Answer 5

Market share: sales of firm/total market sales x 100

Sales growth: difference in sales/earliest year x 100

Market growth: difference in sales/earliest year x 100

Market size: (sales/market share) x 100

Question 6

What external influences might effect marketing objectives and decisions?

Answer 6

1) Market and competition - Marketing objectives are likely to vary according to whether the market is growing or static, and depending on the actions of competitors.
2) Economic factors - Factors such as the stage of economic cycle and interest rates will influence objectives as they will affect consumer spending.
3) Social factors - Over time, consumer tastes and fashion change and this needs to be reflected in marketing objectives.
4) Ethics - Since consumers are more aware of ethical issues, many businesses have reviewed their marketing objectives to reflect this. This can be seen in the move to promote fair trade products and the fact they do not exploit workers in sweat shops.
5) Technology - This has had a big impact on the way businesses both produce and sell their goods and services. Growth of online sales and the facility for consumers to design their own products (mass customisation) have had a major impact on marketing objectives.

Question 7

What internal influences might effect marketing objectives and decisions?

Answer 7

1) Finance available - All marketing functions need to operate within the budget allocated, although a business whose finances are in a healthy state will be able to allocate larger amounts to marketing.
2) Production capacity - The marketing function must liaise with the operations function in order to ensure that is it physically possible to achieve any targets set for sales growth.
3) Human resources - Objectives set must also take into account the size and capabilities of the workforce. Increasing market share might be difficult without further recruitment and training.
4) Nature of product - Any objectives set need to reflect the nature of the product. Innovative products might have considerable scope for growth, whereas products such as bread and fuel will have little scope.

Question 8

Briefly outline the difference between sales volume and sales value.

Answer 8

Sales volume refers to the number of units sold. Sales value represents the value in monetary terms of those sales.

Question 9

How is it possible for sales to increase but market share to fall?

Answer 9

If the actual market is increasing in size faster than an individual company’s market share, then sales will rise but market share fall.

Question 10

Why would a business wish to achieve brand loyalty?

Answer 10

If a business can achieve brand loyalty, not only will it mean returning customers and maintaining market share, but these customers are also likely to recommend the product to others.

Question 11

Identify three internal and three external influences on marketing objectives.

Answer 11

Internal:

a) Finance available
b) Production capacity
c) Human resources

External:

a) Economy
b) Competition
c) Ethics

Question 12

If XYZ plc market share is 5% and its sales are £30m, what is the total market share?

Answer 12

Total market size = (sales/marketshare x 100

30/5 = £6m x 100 = £600m total market size

Question 13

Define MARKET RESEARCH

Answer 13

Market research is the process of gathering data on potential customers.

Question 14

Define PRIMARY RESEARCH

Answer 14

Primary research is the collection of information for the first time for specific purposes.

Question 15

Define SECONDARY RESEARCH

Answer 15

Secondary research is the collection of data that already exists and has been used for other purposes.

Question 16

Define QUALITATIVE MARKET RESEARCH

Answer 16

Qualitative market research is research into the attitudes and opinions of consumers that influence their purchasing behaviour.

Question 17

Define QUANTITATIVE MARKET RESEARCH

Answer 17

Quantitative market research is the collection of information on consumer views and behaviour that can be analysed statistically.

Question 18

Define MARKET MAPPING

Answer 18

Market mapping is using a diagram to identify all the products in the market using two key features, e.g. price and quality.

Question 19

Define SAMPLING

Answer 19

Sampling is the selection of a representative group of consumers from a larger population.

Question 20

Define CONFIDENCE INTERVAL or MARGIN OF ERROR

Answer 20

Confidence interval or margin of error is the plus or minus figure used to show the accuracy of results arising from sampling.

Question 21

Define CONFIDENCE LEVEL

Answer 21

Confidence level is the probability that research findings are correct.

Question 22

Define EXTRAPOLATION

Answer 22

Extrapolation analyses past performance of a variable, such as sales, and extends the trend into the future.

Question 23

Describe what a TREND is

Answer 23

A trend is an underlying pattern of growth or decline in a series of data.

Question 24

Define CORRELATION

Answer 24

Correlation is a statistical technique used to establish the extent of a relationship between two variables such as the level of sales and advertising.

Question 25

Define ELASTICITY

Answer 25

Elasticity is a measure of the responsiveness of demand to a change in a variable, e.g. price or income.

Question 26

Define MARKET SEGMENTATION

Answer 26

Market segmentation is dividing the market into identifiable sub-markets, each with its own customer characteristics.

Question 27

List three ways primary market research differs from secondary market research.

Answer 27

Primary market research differs from secondary in that it is:

1) first-hand information
2) specific to the purpose required
3) more expensive to collect

Question 28

Explain the difference between qualitative and quantitative market research. Support your answer with examples of situations in which they may be appropriate.

Answer 28

Qualitative market research is designed to discover the attitudes and opinions of consumers that influence their purchasing behaviour. A food manufacturer might use a consumer panel to test a new chocolate bar and receive detailed opinions on the taste and texture of the new product.

Quantitative market research is the collection of information on consumer views and behaviour that can be analysed statistically. This type of research might be used to investigate whether a new product is likely to achieve a sufficient volume of sales to make it financially viable.

Question 29

Briefly outline the value of sampling.

Answer 29

A business is unlikely to have either the time or the financial resources to interview the whole of the population, so it will interview only a small relevant sample when undertaking market research. This saves the business both time and money.

Question 30

Distinguish between correlation and extrapolation.

Answer 30

Correlation is a statistical technique used to establish the extent of a relationship between two variables such as sales and advertising.

Extrapolation analyses the past performance of sales and uses this to forecast the future trend of sales.

Question 31

In market research 60% of respondents preferred a particular soap brand. What does a 5% confidence interval tell analysts about this result?

Answer 31

The confidence interval in market research is the margin of error. In this case, if 60% of all respondents (sample) prefer a particular soap, market research analysts can be confident that between 55 and 65% of the overall population would prefer that brand.

Question 32

Define MASS MARKETING

Answer 32

Mass marketing is when businesses aim their products at most of the available market.

Question 33

Define MARKETING MIX

Answer 33

The main variables comprising a firm’s marketing strategy.

Question 34

A business has calculated the price elasticity of its product at -2.3. What would be the impact on revenue of a price increase?

Answer 34

A figure of -2.3 indicates elastic demand (ignore the minus sign). As a result, a price increase would result in a fall in demand and therefore a decline in revenue.

Question 35

Briefly outline why demand for a luxury product is likely to be income elastic.

Answer 35

Spending on luxury items requires consumers to have disposable income. This means spending on luxuries will be greater when income is rising and less when it is falling as in the recession of 2008. This means spending on luxuries is responsive to changes in income, i.e. it is income elastic.

Question 36

Define PRICE STRATEGIES

Answer 36

The medium- to long-term pricing plans that a business adopts.

Question 37

Define PRICE ELASTICITY OF DEMAND

Answer 37

Price elasticity of demand is the extent to which the level of demand for a product is sensitive to price changes.

Question 38

Define PROMOTION

Answer 38

Promotion is bring consumers’ attention to a product or business.

Question 39

Define PROMOTIONAL MIX

Answer 39

The combination of methods used by businesses to communicate with prospective customers to inform them of their products and to persuade them to buy these products

Question 40

Briefly outline the benefits and potential drawbacks of market targeting.

Answer 40

Market targeting results in more effective marketing as it can be directed specifically at the target group and convey a clear message relative to the positioning of the product or service. Resources will also be used more effectively as a result of the targeted marketing approach.

Market targeting may, however, result in potentially profitable segments being overlooked. It may also be the case that changes in taste and fashion are missed.

Question 41

Distinguish between a niche and a mass market.

Answer 41

Mass market refers to the whole market, whereas a niche is a small part of that larger market, e.g. Ford aims its cars at the whole market, whereas Porsche targets a small section of the car market.

Question 42

Define MULTI-CHANNEL DISTRIBUTION

Answer 42

Where firms use more than one type of distribution channel.

Question 43

For what reason has the marketing mix been extended from 4Ps to 7Ps?

Answer 43

1) Product
2) Place
3) Price
4) Promotion
5) People
6) Process
7) Physical environment

People, process and physical environment have been included in the marketing mix of 4Ps due to the growth of the service sector and the importance of these Ps to that sector.

Question 44

Briefly explain two factors a marketing manager will take into consideration when designing a marketing mix.

Answer 44

A marketing manager is likely to take into consideration market research and the nature of the product when designing a marketing mix. Market research may reveal information regarding an acceptable price for consumers or details about particular functions of the product. The nature of the product is also likely to be used to determine where it is sold and the price charged.

Question 45

Briefly explain the difference between the Boston matrix and product life cycle and suggest how managers might use them to make decisions about the portfolio of products being sold.

Answer 45

The Boston matrix allows businesses to undertake product portfolio analysis based on the product’s market growth rate and its market share. It classifies products into four categories and helps managers to have products in each one.

The product life cycle is the theory that all products follow a similar pattern, moving through five stages during their life. Its use can avoid circumstances where firms have a range of products all in declining popularity.

Question 46

Explain the difference between a cash cow and problem child in the Boston matrix.

Answer 46

A cash cow is a product that has a large share of a market that is growing quickly.

A problem child is a product that has a small share of a market that is growing quickly.

Question 47

Using examples, explain the difference between a pricing strategy and a pricing tactic.

Answer 47

Pricing strategies are the medium- to long-term pricing plans that a business adopts.

Pricing tactics are a series of pricing techniques that are normally used only over the short term to achieve specific goals such as increasing sales.

Question 48

Outline the circumstances in which a business might decide to use a strategy of price skimming.

Answer 48

Price skimming may be appropriate when a new product is launched onto the market, especially if it has unique selling points that differentiate it from rivals’ products.

Question 49

State four elements of the promotional mix.

Answer 49

The promotional mix includes:

1) Advertising
2) Public relations
3) Direct selling
4) Merchandising

Question 50

Explain two influences on the promotional mix of a newly opened restaurant.

Answer 50

Two in

Question 51

Explain two influences on the promotional mix of a newly opened restaurant.

Answer 51

Two influences on the promotional mix are the amount of finance available and the target market. Finance is likely to be limited for a new business and will need to be carefully budgeted. The restaurant’s target market will also have an impact - is it targeting low- or high-income diners? The promotional mix will be determined accordingly.

Question 52

Tesco uses a multi-channel distribution strategy. Briefly outline the different channels it uses.

Answer 52

Tesco sells its products both in its shops and online. It also operates a click and collect service.

Question 53

Briefly explain why people and process are just as important when selling products as they are for selling services.

Answer 53

The people selling a product and the process used can make or break the sale of that product, so they are just as important as they are for selling a service.

Question 54

Briefly explain how positioning and product life cycle might affect the marketing mix.

Answer 54

Product life cycle and positioning will affect the marketing mix in that a product in the growth stage of the product life cycle will require a different mix from one in the maturity stage. In addition, in terms of positioning, a convenience product will require a different mix from a luxury product.

Question 55

Briefly explain how digital marketing has benefited businesses.

Answer 55

Digital marketing has benefited businesses in that they have the ability to gather more detailed information about consumers and to build relationships with them. For example, through its loyalty card Tesco can target promotions at individual customers.