Unit 3: Marketing Flashcards
Why do some markets become more competitive?
- Government intervention in markets: Deregulation, selling off public sector organisations to the public sector (privatisation).
- Transportation (the growth of free trade between countries) so businesses can send its products globally.
- Internet (the growth of e-commerce and social media networks). This has made customers more aware of the suppliers of products and increased consumer choice and competition within the workplace.
How do businesses respond to changing spending patterns and increased competition?
- Product development - market research identifies how the needs and wants of consumers are changing. This info can be used to increase the satisfaction of consumers.
- Improve efficiency - efficient use of resources help a business to reduce average costs.
- Increased promotion - Increasing advertisements, promotional techniques such as money off coupons, persuading consumers to buy a firms product instead of a competitors product.
Define niche marketing
Developing products for a small segment of the market. (High priced goods).
Advantages of a niche market
- Smaller firms are able to survive and earn profit.
- There is less competition in this market. Firms do not waste scarce resources responding to customer actions.
Disadvantages of a niche market
- Opportunity to earn high profits attracts competitors and this reduces prices and future profits.
- Small changes in consumer spending patterns can have a big impact on businesses operating in niche markets.
Define mass marketing
Selling the same product to the whole market, for example flour.
Advantages of mass marketing
- A much larger market has the potential for higher sales and profits.
- Requires large-scale production, so firms benefit from economies of scale which reduces unit costs.
Disadvantages of mass marketing
- Highly competitive in the market which reduces prices and profit margins.
- Not all markets are large enough to support a mass marketing approach.
Define market segment
A part of the whole market into which consumers have specific characteristics.
Define market segmentation
Dividing the whole market up into segments by consumer characteristics and then targeting each product to different segments.
Define geographic segmentation
Dividing consumers in the market based on their geographic area, due to cultural/religious reasons, different climates.
Define demographic segmentation
Dividing consumers in the market based on their ethnic background, income, gender, age and social class.
Define psychographic segmentation
Dividing consumers in the market based on their personalities, lifestyle and attitudes.
Benefits of market segmentation
- Goods and services designed to meet the the specific needs and wants of consumers.
- Marketing strategies are better targeted at each segment - reduces waste of scarce resources.
- Segmenting the whole market identifies a segment of consumers who have very specialised needs that aren’t being satisfied. This presents an opportunity for niche marketing.
Define market research
The process of collecting, analysing, recording data about customers, competitors and market for a product.
Info obtained from market research helps a business to:
- Find out what customers like or dislike about its products.
- Identify consumer tastes and preferences.
- Identify competitors and gauge their strengths & weaknesses.
- Know size of the market.
Define unique selling point
The special feature of a product that sets it apart from competitors products.
Define a market oriented business
Products are developed based on consumer demand or as identified by market research.
Define product oriented business
The firm decided what to produce and tries to find buyers for the product.
Benefits of the market oriented approach
- Risk of new products failing is reduced because they have been produced following market research which identifies the demand of consumers.
- Products that meet needs of consumers are likely to last longer - this leads to higher sales and profits.
Define primary research
The collection of first-hand data for the specific needs of the firm.
Define secondary data and identify its uses
It is the collection of second-hand data from other sources.
Mostly common uses include the internet, libraries, newspapers & magazines, government publications.
Advantages of primary research
- Data is up to date.
- Data is collected for a specific purpose which is directly relevant to the business.
Disadvantages of primary data
- Time-consuming
- Costly
- Risk of data being inaccurate/containing bias.
Advantages of secondary data
- Easier and quicker to collect.
- Cheap to obtain.
Disadvantages of secondary data
- May have been collected some time ago, not up to date.
- Data collected may not be relevant to the specific purpose of the business, not as reliable.
Define quantitative data
The collection of numerical data that can be analysed using statistical techniques.
Define qualitative data
The collection of information about consumers buying behaviour and their opinions about products.
Methods of primary research
- Focus groups
- Interviews
- Test markets
- Observation
- Consumer surveys
Define sampling
A representative sample of the target market used for market research.
Define marketing mix
Four marketing decisions needed for the effective marketing of a product.
Define Four P’s
The right product at the right price with the right promotion in the right place.
Define product
The goods and services produced to satisfy consumers needs/wants.
Costs and benefits of developing new products
Costs:
- Market research needs to be carried to identify needs of consumers, which is expensive.
- Requires large capital expenditure.
Benefits:
- Increase potential sales, revenue and profit.
Helps to achieve growth and benefit from economies of scale.
Define brand image
The general impression of a product held by consumers.
- It would increase a business’s sales and revenue. This is because:
- Consumers recognize its product more easily when looking at similair products.
- Its product can be priced higher than less well known brands.
- Easier to launch new products on the market as consumers are aware of the brand and are more likely ot try it if they have customer quality.
Define product life cycle, and identify its 4 stages
The pattern of sales of products from its introduction to withdrawal from the market.
Stages:
1) Introduction stage - product is introduced, sales are low
2) Growth stage - becoming better known to consumers, sales increasing. earns profits.
3) Maturity stage - sales not growing and not falling most profitable stage.
4) Decline stage - sales are falling, product is unprofitable, withdrawn from market.
Define extension strategies
Marketing activities to increase the maturity stage of products.
Define price
The amount paid by the customer to the supplier when buying a good or service.
Define product quality:
The product meets the expectations of customers.
Market skimming: definition, benefits, limitations
Market skimming includes setting a high price for a product that is unique or very different from any other product on the market.
Benefits:
- The high price can help the firm to create a quality image for its products.
- High price helps firm to recover R&D costs.
Limitations:
- High profits will attract cheaper competitors products.
- Some customers may not afford it, leading to loss of sales.
Penetration pricing: definition, benefits, limitations
Penetration pricing involves setting a low price to attract more consumers to buy the product.
When high sales are achieved, price will be higher.
Benefits:
- Attracts customers quickly and helps product become established in the market.
- Increases market share quickly.
Limitations:
- Loss of revenue due to lower prices.
- Cannot recover any development costs quickly.
Competitive pricing: definition, benefits and limitations.
Competitive pricing involves setting the price of a product similar to a competitors product which is already established in the market.
Benefits:
- Since prices are similar businesses compete on other things such as quality of product or consumer service.
Limitations:
- The market need to find ways of competing, price leader needs to be followed otherwise customers or market share will be lost.
Cost-plus pricing: definition, benefits, limitations
This involves setting price by adding a fixed amount to the cost of making or buying a product.
Benefits:
- Quick and easy way to work out the price.
- Makes sure that price covers all costs.
Limitations:
- Price may be higher than competitors so customers are less willing to pay, leading to reduced sales and profits.
Promotional pricing: definition, benefits, limitations
The normal price is discounted, below cost.
Benefits:
- Good way to sell off unwanted inventory.
A good way of increasing short-term sales and market share.
Limitations: revenue on each item is low so profits may be low too.
Define demand
The quantity of goods and services consumers are willing to and able to buy.
Define price elasticity of demand
Measures by how much demand (sales) of a product changes when there is change in price.
Define price inelastic demand
The percentage change in demand is greater than the percentage change in price (more responsive to changes in price).
Define channels of distribution
How a product gets from the true producer to the final consumer.
What are the 4 channels of distribution?
- Producer to Consumer
- Producer to Retailer to Consumer
- Producer to Wholesaler to Retailer to Consumer
- Producer to Agent to Wholesaler to Retailer to Consumer
Define wholesaler
A business that buys products in bulk from producers and then sells them to retailers.
Define retailer
Shops and other outlets that sell goods and services to the final consumer.
Define middlemen
The intermediaries of the channel of distribution, e.g wholesalers or retailers.
Define direct selling
The product is sold from the producer directly to the final consumer without the need for middlemen.
Advantages and disadvantages of Producer to Consumer
Advantages:
- All profit is earned by producer.
- Producer controls all parts of the marketing mix.
Disadvantages:
- All promotional activities have to be carried and financed out by producers.
- Delivery costs may be high if many customers are in a wide area.
Advantages and disadvantages of Producer to Retailer to Consumer
Advantages:
- Consumers can see and try the product before buying.
- Retailers are more conveniently located for consumers.
Disadvantages:
- Retailer takes some profit from producer.
- Producers lose some control over the marketing mix.
Advantages and disadvantages of Producer to Wholesaler to Retailer to Consumer
Advantages:
- Wholesaler buys in bulk from producer and breaks it down into smaller quantities for retailer.
- Wholesalers will advertise and promote product to retailers.
Disadvantages:
- Another middlemen - wholesaler - takes part of the profit from producer.
- Producer loses more control over marketing mix.
Advantages and disadvantages of Producer to Agent to Wholesaler to Retailer to Consumer
Advantages:
- The agent has specialist knowledge about the market, especially foreign markets.
Disadvantages:
- Another middlemen is added to the channel of distribution which reduces profit from producer.
Define promotion
Marketing activities used to communicate with customers and potential customers to inform and persuade them to buy a product.
Define advertising
Paid for communication with consumers which uses printed/visual media in order to inform and persuade consumers to buy a product.
Define informative advertising
Information about the product communicated to consumers to create product awareness and attract their interest.
Define persuasive advertising
Communication with consumers aimed at getting them to buy a firm’s product rather than a competitors product.
Define below the line promotion
Promotion that is not paid for communication but uses incentives to encourage customers to buy.
Define sales promotion
Incentives used to encourage short-term increase in sales.
Activities:
- Money off coupons
- Point of sale displays in shops
Define personal selling
Sales staff communicate directly with a consumer to achieve a sale and form a long-term relationship between firm and consumer.
Advantages and disadvantages of personal selling
Advantages:
- Sales person has direct communication with consumer and this enables seller to build a relationship with consumer that lasts after sale.
Disadvantages:
- Expensive form of promotion.
- To provide incentives to staff, businesses would pay bonuses which reduces profit of the business.
Define direct mail
Printed material sent directly to address of consumers.
Advantage: good way of communicating with a large market over a wide geographical area.
Disadvantage: Can be seen as junk mail.
Define sponsorship
Payment by a business to have its name and product associated with a particular event.
Define marketing budget
The amount of money made available by a business for its marketing activities during a particular period of time.
- The size of the marketing budget affects promotional decisions.
- This doesn’t always guarantee success, it should be spent cost-effectively.
Define e-commerce
Use of the internet and other technologies by businesses to market and sell goods and services to consumers.
- Many businesses have websites, it helps them to sell their products online.
Opportunities and threats of e-commerce to businesses
Opportunities:
- Increased market - business is able to sell its good and services around the world.
- Reduced costs
Threats:
- Increased competition as competitors can be from any part of the world.
- Unfamiliarity from consumers.
Opportunities and threats of e-commerce to consumers
Opportunities:
- Lower prices
- Convenience as consumers can order their products in the comfort of their own homes at anytime of the day.
- Wider choice of products.
Threats:
- Fraud - a website might take consumers money and not deliver the goods.
- Hacking - consumers personal data/bank account details may be stolen.
- Returning items is inconvenient.
Define marketing strategy
A plan to achieve the objectives using a given level of resources.
Define legal controls
Laws that control the activity of a business.
What are the impacts of legal controls in marketing strategies?
- Increases costs, products need to be changed to meet minimum quality standards or prevent health and safety issues.
Opportunities and problems for entering new markets.
- Growth potential of new markets in other foreign countries where businesses expand into newer markets in other countries as the market in their own country has reached maturity or decline.
- Barriers to trade - usually taxes, quotas or bans that one country places on the goods of other countries to prevent/increase the cost of them coming in the country.
Problems of entering foreign markets
- Differences in language and culture, some words do not translate from one language to another which creates problems in communication.
- Economic differences - the price charged to consumers overseas may be higher than those in domestic markets as the average income for consumers differs widely between countries.
- Social differences - In some countries factors such as the age structure of the population, importance of family and role of women all have an impact on business activity.
Solutions to overcome problems of entering foreign markets
- International franchising
- Licensing - where a business in one country permits a firm in another country to produce its branded product ‘under licence’.
- Joint venture - an agreement between two or more businesses to form a project together, sharing capital risks and profit.
Define customer base
The group of customers a business sells it products to.
Define market
All customers and consumers who are interested in buying a product and have the financial resources to do OR a place where sellers and buyers come together to buy and sell goods and services.
Define target market
Individuals or organisations identified by businesses as the customers of consumers of its products.
Define customer
Individuals or businesses who buy goods from another business.
Define consumer
The final user of a product.
Define consumers market
Markets for goods and services bought by the final consumer.
Define industrial markets
Markets for goods and services bought by other businesses to use in their production process.
Define business environment
All internal and external factors that influence the operations of a business.
