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Business Studies > Unit 3: Marketing > Flashcards

Unit 3: Marketing Flashcards

1
Q

Why do some markets become more competitive?

A
  • 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.
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2
Q

How do businesses respond to changing spending patterns and increased competition?

A
  • 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.
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3
Q

Define niche marketing

A

Developing products for a small segment of the market. (High priced goods).

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4
Q

Advantages of a niche market

A
  • 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.
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5
Q

Disadvantages of a niche market

A
  • 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.
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6
Q

Define mass marketing

A

Selling the same product to the whole market, for example flour.

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7
Q

Advantages of mass marketing

A
  • 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.
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8
Q

Disadvantages of mass marketing

A
  • Highly competitive in the market which reduces prices and profit margins.
  • Not all markets are large enough to support a mass marketing approach.
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9
Q

Define market segment

A

A part of the whole market into which consumers have specific characteristics.

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10
Q

Define market segmentation

A

Dividing the whole market up into segments by consumer characteristics and then targeting each product to different segments.

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11
Q

Define geographic segmentation

A

Dividing consumers in the market based on their geographic area, due to cultural/religious reasons, different climates.

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12
Q

Define demographic segmentation

A

Dividing consumers in the market based on their ethnic background, income, gender, age and social class.

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13
Q

Define psychographic segmentation

A

Dividing consumers in the market based on their personalities, lifestyle and attitudes.

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14
Q

Benefits of market segmentation

A
  • 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.
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15
Q

Define market research

A

The process of collecting, analysing, recording data about customers, competitors and market for a product.

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16
Q

Info obtained from market research helps a business to:

A
  • 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.
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17
Q

Define unique selling point

A

The special feature of a product that sets it apart from competitors products.

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18
Q

Define a market oriented business

A

Products are developed based on consumer demand or as identified by market research.

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19
Q

Define product oriented business

A

The firm decided what to produce and tries to find buyers for the product.

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20
Q

Benefits of the market oriented approach

A
  • 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.
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21
Q

Define primary research

A

The collection of first-hand data for the specific needs of the firm.

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22
Q

Define secondary data and identify its uses

A

It is the collection of second-hand data from other sources.
Mostly common uses include the internet, libraries, newspapers & magazines, government publications.

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23
Q

Advantages of primary research

A
  • Data is up to date.
  • Data is collected for a specific purpose which is directly relevant to the business.
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24
Q

Disadvantages of primary data

A
  • Time-consuming
  • Costly
  • Risk of data being inaccurate/containing bias.
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25
Q

Advantages of secondary data

A
  • Easier and quicker to collect.
  • Cheap to obtain.
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26
Q

Disadvantages of secondary data

A
  • 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.
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27
Q

Define quantitative data

A

The collection of numerical data that can be analysed using statistical techniques.

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28
Q

Define qualitative data

A

The collection of information about consumers buying behaviour and their opinions about products.

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29
Q

Methods of primary research

A
  • Focus groups
  • Interviews
  • Test markets
  • Observation
  • Consumer surveys
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30
Q

Define sampling

A

A representative sample of the target market used for market research.

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31
Q

Define marketing mix

A

Four marketing decisions needed for the effective marketing of a product.

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32
Q

Define Four P’s

A

The right product at the right price with the right promotion in the right place.

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33
Q

Define product

A

The goods and services produced to satisfy consumers needs/wants.

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34
Q

Costs and benefits of developing new products

A

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.

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35
Q

Define brand image

A

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.

36
Q

Define product life cycle, and identify its 4 stages

A

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.

37
Q

Define extension strategies

A

Marketing activities to increase the maturity stage of products.

38
Q

Define price

A

The amount paid by the customer to the supplier when buying a good or service.

39
Q

Define product quality:

A

The product meets the expectations of customers.

40
Q

Market skimming: definition, benefits, limitations

A

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.

41
Q

Penetration pricing: definition, benefits, limitations

A

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.

42
Q

Competitive pricing: definition, benefits and limitations.

A

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.

43
Q

Cost-plus pricing: definition, benefits, limitations

A

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.

44
Q

Promotional pricing: definition, benefits, limitations

A

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.

45
Q

Define demand

A

The quantity of goods and services consumers are willing to and able to buy.

46
Q

Define price elasticity of demand

A

Measures by how much demand (sales) of a product changes when there is change in price.

47
Q

Define price inelastic demand

A

The percentage change in demand is greater than the percentage change in price (more responsive to changes in price).

48
Q

Define channels of distribution

A

How a product gets from the true producer to the final consumer.

49
Q

What are the 4 channels of distribution?

A
  • Producer to Consumer
  • Producer to Retailer to Consumer
  • Producer to Wholesaler to Retailer to Consumer
  • Producer to Agent to Wholesaler to Retailer to Consumer
50
Q

Define wholesaler

A

A business that buys products in bulk from producers and then sells them to retailers.

51
Q

Define retailer

A

Shops and other outlets that sell goods and services to the final consumer.

52
Q

Define middlemen

A

The intermediaries of the channel of distribution, e.g wholesalers or retailers.

53
Q

Define direct selling

A

The product is sold from the producer directly to the final consumer without the need for middlemen.

54
Q

Advantages and disadvantages of Producer to Consumer

A

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.

55
Q

Advantages and disadvantages of Producer to Retailer to Consumer

A

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.

56
Q

Advantages and disadvantages of Producer to Wholesaler to Retailer to Consumer

A

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.

57
Q

Advantages and disadvantages of Producer to Agent to Wholesaler to Retailer to Consumer

A

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.

58
Q

Define promotion

A

Marketing activities used to communicate with customers and potential customers to inform and persuade them to buy a product.

59
Q

Define advertising

A

Paid for communication with consumers which uses printed/visual media in order to inform and persuade consumers to buy a product.

60
Q

Define informative advertising

A

Information about the product communicated to consumers to create product awareness and attract their interest.

61
Q

Define persuasive advertising

A

Communication with consumers aimed at getting them to buy a firm’s product rather than a competitors product.

62
Q

Define below the line promotion

A

Promotion that is not paid for communication but uses incentives to encourage customers to buy.

63
Q

Define sales promotion

A

Incentives used to encourage short-term increase in sales.

Activities:
- Money off coupons
- Point of sale displays in shops

64
Q

Define personal selling

A

Sales staff communicate directly with a consumer to achieve a sale and form a long-term relationship between firm and consumer.

65
Q

Advantages and disadvantages of personal selling

A

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.

66
Q

Define direct mail

A

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.

67
Q

Define sponsorship

A

Payment by a business to have its name and product associated with a particular event.

68
Q

Define marketing budget

A

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.
69
Q

Define e-commerce

A

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.

70
Q

Opportunities and threats of e-commerce to businesses

A

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.

71
Q

Opportunities and threats of e-commerce to consumers

A

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.

72
Q

Define marketing strategy

A

A plan to achieve the objectives using a given level of resources.

73
Q

Define legal controls

A

Laws that control the activity of a business.

74
Q

What are the impacts of legal controls in marketing strategies?

A
  • Increases costs, products need to be changed to meet minimum quality standards or prevent health and safety issues.
75
Q

Opportunities and problems for entering new markets.

A
  • 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.
76
Q

Problems of entering foreign markets

A
  • 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.
77
Q

Solutions to overcome problems of entering foreign markets

A
  • 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.
78
Q

Define customer base

A

The group of customers a business sells it products to.

79
Q

Define market

A

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.

80
Q

Define target market

A

Individuals or organisations identified by businesses as the customers of consumers of its products.

81
Q

Define customer

A

Individuals or businesses who buy goods from another business.

82
Q

Define consumer

A

The final user of a product.

83
Q

Define consumers market

A

Markets for goods and services bought by the final consumer.

84
Q

Define industrial markets

A

Markets for goods and services bought by other businesses to use in their production process.

85
Q

Define business environment

A

All internal and external factors that influence the operations of a business.

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