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Business Studies > Unit 3.3 > Flashcards

Unit 3.3 Flashcards

1
Q

Confidence intervals

A

range of values, inside which we think our true value lies - sometimes called margin of error
- e.g. true average usage of toothpaste may be 2-3 times per day

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2
Q

Price elasticity of demand

A

responsiveness of customers to a change in price - for most goods, if prices rise then demand will fall, however for essential goods etc such as food, an increase in price will see demand stay the same

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3
Q

Use of PED data

A

helps set prices as business’s want to charge a price which will produce the greatest profit margins - called equilibrium or market clearing price

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4
Q

Elastic products

A

PED value greater than 1

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5
Q

Inelastic products

A

PED value between 0 and -1

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6
Q

Factors influencing PED data

A
  • Brand strength
    -Necessity e.g. fuel or food
  • Habit - addictions etc
  • Availability of substitutes
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7
Q

Income elasticity of demand (YED)

A

Estimates how demand will change depending on changes to income

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8
Q

Income elasticity of demand (YED) - Normal (necessity) goods

A

demand increases when income increases - YED would be greater than 0

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9
Q

Income elasticity of demand (YED) - Inferior goods

A

demand decreases as income increases - YED less than 0 - generally cheap alternatives such as ‘Tesco’s own collection’

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10
Q

Types of price elasticity of demand - PED greater than 1

A

change in demand will be higher than the change in price - goods are price elastic

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11
Q

Types of price elasticity of demand - PED less than 1

A

change in demand will be lower than the change in price - goods are price inelastic

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12
Q

Types of price elasticity of demand - PED = 1

A

change in demand is the same as change in price - goods are unit elastic

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13
Q

Types of price elasticity of demand - PED = 0

A

change in price will not affect the demand for the product - goods are price inelastic

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14
Q

Perfectly elastic demand

A

when demand is perfect, total revenue falls to zero

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15
Q

Perfectly inelastic demand

A

When demand is perfectly inelastic, total revenue moves in the same direction by the same proportion

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16
Q

Income elasticity of demand is usually strongly positive for…

A
  • fine wine and spirits
  • sports and leisure facilities
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17
Q

Income elasticity of demand is lower for…

A
  • mass transport - bus and rail etc
  • Takeaway pizza etc
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18
Q

Segmentation

A

the process of dividing the whole market into smaller parts - enables the business to target their products at the right customers

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19
Q

Value of segmentation

A
  • allows for the business to target consumers and thus maximise sales
  • 4P’s = price, place, product, promotion
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20
Q

Targeting

A

way of identifying a group of people with similar characteristics - can them aim advertising at them

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21
Q

Positioning

A

to promote and advertise a product or service in a specific market segment - will educate the consumers about the features and benefits of the product’s

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22
Q

Segmentation - by demographic

A

could be gender specific or based on race and religious beliefs etc

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23
Q

Segmentation - Geographic

A

makes it easier for businesses to target regional markets - can be different country’s or areas such as rural or urban

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24
Q

Segmentation - Income

A

according to annual salary - establishing a groups disposable income is important so that products can be targeted to groups that can actually afford them etc.

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25
Segmentation - Behavioural
lifestyle of the buyer etc - can include hobbies and interest's etc
26
Mass Market
market that is aimed at the general population e.g. regular toothpaste
27
Niche Market
subset of the Mass market - addresses specialist needs e.g. sensitive toothpaste
28
Mass market characteristics
sold to all consumers in the same way - products can be sold on a global scale with just a few language tweaks e.g. Disney films
29
Mass market brands
very important in mass marketing - instils loyalty in customers - branding helps the business stand out from competitors
30
Pros of a Niche market
- can charge a premium price - easier to target customers - Less competition
31
Cons of a Niche market
- risky - demand may not be constant - High unit cost so no economies of scale
32
Marketing 7P's - Promotion
customer is found and persuaded to buy the product
33
Marketing 7P's - Product
Product/Service a consumer buy's
34
Marketing 7P's - Price
How much a customer pays for a product
35
Marketing 7P's - Process
systems that deliver's a product to a customer
36
Marketing 7P's - People
people who make contact with customers when delivering the product
37
Marketing 7P's - Place
how the product is distributed to the consumer
38
Marketing 7P's - Physical environment
element's of the physical environment that the customer experiences
39
Product life cycle - Stage 1
Development - product is designed and market research analysed - all capital invested into the product - risky
40
Product life cycle - Stage 2
Introduction - high cost's in research and development - sales are low as consumers are not aware of the product - Advertising begins
41
Product life cycle - Stage 3
Growth -Product's enjoy rapid growth in sales and profit's - demand = high - businesses may invest heavily into advertising at this point
42
Product life cycle - Stage 4
Maturity - product begins to face intense competition as the market becomes saturated - sales are high but profit begins to fall
43
Product life cycle - Stage 5
Decline - Products may be limited in production - profit and sales have fallen and the product may be withdrawn from sale - may heavily discount to promote sales
44
Product life cycle - Stage 6
Extension strategy - Businesses can introduce measures to prolong the maturity phase of the product - this is when sales peak Measures may include - Updating packaging - Investing into advertising - adding new features - price reduction
45
Boston Matrix - Cash Cow
Low market growth AND High market share - will sell very well and little advertising is needed
46
Boston Matrix - Star Product
High market growth AND High market share - this product has lot's of potential
47
Boston Matrix - Question mark or problem child
High market growth AND Low market share - needs investment into marketing etc for this product to succeed
48
Boston Matrix - Dog
Low market growth AND Low market share - requires no investment as is in the decline phase of the product life cycle
49
Pros of the Boston Matrix
- Good starting point to review the portfolio - informs marketing strategy and decisions
50
Cons of the Boston Matrix
- Products may not fit into the graph - high market share doesn't always lead to high profits - Very Simplistic
51
Promotional mix - personal selling
- sales person act's on behalf of the organisation - well trained however expensive in terms of wages and training
52
Promotional mix - Direct Marketing
Targeted through the mail/post - can be tailored to each customer
53
Promotional mix - Advertising (ATL and BTL)
ATL = above the line advertising = advertising to mass audience e.g. Tv adverts etc# Pros = reaches large audience Cons - Very expensive BTL = below the line advertising = advertising to niche markets e.g. billboards and leaflets
54
Promotional mix - Sponsorships
Positive association of a product with a celebrity or sport - can be very expensive an it is difficult to tell the impact it has had in sales
55
Branding
the picture a customer paint's of a business after seeing their products and advertising
56
Manufacturer / Corporate branding
aims to build communications and relationships between the business and the customers Pros = Spreads awareness of the business across all of it's brands (business's can have many brands) Cons = takes a long time to establish these relations
57
Product branding
aims to show the customer the benefit's of a product and what differentiates it from other products in the same market Pros = Branded products can command higher prices Cons = May require a high investment and branding may take years to build up
58
Own brand products
made by a manufacturer on behalf of a supermarket Pros = Boosts customer loyalty and fills gaps in the market Cons = they can be poorer quality to the original which may damage sales
59
Cost Plus pricing Strategy
total cost of a product is calculated then a fixed percentage of profit is added on Pros: - Protects profit margins and is easy to apply Cons: - doesn't take into account the pricing of the competition
60
Skimming pricing strategy
used when launching a new product - price is set high to start before being reduced as competitors enter the market Pros: - high starting price can establish an upmarket image and maximises profits made from buyers who ant the latest items etc and are willing to pay higher prices for them Cons: - Cheaper alternatives can take sales from the original
61
Competitive pricing strategy
Priced in line with competition - customers have to judge a product based on quality etc instead of price - Used when the market has lots of very similar products Pros: - encourages customers to shop at smaller businesses Cons: - May not cover all costs - smaller businesses cant take advantage of economies of scale
62
Penetration pricing
Setting the price low on a new product to encourage sales Pros: - encourages consumers to purchase the product Cons: - Expensive as it eats away at profits
63
Predatory pricing strategy
Businesses with monopolies may lower prices to prevent competitors from entering the market Pros: - drives competitors out of the market Cons: - depends on the price elasticity of the product
64
4 stage distribution
Manufacturer - Wholesaler - retailer - Consumer Pros = manufacturers don't have to invest into marketing etc Cons = higher prices for consumers
65
3 stage distribution
Manufacturer- Retailer- Consumer Pros = - easier for manufacturer to get products to the retailer Cons = all responsibility regarding quality etc is on the retailer
66
2 stage distribution
Manufacturer- Consumer Pros - Manufacturer could charge higher prices Cons - More responsibility on the manufacturers
67
Influences on an integrated marketing mix - Position in the product life cycle
Developer focus on promotion during the introduction stage to attract more customers
68
Influences on an integrated marketing mix - The Boston matrix
Cash - cow businesses can focus on raising prices to maximise profit whereas Question mark products etc need a focus on marketing and alternative pricing strategies
69
Influences on an integrated marketing mix - Competition
Marketing activities change depending on the volume of competition within the market - highly competitive market = competitive marketing etc
70
Influences on an integrated marketing mix - Positioning
Products positioning in a market determines marketing activities etc also - High end brands have different marketing to cheaper goods etc
71
Advantages of being an E-Tailor
- larger range of products than a store - can undercut competitors on price as they have less cost's due to limited staff etc compared to a high street store - (Lower fixed costs) -Potential to grow rapidly and reach a global marketplace
72
Disadvantages of being an E-Tailor
- Hard to establish trust with customers - Only as strong as the distribution delivery time - if products arrive late then it might damage the reputation of the business - Website costs can be high
73
Extended marketing mix - People
both inside and outside the business Internal = recruiting right staff etc External - Customers, suppliers etc
74
Extended marketing mix - Process
- Electronic processes = QR codes - Technological Processes = ease of checkout in the website etc - Direct processes = help customers choose the right product - Indirect processes = customer helpline or warranty etc
75
Extended marketing mix - Physical evidence
What is experienced by the customer - includes the appearance of the shop as well as appearance of website and packaging
76
Integrated marketing mix
provides seamless experience for the customer - attempts to coordinate and combine the 7P's
77
Digital marketing
using the internet to achieve marketing objectives
78
E-Commerce
business transactions conducted via the internet - E -Tailor sells goods directly through the internet
79
Primary market research methods
- Questionnaires - Surveys - Focus groups - Observation
80
Secondary market research questions
- Business websites - Commercial reports - Newspaper/magazine articles - Internet - Gov reports

Business Studies (11 decks)

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