3.3 Decision making to improve marketing

Question 1

What is the purpose of marketing?

Answer 1

To anticipate and satisfy customer needs and wants in a profitable way

Question 2

What is sales volume?

Answer 2

The amount of an item sold

Question 3

What is sales value?

Answer 3

Volume X price

Question 4

What are some possible marketing objectives? (5)

Answer 4

-Sales volume / value
-Market size
-Sales growth
-Market share
-Brand loyalty

Question 5

Advantage and disadvanatge of sales volume / value as a marketing objective

Answer 5

+ = Easy to measure, can be used to compare to rivals selling similar goods

• = Sales volume does not consider revenue , sales value does not consider profits/costs

Question 6

Advantage and disadvanatge of market growth as a marketing objective

Answer 6

+ = A growing market allows a business to access new customers
- = Usually outside of the control of a business

Question 7

What are some factors that influence market growth?

Answer 7

-Economic growth
-Nature of the product
-Fashion

Question 8

What is sales growth?

Answer 8

The % change in sales over time.

Question 9

What is market share? + / - of setting market share related marketing objectives

Answer 9

% of total sales of a good/service that a business has achieved.

+ = Good measure of success as compares businesses sales to that of rivals
- = Difficult to define what a market is

Question 10

What is brand loyalty?

Answer 10

The degree of attatchment that a consumer has to a particular brand

Question 11

Why would a business set marketing objectives?

Answer 11

• To provide a benchmark against which success or failure can be measured
• Gives a focus for decision making
• Helps departments have a common purpose
• Objectives can be motivating for staff

Question 12

What are some external influences on marketing objectives? (4)

Answer 12

-Market factors (growth/decline)
-Competitor actions and performance
-Technological change
-Economic factors

Question 13

What is primary market research? What are some examples?

Answer 13

New research that has never been done before ; experiments, observations, focus groups, surveys

Question 14

What is secondary market research? What are some examples?

Answer 14

Researching and reading information that already exists ; gov.publications, company records, market research organisations, loyalty cards

Question 15

What is the difference between qualitative and quantitative market research?

Answer 15

Qualitative means consumers are asked open ended questions such as Why? How?

Quantitative means information presented is based on numbers

Question 16

What is market mapping?

Answer 16

A technique that analyses markets by looking at features that distinguish incumbent products or business. Can be used when a new business wishes to enter a market and is looking where there is a gap.

Question 17

What is sampling?

Answer 17

The gathering of data from a group of respondants whos view represent that of the whole market

Question 18

What is a confidence interval?

Answer 18

A confidence interval is an indicator presented next to a piece of data that represents how accurate that data is likely to be. For example:

A confidence interval of 95% next to the data from a survey asking customes if they are going to buy the product again, indicates that if 100 customers were surveyed then 95 of them would be giving a completely honest answer.

Question 19

What is a correlation?

Answer 19

Correlation shows the strength of a relationship between 2 variables, for example the amount of £ spent on advertising and the amount of customer enquiries.
Is presented on a scatter graph.
Can be positive, negative or NO correlation

Question 20

What is extrapolation?

Answer 20

Using previous patterns of numerical data to predict values in the future.

Question 21

What is PED?

Answer 21

Price Elasticity of Demand measures the responsiveness of quantity demanded given a change in price.
In simpler terms: how consumers react to a change in price.

Question 22

What is the formula for PED?

Answer 22

% change in Q demanded / % change in price

Question 23

How do you calculate a % change?

Answer 23

(change / original value) x 100

Question 24

How is PED usually presented?

Answer 24

A single digit number, usually negative because of the inverse relationship between price and quantity, the minus sign is left unwritten.

Question 25

What are the 5 different types of PED? What are they numerically? What do they mean? How are they presented on a graph?

Answer 25

Elastic - PED greater than 1, a certain % change in price will result in a greater % change in demanded. On a demand graph, this is less steep gradient, closer to horizontal, ofc sloping down.

Inelastic - PED less than 1, a certain % change in price will result in a lesser % change in quantity demanded. On a demand graph, this is a steep gradient, closer to vertical, ofc sloping down.

Perfectly elastic - PED = Infinity. Meaning any change in price will result in quantity demaned falling to 0. Consumers are willing to purchase all they can at this price, if price rises demand will decrease infinitly and if prices fall demand will increase infinitly. On a demand graph, this is a perfectly horizontal line.

Perfectly inelastic - PED = 0. Meaning any change in price will result in NO change in quantity demanded. On a demand graph, this is a perfectly vertical line.

Unit elastic - PED = 1. Any change in price will result in a proportionally equal change in demand. Price rises by 10%, demand will fall by 10%. A demand curve with unit PED throughout is like a drop in on a skateboard ramp.

Question 26

What is the significance of PED to a business?

Answer 26

Business can use PED to make pricing decisions that can increase total revenue.

Question 27

What are the determinants of PED?

Answer 27

Think SPLAT

Substitutes - The higher number of close substitutes a good/service has, the more price elastic demand will be. The more price rises, consumers will switch to substitute products instead. The fewer substitutes, the close to price inelastic demand will be

Percentage of income - The greater the proportion of income a price change takes, the price elastic demand will be. For example if an expensive good rises 10% in price, this 10% will take up a large proportion of income, and demand will fall greater than if a product costing a few pence rises 10% in price.

Luxury or not - Luxury goods demand is more price elastic, necessities demand is more price inelastic.

Addiction - If the good is addicitive or habit forming, it will have a more inelastic PED. Consumers are less likely to care about the change in price

Time period - In the long run demand for goods and services is more likely to become price elastic as over time more substitues for the product enter the market.

Question 28

What is Income Elasticity of Demand?

Answer 28

YED measures the responsiveness of quantity demanded given a change in income

Question 29

How is YED calculated?

Answer 29

% change in Q demanded / % change in income

Question 30

What does it mean if YED is positive or negative?

Answer 30

Positive = Normal good, meaning an increase in income leads to an increase in demand and vice versa

Negative = Inferior good, meaning a rise in incomes results in a decrease in demand I.E Margerine, as incomes rise people will prefer to buy butter.

Question 31

What 3 types of goods can be identifies from YED?

Answer 31

Normal good = Positive YED
Inferior good = Negative YED
Luxury good = Highly positive YED, greater than +1

Question 32

What is an elastic and inelastic YED?

Answer 32

Elastic = greater than 1, meaning a % change in income will result in a greater % change in Q demanded

Inelastic = greater than 0, less than 1….meaning a %change in income will result in a lesser % change in Q demanded

Question 33

How can YEDs be useful to a business?

Answer 33

When booms or recessions are forecast

Question 34

What are 3 criticisms of elasticity for business decision making?

Answer 34

Think ECV - Elasticity Can Vary

1) Estimates - Elasticity calculations are only estimates, as data may be collected from surveys that cannot be fully trusted OR past data which may not reflect current consumer habits or accurately predict the future. Therefore important decisions should not only be based on Elasticiy calculations and instead be used as a guide.

2) Ceteris Paribus - The assumption of Ceteris paribus can be misleading. For all elasticity calculations only one variable is assumed to impact quanitity demanded/supplied however there are many other factors that come into play such as income, changes in fashion, interesest rates, consumer confidence ETC

3) Varies - Elasticity varies along the curve therfore business must be sure to re-calculate elasticity at every change in price.

Question 35

What is market segmentation?

Answer 35

The classification of customers or potential customers into groups, called market segments.

Question 36

What are the 4 types of possible market segments?

Answer 36

-Demographic ; age, gender, maritul status
-Geographic
-Income
-Behavioural ; customers attitude to product IE heavy or light user

Question 37

What is niche marketing?

Answer 37

Where a business targets a small segment of a large market

Question 38

What are some + / - of niche marketing?

Answer 38

+ =
Less competition
Small scale of production
Less EOS barriers to entry
Easier to target customers

• =
  Lower profits available due to market limits
  Business vulnerable to small changes in demand due to lack of diversified risk

Question 39

What is mass marketing?

Answer 39

Aiming a product/service at all available markets

Question 40

What are some + / - of mass marketing?

Answer 40

+ =
Large scale production
High revenues
High EOS potential benefits
Barriers to entry for rivals preventing competition
Increases brand awareness

• =
  High fixed capital costs due to barriers to entry IE big factories
  Standardisation makes it hard for business to adapt products to meet individual needs of consumers
  Less scope for adding value
  Heavier competition

Question 41

What is the process of market positioning

Answer 41

Market research -> identify target market segments ->decide how to position product

Question 42

What is the marketing mix?

Answer 42

The combination of marketing elements used by a business in order to meet the needs and expectation of customers

Question 43

What are the 7 points of the marketing mix?

Answer 43

Product
Price
Place
Promotion
People - those who make contact w customer during transaction
Process -how product is delivered to customer
Physical enviroment

Question 44

What are the 3 different types of good?

Answer 44

Convenience good, shopping good and speciality good

Question 45

What is a covenience good?

Answer 45

One that is purchased regularly, by habit and by a larger proportion of the population.

Question 46

What is a shopping good?

Answer 46

One that is purchased quite often but less often than convenience good, the purchase of item is planned,

Question 47

What is a speciality good?

Answer 47

One that has unique characteristics, traveled some distance to purchase and in which price is not considered a key factor.

Question 48

What is the boston matrix?

Answer 48

A tool that analyses the product portfolio of a business and classifies them into 4 different categories, comparing the market share of the product and the growth of the market.

High market share, HIgh market growth = Star
High market share, Low market growth = Cash cow
Low market share, High market growth = Question mark
Low market share, Low market growth = Dog

Question 49

Features of star products in the Boston matrix

Answer 49

High market share, HIgh market growth = Star
- Alot of promotional activity needed due to market growth
- Generally generate alot of revenue and profits

Question 50

Features of Cash Cow in the Boston matrix

Answer 50

High market share, Low market growth = Cash cow
- Established markets, have reached maturity stage of product life cycle
- Low rates of growth discourage new competition, meaning little promotional cost needed
- Can be milked for profits

Question 51

Features of question mark in the Boston matrix

Answer 51

Low market share, High market growth = Question mark
- Pose problems for the business
- Competiting in competivie market
- Despite low market share, the growth in the market indicates potential revenue increases for the product

Question 52

Features of Dogs in the Boston matrix

Answer 52

Low market share, Low market growth
- Little scope for profit, think carefully about retaining
- In a recession, likely to be withdrawn

Question 53

What are the 6 stages of the product life cycle?

Answer 53

Development, Introduction, Growth, Maturity, Decline, Abandonment

Question 54

What is the strategic use of the product life cycle? What is ideal for businesses?

Answer 54

As many products in the marutity stage as possible, and for the maturity stage to last as long as possible using extension strategies

Question 55

What are some examples of extension strategies? (6)

Answer 55

• Attracting new market segments.
   Increasing usage among existing customers.
   Modifying the product.
   Changing the image.
   Targeting new geographical markets.
   Promotions, advertising, and price offers.