3.1 Setting Marketing Objectives

Question 1

Marketing objectives

Answer 1

1. Sales volume and market size
2. Market size
3. Market and sales growth
4. Market share
5. Brand loyalty

Question 2

The value of setting marketing objectives

Answer 2

Helps departments to stay on track with what the business hopes to achieve overall

Marketing department objectives must align with corporate objectives

• E.g. if the business wants to expand, the marketing dept may set an objective to increase market share to support this

Question 3

The marketing objectives are of value as:

Answer 3

Provide a focus and direction for the marketing activities and strategy of the business

Help ensure the resources of the marketing dept are used effectively

Motivate and align the people working within marketing dept/functional area

Question 4

Two categories of Market Research

Answer 4

Primary Research: Data collected first-hand for a specific research purpose

Secondary Research: Data that already exists and which has been collected for a different purpose

Question 5

Sources of Primary data

Answer 5

1. Observation
2. Postal survey
3. Telephone interview
4. Online survey
5. Focus groups
6. Face-to-face survey
7. Test marketing
8. Experiments

Question 6

Focus groups

Answer 6

A form group is a form of qualitative research in which a group of people are asked about:

1. Their perception
2. Opinion
3. Beliefs
4. Attitudes towards a product
5. Service
6. Concept
7. Advertisement
8. Idea
9. Packaging

Question 7

Benefits and drawbacks of Primary Market Research

Answer 7

Benefits:

1. Specifically built based on business needs
2. Up-to-date and relevant
3. Kept private
4. Detailed insight - particularly into customer views

Drawbacks:

1. Expensive to obtain
2. Time consuming and needs to be analysed
3. Risk of survey biased
4. Sampling may not represent the wider market

Question 8

Sources of secondary data

Answer 8

• Google - quick and inexpensive
• Government departments - detailed insights on the economy
• Trade associations: great for market analysis

Question 9

Benefits and Drawbacks of Secondary Market Research

Answer 9

Benefits:

1. Often free but usually cheaper than primary research
2. Good insights as data has already been analysed
3. Quick to access and use

Drawbacks:

1. Can quickly become out-of-date
2. Not tailored to specific business needs
3. Specialist report are often quite expensive

Question 10

Quantitative and Qualitative data

Answer 10

• Quantitative data:
  1. Based on numbers and figures.
  2. Focused on quantity.
  3. Easy to analyse but not detailed.
• Qualitative:
  1. Based on opinions, attitudes and beliefs.
  2. Focuses on the reason.
  3. More difficult to analyse but detailed

Question 11

Market size

Answer 11

• Indicates the potential sales for a firm
  Measured in terms of both volume (units) and value (sales)
• Size of individual segments within the overall market can also be measured
• Not a market objective since a firm cannot influence it

Question 12

Market growth

Answer 12

Key indicator for existing and potential market entrants

Growth rate can be calculated using either value (e.g., market sales) or volume (units sold)

Question 13

Market share

Answer 13

Explains how the market is divided between the existing competitors

Tends to be calculated based on market value but volume can also be used

Good indicator of competitive advantage

Question 14

Sampling in a market share

Answer 14

Sampling involves the gathering of data from a sample that can represent the population

• E.g., target market

Question 15

Types of sampling: Random

Answer 15

Every member of the population has the equal chance of being selected.

• E.g., every tenth person can be stopped and asked to complete a questionnaire

Random sampling does not target any specific segments of the market

It is quick and easy to select and it reduces bias

The sample may not represent the target market

Question 16

Types of sampling: Quota

Answer 16

Respondents are selected based on specific characteristics. E.g., age, income or location

• The required number of respondents (the Quota) is drawn from each segment of the population
• Quota sampling is representative of the whole market and requires less respondents than Random sampling
• It is not random, could bring bias in the selection process

Question 17

Types of sampling: Stratified

Answer 17

The researcher stratifies the target group into sections representing a key group or characteristics to represent the final sample.

• For example: a class has 20 students, 18 (M), 2 (F). The researcher needs 10 students, so it would randomly take 9 (M) and 1 (F), to represent the population.

Question 18

Correlation

Answer 18

Looks at the strength of the relationship between two variables

Question 19

Correlation and Scatter graphs

Answer 19

Correlation is used in Scatter Diagram, on which data points are plotted

The independent variable is plotted on the X axis. This is the factor that causes the other variable to change

• E.g., if a business may be keen to understand the impact of the customer enquiries if advertising expenditure is varied
• In this case, advertising expenditure would be the indipendent variable and customer enquiries would be the dependant variable
• A line of best fit would be used to plot the mathematical relationship between the variables

Question 20

Types of correlation

Answer 20

• Positive: a positive relationship is where the independent variable changes as well as the dependent variable
• Negative: a negative correlation is when the independent variable increases and dependent variable falls
• No correlation: There is no discernible relationship between the independent variable and dependent variable

Question 21

Strong and weak correlation

Answer 21

Strong Correlation:
- The line of best fit indicates the strength of the correlation.
- Little rooom between data points and the line
- A strong correlation can suggest marketing predictions

Weak correlation:
- Weak correlation means data points are spread from the line of best fit.

Question 22

Confidence interval

Answer 22

A confident interval gives the percentage probability that an estimated range of possible values in fact includes the actual value being estimated

Question 23

Confidence intervals

Answer 23

• Businesses benefit from the use of statistics in estimating or predicting future intervals
• A confidence interval helps a business evaluate the reliability of a particular estimate
• Because no estimate can be 100% reliable, businesses need to know how confident they should be in their estimates or whether to act on them

Question 24

Confidence intervals (example)

Answer 24

• If a manufacturing firm takes samples of finished goods from it’s production line to check for quality, how confident can the business be that sample of products inspected is representative of all products being made.
• A common confidence interval acceptable to management is 95%. This means that 19 out of 20 will give results that represents the overall population. Or, -1 out of 20 (5%) is unrepresentative.

Question 25

Confidence intervals: **(Example p.2)**

Answer 25

- Quality management: percentage **reliability** of **machines**. Chances that **quality control samples** will **detect issues** - Market Research: **statistical estimates** for sales forecasting **reliability of** data from customer **surveys** - Risk management & contingency plans: risk of sales forecast not be achieved scenario planning for competitor actions - Budgeting and forecasting: likely range of revenues and costs based on key **assumptions.** Sales forecasts to support new product launches.

Question 26

Extrapolation

Answer 26

Uses trends estabilished from **historical data** to **forecast** the **future**

Question 27

Extrapolation: **How it works**

Answer 27

- Identify trends, e.g., in sales. - Draw a line of best fit. - Continues the trends in blue (future) (**EXTRAPOLATE**). - Used to make predictions.

Question 28

Evaluating Extrapolation

Answer 28

**Adv** - **Simple** method of forecasting - Not much data required - Quick and **cheap** **Disadv** - **Unreliable** if there are significant fluctuations in historical data - Assumes **past trends will continue** into the future. (Unlikely in the majority of competitive business environments) - Ignores qualitative factors (**changes in taste/fashion**)

Question 29

Elasticity

Answer 29

Elasticity measures the **responsiveness of demand** to a change in a relevant variable such as **income/price**

Question 30

Price elasticity of demand (PED)

Answer 30

Price elasticity of demand **measures** the extent to which the **quantity** of a product **demanded** is affected by a change in **price**. **Formula:** % change in quantity demanded ÷ % change in price

Question 31

Why is price of elasticity of demand important?

Answer 31

- PED helps a business examine the likely impact of a change in price - If PED >1 (price elastic) then a change in price will cause a larger change in demand - This means overall revenues would **increase** if the price was reduced - But overall revenues would **decrease** if price increased - If PED <1 (price inelastic) the the *opposite* would happen

Question 32

Factors influencing PED

Answer 32

**Brand strength**: mostly price inelastic **Necessity**: higher necessity = higher demand (inelastic) **Habit**: demand and consumption are matter of habit (inelastic) **Substitutes**: higher substitute choice (elastic) **Time**: in a short run, price changes have less of an impact on demand

Question 33

Income Elasticity of Demand (YED)

Answer 33

Income Elasticity of demand measures the extent to which the **quantity** of a product demanded is **affected by a change in income** **Formula:** % change in quantity demanded ÷ %change in income

Question 34

Interpreting YED

Answer 34

**Positive:** (normal products) - Rise in income correlates to a rise in demand and viceversa - The extent of the change depends on necessity and luxury **Negative:** (inferior goods) - A rise in incomes decrease the demand as consumers switch to a better alternative

Question 35

Normal goods: Luxurious and Necessity

Answer 35

**Luxurious:** - Income Elasticity more than 1 - More income = higher expense on luxury ***EXAMPLE*** - *consumer goods, expensive holidays, branded goods* **Necessity:** - Income Elasticity less than 1 but more than 0 - As income grows **proportionally** less is spent on necessities ***EXAMPLE*** - *Staple groceries (milk), own lable goods*

Question 36

The value of the concepts of price and income elasticity of demand to marketing decision makers

Answer 36

- Elasticity provide useful insights for management and decision making - Firms tend to like products with inelastic demands - Building strong brands and product USP's is a good strategy for making demand more price inelastic - It is difficult to get reliable data, especially in rapidly changing markets - Other factors such as customer tastes, also affect demand - Firms should be aware that competitor's will react, price decisions cannot be isolated

Question 37

The use of data in marketing decision making and planning

Answer 37

- Businesses use variety of tools to analyse marketing data and make forecasts - The key aim of interpreting data is to make reasonable assumptions to support marketing decision making - This information can help the business planning (e.g., resources) to meet demand - Data can also be used inform financial planning, such as sales forecast, costs and profits as well as cash flow forecast and break even - No technique is fully reliable