4. Marketing and Operations Flashcards

1
Q

a) What is a target market?
b) Why is it important for a firm to-choose its target market early in the process of launching its venture?

(8 marks) 2011

A

a) A target market is a segment of the population that has been identified as most likely to want or need the product offering.

Target markets are determined by the market segmentation process, whereby a company/ individual segments the the market into different groups according to different demographic and psychographic attributes. The company then targets, within their chosen segment, a group to market their product to.

b) This is an important process to undergo early on because without a target customer, there is no sale or business. Marketing is an important process for a new business because it is the link between the business, the customer and henceforth profitability.

By identifying a target market early on, an entrepreneur can ensure that its product and all the elements of its marketing mix are consistent and suited to the target market. This increases the likelihood of the product being a sucess when it is launched as it appeals to certain group in society.

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2
Q

a) What are the four primary categories of environmental trends?
b) Provide an example of how a trend in each category could affect the toy industry.

(2,6 marks) 2011

A
  1. Social
  2. Technological
  3. Economic
  4. Political/legal
  5. Social - kids don’t like toys anymore, play on PS instead
  6. Technological - more advanced toys have become popular e.g. electronic board games
  7. Economic - recession means lower spending
  8. Political - new regulations
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3
Q

Why is marketing important?

A

It secures, serves and retains customers by getting the right message to the right customer segment via the right methods

Peter Drucker said:

‘Because its purpose is to create a customer, the business has two basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs’

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4
Q

a) Draw the product life cycle. [3 Marks]
b) Do you consider this model to be helpful when thinking about the development of a new business? Why or why not? [5 Marks]

2010

A

a) Introduction -> Growth -> Maturity -> Decline
b) It is..

Different stages of a product’s life call for explicitly different strategies. This can help to guide entrepreneurs

The framework prepares management for changes of strategy. (A useful spur given much management inertia)

It isn’t

Time spans vary and can be unpredictable

It varies for different types of products and the environment at the time. For example fashions will peak and fall much earlier than the traditional PLC shape. An entrepreneur could interpret their product as the traditional PLC whereas it is actually a fashion or fad product. In essence, it is only a guide and it may be wrong.

There is the danger that the PLC becomes a self-fulfilling prophecy. If entrepreneurs stick too closely to its theory and act accordingly then it may become reality. This could work to the detriment of the entrepreneur for example rigid adherence to PLC means management can prematurely end the life of a product

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5
Q

Define market segment

A

A market segment consists of a group with similar needs or wants who reference eachother and may share geographical location, purchasing power and buying attitudes

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6
Q

Outline the Diffusion of Innovation and why it may be useful to a marketing strategy

A

Innovators

  • like risk
  • want to be at the forefront of technological development
  • Innovators are key because they are gatekeepers; therefore first key to any high-tech marketing effort

Early adopters

  • visionaries
  • provide info to other potential adopters
  • Visionaries represent opportunity, early in a product’s life cycle to generate a burst of revenue and gain exceptional visibility

Early Majority (pragmatists)

  • adopts just ahead of the average population
  • lengthy decision making process
  • pragmatic
  • link the early adopters with the bulk of the population

Late Majority

  • succumb to innovation from pressure/economic necessity
  • conservative

**Laggards **

  • most skeptical
  • isolated

Why is it useful?

Predicts the rate of diffusion of an innovation and the pattern

May inform marketing strategy e.g. during the innovator stage, strategy is to stimulate trial of product

However, only a framework and should be used as a guide

Crossing the chasm presents a difficulty - transition from early adopters to early majority because it involves bridging the gap between visionaries and pragmatics

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7
Q

Identify the advantages and disadvantages of trying to capture a first-mover advantage.

2011 - 8marks

A

Advantages

* No competition
* Customer loyalty
* Space/location
* Brand genericization e.g. hoover. iPhone
* Patents, protection
* Learning curve

Disadvantages

* Copy first mover but avoid negatives
* Less risk
* easier to get finance
* Shifts in customer needs
* Incumbent inertia - locked into specific technology
* Cannibalise existing products - taking your own market share

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8
Q

Give the stages of the Adopter Curve

A

Innovators

Early adopters (visionaries)

Early majority (pragmatists)

Late majority (conservatives)

Laggards

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9
Q

Geoffrey Moore on the Adoption Curve

A

Geoffrey Moore
Along the technology adoption cycle, firms will need to target different groups of customers with distinctive needs and motivations; this requires different marketing approaches.

Early adopters like a “radical discontinuity between the old and the new”
Early majority want “productivity improvements” and are looking to minimise discontinuity
Therefore you must market to them in radically different ways

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10
Q

How could an entrpreneur ‘cross the chasm’?

A

Target a niche.
Force your competitors out of the niche
Use that for a base for broader operations

Eg Palm Pilot built a niche with targetting the management teams of high tech enterprises.
They simplified the product and lowered the price
The passion carried over into the next segment of consumers
The chasm was crossed!

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11
Q

What are the differences between a product and a service?

What are the problems and solutions associated with them?

A

Intangible –services have no tangible element

Inseparable – production and consumption occur simultaneously

Variable – high human contact leads to higher variations

Perishable – services cannot be stored and perish immediately

Problem: Periods of excess supply and demand

Solution: Manage supply and demand explicitly (e.g. differential pricing, part time personnel)

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12
Q

Name and explain two pricing strategies

A

Price skimming

Start with a high price for early adopters, then reduce the price progressively (good for inelastic demand)

Price Penetration

Penetration Go for maximum market penetration by adopting a low price strategy to attract the largest number of new buyers early on

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13
Q

What is operating leverage?

A

It is a measure of how revenue growth translates into growth in operating income.

It ismeasure of leverage, and of how risky (volatile) a company’s operating income is. a

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14
Q

Making pricing decisions

A

Some people are less price sensitive than others

Some products are more price elastic than others

The key to a good pricing strategy is identifying and charging a higher price to those who are less price sensitive and reduce prices of price elastic products

This is called price discrimination

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15
Q

Conditions for effective price discrimination

A

The firm can control what is offered to particular buyer groups

The firm can prevent the re-sale of the good from one buyer group to another

Works well for perishables e.g. customisable coffee as wealthier individuals pay higher price for drink that costs similar amount to make

Another example, Food manufacturing Large retailers with huge volumes are given lower prices than small corner shops with low volume

Also services - business class airfare vs. economy

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16
Q

What is cost-based pricing and what are its advantages/disadvantages

A

Price = Full cost of producing the item + x% profit margin

A pricing method in which a fixed sum or a percentage of the total cost is added (as income or profit) to the cost of the product to arrive at its selling price.

+ Simple, fair

+ Considers cost so is sure to cover them

  • Does not fully consider fixed cost as av cost decreases as output increases
  • Can lead to viscious circle if demand falls
17
Q

When choosing a pricing strategy, what must a company take into consideration?

A

Positioning

  • rest of the marketing mix
  • target market
  • brand image

Demand

Costs

Environment:

  • no. firms, competitors
  • differentiation

Legislation - regulatory costs, duties

18
Q

Types of promotion

A
19
Q

PLC and strategies

A

Introduction

  • Create awareness of product
  • skimming/penetrative prices

Growth

  • Promote actual product + brand, not awareness

Maturity

Decline

20
Q

Environmental/sustainability trending

A

Unilever - 68% increase in share price last year following launch of Sustainable Living Plan.

M&S - Plan A

recently partnership with oxfam to encourage clothes recycling, committed to using sustainable raw materials. M&S rewards farmers and factories for going ‘green’

M&S and Oxfam have teamed up to reward shoppers for recycling unwanted clothes bought at M&S. The clothes are donated to Oxfam, which raised about £3.3 million ($5.3 million) by reselling them. Anyone donating an item of M&S clothing to Oxfam gets a £5 voucher to use on a purchase of £35 or more on clothing, homeware or beauty products at M&S. This develops brand loyalty, and points to the circular economy of the future, where stuff is recycled and make into something else instead of being thrown away.