Chaoter 3 Flashcards
(84 cards)
1
Q
What is PED
A
how responsive demand is to price.
When price increases demand should decrease
2
Q
Elastic
A
Demand is sensitive to a change in price.
PED less than -1.
Increase in selling price cause sales revenue decrease.
% increase in quantity demanded greater than percentage decrease in price.
3
Q
Inelastic
A
Demand not so sensitive to a change in price
Between 0 and -1.
Increase in selling price can cause sales revenue to increase or change a little bit.
% change in demand is lower than price change
4
Q
YED
A
Change in demand to a change in income
Demand / income
5
Q
Normal good
A
Demand increases when income increase.
Positive YED.
Clothes, income ^ buy good quality clothes.
6
Q
Inferior good
A
Negative YED.
Increase income, decrease demand.
E.g store brand products
Public transport like bus when income increase demand decrease.
7
Q
Luxury goods
A
+ YED
bigger than 1
Designer clothes,
Expensive holidays
8
Q
Marketing objectives
A
Likely to be informed by research and can be constrained by budgets. Finances may be restrained ed for businesses, this will cause limitations for how much business will be able to conduct.
Used to select the marketing straight and develop marketing plan.
Managers must understand nature of market they are in and give this a link with customer and business.
9
Q
May focus on sales volume and sales value
A
Sales volume- amount of sales expressed as number of units sold. So it measures number of items sold.
Sales value- sales expressed as total sum of money spent by customers.
10
Q
Market size
A
Total sales value/ sales volume in given market.
Indicates potential sales for a firm. Large one gives greater opportunity for individual business to achieve sales volume/value.
Units sold x price.
Important to business but rarely used as objective as single company will only form part of given market.
Market-when there are buyers and sellers.
11
Q
Market and sales growth
A
% increase in size of market by value/volume over time period.
Change in size/original size x 100.
12
Q
Market share
A
Proportion of total market sales that firm has.
Measure of consumers preferences for product over similar products.
Higher usually means greater sales, less effort to sell more and strong barrier to entry for other competitors.
Also means if market expands, leader gains more than others.
Sales of business/ market sales x 100.
It’s a target rather than absolute level of sales as reflects what’s happening.
13
Q
Brand loyalty
A
Customers return to buy recognised brand.
Branding is promotional method that involves creation of identity for business that distinguish it and its products from competitors.
Easier + cheaper than attracting new customers.
Build r/s with customers.
14
Q
Market research
A
Collect and analyse data + info to inform business of its market.
Why use it- find out trends, information helps reduce risk of decision making, help decide on market objectives.
1. Identify what business wants
2. Decide how gather data
3. Gather data.
4. Analyse data.
5. Interpret + present to inform decision making.
15
Q
Primary
A
collection of first hand data
Surveys and questionnaires, focus groups, observations.
✅up to date.
❎long process
16
Q
Secondary MR
A
Research already been undertaken
Internet. Newspapers and magazines. National + local gov. e.g. ONS
✅available so cheap
❎out of date
17
Q
Qualitative data
A
Gathering of non-statistical information that gives company insight to reasons for human behaviour.
Thoughts on products,
CANT be graphed.
18
Q
Quantitative
A
Statistical data to inform about people’s behaviour but don’t identify reasons.
19
Q
Random sampling
A
Created by chance.
Not target specific market segment.
Ppl generated at random.
Target population- all the people they may want to interview.
✅less bias
❎expensive as large sample required.
20
Q
Stratified sampling
A
Select sample that represents different groups.
May be To find out which item preferred.
Number of items selected from each group will be proportional to number of items in that group.
Sample size- number customers they want to survey.
Strata size- people in each group.
Number selected from each strata= strata size/ population x population size.
21
Q
Quota sampling
A
Sample created to mimic characteristics of market.
Researcher chooses characteristics they wish respondents to have.
✅cheaper as less respondents required
❎Hard to eliminate bias in selection process.
22
Q
Value of sampling
A
Business gain insight to wants and needs of customer cheaply.
Business CANT ask opinions of all customers so must chose representative sample.
Sample- group of people chosen from larger group for investigation
23
Q
Interpretation of market data
A
Review competitors actions.
Keep up to date with market changes.
Identify sales patterns.
24
Q
Correlation
A
Identifying rs between 2 variables.
25
Confidence levels
Probability that research findings are correct
Affected by sampling technique(random), research method,expertise of person carrying out and analysing research. E.g size of sample, bigger represent population.
26
Confidence intervals
Sampling never give 100% accurate picture of whole population.
Range of values that your data suggests something is likely to occur within.
The parameters in which a confidence level applies.
27
Extrapolation
Past data to extend identified trend to future.
Useful when trends clearly identified and when market is relatively stable.
Past is not always good indication of future.
Conditions and trends can change- competitors actions(increase prices), consumer taste, market conditions.
28
Value technology
Gather and analyse large volumes of data quickly and accurately.
Track and interpret consumer spending habits.
Collect consumer opinions.
Encourage customer feedback thru social media and reviews.
29
Determinants of YED
1. If it’s necessity or luxury.
-increased incomes see demand to luxury goods.
2. Income of consumer
-poorer spend income on necessities.
-as they wealthier, YED for necessity move to zero(less responsive to income changes as the good take up a smaller proportion of their budget. Also, they spend more on luxuries which will how higher YED.
30
YED- relevance to business.
Standards of living
-wealthy countries;high disposable income consumer.
so use income to buy luxuries. firms produce superior products that meet needs.
-As global standards of living increase, we expect increase luxury demand and move away from inferior goods.
-Firms will identify state of economy e,g recession (unemployment) and make goods to meet demands. E.g pound shops selling inferior goods are likely to expand in these conditions.
31
Use of data in marketing decisions and planning
Market data can help predict PED AND YED.
-then use it to help inform pricing and product decisions.
Can be used to forecast sales (for this, finance department need estimate future cash inflows and profits).
-This helps inform all other functions on resource requirements allowing for planning e.g. how many staff needed.
Help understand customer needs.
-decisions made that will help meet these needs.
32
Segmentation targeting and positioning steps
1. Segment market into groups of customers with similar characteristics.
2. Decide what segment to target
3. Positif product on market by identifying hiw it will be viewed in relation to competitors.
33
Market segmentation
understand what different groups want instead of treating all same.
Occurs when market is split into subgroups of consumers with similar characteristics.
Helps identify different consumer types and wants + needs.
34
Demographic segmentation
Identifies subgroups of population based on demographic profile/characteristics.
E,g age, gender, race, religion, family size.
35
Geographic segmentation
Defines needs and wants in terms of geographical area consumer based in.
Regions, cities, neighbourhoods.
E.g tastes and traditions vary between countries.
E.g food in McDonald’s varied to meet different customer tastes.
36
Income segmentation
Identify subgroups of market based on income lvl/profession.
A common method uses socio-economic groupings.
A-E
A-Higher managerial e.g. chief executives + directors.
E- casual workers, students, unemployed.
37
Behavioural segmentation
Characterise subgroups based on behaviour patterns of consumer rather than characteristics.(what they actually do)
-Reasons for purchasing e.g needs, emotions, rewards
-frequency of purchase e.g heavy or light user.
-brand loyalty e.g if they aren’t then the brand can attract them with offers.
-method of purchase e.g online.
38
Benefits of market segmentation
Advertising can be target at specific segments so spend us more effective.
Least profitable markets avoided.
Help firm improve existing products + customer service.
39
Targeting
Process deciding which market segmentation to focus on.
40
Targeting influenced by
-where there’s sufficient demand and potential profit.
-competition e.g. may target less competitive segments to gain a competitive advantage, or may focus on competitive market to try outperform rivals.
-objectives e.g firm aim for high growth focus on emerging market segment while a company focused on profitability may target a more niche, premium market..
41
Niche marketing
Target small subsection or previously unexploited gap in larger market.
-may give business first mover advantage and allow them to charge premium price.
E,g clothes retailer focus on tall people.
Profits may be low.
42
Mass marketing
Firm targets while of market rather than particular segment.
-give firm high volume of sales but often at low price.
Provide products that meet some needs of most of the people.
Together successful; promotional techniques to reach more customers, more competition as business fights in relatively large market.
43
Mass marketing risks
-competing against other businesses already in this market e.g established high street banks difficult as fight hard to retain existing customers with high levels of resources to fight with.
-increasing number of niche providers generally reduce demand as customers look for smt that meet needs more precisely.
E,g customers in holiday market are increasing demand for personalised holidays. Don’t want mass-market holiday but one that meets needs.
44
Positioning
Benefit and price combination of a product relative to its competitors.
Where product is placed in market relative to competitors.
Can be achieved by changing elements of marjet mix to meet needs of target market.
Influences include
-internal constraints e.g budgets
-internal strengths elf if efficient in processes, may aim to be a low price provider. E.g may have bargaining power against suppliers.
Also innovation. High skilled employees that encourage development of ideas. Therefore, may focus on providing greater benefits than rivals.
-market conditions e.g degree of competition. Market mapping to find a gap but must have strengths to provide product in the gaps.
-external environment e,g state of the economy.
45
Market mapping
Diagrammatic technique that enables businesses to display perceptions of customers.
Compare different variable regarding products and consumers.
Used to analyse consumer buying habits and preferences e.g price of good with quality.
Dinette what segment of market is under provided for + look at produce product to fill gap.
Products can be compared with all competitors in sa market.
Firm real insight to competition within same market as its own product.
46
Advantages + disadvantages market map
✅help analyse competitors,
Find gap in market
❎just because there’s ‘gap’ don’t mean demand.
Don’t guarantee success.
47
Product
Good + services that firm provides.
Made of core features and functions + additional aspects that can sway consumer behaviour e.g brand (more popular) and guarantees.
-goods are tangible
-services are intangible.
48
Promotion
Activities to communicate with market and increases visibility + sales of product.
Different strategies to make products known to other businesses + public e.g branding, advertising, sponsorship,
Sales promotion e,g buy 1 get 1 free.
49
Price
Money customer pay to receive good/service,
Use Pricing strategies, take into account market research, competitor prices and stage of economy.
And payment terms e.g, if customer can pay installements.
50
Place
Physical location products available + distribution channel travelled through to get from manufacturer to customer.
Can be physical market where buyers and sellers meet face to face or virtual location e.g internet.
Many firms adopting multi-channel approach to place.
Some cases may buy directly from consumer where distribution channel is known as ‘0 level’.
51
People, process, physical environment
Ppl- employees involve I’m deal with customers before, after and during a sale.
Process- steps a customer goes through to complete transaction.
Physical environment- design + features of actual place where transaction occurs.
-influences our perception of the business.
52
Industrial markets B2B
Business sell to others which use them in their own processes. May deal with professional buyers.
Interested in having evidence of technical performance.
Want to understand how product represents value for money and how helps their business improve competitiveness.
physical environment less Important
53
Consumer markets B2C
business sell to public
Product and price may be seen of equal importance to physical environment but more important than place e.g. does it matter what channels product went thru to reach consumer.
Many customers targeted , promotion may have to reach large numbers of people e.g national advertising.
Consumers aren’t professional buyers(buying is their job).
There will be times where they’re affected by factors e.g brand image.
54
Influences on marketing mix- nature of consumer market
Convenience products
- ease with which consumer can get the product is key priority
-milk + newspapers
-widely distributed
-customers won’t travel far and can buy from another brand if not available in current.
-ensuring it’s widely available is part of product success.
Shopping products
- consumer don’t rush into purchase but compare different options weighing up strengths and weaknesses of each option before reach decision.
-microwave
Speciality products
-sports car or Rolex.
-customer spend time thinking about + often researching before buying.
-willing travel far + brand is important + physical enviroemmt where sold.
-market research findings inform elements of marketing mix.
-target market products aimed at.
-positioning relative fi competitors.
-internal constraints e,g budgets, expertise, capacity
-external influences e.g actions of competitors + economy state.
Market mix is dynamic, changes over time. As influences change the business respond by changing elements of mix.
55
Product decisions
Product-G/s that firm provides.
-made of core features and functions + additional aspects that can sway consumer behaviour elf brand/guarantees.
-services are intangible e.h hair cut.
-goods are tangible e.g car
Businesses have a range of products in portfolio.
Augmented product- refers to the ‘extras’ e.g brand name, delivery + guarantees(years) and after sales service.
Core benefit-what it provides.
56
Product portfolio analysis
Look at range of products and brands firm has under its control.
Also known as product range.
This analysis help firm identify where its products are positioned in the market.
Helps decide if some products need more investment or if some are no longer viable.
57
Boston matrix
Technique Used to analyse business’ product portfolio.
Considers each product within portfolio in relation to market share + rate if market growth.
-want products to remain stars.
58
Cash cows
High m.s in low growth market.
Established products.
Profit can finance other products eg rising stars.
Want to establish as many as possible.
As it’s low market growth, perhaps less competition from new firms entering, therefore spend less on advertising.
Can ‘milk’ product to finance other business areas.
59
Dogs
Low market share in low growth market.
Unlikely to be kept on by company.
Little chance for future profits.
Don’t always mean company discontinue product, if there’s a market then some products can be profitable.
But when a firm looks at products, more likely concentrate on cash cows and rising stars
60
Problem children/?
Low M.S high growth market
With growth, can be successful if enough demand.
Not yet established.
Equally may or not turn out to do well.
May what to invest to protect and grow these products.
Will require a lot of attention through marketing.
If sales increase, may be increased profits and may be into a cash cow.
61
Star
High growth high market share.
As it’s growing, other firms enter market with similar products, means competition.
Heavy promotion + investing + more distribution for products to remain stars.
Often funded from cash cows.
62
Product life cycle
Technique to track the stages a product gives through during its life.
Sales over time from development until removed.
Revenue from a product t that reached maturity could be used to help develop a new product.
1. Development- negative cash flow as M.R and R&D. No sales revenue.
2. Intro- production and promotion costs can be high.
3. Growth- SR increases. More units sold, production costs ^. But will be economies of scale.
4. Maturity- sales stabilise, product act as cash cow.
5. Decline- starts to lose sales.
6. Extension- products adapted.
63
NPD process
1. Generate ideas thru different methods e.g brainstorm.
2. Narrow ideas to come up with specific one.
3. Development + test concept.
4. Analyse costs, sales forecasts + profits.
5. Market testing of concept.
6. product launch.
64
NPD risks
1. Many product ideas don’t make it to actual production. As may not make profit.
2. Many don’t sell well + withdrawn. Maybe as market hasn’t been understood/promotion problems.
65
NPD definition
Investment to modify existing P/ replace with new.
May be required as: existing products come to end of their life cycle, match competitors actions, new opportunities as changes in market.
66
Influences on NPD technology
Advances in tech have incredible changes.
Internet + phones made communications and exchange of info quick, easy, cheap.
-brought economies of scale to business.
-made the world a global market thru communication systems.
-rapid development of new and innovative products.
67
Influences on NPD competitors actions.
High competitive markets.
Competing with firms from all over globe.
Firms have Close eye on competitors actions + either respond to moves by competitors or bring out new products before competitors do.
68
Influences on NPD entrepreneurial skills of mangers and owners.
Mangers + owners will:
-be able to see opportunities for new products that may rise in market.
-provide funding required for firms if they are to have resources that are needed to develop products.
-inspo and motivation for other members of organisation so all staff engaged in identifying new ideas,
69
Pricing decisions
-money customer pays to receive good/service.
-to price their products, take into account market research, competitors prices and economy.
70
Penetration pricing
Low price to gain market share and get foothold in market.
May be for product in mass market.
Low price Entices people to buy.
Gain early customer base.
Once launched + build customer base, raise price.
Price elastic.
E.g phone and network services.
71
Price skimming
High initial price for new product to recover development costs + maximise profit.
Targeting segment of the market known as ‘early adopters’- customers who must have product as soon as launched and pay high prices.
Base initial promotional campaign around that and create a ‘must have’ mentality.
Once this markets skimmed off , company lowers price.
72
Dynamic pricing
Prices change frequently + quickly in response to demand changes.
Often used by businesses with set capacity e.g airlines plane gets full, price rise.
No ‘one’ price for a ticket, depends when you enquire + make the booking.
Made possible by technology that tracks demand + levels of interest.
73
Promotion
Activities to communicate with market ; increasing visibility + sales.
Different strategies to make products more known + to general public. Branding, advertising
74
Factors influencing PED
**Availability of substitutes**- closer the substitutes + more available, high PED.
-when there’s more substitutes, ppl easily switch to smt else if price goes up, demand drops a lot ppl want substitute instead.
Price of competition.
**Time**- more time, higher ped.
-Others have ability to produce similar products + customers more chance of adapting buying habits.
**Branding**- time + money spent by firm building brand image. By creating brand loyalty firm knows customers pay more so raise prices as PED lower.
**Income**-incomes high, easier for firms raise price as PED LOWER.
**Nature of good**- luxury good is price elastic as demand sensitive to price.
Necessity price inelastic as demand less sensitive to price.
75
Problems of forecasting PED
Changing in dynamic world,
Different measure as:
-hard find accurate info
-trends changing
-competitors always improving products, bring out new, promote products. Have to adapt to competitors to stand out.
76
Elements of promotional mix
Promotion- informs and persuades customers about product to sell. AIDA awareness, interest, desire and action.
Promotional mix- combination of promotional activities used for awareness + generate sales.
77
Elements of promotional mix
Promotion- informs and persuades customers about product to sell. AIDA awareness, interest, desire and action.
Promotional mix- combination of promotional activities used for awareness + generate sales.
78
Promotional decisions
Influenced by segmentation, targeting and positioning process.
-Will it appeal to target market- if they use internet then google advertising.
-does promotion support rest if market mix + correctly position product relative to competition.
Internal constraints e.g size of promotional budget(money to spend, TV adverts r expensive) or ethical objectives.
External
-technology
-competitors actions- innovation, make promotion different.
-environmental issues.
79
Distribution
Route which product travels from producer to consumer.
Sell product directly to consumer thru direct selling/Internet.
Consider:
- type of product
-nature of product e.g if it’s high value that sells in low quantities then distribute direct to consumer. If low calls and High quantities use a retailer.
-control required by manufacturer e.g if intermediary used, business may gain ownership and decide how product displayed , promoted, priced. E.g Gucci wants to protect brand.
80
Integrated marketing mix
Individual elements complement each other to reinforce brand values.
Important to
-clear message to target market.
-Position product effectively in PLC e.g in decline stage, price may need to be low.
-achieve marketing objectives e.gincrease sales may require more investment in promotion.
81
Integrated marketing mix influence by
Type of product
-specialist have physical environment that match product quality + likely have premium price tag.
Marketing objectives
-of increase market share may alter its mix to achieve this. E.g bring improved product
82
Digital marketing and e-commerce
Form of digital technology to improve customer communication.
E,g on,one advertising, social media , targeted feeds.
Buyers + sellers meet to trade in virtual market place e.g internet.
Key for marketing managers is to watch market trends and make sure business adapts.
EBay succeeded as adopted e-commerce well.
Improve customer relations as more involved in marketing process- review products to help other buyers, contribute ideas.
Target customers- set up online cheaply and focus on small segment.
83
Promotional methods
Public relations- communicate with media (tv, newspaper and radio) to get favourable publicity.
✅customer loyalty thru consistent communication
❎media outlets control how message presented, misleading?
POS promotion- in-store displays and demonstrations to increase customer spending each time they visit.
✅increase attention and engagement
❎limited only reaches customers in store.
Sales promotions- short term offers by firms to increase sales for products. Buy 1 get 1 free.
✅❎
84
Relationship marketing
Build longer term rs with valued customers rather than short term sales.
✅encourages emotional attachment to brand
Retains customers + build connections wiht business r.g get customers to use wide range of business services.
