Component 3 Flashcards
(118 cards)
1
Q
What are the 2 broad categories of markets that enterprises target?
A
B2C (business to consumer) and B2B (business to business)
2
Q
What features differ in a B2B market?
A
A business customer might negotiate price more, a business customer might be buying in bulk, you might need to customise your order for a B2B customer, B2B customers might expect trade credit
3
Q
What is meant by the term ‘market’?
A
Any place where buyers and sellers meet to trade.
4
Q
Give examples of tyoes of market
A
Physcial, virtual, local, national, global
5
Q
What is market segmentation?
A
ividing the market into different sections (segments) to enable the business to specifically target customers with the most appropriate products and promotions
6
Q
Give 4 types of market segmentation
A
Demographic, Psychographic, Geographic, behavioural
7
Q
Give 4 characteristics used in psychographic segmentation
A
social class, attitudes, lifestyle and personality characteristics
8
Q
Name 9 charactersistics used in demographic segmentation
A
age, race, religion, gender, family size, ethnicity, income, education level, socio-economic group
9
Q
Name 5 characteristics in behavioural segmentation
A
spending, consumption, usage, loyalty status and desired benefits
10
Q
What type of segmentation looks at the social and economic characteristics of individuals and households?
A
demographic
11
Q
What classifications are given in socio economic segmentation?
A
A, B, C1, C2, D, E
12
Q
What type of segmentation looks at consumer’s personality traits?
A
Psychographic
13
Q
What types of charactersitics are used in psychographic segmentation?
A
people’s attitudes, lifestyles and personality types
14
Q
Which segmentation technique uses people’s hobbies?
A
Psychographic
15
Q
Which type of segmentation uses consumers loyalty or product usage or frequency of consumption?
A
behavioural
16
Q
Give 3 benefits to the enterprise of using market segmentation
A
Able to adapt the product, able to adapt the marketing, able to focus on and dominate one particular segment
17
Q
Name 5 pricing strategies
A
Cost plus, skimming, premium, penetration and competitive
18
Q
What is the difference between skimming and pricing stategies?
A
Skimming starts high and then drops the price, premium stays high
19
Q
What is an advantage of skimming?
A
Gain high revenues to cover development costs
20
Q
Who does skimming target?
A
Early adopters (people that are open to being the first to try something)
21
Q
How does cost plus pricing work?
A
Set the price based on the cost + a fixed percentage for profit
22
Q
Give an advantage and disadvantage of cost plus
A
Adv = predictable rate of profit because the price always has a fixed mark up. disadv = might lose revenue because the price is higher than competitors
23
Q
Give a disadv of competitor pricing
A
It could result in a price war if competitors try to lower their prices
24
Q
How does competitor pricing work?
A
Set the price around the level of the competition and then find a different way to differentiate your product
25
Give an advantage and disadvantage of penetration pricing
Adv= should get high sales because the price is low disadv = small profit margins because price is low so very little flexibility if costs go up.
26
What are the 5 stage of the product life cycle?
Development, Introduction , Growth, maturity, decline
27
What happens in the development stage?
No sales, just research and development. So high costs and no profit
28
What happens in the introduction stage?
Customers try the product for the first time so use advertising to raise brand awareness and sales promotion strategies. Sales not yet high, costs are high
29
What happens in the growth stage?
Sales grow rapidly. Businesses try to get loyalty and repeat sales as well as new customers. Advertising high, loyalty cards. Profit is high
30
What happens in the maturity stage?
Customers are now loyal but competition increases. Need to retain customers. Bring out new features. Use loyalty.
31
What happens in the decline stage?
Sales drop. Some profit still because marketing costs are very low. Decide whether to sell off the brand or extend the product with a relaunch.
32
Why does a business want to know its Product Life Cycle?
To help decide what the marketing priorities are at each stage, eg sales promotions in the introduction phase at get customers to try it.
33
What is a brand?
the unique and recognisable identitiy of the company. It can include logo, colour, slogan
34
Why is brand important?
It helps you to stand out from competitors. Customers get to know what you stand for. You can bring out other products in the same brand for your loyal customers.
35
What is a brand personality?
A human characteristic given to the brand eg Chanel is sophisticated
36
What is a USP?
Unique Selling Point. An attribute that can't be copied by a rival eg a patent, your brand, a recipe
37
Name the 5 strategies in the promotional mix
Advertising, sales promotion, personal selling, direct marketing and public relations
38
What is the purpose of advertising?
To persuade and inform
39
What is the purpose of sales promotion?
To offer an incentive to customers
40
What 2 aspects of advertising must be planned?
Medium and message
41
What is meant by the 'medium' of advertising?
The channel used to coummincate
42
What 5 mediums are there for advertising?
Digital, audio, ambient, print and moving image
43
Name 6 methods of sales promotion
Buy one Get one Free, discounts, coupons, competitions, money off, loyalty incentives
44
Give 4 methods for Personal Selling
Face to face, telephone, email, video/web conferencing
45
What is meant by Public Relations
promoting a produce/service, brand or enterprise by placing information about it in the media without paying for the time or media space directly.
46
Give 3 methods of public relations
Sponsorship, exhibtions or press releases
47
What is direct marketing?
Establishing a personal relationship between the enterprise and the customer, addressing the customer by name
48
Name 4 methods of direct marketing
Junk mail, catalogues, magazines and telemarketing (telephone)
49
When advertising, what name is given to what an enterprise to trying to communicate
message
50
What is the ambient channel of advertising?
unusual methods in public spaces eg guerilla advertising
51
Give 6 ways the size of the enterprise will effect the promotional mix
size of the market being targeted, amount of finance available to spend on promotion, whether they have a dedicated marketing team, marketing expertise within the enterprise, type of promotional methods used, frequency of promotions
52
What word, beginning with 'c' is a limit to this amount of money that therefore limits the promotional methods the enterprise can use?
constraint
53
What promtional strategy is more likely to be used in B2B?
Direct marketing and Personal Selling
54
How might a local business chose to segment its market?
Geographic, choosing to use advertising through local mediums such as local radio and papers
55
What promotional strategies might have high impact on a small budget?
guerilla advertising
56
What promtional strategy might be easy to update regularly on a low budget?
digital advertising
57
What promotional strategy might be used to support a local cause?
Public Relations through sponsorship
58
What promotional strategy might be used to atract local B2B customers?
Local trade fairs like the Chamber of Commerce and direct marketing through cold calling
59
What promotional strategies might be suitable for a small, local business targetting tourists?
vouchers in local outlets, leaflets distributed in the Tourist Information or local hotels, print advertising on bus stops
60
It is cheaper for an enterprise to keep hold of customers rather than win new customers. How does this influence the promotional mix?
Invest in sales promiotions that use loyalty schemes
61
What is the difference between a debit card and a credit card?
A debit card immediately takes payment out of your account but a credit card takes payment out at the end of the month
62
What is a direct debit?
It is an instruction to the bank to pay a 3rd party directly from your account on a specified date in the month.
63
What is an advantage of a direct debit?
It means you will not miss a payment as it is automatically taken out each month
64
What is a disadvantage of a credit card?
It means you could overspend (up to the amount on the card's credit limit) because the money isn't immediately being taken out of the account
65
What is the advantage of a credit card?
it allows the user to delay the payment until the end of the month or to pay it off gradually but interest on the credit may be charged.
66
What do the letters SOFP stand for as a financial document?
Statement of Financial Position
67
What is an asset?
Something a business owns
68
What do you call something a business owes?
A liability
69
When a SOFP uses the term 'current', what is meant?
used in less than 1 year
70
Give 3 examples of current assets
Cash, debtors and stock
71
Give 3 examples of current liabilities
Overdraft, tax and creditors
72
Give 2 examples of fixed assets (non current)
Buildings and machinery
73
Give an example of a non current liability
Bank loan
74
What is meant by working capital?
Money used in the day-to-day running of the business
75
How do you work out Working Capital?
CA-CL (current assets - current liabilities
76
What does CA/CL tell a business?
Current ratio or the proportion of assets to liabilities
77
How do you work out Net Assets?
Total assets - total liabilities
78
What two sources of finance always balance out the Net Assets?
Profit reserves and share equity
79
What is share equity?
Money invested by shareholders
80
What is meant by liquidity?
The proportion of current assets to current liabilities, ie the ability to get hold of cash
81
What are the 2 performance measures for liquidity?
current ratio and liquid capital ratio
82
How is liquid capital ratio worked out?
current assets - stock / current libilities
83
How does profitability differ from profit?
profitability is the proportion of profit from each sale while profit is the total left over from sales (revenue) after all expenses are taken away
84
How is profitability measured?
Gross and Net Profit Margin
85
How is Gross Profit Margin worked out?
GP/Revenue x 100
86
How is Net Profit Worked out?
NP/Revenue x 100
87
How is Gross Profit calculated?
Revenue - Cost of Sales
88
Net Profit Formula?
Revenue - all costs/expenses
89
What is the term used to describe when the actual budget is better than the expected budget?
Favourable (F)
90
What is the term used to describe when the actual budget is worse than the expected budget?
Adverse (A)
91
Give 3 types of budget an enterprise can draw up
Expenditure, Revenue and Profit budgets
92
On a budget, what does the term variance mean?
The difference between the expected and actual budget figures
93
What is meant by budgetary control?
Checking the actual figures are what the business expected and making changes
94
Explain the term cash flow
The money in and the money out of a business over time
95
How do you work out Net Cash Flow?
Cash In - Cash out
96
How do you calculate Closing Balance on a cash flow forecast?
Net Cash Flow + Opening balance
97
How does an enterprise use a cash flow forecast?
To ensure that future payments will be covered with cash in the bank.
98
How do CREDIT sales and CREDIT purchases effect your cash flow?
Credit means that the payment is delayed so the inflow or outflow must be adjusted to the correct month.
99
What is break even?
The point where Total Revenue exactly covers Total Costs (TR=TC), in other words no profit is made, but neither is loss made
100
What is the formula for Break Even?
Fixed Costs / Selling price - Variable Cost
101
Where on the diagram is profit and loss?
Profit is the triangle to the right of the Break even point and loss is the triangle to the left
102
Which two lines cross at the break even point?
Total Revenue and Total Cost
103
Explain the difference between break even value and break even units?
Break even value is the amount of money needed to break even, break even units is the number of sales to break even.
104
Explain the margin of safety
Margin of Safety is the additional (spare) units sold beyond break even. It is actual sales - break even sales.
105
How might a business use break even?
To set targets on how many units to sell.
To decide a price to set to achieve their break even point.
106
On a break even graph, revenue is always plotted starting at which point?
0
107
On a break even graph, total costs is always plotted starting at which point?
The point where fixed costs is drawn from the Y axis (£)
108
Describe the fixed cost line on a break even graph
A straight, horizontal line because the cost does not change with the level of sales
109
Give 3 internal sources of finance
Sale of assets, retained profit, personal savings
110
Give 3 short term external sources of finance
Bank overdraft, crowdfunding, trade credit
111
Give 3 long term external sources of finance
mortgages, share capital, taking on new partners
112
Give 3 medium term sources of finance
hire purchase (HP), leasing, loans, peer-to-peer lending (P2P), investment from business angels
113
When you are deciding the advantages and disadvantages of the different sources of finance, what can you usually talk about?
Interest payments on the finance
How much money is available through that source of finance
114
What is hire purchase?
When a business pays a rental sum each month for the equipment but then has the right to make a final payment to own the item at the end of the contract. Interest payments are high. eg mobile phones
115
What is leasing?
Paying a monthly rental sum but there is no right to buy at the end. Interest payments are high. eg a car
116
What is peer-to-peer lending?
A loan from another business. Like a loan, there is interest to pay.
117
What is share capital?
Money raised by selling part of the business to a share holder. Shareholders expect dividend back which is a share of the profit. Shareholders also get a vote in the business each year.
118
Whats is trade credit?
An arrangement with a supplier to delay your payment by 30-90 days. This may have a bad effect on the relationship with your supplier as they are having to wait for their money.
