Decision-Making to Improve Marketing Performance

Question 1

Internal Influences on Marketing Objectives

Answer 1

Corporate objectives

As with all the functional areas, corporate objectives are the most important internal influence. A marketing objective should not conflict with a corporate objective

Finance

The financial position of the business (profitability, cash flow, liquidity) directly affects the scope and scale or marketing activities.

Human resources

For a services business in particular, the quality and capacity of the workforce is a key factor in affecting marketing objectives. A motivated and well-trained workforce can deliver market-leading customer service and productivity to create a competitive marketing advantage

Operational issues

Operations has a key role to play in enabling the business to compete on cost (efficiency / productivity) and quality. Effective capacity management also plays a part in determining whether a business can achieve its revenue objectives

Business culture

E.g. a marketing-orientated business is constantly looking for ways to meet customer needs. A production-orientated culture may result in management setting unrealistic or irrelevant marketing objectives.

Question 2

External influences on marketing objectives:

Answer 2

Economic environment

The key factor in determining demand. E.g. many marketing objectives have been thwarted or changed as a result of the recession. Factors such as exchange rates would also impact objectives concerned with international marketing.

Competitor actions

Marketing objectives have to take account of likely / possible competitor response. E.g. an objective of increasing market share by definition means that competitor response will not be effective

Market dynamics

The key market dynamics are market size, growth and segmentation. Changes in any of these undoubtedly influence marketing objectives. A market whose growth slows is less likely to support an objective of significant revenue growth or new product development

Technological change

Consumer and other markets are now affected by rapid technological change, shortening product life cycles and creating great opportunities for innovation. These have to be taken into account when setting marketing objectives.

Social & political change

Changes to legislation may create or prevent marketing opportunities. Change in the structure and attitudes of society also have major implications for many markets.

Question 3

Why do businesses need accurate and up-to-date information

Answer 3

Changes in technology – enabling new products and new production processes (e.g. the growth of digital study products like this toolkit which are reducing demand for printed textbooks)

Changes in consumer tastes – meaning that the demand for some products will decline, whilst others will grow more popular (e.g. increased demand for activity-related holidays at the expense of mass-market beach holidays)

Changes in the product ranges of competitors – the introduction of new rival products, or changes in pricing policies can greatly influence the demand for a product (e.g. the introduction of the Microsoft X-Box – which has challenged Sony’s PlayStation 2)

Changes in economic conditions – an improvement or worsening of the economic climate will have an impact on incomes on a national or regional level. Different products may be affected differently e.g. luxuries v necessities etc

Question 4

What is the purposes of marketing research

Answer 4

Gain a more detailed understanding of consumers’ needs – marketing research can help firms to discover consumers’ opinions on a huge range of issues, e.g., views on products’ prices, packaging, recent advertising campaigns

Reduce the risk of product/business failure – there is no guarantee that any new idea will be a commercial success, but accurate and up-to-date information on the market can help a business make informed decisions, hopefully leading to products that consumers want in sufficient numbers to achieve commercial success.

Forecast future trends – marketing research can not only provide information regarding the current state of the market but it can also be used to anticipate future customer needs. Firms can then make the necessary adjustments to their product portfolios and levels of output in order to remain successful.

Question 5

Examples of primary research methods

Answer 5

Focus groups
Interviews (online & in-person)
Surveys & questionnaires
Mystery shoppers
Product testing and product trial

Question 6

What is primary research

Answer 6

research data that is collected first-hand for a specific research purpose.

Question 7

Advantages and drawbacks of primary market research
Advantages

Answer 7

Directly focused on research objectives = fit for purpose

Tends to be more up-to-date than secondary research

Provides more detailed insights – particularly into customer views

Drawbacks

Time-consuming and often costly to obtain

Risk of survey bias – research samples may not be representative of the population

Question 8

Secondary?

Answer 8

uses data that already exists and has been collected by someone else for another purpose.

Question 9

What are internal sources of secondary data?

Answer 9

own records that represent a potential source of valuable data. For instance, records of past advertising campaigns within the marketing department can be compared with copies of invoices held in the sales department in order to judge their effectiveness and get ideas for future campaigns. Past sales figures can also be used to spot trends and forecast future figures.

The increasing availability and use of loyalty cards and big data has given businesses the chance to gather a wide range of valuable information on customer buying habits, allowing them to target promotional campaigns more effectively.

Internal sources of data should always be considered as a first line of enquiry for any investigation because they are usually the quickest, cheapest and most convenient source of information available. Internal data will also be exclusive to the organisation that generated it, so that rival firms will not have access to it.

However, internal data may be incomplete or out of date, and, if a project is new, there may be no relevant data at all. In such cases, an organisation may need to consider using external sources of secondary data

Question 10

What are external sources of secondary data?

Answer 10

There are several sources of existing data available from outside of the business that may be of value. These include:

Commercial market research organisations – including MINTEL, Keynote and Euromonitor
The Government – the much wider availability of open data from the government has significantly increased the availability of such data
Competitors – company reports and websites are easily accessible and contain a limited amount of information
Trade Publication
The general media

Question 11

Sample design covers:

Answer 11

Method of selection
Sample structure
Plans for analysing and interpreting the results.

Question 12

More on sample designs:

Answer 12

can vary from simple to complex. They depend on the type of information required and the way the sample is selected.

Sample design affects the size of the sample and the way in which analysis is carried out; in simple terms the more precision the market researcher requires, the more complex the design and larger the sample size will be.

The sample design may make use of the characteristics of the overall market population, but it does not have to be proportionally representative. It may be necessary to draw a larger sample than would be expected from some parts of the population: for example, to select more from a minority grouping to ensure that sufficient data is obtained for analysis on such groups.

Many sample designs are built around the concept of random selection. This permits justifiable inference from the sample to the population, at quantified levels of precision. Random selection also helps guard against sample bias in a way that selecting by judgement or convenience cannot.

Question 13

Defining the Population

Answer 13

The first step in good sample design is to ensure that the specification of the target population is as clear and complete as possible. This is to ensure that all elements within the population are represented.

The target population is sampled using a sampling frame.

Often, the units in the population can be identified by existing information such as pay-rolls, company lists, government registers etc.

A sampling frame could also be geographical. For example, postcodes have become a well-used means of selecting a sample.

Question 14

Sample size

Answer 14

For any sample design, deciding upon the appropriate sample size will depend on several key factors:

No estimate taken from a sample is expected to be exact: assumptions about the overall population based on the results of a sample will have an attached margin of error
To lower the margin of error usually requires a larger sample size: the amount of variability in the population, ie the range of values or opinions, will also affect accuracy and therefore size of the sample
The confidence level is the likelihood that the results obtained from the sample lie within a required precision: the higher the confidence level, the more certain you wish to be that the results are not atypical. Statisticians often use a 95% confidence level to provide strong conclusions
Population size does not normally affect sample size: in fact the larger the population size, the lower the proportion of that population needs to be sampled to be representative. It’s only when the proposed sample size is more than 5% of the population that the population size becomes part of the formulae to calculate the sample size

Question 15

Cluster sampling:

Answer 15

Units in the population can often be found in certain geographic groups or “clusters” for example, primary school children in Derbyshire.

A random sample of clusters is taken, then all units within the cluster are examined.

Advantages
Quick and easy
Doesn’t need complete population information
Good for face-to-face surveys
Disadvantages
Expensive if the clusters are large
Greater risk of sampling error

Question 16

convenience sampling:

Answer 16

Uses those who are willing to volunteer and easiest to involve in the study.

Advantages
Subjects are readily available
Large amounts of information can be gathered quickly
Disadvantages
The sample is not representative of the entire population, so results can’t speak for them - inferences are limited. future data
Prone to volunteer bias

Question 17

Judgement sample

Answer 17

A deliberate choice of a sample - the opposite of random

Advantages
Good for providing illustrative examples or case studies
Disadvantages
Very prone to bias
Samples often small
Cannot extrapolate from sample

Question 18

Quota

Answer 18

The aim is to obtain a sample that is “representative” of the overall population.

The population is divided (“stratified”) by the most important variables such as income, age and location. The required quota sample is then drawn from each stratum.

Advantages
Quick and easy way of obtaining a sample
Disadvantages
Not random, so some risk of bias
Need to understand the population to be able to identify the basis of stratification

Question 19

Random sampling:

Answer 19

This makes sure that every member of the population has an equal chance of selection.

Advantages
Simple to design and interpret
Can calculate both estimate of the population and sampling error
Disadvantages
Need a complete and accurate population listing
May not be practical if the sample requires lots of small visits over the country

Question 20

Correlation:

Answer 20

Correlation is another method of sales forecasting. Correlation looks at the strength of a relationship between two variables.

Question 21

Correlation measured by:

Answer 21

Correlation is usually measured by using a scatter diagram, on which data points are plotted. For example, a data point might measure the number of customer enquiries that are generated per week (x-axis) against the amount spent on advertising (y-axis).

Question 22

correlation variables:

Answer 22

Independent variable (the factor that causes the other variable to change) on the x-axis
Dependent variable (the variable being influenced by the independent variable) on the y-axis

Question 23

Line of best fit?

Answer 23

“line of best fit” (the regression line) which attempts to plot the mathematical relationship between the variables based on the data points. This can be drawn by hand or using an Excel spreadsheet or specialist marketing software.

Question 24

Positive correlation

Answer 24

A positive relationship exists where as the independent variable increases in value, so does the dependent variable

Question 25

Negative

Answer 25

A negative relationship exists where as the independent variable increases in value, the dependent variable falls in value

Question 26

No correlation

Answer 26

There is no discernible relationship between the independent and dependent variable

Question 27

The line of best fit indicates the strength of the correlation.

Answer 27

Strong correlation means that there is little room between the data points and the line. Weak correlation means that the data points are spread quite wide and far away from the line of best fit.

Question 28

danger of correlation

Answer 28

The big danger with correlation is of believing there is really a causal link between two variables when, in fact, they are not related. It is logical to believe that there is a causal link between the daily temperature and sales by ice-cream vans. However, is there a link between increasing childhood obesity and increasing disposal incomes for households? Both these variables have risen over the long-term, but they are probably not directly related.

Question 29

What is a confidence interval?

Answer 29

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

Question 30

How are confidence intervals used in business?

Answer 30

Take two examples: If a business undertakes primary market research amongst target customer to obtain opinions about a new product launch: how confident can management be that the opinions are representative of all target customers? When a manufacturing takes samples of finished products from its production line to check for quality: how confident can the business be that the sample of products inspected is representative of all the products being made? A common confidence interval acceptable to management is 95%. This means that 19 out of 20 samples taken (95%) will give results that are representative of the overall population. Or to put it another way - 1 out of 20 (5%) are unrepresentative! When the accuracy of sampling is critically important, then the acceptable confidence interval needs to rise.

Question 31

Why are confidence intervals so useful in business?

Answer 31

Businesses benefit from the use of statistics in estimating or predicting future events 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 and whether or not to act on them

Question 32

income and price (extra time for this)

Question 33

Market segmentation:

Answer 33

splits up a market into different types (segments) to enable a business to better target its products to the relevant customers.

Question 34

market mapping!!

Question 35

advantages of positioning maps:

Answer 35

Help spot gaps in the market Useful for analysing competitors - where are their products positioned? Encourages use of market research

Question 36

Disadvantages of positioning maps:

Answer 36

Just because there is a “gap” doesn’t mean there is demand for the product Not a guarantee of success How reliable is the market research that maps the position of existing products based on the chosen dimensions?

Question 37

Niche marketing

Answer 37

Where a business targets a smaller segment of a larger market, where customers have specific needs and wants

Question 38

niche advantages

Answer 38

Less competition – the firm is a "big fish in a small pond" Clear focus - target particular customers (often easier to find and reach too) Builds up specialist skill and knowledge = market expertise Can often charge a higher price – customers are prepared to pay for expertise Profit margins often higher Customers tend to be more loyal

Question 39

The main disadvantages of marketing to a niche include:

Answer 39

Lack of "economies of scale" (these are lower unit costs that arise from operating at high production volumes) Risk of over dependence on a single product or market Likely to attract competition if successful Vulnerable to market changes – all "eggs in one basket"

Question 40

mass marketing:

Answer 40

Where a business sells into the largest part of the market, where there are many similar products on offer Customers form the majority in the market Customer needs and wants are more "general" & less "specific" Associated with higher production output and capacity (economies of scale) Success usually associated with low-cost operation, heavy promotion, widespread distribution or market leading brands

Question 41

What is a target market

Answer 41

the set of customers sharing common needs, wants & expectations that a business tries to sell to.

Question 43

Mass marketing (undifferentiated)

Answer 43

Business targets the WHOLE market, ignoring segments Products focus on what customers need and want in common, not how they differ

Question 44

Segmented (differentiated)

Answer 44

Business target several market segments within the same market Products are designed and targeted at each segment Requires separate marketing plans and often different business units & product portfolios

Question 45

Concentrated (niche)

Answer 45

Business focuses narrowly on smaller segments or niches Aim is to achieve a strong market position (share) within those niches Some examples of these three approaches to targeting a market are provided below

Question 46

examples in notes

Question 47

7ps

Answer 47

product; price; place; promotion; people; process and physical.

Question 48

types of products in photos

Question 49

boston matrix

Question 50

product life cycle

Question 51

What are pricing tactics:

Answer 51

These are adopted in the short run to suit particular situations Tactics have only limited impact beyond short-term sales of the product itself. It may also be that the pricing strategies a business can implement are constrained by the competitive position of the business. It is often said that there are four categories of position a business can find itself in which influence the control it has over pricing:

Question 52

tactics:

Answer 52

1) Price taker Here, a business has no option but to charge the ruling market price. (2) Price maker For a price maker, the business has a strong enough competitive position to be able to fix its own price – either higher or lower than the competition. (3) Price leader A price leader is often a market leader whose market share is so strong that its price changes are closely followed (and often copied) by rivals (4) Price follower A business that just follows the price-changing lead of the market leader (ignoring the rest of the competition)

Question 53

business pricing:

Answer 53

Maximises profits and the return on assets or investment: the selling price achieved for a product directly affects the gross profit margin made on each sale Maximises the sales revenue: sales revenue is the total amount of money made from sales and is the price of the product multiplied by the number of sa

Question 54

what is price skimming:

Answer 54

Price skimming involves setting a high price before other competitors come into the market. This is often used for the launch of a new product which faces little or now competition – usually due to some technological features. Such products are often bought by "early adopters" who are prepared to pay a higher price to have the latest or best product in the market.

Question 55

- of price skimming

Answer 55

Price skimming as a strategy cannot last for long, as competitors soon launch rival products that put pressure on the price. Distribution (place) can also be a challenge for an innovative new product. It may be necessary to give retailers higher margins to convince them to stock the product, reducing the improved margins that can be delivered by price skimming. A final problem is that by price skimming, a firm may slow down the volume growth of demand for the product. This can give competitors more time to develop alternative products ready for the time when market demand (measured in volume) is strongest.

Question 56

penetration pricing:

Answer 56

The aim of penetration pricing is usually to increase market share of a product, providing the opportunity to increase price once this objective has been achieved. Penetration pricing is the pricing technique of setting a relatively low initial entry price, usually lower than the intended established price, to attract new customers. The strategy aims to encourage customers to switch to the new product because of the lower price.

Question 57

Amongst the advantages claimed for penetration pricing include:

Answer 57

- Catching the competition off-guard / by surprise - Encouraging word-of-mouth recommendation for the product because of the attractive pricing (making promotion more effective) - It forces the business to focus on minimising unit costs right from the start (productivity and efficiency are important) - The low price can act as a barrier to entry to other potential competitors considering a similar strategy - Sales volumes should be high, so distribution may be easier to obtain

Question 58

Penetration pricing strategies do have some drawbacks, however:

Answer 58

- The low initial price can create an expectation of permanently low prices amongst customers who switch. It is always harder to increase prices than to lower them - Penetration pricing may simply attract customers who are looking for a bargain, rather than customers who will become loyal to the business and its brand (repeat business) - The strategy is likely to result in retaliation from established competitors, who will try to maintain their market share

Question 59

dynamic pricing

Answer 59

pricing strategy in which businesses set flexible prices for products or services based on current market demands. The aim of dynamic pricing is to allow a business that sells goods or services online and/or via mobile apps to adjust selling prices on the fly in response to changing market demand.

Question 60

These dynamic pricing rules will often take into account factors such as

Answer 60

The customer's location Time of day Day of the week Level of demand Competitors' pricing

Question 61

What is a brand?

Answer 61

product with unique character, for instance in design or image. It is consistent and well recognised.

Question 62

The advantages of having a strong brand are:

Answer 62

Brands inspire customer loyalty leading to repeat sales and word-of mouth recommendation The brand owner can usually charge higher prices, especially if the brand is the market leader Retailers or service sellers want to stock top selling brands. With limited shelf space it is more likely the top brands will be on the shelf than less well-known brands.

Question 63

The strength of a brand can be exploited by a business to develop new products. This is known as brand extension

Answer 63

a product with some of the brand's s characteristics. Examples include Dove soap and Dove Shampoo (both contain moisturiser); Mars Bar and Mars Ice Cream

Question 64

What is a logo?

Answer 64

A logo is a symbol or picture that represents the business. It is important because it is easy to recognise, establishes brand loyalty and can create a favourable image.

Question 65

Brand stretching

Answer 65

is where the brand is used for a diverse range of products, not necessarily connected. E.g. Virgin Airlines and Virgin Cola; Marks and Spencer clothes and food.

Question 66

distribution:

Answer 66

Place (or its more common name "distribution") is about how a business gets its products to the customers.

Question 67

Distribution is achieved by using one or more distribution channels, including:

Answer 67

Retailers Distributors / Sales Agents Direct (e.g. via e-commerce) Wholesalers

Question 68

distribution channel:

Answer 68

"all the organisations through which a product must pass between its point of production and consumption” a product might pass through several stages before it finally reaches the consumer. The organisations involved in each stage of distribution are commonly referred to as "intermediaries".

Question 69

Benefits of Multi-channel Distribution

Answer 69

Allows more target market segments to be reached Customers increasingly expect products to be available via more than one channel Enables higher revenues – e.g. if retail outlets have no stock, but customer can buy online

Question 70

Drawbacks of Multi-channel Distribution

Answer 70

Potential for channel “conflict” –e.g. competing with retailers by also selling direct Can be complex to manage Danger that pricing strategy becomes confused (in the eyes of customers)

Question 71

email marketing

Answer 71

Email marketing is the most widely used type of digital marketing - and many would argue that it is also the most widely abused type of digital marketing. Simply, email marketing involves the broadcast of email messages to audiences of email addresses. Email marketing has become much more sophisticated

Question 72

online advertising

Answer 72

There are few businesses that do not advertise online now. The ability to define and target online campaigns at specific audiences or in specific locations makes online advertising particularly attractive. So too does the sophisticated and real-time performance data on that advertising, including being able to attribute advertising campaigns to online sales. Online advertising remains dominated by the large search engines (Google, Bing) as well as the major social media networks such as Facebook, Instagram, Twitter and LinkedIn.

Question 73

SEARCH ENGINE OPTIMISATION (SEO)

Answer 73

With so much business now done online, it is vital that a business can be found by potential customers online. Done right, search engine optimisation (or SEO for short) can attract significant traffic to a website. The goal of SEO is to optimise content in a way that makes it appear among the first results on the results pages of search engines - particularly Google. There is a whole global industry dedicated to providing businesses with tools and advice on SEO - some of which is reliable but much isn't!

Question 74

content marketing

Answer 74

Content marketing is closely linked to search engine optimisation. It involves creating and distributing valuable, relevant, and consistent content to attract and retain a clearly defined audience . Examples of content marketing include blogs, specialist reports, streamed videos and webinars. The aim of content marketing is to reach and then engage with the target audience - often by persuading the audience to provide contact details (usually email or registration for an online newsletter).

Question 75

influencer marketing

Answer 75

Influencer marketing is a fast-growing part of digital marketing. Influencer marketing is a form of social media marketing that involves endorsements from "influencers". These are people and who may possess (or claim to possess) an expert level of knowledge and/or social influence in their respective fields. The factors that determines the impact of an "influencer" vary. A good starting point might be the number of "followers" or subscribers that the influencer has, or the extent to which their comments and recommendations are "liked" or shared via share social media.

Question 76

viral marketing

Answer 76

Like influencer marketing, viral marketing also uses existing social media networks to promote a product. Its name refers to how consumers spread information about a product with other people in their social networks, much in the same way that a virus spreads from one person to another. Video content in particular has been proven to be some of the most "virulent" content shared in this way, which has helped some businesses gain significant audiences for their brands, products and services.

Question 77

need to decide which technological solutions are most appropriate for their business, based on factors such as:

Answer 77

Pricing (most marketing technology is sold as "software as a service" with per user pricing Ease of use (for those employees tasked with implementing the technology) Compatibility with other business systems Scalability - can the technology grow with the business? Compliance - e.g. with fast-changing regulations about data protection

Question 78

technology examples

Answer 78

campaign testing: Campaign testing is a key feature of digital marketing technology. Essentially it allows a business to set up more than one (and in some cases many thousands) of different marketing campaigns to test which is most effective. The best campaign formats (e.g. messages, images, video, placement) are then automatically rolled-out to a wider target audience, thereby reducing wasted marketing spend. competitor analysis: Whether it is tracking activity on a competitor YouTube channel, website or mobile app, or even competitor pricing online, there is software available to help businesses know exactly what their competitors are up to!