Marketing

Question 1

What is Marketing?

Question 2

THE CUSTOMER
What is Market Segmentation?

Answer 2

Market Segmentation is what is used for a business to ensure:
* the product/service provided meets the specific needs and wants of the customer
* the product/service is available in approriate places for the customer to access it
* the price for the product/service is appropriate for the target market
* the promotion and advertising is targeted towards to the correct customers to maximise the chance of success

Question 3

THE CUSTOMER
The Factors of Market Segmentation:

Answer 3

Age
* individual’s needs and wants change as they get older, so the market is split into age ranges, e.g. 0-5 years

Income
* the market is split based on the income earned or the social class, e.g. working or upper class

Gender
* the market is split by gender, i.e. male or female, as they tend to have different intrests and preferences

Lifestyle
* the market is split based on how individual’s choose to lead their lives, e.g. sportswear, fashion

Location
* the market is split based on the needs of individual’s living in different areas, e.g. smaller cars are aimed to those who want to keep costs limited and areas where parking is limited

Occupation
* the market is split based on the needs of different occupations, e.g. an accountant will have different needs compared to a joiner

Religious/Cultural Beliefs
* the market is split based on the religions and cultures of individual’s, e.g. Halal meat will be promoted more to those who practise the Muslim faith

Question 4

MARKET RESEARCH
Benefits of Market Research:

Answer 4

• to stay ahead of the competition
• to anticipate future needs of customers
• to find out the needs and wants of customers
• to advertise the product/service appropriately

If this is done successfully, sales revenue (income) and profits will increase.

Question 5

MARKET RESEARCH
What is Desk Research?

Answer 5

Already existing (secondary) information and was collected for a specific purpose by someone else.

Question 6

MARKET RESEARCH
Advantages and Disadvantages of Desk Research:

Answer 6

Advantages
* cost effective - cheaper to gather than field research
* far less expensive to implement than primary research
* as the information already exists it is easy and less time consuming to obtain

Disadvantages
* may contain bias
* may be out of date
* information also available to competitors

Question 7

MARKET RESEARCH
Methods of Desk Research:

Answer 7

Internal
* analysing customer complaints
* studying past trends in sales figures
* examining customer records, e.g. Tesco Clubcard

External
* internet
* newspapers
* competitor’s websites

Question 8

MARKET RESEARCH
What is Field Research?

Answer 8

New and first-hand (primary) information gathered by the business itself for a specific purpose.

Question 9

MARKET RESEARCH
Advantages and Disadvantages of Field Research:

Answer 9

Advantages
* not available to competitors
* the information is up to date
* the information has been gathered for a specific purpose and is therefore relevant

Disadvantages
* it is time consuming to gather
* data must be analysed once collected
* collecting the information is expensive

Question 10

MARKET RESEARCH
Methods of Field Research:

Answer 10

Observation
* watching something and recording what happens; the observer might have to count how many times something happens, someone does something, or what someone’s reaction is to a situation

Online Survey
* when people answer questions, giving ratings or comments electronically

Mystery Shopper
* poses as a customer to research the level of customer service offered

Question 11

MARKET RESEARCH
Advantages and Disadvantages of Methods of Field Research:

Answer 11

Observation
Advantages
* facts and figures are gathered - easier to analyse than thoughts and opinions
* people being observed might not be aware so should act naturally

Disadvantages
* only shows actions, not thoughts or feelings
* there are privacy and ethical issues to consider when observing people

Online Survey
Advantages
* more cost effective than other methods
* a link to the survey can be sent to large numbers of people via email

Disadvantages
* many people will ignore the survey
* relies on respondents having a connection to the Internet

Mystery Shopper
Advantages
* can give a true picture of service
* can be used to gain information on competitors

Disadvantages
* insufficent or biased data
* workforce anxiety - always on edge that customers could be MSs
* can be expensive if third party employed as a mystery shopper

Question 12

THE MARKETING MIX
What is the Marketing Mix?

Answer 12

Product
* good/service produced by the business and then sold to customers

Price
* how much a business charges customer for the product - different pricing strategies are used depending on the circumstances

Place
* where the product is sold

Promotion
* how customers are told that the product exists, e.g. advertising, special offers

Question 13

PRODUCT
What is it?

Answer 13

This is the product (or service) produced by the business to be sold onto the customer. It must meet the needs/wants of the customer, or they will not buy it - market research will help the business to identify this.

When developing a product a business must consider;
* value for money, (Price v Quality)
* taste, e.g. texture, flavour, ingredients
* physical appearance, e.g. size, shape, colour
* packaging, e.g. eye catching, environmentally friendly
* unique Selling Point (USP), i.e. what makes your product different to existing products

Question 14

PRODUCT
Product Life Cycle:

Question 15

PRODUCT
GAPTAP:

Answer 15

G: Generate the idea
* come up with the idea for the product.
* this can come from within the business or from market research to find out what the consumer wants.

A: Analyse the idea
* examine the product suggested to identify if it’s feasible to make, e.g. do the business have enough finance, trained staff, etc. Managers will then decide whether the product can be made.

P: Produce a prototype
* create an example of the product to see what it will look like, the size and the design to see if it works and is possible to produce.

T: Test the product
* use test marketing or a focus group to ask the consumers views of the product. Collect feedback.

A: Alter the product
* make changes based on the market research to ensure the product is the best is can be. This will reduce the risk of failure.

P: Produce the Product
* start production of the product.
* advertise and promote the product so that consumers are aware that it exists.

Question 16

PRODUCT
Introduction:

Answer 16

During this stage, few consumers know about the product when it is launched onto the market. Initially, sales and profit are low. The aim is to raise awareness of the product through promotional activities, e.g. advertising, free samples, or a special introductory price.

Question 17

PRODUCT
Growth:

Answer 17

Sales increase rapidly as more customers become aware of the product as a result of the promotional activities. Profits also increase as the product becomes more popular.

Question 18

PRODUCT
Maturity:

Answer 18

This is the most profitable stage of the product life cycle as sales have reached their highest point. Competitors may enter the market and the pricing strategy may have to be reviewed to retain customers.

Question 19

PRODUCT
Decline:

Answer 19

Sales of the product fall as demand for the product decreases. A business can try to extend the product life by bringing out newer or adapted versions, e.g. Dairy Milk, Dairy Milk Oreo, Dairy Milk Creations.

Question 20

PRODUCT
Extending the Product Life Cycle:

Answer 20

To prevent a product declining, and to extend the life of the product, a business can take a number of actions including;

• increase channels of distribution
• develop a wider range of products
• finding new uses for existing products
• promoting more frequent use of the product
• developing new markets for existing products
• re-launch the product with new image/packaging
• offer promotions to remind consumers of product

When extending the product life cycle the business will have to alter at least one of the 4Ps.

Question 21

PRODUCT
What is Branding?

Answer 21

A brand can mean a logo, a name, or slogan that can only be used by the business which has registered it. Branding is used to build brand loyalty and plays an important part in promotion. As customers, we associate branding with high quality products and therefore are charged a higher price.

Question 22

PRODUCT
Advantages of Branding:

Answer 22

Advantages
* gives an impression of quality and reliability
* creates a unique identity and is instantly recognisable to customers – competitive advantage
* the brand name can increase the value of the business

Disadvantages
* bad publicity for one product in the brand can negatively affect the whole brand name
* brands must invest in research and development and advertising to remain competitive
* some brands are likely to be copied, fake versions can appear on the market for cheaper

Question 23

PRODUCT
Own Brand Products:

Answer 23

When a business produces and sells their own version of a product. Usually, the brand is the name of the retailer.

Own brand products are usually of similar quality to well-known brand and have similar packaging but are usually less expensive than the branded products.

Question 24

PRODUCT
Advantages and Disadvantages of Own Brand Products:

Answer 24

Advantages
* gives customers more choice
* usually cheaper than branded products therefore popular with customers
* very little advertising required as own brand is well known, e.g. Tesco

Disadvantages
* can be viewed as a copy or imitation of a brand
* sometimes seen as poorer quality compared to other brands

Question 25

PRODUCT
What is Packaging?

Answer 25

Packaging is the materials used to protect and promote goods. It is designed to capture a customer’s attention and it can directly affect whether they buy the product or not.

Packaging has to fulfil a number of important functions, including:
* preventing leakage of the contents
* protecting the product from damage
* communicating the brand and its benefits
* presenting government-required warning and information labels

Question 26

PRODUCT
Advantages and Disadvantages of Packaging:

Answer 26

Advantages
* protects the product and prolongs its life
* attracts consumers and persuades them to try a product
* can be updated to attract new customers, e.g. Coca-Cola name bottles and Santa bottles

Disadvantages
* can be costly for the business to make packaging if it wants to give off a high-quality image
* needs to be updated to stay in line with Government legislation
* if packaging is not easy to use, then it can put customers off from buying the product

Question 27

PRICE
Why is Price Important?

Answer 27

Price is important to customers for two reasons;
Firstly, customers will only pay what they can afford and what they think is a reasonable price for the product.
Secondly, consumers will use price as a measure of quality - high price would suggest a high quality and vice versa.

Question 28

PRICE
Factors to Consider before Deciding on a Price:

Answer 28

Price Charged by Competitors
* it is important not to charge a higher price than competitors as there is a risk that customers will choose them over the business

Cost of Making the Product
* to be profitable a business must cover their costs. The price charged for the product should be higher than the cost of making it

How Many Units of the Product will be Produced
* if a business is making a large quantity of the same product, they will benefit from Economies of Scale, meaning that each unit will cost less to make. However, producing products in small quantities will be more expensive per unit produced; therefore, a higher price will be charged.

Target Market and Image
* a business which aims their products to those earning a high income, e.g. Ferrari, will price their products higher than a business which aims their products to those earning a lower income, e.g. Ford

Question 29

PRICE
Pricing Strategies - Short Term:

Answer 29

Psychological Pricing
* a business can set prices to make the customer believe that the product is cheaper than it is, e.g. 99p instead of £1.00, or £99.99 instead of £100.00

Penetration Pricing
* used by a business that is entering (or penetrating) a market where competitors are already selling similar products. Prices will be set lower than competitors to tempt customers to buy the new product rather than the competitors, once the popularity of the product increases the price can increase in line with competitors’ prices

Price Skimming
* used when a business is the first to launch a new product onto the market. The price is high which allows the business to make a large initial profit and recoup some of the costs of developing the new product, as competitors enter the market the price will gradually fall

Question 30

PRICE
Pricing Strategies - Long Term:

Answer 30

Low Price
* a business may decide to charge a price lower than those of competitors to increase sales. Usually used in a marketplace with little brand loyalty and competition is high.

High Pricing (Premium Pricing)
* a business can charge a high or premium price for their product if they are seen as being better than their rivals in meeting the needs of the target market, e.g. perfumes and designer clothes. Other reasons for charging a high price would be a well-established brand name and reputation, lack of competition in the market, or a USP (Unique Selling Point).

Question 31

PLACE
Factors to Consider before Deciding on a Place:

Answer 31

Suitable Premises
* certain size of shop may be required
* certain facilities may be needed, e.g. large stockroom, kitchen area

Location of Customers
* businesses want a location where a customer base already exists, e.g. a busy shopping mall
* customer will not travel too far – market research will help identify where the customers are

Availability of Employees
* a certain number of staff might be needed – an area with high unemployment levels would benefit a business
* employees with suitable skills may be required, e.g. tradesmen

Question 32

PLACE
Advantages and Disadvantages of the Suitability of Different Locations:

Answer 32

E-Commerce
Advantages
* can sell 24/7
* can target customers worldwide
* can sell a larger variety of items online

Disadvantages
* internet issues can occur
* lots of competition online
* customers might be put off because of the risk of poor security and fraud

Shopping Centre
Advantages
* high volume of customers
* variety of shops will attract customers
* cater to wide variety of target markets – kids, teens, elders

Disadvantages
* high competition
* very expensive to rent a unit

Question 33

PLACE
What is a Channel of Distribution?

Answer 33

Channel of Distribution refers to the process of taking the product from the production line and making it available to the customer.

Question 34

PLACE
Advantages and Disadvantages of the Methods of Distribution:

Answer 34

Road
Advantages
* can depart at any time/24 hours
* refrigerated vehicles can be used to transport perishable goods
* customer receives product right to their door/more flexible

Disadvantages
* traffic congestion can cause delays
* it is not suitable for all products, e.g. large items
* not as environmentally friendly as other methods, e.g. carbon emissions

Rail
Advantages
* fewer delays than road
* it is often faster than by road
* it is more environmentally friendly than road and air

Disadvantages
* it is not suitable in rural areas with no rail network
* there may not be a train station nearby so deliveries can be restricted
* rail services can be disrupted – technical difficulties or rail track issues

Air
Advantages
* ideal for long distance and more remote locations
* large quantities of small products can be transported

Disadvantages
* large items cannot be transported easily
* the airport is not the final destination, so often still requires road transport for the final delivery

Sea
Advantages
* less expensive than air for large loads
* large items can be transported worldwide
* suitable for items that have a long shelf life

Disadvantages
* slower method than others meaning longer delivery times
* can only deliver to limited places as a dock is needed to drop off goods

Question 35

PROMOTION
What is Promotion?

Answer 35

Promotion is the way in which the organisation makes the customer aware of the features and benefits of the product. It is used to attract new customers as well as retain existing customers.

Question 36

PROMOTION
Methods of Promotion:

Answer 36

Coupons and Vouchers
* offer money off future purchases and can be made available in many different ways, e.g. newspapers and bus tickets - often used to encourage loyalty, e.g. spend £40 and receive £5 off your next shop

Loyalty Cards
* rewards customers for shopping with the business regularly, e.g. Costa Coffee Club where customers earn points for each £1 they spend

Competitions
* customers must buy the product to allow them to enter competitions or prize draws - this is promoted on the packaging

BOGOF
* used for a limited time frame to encourage customers to purchase selected products - can be used to sell excess stock.

Bonus Packs
* more of the product is offered for the same as the original price, e.g. 20% extra free

Celebrity Endorsement
* abusiness will pay a celebrity to promote a product, e.g. Michael Jordan and Nike

Question 37

PROMOTION
Advantages and Disadvantages of the Methods of Advertising:

Answer 37

Apps
Advantages
* can be used by customers on the move, e.g. phone
* increased access to free Wi-Fi to access the internet, e.g. cafes

Disadvantages
* staff must be trained to design and app that is customer friendly
* customers need to buy a smart phone or tablet computer to use which is expensive
* internet connection depends on the location and devise being used

Newspapers
Advantages
* adverts can be retained by consumer for future reference
* products can be targeted to market segments based on readership of paper

Disadvantages
* adverts are often ignored
* fewer people buy printed newspaper now
* often in black and white so less eye catching

Radio
Advantages
* less expensive than press and television advertising
* captive audience as listeners do not tend to channel surf when adverts are on

Disadvantages
* difficult to target specific market segments
* listeners often ‘tune out’ when adverts are played
* relies solely on sound to make an impact on listener

Question 38

ETHICAL MARKETING
What is Ethical Marketing/What is it Not Ethical for a Business to do?

Answer 38

Ethics are moral guidelines which regulate good behaviour therefore ethical marketing means making marketing decisions that are morally right.

It would not be ethical for a business to;
* exclude potential customers from the market
* obtain research data illegally or without permission
* reach agreements with competitors to keep prices high, and so exploit customers to earn as much profit as possible
* deliberately market their products at vulnerable groups, e.g. children or the elderly

Question 39

ICT IN MARKETING
Effects of ICT in Marketing on Factors:

Answer 39

E-Commerce
Advantages
* business is open 24/7
* can sell a larger variety of stock
* savings on expensive showrooms/ stores
* can sell worldwide means the business will be better known

Disadvantages
* lots of competition online
* designing and keeping the website up to date is expensive and requires specialists
* not all the businesses target customers have access to the internet.
* if the website crashes, then customers won’t be able to buy any goods.

Social Media
Advantages
* can see updates on stock levels
* celebrities can tag businesses in posts
* allows quick interactions with customers
* easy to run competitions which boosts publicity
* sharing/ “like”ing increases the exposure of the business
* customers follow businesses they like to see products on sale

Databases
These are used to keep customer records and can be easily searched to allow the business to target marketing materials to particular groups of customers, e.g. student discount