Marketing (Chapters 50 - 57)

Question 1

Chapter 50
What does SWOT stand for?

Answer 1

S - Strengths.
W - Weaknesses.
O - Opportunities.
T - Threats.

Question 2

Chapter 50
What can the SWOT analysis be used for and how can it be used?

Answer 2

• A SWOT analysis can be carried out by an individual department within a business or by a business as a whole.
• The whole analysis can be used as a forward-looking tool. E.g. the managers can consider how effective the business is in respect of the environment in which it operates.

Question 3

Chapter 51
What is market research and what does it include?

Answer 3

A systematic, objectives collection and analysis of data about a particular target market. This includes:
• Describing the market (identifying consumers and customers, trends, etc.)
• Explaining the market (understanding why changes in the market have taken place, why a particular business’s market share increased/decreased, reasons for success/failure of a marketing strategy).
• Predicting the market (how will the consumers react to changes in the price of the product).

Question 4

Chapter 51
What are the two types of research used in market research and how do they differ?

Answer 4

• Quantitative research (objective) - concentrates on numerical data, what consumers actually purchase and use.
• Qualitative research (subjective) - opinion based research which aims to identify how or why things are as they are.

Question 5

Chapter 51
What are the 2 ways of conducting research?

Answer 5

• Primary (field research).
• Secondary (desk research).

Question 6

Chapter 51
What are some methods of primary research and which factors need to be considered before deciding on which one to use?

Answer 6

Some methods are:
• Interviews.
• Observation.
• Trial marketing (trialing a product to try and find a representative group of consumers).
• Focus groups (8-10 people are offered stimuli and their responses are recorded).
Factors to consider:
• Marketing objectives.
• Cost and budget constraints.
• Information required and available.

Question 7

Chapter 51
What are the 2 main sources for secondary research and what are some examples of each?

Answer 7

• Internal sources - sales/data figures, previous survey results, customer information.
• External sources - the Internet, market research companies, government statistics, newspapers/magazines.

Question 8

Chapter 52
What does the population refer to when it comes to sampling?

Answer 8

The term usually refers to the total group included in the sample. E.g. all the pupils in a school to do a survey on school meals.

Question 9

Chapter 52
What are some random and non-random probability sampling methods?

Answer 9

Random sampling:
• Simple random sampling.
• Systematic sampling (every ‘nth’)
Non-random sampling:
• Quota sampling (splitting the population into groups and picking in proportion to the size of each group).
• Stratified sampling (splitting the population into proportionate/disproportionate strata based on some well-known characteristics).

Question 10

Chapter 52
What are some reasons for sampling errors?

Answer 10

• Non-sampling errors: the respondent not being honest due to what’s politically or socially right/wrong.
• Sampling errors: how far off the sample mean is from the population mean.

Question 11

Chapter 52
What is market segmentation?

Answer 11

Dividing the market into groups of people with different needs and characteristics to help the business target the right audience with its products.

Question 12

Chapter 52
What are some types of market segmentation?

Answer 12

• Age.
• Gender.
• Social class.
• Geography (in which area they live).
• Residence (people living in a particular type of accommodation e.g. modern family, poorest council estates).

Question 13

Chapter 52
What are some disadvantages of market segmentation?

Answer 13

• Risk of excluding other customers by taking segmentation too far which means potential sales may be lost.
• Consumers are prepared to move over boundaries in their purchasing patterns, so it is difficult to categorise consumers and their behaviour.

Question 14

Chapter 52
What is market share and how can it be measured?

Answer 14

A proportion of the total market that a particular firm has achieved. Can be measured by sales volume or by sales value.

Question 15

Chapter 52
What are some factors that can affect market growth?

Answer 15

• Nature of the product.
• Changes in fashion and tastes.
• Population changes.
• Changes in the standard of living.

Question 16

Chapter 52
What are some factors affecting buyer behaviour?

Answer 16

• Income, employment and standard of living.
• Advertising/Publicity campaigns.
• Consumer confidence (lack of confidence about the future).

Question 17

Chapter 53
What is the difference between niche marketing and mass marketing?

Answer 17

• Niche marketing - targeting a clear and identifiable segment of the market.
• Mass marketing - selling into a market containing many products that are similar.

Question 18

Chapter 53
What is the difference between market and product orientation and what are some tools used for each?

Answer 18

• Market/Customer orientation - getting the right product through market research, market testing and customer focus.
• Product orientation - getting the product right through product research, product testing and product focus.

Question 19

Chapter 53
What is the difference between customers and consumers?

Answer 19

• Customers - the ones purchasing the product.
• Consumers - the ones using the product.

Question 20

Chapter 53
How is business-to-business marketing different to customer marketing?

Answer 20

• Limited in the types of marketing it can use.
• Most likely to use personal selling (sales staff approaching personnel of other businesses).

Question 21

Chapter 54
What is differentiation and what are some of its types?

Answer 21

Differentiation refers to making the product distinctive to make it stand out. Types:
• Branding.
• Quality to match the brand.
• Producing the right type of product.

Question 22

Chapter 54
What is a USP?

Answer 22

Unique Selling Point (USP) - something that makes the product stand out against competitors.

Question 23

Chapter 54
What are the 4 stages of the product life cycle (sales/time)?

Answer 23

• Introduction/Development (low sales, high costs in advertising and identifying customer needs).
• Growth (a rise in sales, product changes based on feedback).
• Maturity (profitable product, emphasis on maintaining success).
• Decline (sales are falling due to better alternatives).

Question 24

Chapter 54
What are some factors of the marketing mix that need to be considered during the introduction stage?

Answer 24

• Sufficient market research to ensure the product meets its consumers’ needs.
• Increased advertising.
• Depending on the nature of the product, introductory offers may need to be implemented.

Question 25

Chapter 54 How is the marketing mix affected during the growth stage?

Answer 25

• Modifications may be made after initial feedback from market research. • A likely change in advertising from informative to competitive. • Wider distribution.

Question 26

Chapter 54 How is the marketing mix affected during the maturity stage?

Answer 26

• Slight variations of the established product may be needed to maintain sales. • A possibility of seeking new markets. • Less emphasis on advertising as it's needed to simply remind the customers of its existence.

Question 27

Chapter 54 How is the marketing mix affected during the decline stage?

Answer 27

• Little point in spending money on a product in decline. • A drastic price reduction in order to sell off any stock. • Sales promotion may be used to sell off final stock.

Question 28

Chapter 54 What is product positioning and how can it be achieved?

Answer 28

Product positioning is selling the 'right' product to the 'right' segment of the market. Achieved by: • The price in relation to that of competitors. • Having a beneficial quality compared to others. • Being a niche product. • Being something completely different.

Question 29

Chapter 54 What is the product portfolio?

Answer 29

The collection of all products a business has produced.

Question 30

Chapter 54 What is the Boston Matrix and what are its 4 categories?

Answer 30

It is a tool that a business can use when deciding what products to produce. The Matrix considers the products in terms of their market share and potential market growth. It has 4 categories: • Rising star (high market share and growth). • Problem child (low market share, high growth, usually supported by cash cows). • Cash cow (high market share, low growth). • Dog (low share and growth).

Question 31

Chapter 54 What are some advantages of using the Boston Matrix?

Answer 31

• Allows the business to see if it has a balanced portfolio. • And whether it has sufficient cash cows to feed the problem child. • Allows to see if it has too many rising stars, as it can become financially draining.

Question 32

Chapter 55 What are some factors affecting the price?

Answer 32

• Objectives of the business. • Consumers (their income and tastes). • Costs of producing the goods. • Level of demand and competition within the market.

Question 33

Chapter 55 What is the price elasticity of demand and what are some qualities of it being elastic and inelastic?

Answer 33

Price elasticity of demand is the response of demand to a change in price. It can be elastic or inelastic: • Elastic - large price increase, large number of substitutes, luxury good. • Inelastic - small price increase, few/no substitutes, necessity.

Question 34

Chapter 55 What is income elasticity of demand and what are the qualities of it being elastic and inelastic?

Answer 34

The response of demand to a change in income. • Elastic - inferior and luxury goods, large increase in income, consumers' income is low. • Inelastic - necessities, small increase in income, consumers' income is high.

Question 35

Chapter 55 What is the cross elasticity of demand?

Answer 35

Shows how a change in price of one good will affect the demand for another.

Question 36

Chapter 55 What is price skimming as a pricing strategy?

Answer 36

A business setting a high price in an attempt to gain profit quickly. Often used on products that have a short life cycle.

Question 37

Chapter 55 What is penetration pricing as a pricing strategy?

Answer 37

A business sets a low price on a product and heavily advertises it in an attempt to attract customers and to establish itself in the market.

Question 38

Chapter 55 What is premium/prestige pricing as a pricing strategy?

Answer 38

A high price is set in an attempt to make it look higher quality.

Question 39

Chapter 55 What is psychological pricing as a pricing strategy?

Answer 39

Setting a price that sounds less than it actually is (e.g. 99p, £2.98).

Question 40

Chapter 55 What is a loss leader as a pricing strategy?

Answer 40

Setting a low price on a product to encourage customers to purchase more products.

Question 41

Chapter 55 What is competition-based pricing as a pricing strategy?

Answer 41

A short-term strategy which involves the business setting a price lower than its competitors in an attempt to 'beat them'.

Question 42

Chapter 55 What is predatory/destroyer pricing as a pricing strategy?

Answer 42

Often seen as anti-competitive by the CMA, involves an established business setting low prices, even causing a short-term loss, in response to a new business entering the mearket

Question 43

Chapter 55 What is market-based/going-rate pricing as a pricing strategy?

Answer 43

For products that are very similar or even identical, a business will take its price for a product from the market (e.g. milk, petrol, oil).

Question 44

Chapter 55 What are the different types of promotional pricing?

Answer 44

• BOGOF (Buy One Get One Free). • Price reductions. • Loss leaders. • '3 for 2' offers. These are used to maintain a high level of sales.

Question 45

Chapter 55 What is the cost plus as a pricing strategy?

Answer 45

The business's price is a 'mark-up' to its costs. E.g. cost of producing a product = 60, mark-up = 50%, final price = 90.

Question 46

Chapter 55 What is contributional/marginal cost pricing as a pricing strategy?

Answer 46

A method where the business ignores the fixed costs and overheads and only considers the variable costs for making the product.

Question 47

Chapter 55 What is price discrimination and what are its forms?

Answer 47

Price discrimination occurs when different prices are charged for the same product/service in different markets. The 2 forms are: • Area - a different price being charged in different parts of the world/country. • Time - a different price is charged at different times of the day.

Question 48

Chapter 56 What are the different channels of distribution?

Answer 48

• Producer - Wholesaler - Retailer - Consumer. • Producer - Retailer - Consumer. • Producer - Consumer. • Producer - Wholesaler - Consumer. • Producer - Agent - Consumer.

Question 49

Chapter 56 Who is a wholesaler?

Answer 49

A wholesaler buys in bulk from the producer and breaks it down onto smaller units.

Question 50

Chapter 56 Who is an agent?

Answer 50

Agents negotiate between buyers and sellers, acting on the behalf of the producer. E.g. travel agent.

Question 51

Chapter 56 What is the difference between online/digital distribution and physical distribution?

Answer 51

• Digital distribution - ordering a product directly from the producer and using a delivery service to receive it or purchasing digital goods. • Physical distribution - the physical method of distribution used by a business.