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business unit 3 and 5 > unit 3 > Flashcards

unit 3 Flashcards

1
Q

market size equation

A

total sales in market

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2
Q

market growth equation

A

market size(new)-market size(old)
————————————————- X100
market size (old)

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3
Q

sales growth equation

A

sales(new) - sales(old)
———————————- X100
sales(old)

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4
Q

market share equation

A

business sales
———————- X 100
market size

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5
Q

what is the role of marketing

A

The role of marketing is to identify, predict and satisfy the needs of the customer in a profitable manner.

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6
Q

What are marketing objectives?

A

Marketing objectives set out what a business wants to achieve from its various marketing activities. They need to be consistent with the overall aims and objectives of the business, this provides focus for the marketing department.

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7
Q

Give 5 examples of marketing objectives

A

Market size
Market share
Market growth
Sales growth
Brand loyalty

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8
Q

Define market size

A

The number of sales, by value or volume, in a market as a whole.

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9
Q

Define market share

A

The proportion of total sales that a particular firm controls in a market

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10
Q

Define market growth

A

The percentage increase in the size of the total market in terms of either value or volume

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11
Q

Define sales growth

A

The percentage increase in the size of the sales of a firm in terms of either value or volume

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12
Q

Give 4 examples of external factors on marketing objectives

A

-Market size growth and segmentation

-Technology

(Many markets are affected by rapid technological change, shortening product life cycles and creating opportunities for innovation)

-Competitors

-Ethical / environmental factors

(Demand-rate of economic growth will impact demand)

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13
Q

Give 3 examples of internal factors on marketing objectives

A

-Corporate objectives

(Most important internal inf. a marketing objective should not conflict with a corporate objective)

-Finance

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

-Human Resources

(Quality and capacity)

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14
Q

Give 4 ways a business can carry out market analysis

A

-Sales growth
-Market growth
-Market share
-Market mapping

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15
Q

What is quantitative research?
pros and cons

A

Research concerned with data. Main method of collecting quantitative research is through surveys

pros-quicker to gather, faster to analyse,
examine larger samples, easier to make
decisions from.

cons-tends to be very narrow and closed,
unhelpful if u want to understand issue
with depth

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15
Q

What is qualitative research?
pros and cons

A

Opinions, attitudes, beliefs and intentions

Usually gathered through focus groups

pros- creates in depth data
cons-slower to gather ,diff to analyse data,
harder to make decisions from

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16
Q

What is primary research?

A

Business gathers new data themselves or employs someone to do it for them on their behalf

pros-design quantitative and qualitative
questions tailored precisely to ur needs,
may give you trade secrets to provide
competitive edge

cons-likely to be time consuming, likely to be
expensive

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17
Q

What is secondary research?

A

Analysing and utilising research that has previously been collected

pros- likely to be quick, likely cheaper to access
research

cons-competition will have access to the same
info, research may be to broad or out of
date

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18
Q

What is market mapping?

A

market mapping is a tool to analyse competition in a specific market .
you can use it to see gaps in the market and also look at areas that are overcrowded . you can use it to make decisions

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19
Q

What is market research?

A

Market research is the process of gathering data and information about the market. It supports businesses to spot opportunities and decide what to do next.

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20
Q

What is extrapolation?

A

Using past data to extend an identified trend and extending it into the future

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21
Q

What is a disadvantage to extrapolation?

A

The past is not always a good indication of the future. Conditions and trends can soon change due to competitors’ actions, consumer tastes and market conditions

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22
Q

What is correlation?

A

Correlation is a measure of how closely two variables are related

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23
Q

What does sampling allow?

A

Sampling allows a business to gain an insight into the needs and wants of the customer in a cost effective manner

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24
Q

What impacts the value of information collected by sampling?

A

The sampling technique
How the sample was carried out
The size of the sample

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25
Q

What does the size of a sample depend on?

A

Budget available
The importance of accuracy
Degree of confidence in results

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26
Q

Give 4 advantages of using software to do your marketing analysis

A

-gather and analyse large volumes of data quickly
-lower running costs
-track and interpret consumer spending habits
-store lots of information

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26
Q

Give 3 disadvantages of using software to do your marketing analysis

A

-higher fixed costs at the start
-you have to train staff to use new software
-takes time to update software or new technology

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27
Q

Give 4 ways in which technology can be used to gather information about customers

A

-Loyalty cards
-Social networking sites
-Search engines
-WiFi signals(cookies)

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28
Q

Define price elasticity of demand (PED)

A

Price elasticity of demand is a measure of how responsive demand is to a change in price

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29
Q

What does price elastic mean?

A

when changes in quantity demanded is greater than change in price
-demand is SENSITIVE to price change

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30
Q

What does price inelastic mean?

A

when changes in quantity demanded is SMALLER than change in price

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31
Q

If the price elasticity of demand is greater than 1 (ignoring the negative sign), is the product price elastic or price inelastic?

A

Price elastic

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32
Q

If the price elasticity of demand is between 0 and 1 (ignoring the negative sign), is the product price elastic or price inelastic?

A

Price inelastic

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33
Q

Formula for PED

A

% change in quantity demanded
————————————————— =PED
% change in price

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34
Q

What happens to revenue if you raise or lower the price of a price elastic product?

A

If you raise selling price, sales revenue will decrease.

If you lower swelling price, sales revenue will generally increase.

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35
Q

What happens to REVENUE if you raise or lower the price of a price inelastic product?

A

If you raise selling price, sales revenue will increase.

If you lower selling price, sales revenue will decrease.

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36
Q

Give 6 factors which influence PED

A

-the availability of substitutes
-the price of competitor goods
-time
-branding
-income
-nature of the good

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36
Q

What does YED measure?

A

measures the responsiveness of demand to change in income

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36
Q

If YED is more than 1, what type of good is it?

A

A luxury

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37
Q

If YED is less than 1 but greater than 0, what type of good is it?

A

A necessity

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38
Q

If YED is less than 0, what type of good is it?

A

An inferior good

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39
Q

Give 2 examples of luxury goods

A

Expensive holidays
- Branded goods

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40
Q

Give 2 examples of necessity goods

A

Staple groceries
- Own label goods

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41
Q

why would a business want to be more price inelastic?

A

-brand loyalty
-have fewer rivals
however it is difficult to calculate

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42
Q

What are the advantages to setting market objectives

A
  • provides a focus for helping to identify marketing priorities and allocate resources

-A way of measuring marketing activity performance

  • helps make sure marketing strategy and activities are aligned with corporate objectives
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43
Q

Disadvantages to marketing objectives

A

-Fast changing external environment

(E.g new competitor)

  • potential conflict between marketing objectives

(E.g trying to increase market share by cutting prices may damage objectives for brand perception)

-easy to be too ambitious with marketing objectives

(E.g growing market share without putting necessary resources in place to achieve it)

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44
Q

Market mapping advantages

A

-helps spot gaps in the market
-useful for analysing competitors
-encourage use of market research

45
Q

Market mapping disadvantages

A

-just because there is a gap doesn’t mean there is demand

-not a guarantee of success

-how reliable is the market research

46
Q

Advantages to sampling

A
  • even a relatively small sample size can provide useful research insights

-using sampling before making marketing decisions can reduce risks and costs

-sampling is flexible and relatively quick

47
Q

Disadvantage to sampling

A

-biggest risk = sample is unrepresentative of population- leading to incorrect conclusions

-risk of bias in research questions

  • less useful in market segments where customers tastes and preferences are changing frequently
48
Q

Confidence intervals and levels

A

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

49
Q

What is market segmentation?

A

Market segmentation involves dividing a market into parts that reflect different customer needs and wants

50
Q

Advantages of segmentation

A

-helps make the marketing mix more effective-e.g better targeting of promotion

-helps with new product development-focused on needs of customers in the segment

-focuses resources on parts of a market where the business can succeed

51
Q

Disadvantage of market segmentation

A
  • just because you can identify a segment doesn’t mean you can reach the customers in it

-markets are increasingly dynamic-fast-changing; so too are the segments

-segmentation is an imprecise science- data not always available, up to date or reliable

52
Q

What is a target market

A

A target market is the set of customers sharing common needs and wants that a business decides to target

53
Q

Three main strategies for targeting a market

A

-mass marketing
Business targets the whole market, ignoring segments products focus on what customers need and want in common, not how they differ

-segmented
Businesses target several market segments within the same market. Products are designed and targeted at each segment

-concentrated(niche)
Business focuses narrowly on smaller segments or niches. Aim is to achieve a strong market position (share) within those niches

54
Q

The marketing (positioning) map

A

A market (or positioning) map illustrates the range of “positions” that a product can take in a market based on two dimensions that are important to customers

55
Q

Positioning as a competitive advantage

A

-customers choose products based on the value proposition

-providing superior value than the competition is a source of competitive advantage(if it can be sustained)

-there are various possible value differences which can deliver competitive advantage

56
Q

Possible positioning strategies

A

-offer more for less
-offer more for more
-offer more for the same
-offer less for much less

57
Q

Mass marketing

A

The largest part of the market, where there are many similar products offered by competitors and customers are less specific about their needs and wants

58
Q

Niche marketing

A

-A smaller segment of a larger market, where customers have more specific needs and wants

59
Q

Key features of mass market

A

-customers form the largest part of the market
-customers needs and wants are more “general” and less “specific”

-Associated with higher production output and capacity + potential for economies of scale

-Success usually associated with low-cost (highly efficient) operation or market leading brands

60
Q

Benefits of mass marketing

A

-widest potential customer base

-lower risk - resources focused on one large market

  • low unit costs from economies of scale

-market research costs relatively low

61
Q

Advantages of niche marketing

A

-less competition

-clear focus - target particular customers

-builds up specialist skill and knowledge

-can often charge a higher price

  • profit margins often higher

-customers potentially more loyal

62
Q

Drawbacks of niche marketing

A

-lack of economies of scale

-risk of over dependancy on a single product or market

-likely to attract competition if successful

-vulnerable to market changes - all eggs in one basket

63
Q

What is the marketing mix

A

The marketing mix is the combination of marketing elements used by a business to enable it to meet the needs and expectations of customers

64
Q

What are the 7 Ps

A

-product

(the product or service that the customer buys)

-price

(How much the customer pays for a product)

-place

(How the product is distributed to the customer)

-promotion

(How the customer is found and persuaded to buy)

-people

(The people who make contact with customers in delivering the product)

-process

(The systems and processes that deliver a product to a customer)

-physical environment

(The elements of the physical environment the customer experiences)

65
Q

Consumer goods

A

-bought by final consumers for personal consumption
-differ in the way consumers buy them

66
Q

Industrial good

A

-bought for further processing or for use in conducting a business
-bought by other businesses, not consumers

67
Q

Three main categories of consumer products

A
  • convenience product (bought frequently low price)

-shopping products(less frequently, tends to be higher priced, distribution less spread)

-speciality products(unique characteristics or brand, high price, more carefully targeted)

68
Q

Three main kinds of industrial products

A

-materials and parts(raw materials)

-capital items(industrial products used in production e.g it systems)

-supplies and services(maintain/security)

69
Q

Boston matrix

A

A tool to help businesses decide how to manage their portfolio of:
-business
-brands
-products
-A model which helps analyse a firm’s strategic position

70
Q

Boston matrix x and y

A

X axis- market share
Y axis-market growth rate

71
Q

Star

A

High market share
High market growth rate

72
Q

Question marks

A

High market growth rate
Low market share

73
Q

Dogs

A

Low market growth rate
Low market share rate

74
Q

Cash cows

A

High market share
Low market growth

75
Q

Star summary

A

-best products and brands
-market leader
-the product is strong in a fast growing market
-requires high marketing spending
-cash flow may be positive depending on profitability and market share

76
Q

Strategy for stars

A

-repel challenges from competitors

-create barriers to entry(e.g branding, customer loyalty, quality advantages)

-invest to sustain in growth

-maintain or build market share

77
Q

Question marks(problem child) summary

A

-low share of fast growing market

-cash flow is usually negative

-products have potential but the future is uncertain

-coule become either a star or a dog

78
Q

Strategy for question marks

A

-invest to increase market share

-try to build competitive advantage

  • build selectively and invest in the most likely stars

-cash flow likely to be negative

79
Q

Cash cows summary

A

-large positive cash inflow
-little potential for growth
-likely to be mature stage in the product life cycle
-high share of a low growth market

80
Q

Strategy for cash cows

A

-defend market share
-reduce investment in order to maximise cash flow and profits
-use profits from cash cows to invest in question marks and stars

81
Q

Dogs summary

A

Dogs are usually:
-products that have failed
-products that are in the decline phase of their product life cycle

-low share of a low growth market
-not going anywhere and no real potential

82
Q

Strategy for dogs

A

-not worth investing in
-uses up more management time and resources than can be justified
-phase out, or sell off

83
Q

Boston matrix picture

A
84
Q

How valuable is the Boston matrix

A

-A useful tool for analysing product portfolio decisions.

  • only a snapshot of the current position

-relative market share and market growth are not the only dimensions important to a business

85
Q

Comparison with the product life cycle

A

Product life cycle
-concerned with individual products
-focused on sales

Boston matrix
-concerned w portfolio of products, brand and businesses
-greater focus on cash flow

86
Q

What id the product life cycle

A

A theoretical model which describes/predicts the stages a product goes through during its life

87
Q

What can using the product life cycle help with

A

-forecasting sales trends
-marketing targeting and positioning
-analyse and manage a product portfolio
-focus investment in products

88
Q

What are the stages in the product life cycle

A

-development
-introduction
-growth
-maturity
-decline/end

89
Q

Development stage

A

• “New product development” or NPD

• Often complex

• Absorbs significant resources

• May not be successful

• May involve a long lead time before sales are achieved

90
Q

Introduction stage

A

• New product launched

• Usually low sales

• Low capacity utilisation & high unit costs

• Heavy promotion to make consumers aware of the product

• Usually negative cash flow

91
Q

Strategies at the Introduction Stage

A

• Aim = encourage customer adoption

• High promotional spending to create awareness and inform people

• Either skimming or penetration pricing

• Limited, focused distribution

• Demand initially from “early adopters”

92
Q

Strategies in the Growth stage

A

• Promote brand awareness

• Intensive distribution - many new outlets

• Market penetration

• Wider target customer base

• Improve the product - new features, improved styling, more options

93
Q

Maturity Stage

A

• Slower sales growth as rivals enter the
market = intense competition + fight for
market share

• Low unit costs = very efficient

• High profits for those with high market share

• Weaker competitors start to leave the market

• Prices start to fall

• Cash flow should be strongly positive (less need for investment & marketing)

94
Q

Strategies for Mature Products

A

• Manage capacity & production

• Promotion focuses on differentiation

• Intensive distribution

• Adopt extension strategies:
- Attract new, late users
- Develop new uses
- Reposition in the market

95
Q

Strategies for Mature Products

A

• Manage capacity & production

• Promotion focuses on differentiation

• Intensive distribution

• Adopt extension strategies:
- Attract new, late users
- Develop new uses
- Reposition in the market

96
Q

Decline stage

A

• Falling sales
• Market saturation
• Rapid fall in profits & weak cash flow
• More competitors leave the market
• Excess capacity & rising unit costs

97
Q

Reasons Why Products Enter the Decline Stage

A

• Technological advance
• Changes in consumer tastes and behaviour
• Increased competition
• Failure to innovate and develop the product

98
Q

Strategies for the Decline Stage

A

• Maintain market share of what is left
• Minimise marketing spend
• Cut prices to stay competitive
• Support loyal customers

99
Q

Criticisms of the Product Life Cycle Model

A

• The shape and duration of the cycle varies from product to product

• Strategic decisions can change the life cycle

• Hard to know precisely where a product is in its life cycle

• Length cannot be reliably predicted - maturity phase can last a long time!

• Decline not inevitable

100
Q

Penetration Pricing

A

Offer a product at a very low introductory price
• Aim to
- Gain market share quickly
- Build customer usage and loyalty
-Build sales of higher-priced related items (“hook & bait” approach

• Opposite of price skimming as a pricing strategy for entering new markets

101
Q

Will Penetration Pricing Work?

A

• It is a low-price strategy, so demand in the market must be highly price-sensitive (elastic)

• Increase in sales and market share need to generate lower unit costs (economies of scale) to make the lower prices profitable

• Prices need to be kept low to deter competition using a similar strategy

102
Q

Possible Drawbacks of Penetration Pricing

A

• The low initial price can create an expectation of permanently low prices amongst customers who switch

• 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

103
Q

What is Price Skimming?

A

• Setting a high price to maximise profit when a new product is launched into a market

• Product is sold to different market segments at different times

• Top segment is skimmed off first with the highest price

• Objective
- Maximise profit per unit to achieve quick recovery of development costs

104
Q

What market conditions are required for price skimming to work?

A

• The product needs to have a high quality and brand image to support a high price

• Must be enough buyers prepared to pay the high price

• Competitors must be deterred from being able to enter the market with a similar product and under-cutting the price-skimmer

105
Q

What is a Brand?

A

A brand is a product that is easily distinguished from other products so that it can be easily communicated and effectively marketed. A brand name is the name of the distinctive product.

106
Q

Key Benefits of Effective Branding

A

-Adds significant value (from customer point of view)

-Builds customer loyalty & aspiration

-Able to charge higher prices + demand is more price inelastic

107
Q

Why Businesses Use
Promotion

A

• The main aim of promotion is to ensure that customers are aware of the existence and positioning of products

• Promotion is also used to persuade customers that a product is better than competing products and to remind customers about why they may want to buy

108
Q

Promotional Mix

A
  • The specific mix of promotional methods that a business uses to pursue its marketing objectives
  • The elements of the mix need to be properly integrated to make them effective

-ADVERTISING
-SALES PROMOTION
-DIRECT MARKETING
-PERSONAL SELLING
-PUBLIC RELATIONS
-BRANDING

109
Q

Key Factors Influencing Promotional Decisions

A
110
Q

What is Multi-Channel Distribution?

A

Multi-channel distribution involves a business using more than one type of distribution channel

111
Q

Benefits of Multi-Channel Distribution

A

-Allows more target market segments to be reached

-Customers expect to be able to buy in different ways

-Higher sales - e.g. if retail outlets have no stock, but customer can buy online, the sale is not lost

112
Q

Drawbacks of Multi-Channel Distribution

A

-Potential for channel “conflict”
-e.g. competing with retailers by also selling direct

-Loss of profit margin to intermediaries such as retailers and distributors - that might be retained by selling direct

-Danger that pricing strategy becomes confused (in the eyes of customers)

113
Q

Main Objective of Distribution (Place)

A

To make products available in the right place at the right time in the right quantities

114
Q

What is a Distribution Channel?

A

A distribution channel moves a product through the stages from production to final consumption

business unit 3 and 5 (4 decks)

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