unit 3 Flashcards
1
Q
market size equation
A
total sales in market
2
Q
market growth equation
A
market size(new)-market size(old)
————————————————- X100
market size (old)
3
Q
sales growth equation
A
sales(new) - sales(old)
———————————- X100
sales(old)
4
Q
market share equation
A
business sales
———————- X 100
market size
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.
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.
7
Q
Give 5 examples of marketing objectives
A
Market size
Market share
Market growth
Sales growth
Brand loyalty
8
Q
Define market size
A
The number of sales, by value or volume, in a market as a whole.
9
Q
Define market share
A
The proportion of total sales that a particular firm controls in a market
10
Q
Define market growth
A
The percentage increase in the size of the total market in terms of either value or volume
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
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)
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)
14
Q
Give 4 ways a business can carry out market analysis
A
-Sales growth
-Market growth
-Market share
-Market mapping
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
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
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
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
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
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.
20
Q
What is extrapolation?
A
Using past data to extend an identified trend and extending it into the future
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
22
Q
What is correlation?
A
Correlation is a measure of how closely two variables are related
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
24
What impacts the value of information collected by sampling?
The sampling technique
How the sample was carried out
The size of the sample
25
What does the size of a sample depend on?
Budget available
The importance of accuracy
Degree of confidence in results
26
Give 4 advantages of using software to do your marketing analysis
-gather and analyse large volumes of data quickly
-lower running costs
-track and interpret consumer spending habits
-store lots of information
26
Give 3 disadvantages of using software to do your marketing analysis
-higher fixed costs at the start
-you have to train staff to use new software
-takes time to update software or new technology
27
Give 4 ways in which technology can be used to gather information about customers
-Loyalty cards
-Social networking sites
-Search engines
-WiFi signals(cookies)
28
Define price elasticity of demand (PED)
Price elasticity of demand is a measure of how responsive demand is to a change in price
29
What does price elastic mean?
when changes in quantity demanded is greater than change in price
-demand is SENSITIVE to price change
30
What does price inelastic mean?
when changes in quantity demanded is SMALLER than change in price
31
If the price elasticity of demand is greater than 1 (ignoring the negative sign), is the product price elastic or price inelastic?
Price elastic
32
If the price elasticity of demand is between 0 and 1 (ignoring the negative sign), is the product price elastic or price inelastic?
Price inelastic
33
Formula for PED
% change in quantity demanded
————————————————— =PED
% change in price
34
What happens to revenue if you raise or lower the price of a price elastic product?
If you raise selling price, sales revenue will decrease.
If you lower swelling price, sales revenue will generally increase.
35
What happens to REVENUE if you raise or lower the price of a price inelastic product?
If you raise selling price, sales revenue will increase.
If you lower selling price, sales revenue will decrease.
36
Give 6 factors which influence PED
-the availability of substitutes
-the price of competitor goods
-time
-branding
-income
-nature of the good
36
What does YED measure?
measures the responsiveness of demand to change in income
36
If YED is more than 1, what type of good is it?
A luxury
37
If YED is less than 1 but greater than 0, what type of good is it?
A necessity
38
If YED is less than 0, what type of good is it?
An inferior good
39
Give 2 examples of luxury goods
Expensive holidays
- Branded goods
40
Give 2 examples of necessity goods
Staple groceries
- Own label goods
41
why would a business want to be more price inelastic?
-brand loyalty
-have fewer rivals
however it is difficult to calculate
42
What are the advantages to setting market objectives
- 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
43
Disadvantages to marketing objectives
-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)
44
Market mapping advantages
-helps spot gaps in the market
-useful for analysing competitors
-encourage use of market research
45
Market mapping disadvantages
-just because there is a gap doesn’t mean there is demand
-not a guarantee of success
-how reliable is the market research
46
Advantages to sampling
- 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
Disadvantage to sampling
-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
Confidence intervals and levels
A confidence interval gives the percentage probability that an estimated range of possible values in fact includes the actual value being estimated
49
What is market segmentation?
Market segmentation involves dividing a market into parts that reflect different customer needs and wants
50
Advantages of segmentation
-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
Disadvantage of market segmentation
- 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
What is a target market
A target market is the set of customers sharing common needs and wants that a business decides to target
53
Three main strategies for targeting a market
-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
The marketing (positioning) map
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
Positioning as a competitive advantage
-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
Possible positioning strategies
-offer more for less
-offer more for more
-offer more for the same
-offer less for much less
57
Mass marketing
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
Niche marketing
-A smaller segment of a larger market, where customers have more specific needs and wants
59
Key features of mass market
-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
Benefits of mass marketing
-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
Advantages of niche marketing
-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
Drawbacks of niche marketing
-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
What is the marketing mix
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
What are the 7 Ps
-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
Consumer goods
-bought by final consumers for personal consumption
-differ in the way consumers buy them
66
Industrial good
-bought for further processing or for use in conducting a business
-bought by other businesses, not consumers
67
Three main categories of consumer products
- 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
Three main kinds of industrial products
-materials and parts(raw materials)
-capital items(industrial products used in production e.g it systems)
-supplies and services(maintain/security)
69
Boston matrix
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
Boston matrix x and y
X axis- market share
Y axis-market growth rate
71
Star
High market share
High market growth rate
72
Question marks
High market growth rate
Low market share
73
Dogs
Low market growth rate
Low market share rate
74
Cash cows
High market share
Low market growth
75
Star summary
-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
Strategy for stars
-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
Question marks(problem child) summary
-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
Strategy for question marks
-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
Cash cows summary
-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
Strategy for cash cows
-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
Dogs summary
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
Strategy for dogs
-not worth investing in
-uses up more management time and resources than can be justified
-phase out, or sell off
83
Boston matrix picture
84
How valuable is the Boston matrix
-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
Comparison with the product life cycle
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
What id the product life cycle
A theoretical model which describes/predicts the stages a product goes through during its life
87
What can using the product life cycle help with
-forecasting sales trends
-marketing targeting and positioning
-analyse and manage a product portfolio
-focus investment in products
88
What are the stages in the product life cycle
-development
-introduction
-growth
-maturity
-decline/end
89
Development stage
• "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
Introduction stage
• 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
Strategies at the Introduction Stage
• 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
Strategies in the Growth stage
• Promote brand awareness
• Intensive distribution - many new outlets
• Market penetration
• Wider target customer base
• Improve the product - new features, improved styling, more options
93
Maturity Stage
• 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
Strategies for Mature Products
• Manage capacity & production
• Promotion focuses on differentiation
• Intensive distribution
• Adopt extension strategies:
- Attract new, late users
- Develop new uses
- Reposition in the market
95
Strategies for Mature Products
• Manage capacity & production
• Promotion focuses on differentiation
• Intensive distribution
• Adopt extension strategies:
- Attract new, late users
- Develop new uses
- Reposition in the market
96
Decline stage
• Falling sales
• Market saturation
• Rapid fall in profits & weak cash flow
• More competitors leave the market
• Excess capacity & rising unit costs
97
Reasons Why Products Enter the Decline Stage
• Technological advance
• Changes in consumer tastes and behaviour
• Increased competition
• Failure to innovate and develop the product
98
Strategies for the Decline Stage
• Maintain market share of what is left
• Minimise marketing spend
• Cut prices to stay competitive
• Support loyal customers
99
Criticisms of the Product Life Cycle Model
• 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
Penetration Pricing
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
Will Penetration Pricing Work?
• 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
Possible Drawbacks of Penetration Pricing
• 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
What is Price Skimming?
• 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
What market conditions are required for price skimming to work?
• 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
What is a Brand?
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
Key Benefits of Effective Branding
-Adds significant value (from customer point of view)
-Builds customer loyalty & aspiration
-Able to charge higher prices + demand is more price inelastic
107
Why Businesses Use
Promotion
• 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
Promotional Mix
* 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
Key Factors Influencing Promotional Decisions
110
What is Multi-Channel Distribution?
Multi-channel distribution involves a business using more than one type of distribution channel
111
Benefits of Multi-Channel Distribution
-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
Drawbacks of Multi-Channel Distribution
-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
Main Objective of Distribution (Place)
To make products available in the right place at the right time in the right quantities
114
What is a Distribution Channel?
A distribution channel moves a product through the stages from production to final consumption
