1
Q
Def. Marketing
A
Identifying the wants and needs of consumers and satisfying those needs better than the competitors by using the right product design, pricing, promotion and placement.
2
Q
Def. Market
A
Has 2 meanings:
• The place of mechanism where buyers and sellers meet to engage in exchange eg. shopping centres or the internet.
• The group of consumers that is interested in a product and has the resources to purchase the product.
3
Q
Def. Consumer markets
A
Markets of goods and services bought by the final user of them
4
Q
Def. Industrial markets
A
Markets of goods and services bought by business to be used in the production process of other products
5
Q
Def. Human needs and wants
A
- Needs are basic requirements that an individual would have e.g water, food
- Wants are things an individual wouldn’t need for survival, but satisfies the human’s desires and human needs to an extent.
6
Q
Is product value and product satisfaction the same? Why?
A
No. High value products, as in expensive products with high cost to produce may not satisfy the individual. Customer satisfaction comes from a balance between high value and reasonable pricing.
7
Q
Def. Marketing objectives
A
The goals set for the marketing department to help the business achieve its overall objectives. e.g Increasing market share
8
Q
Def. Marketing strategy
A
Long-term plan established for achieving marketing objectives.
9
Q
How to determine whether the marketing objective is effective?
A
Have to be SMART.
10
Q
Why are marketing objectives important?
A
- Provide a sense of direction for the department
- Progress can be monitored against the objectives
- Can be broken down into smaller objectives to show a clearer path
- Form the basis for marketing strategy.
11
Q
What are the links between the marketing department and other departments? (3)
A
- Marketing -> Finance: Help construct budgets from sales forecasts.
- Marketing -> Human resources: if there’s a need for additional staff.
- Marketing -> Operations: Planning on resources needed for for e.g new product development.
12
Q
Def. Market orientation
A
An outward-looking approach basing product decisions on consumer demand, as established by market research. Market orientated products are designed based on the consumer’s satisfaction. e.g toothbrushes.
13
Q
What are the benefits of market orientation?
A
- Less chance of newly developed products to fail
- Likely to survive longer with higher profits if consumer needs are met.
- There’s constant feedback from consumers => research never ends => more chances for developing updates.
14
Q
Def. Product orientation
A
An inward-looking approach that focuses on making products that can be made - or have been made for a long time - and then trying to sell them. Product orientated business concentrate their efforts on efficiently producing high-quality goods.e.g Medical machinery.
15
Q
Def. Asset- led marketing
A
An approach to marketing that bases strategy on the firm’s existing strengths and assets instead of purely on what the customer wants. It is still based on market research, but doesn’t satisfy all of the consumers. An in between of product and market orientated businesses.
16
Q
Def. Demand
A
The quantity of the product that consumers are willing and able to buy at a given price in a time period.
17
Q
Def. Supply
A
The quantity of a product that firms are prepared to supply at a given price in a time period.
18
Q
What’s the use of determining demand and supply?
A
It determine the equilibrium price from the ‘demand and supply analysis’.
19
Q
What is the relationship between demand and price and how can it be affected?
A
- Demand varies with price. The higher the price, the lower the demand: as the higher the price the less is sold.
- The level of demand could also be affected by: changes in consumer incomes, changes in population size and structure, changes in substitute and complementary goods, fashion and tastes changes, advertising and promotion strategies.
- Figures in the text book pg. 249
20
Q
What is the relationship between supply and price and how can it be affected?
A
- Supply varies with price. The higher the price, the higher the supply: because the higher the price, the more willing firms are to supply the product.
- The level of supply could also be affected by: Costs of production, Taxes imposed, Subsidies, weather conditions, advances in technology.
- Figures in the text book pg. 250
21
Q
Def. Equilibrium price
A
The market price that equates supply and demand for a product.
22
Q
How is equilibrium price determined?
A
When demand and supply are combined, where the 2 lines intersect is the equilibrium price.
23
Q
Def. Market location
A
Geographically where the market is located. Local markets would have limited sales potential e.g florist shops. Then regional markets have more, then national markets, then international markets that have the greatest sales potential.
24
Q
Def. Market size
A
The total level of sales of all producers within the market. It can be measured in two ways: The volume of sales (units sold) or the value of goods sold (revenue).
25
Why is the size of market important?
* The marketing managers can assess whether a market is worth entering or not.
* Firms can calculate their own market share.
* Growth or decline of the market can be identified.
26
Def. Market Growth
The percentage change in the total size of a market (volume or value) over a period of time.
27
Def. Market share
The percentage of sales in the total market sold by one business. Market share % = (firm's sales in time period/Total market sales in time period) x 100
28
What are the benefits of high market shares?
* Sales are higher which could lead to higher profits
* Retailers will be more keen to stock and promote best selling brands
* Being a 'market leader' can be used as promotional material.
29
How can a firm's market share decrease even though its sales are rising?
The total market sales are increasing at a faster rate than the firm's sales => the market share will fall.
30
How can a business add value to a product/service?
* Create a luxurious retail environment.
* Using high quality packaging
* Promotion and branding
* Create a unique selling point (USP)- the special feature of a product that differentiates it from competitors' products.
31
Def. Niche marketing
Identifying and exploiting a small segment of a larger market by developing products to suit it. Usually sell expensive and high status products. E.g Channel.
32
Def. Mass Market
Selling the same products to the whole market with no attempt to target groups in it. E.g Toothpaste.
33
What are the advantages and disadvantages of niche markets?
Advantages:
• Small firms can survive in markets that are dominates by large firms
• With little to no competitors, they can have high pricing (monopoly).
• May be bought as status products instead for their performance.
Disadvantages:
• Do not allow economies of scale -> higher costs
• Any decisions could have a high risk because there is too little consumer potential.
34
Def. Market segment
A sub-group of a whole market in which consumers have similar characteristics.
35
Def. Market segmentation
Identifying different segments within a market and targeting different products or services to them. Successful segmentation requires a business to have a clear consumer profile.
36
Def. Consumer profile
A quantified picture of consumers of a firm's products, showing age groups, income levels, location, gender and social class.
37
What are the 3 commonly used bases for segmentations?
* Geographic differences
* Demographic differences
* Psychographic differences
38
What are geographic differences?
* Consumer tastes change depending on where they are located.
* Geographical differences may occur from cultural differences (e.g alcohol cannot be promoted in Arab Muslim countries) or climate (e.g considering heating or refrigerating products).
39
What are demographic differences?
* Demography is the study of population data and trends.
| * Demographic factors are age, sex, family size, ethnic background, social class...
40
What are the psychographic factors?
• To do with differences between people's lifestyles, personalities, values and attitudes.
41
What are the advantages of market segmentation? (4)
* Businesses can define their target market to design and produce goods that would lead to increased sales
* Identifies gaps in the market to be fully exploited.
* Focusing on target groups to avoid wasting finance.
* Small firms can compete in smaller market segments instead of the whole market
42
What are the disadvantages of market segmentation? (3)
* Research and development costs are high
* Promotional costs would be higher because of the variation of them
* Production and stock holding costs are higher because there's more variation in products
43
Def. Market Research
This is the process of collecting, recording and analysing data about the customers, competitors and the market.
44
What are the needs of market research? (4)
* To reduce the risks associated with new product launches
* To predict future demand changes
* To explain patterns in sales of existing products and market trends
* To assess the most favoured designs, flavours, styles, promotions and packages for a product.
45
What's the market research process? (1 ,2)
1. Management problem identification: by setting out the problem accurately, the process can be directed accurately, without any unnecessary data gathered. e.g. Why are our sales falling?
2. Research objectives: Must be set in the way that would provide all the information needed once accomplished. E.g. How many are likely to buy are products in country X?
3. Sources of data - primary and secondary research.
46
Market process number 3: Definitions.
3. Sources of data - Primary and secondary research
Primary research: new research, carried out to answer specific issues or questions. It can involve questionnaires, surveys or interviews with individuals or small groups. Secondary research: makes use of information previously researched for other purposes and publicly available.
47
What are the sources of secondary data? (7)
* Government publications e.g economic trends
* Local libraries and local government offices
* Trade organisations e.g Engineering Employers Federation
* Market intelligence reports e.g Key note report
* Newspaper reports and specialist publications e.g The financial times
* Internal company records e.g customer sale records
* The internet
48
What are the advantages and disadvantages? (3 3)
Advantages:
• Often cheap
• Obtained quickly
• Allows comparison of data of different source
Disadvantages:
• Out-of-date
• Data might not be relevant
• Not applicable for new product development (NPD)
49
What are the two methods of primary research? Definitions
Qualitative research: Research into the in depth motivation behind the consumer buying behaviour or opinions.
Quantitive research: research that leads to numerical results that can be statistically analysed.
50
Def. Focus Groups
A group of people who are asked about their attitude towards a product, service, advertisement, or new style of packaging. Is a way to collect qualitative research.
51
What are the advantages and disadvantages of focus groups? (3 2)
Advantages:
• Can be used as primary research
• Data tends to be more accurate and realistic
• Can have discussions.
Disadvantages:
• Time-consuming
• Difficult to analyse and to present
52
What are the quantitive research techniques? (3)
1. Observation and recording: recording only what actually happens, no explanations.
2. Test marketing: to promote and sell the product in limited geographical scale and record data.
3. Consumer surveys: Directly asking potential consumers for their opinions and preferences.
53
What are the four important issues for market researchers to be aware of when conducting consumer surveys?
1. Who to ask? Selecting a sample that reflect the characteristics of the survey population.
2. What to ask? Questionnaire must be unbiased and unambiguous for it to be effective.
3. How to ask? By telephone, or hard copy questionnaires or online questionnaires.
4. How accurate is it? Assessing the likely accuracy and validity of the results.
54
Who to ask?
| Def. Sample
The group of people taking part in a market research suvey selected to be representative of the overall target market.
55
What are the sampling methods? (3)
1. . Simple random sampling: the samples are gathered in a process that gives all the individuals in the population equal chances of being selected.
3. . Stratified sampling: when target populations have a lot of strata, interviewer chooses random sample from all strata.
4. . Quota sampling: interviewer selects an appropriate number of respondent from each stratum in a stratified population.
56
What to ask?
Questionnaire design:
Open questions: those that invite a wide-ranging or imaginative response - the results will be difficult to collate and present numerically. e.g question: What do you think about this product?
Closed questions: Questions to which a limited number of pre-set answers is offered. e.g do you like this product? yes or no.
57
What other factors make a questionnaire effective? (6)
* Make the objective of the questionnaire clear to make clear questions
* Write clear questions
* Try to make sure questions are in order
* Avoid biased questions
* Use clear language
* Include some question that will allow classification of the sampler.
58
How to ask?
Self completed questionnaires or interviews?
Questionnaires could be limited to only people who have spare time such as retired people. While interviews can be conduct from people on the street, which gives a wider variety of the type of people and allows follow up questions, but is a lot more expensive.
59
What affects primary research's accuracy?
* Sampling bias: The only accurate method would be asking the whole population.
* Questionnaire bias: May occur when question leads respondents to one particular answer - biased questions.
* Other form of bias: such as respondents lying in their answers.
60
What are the types of data presentation? (5)
* Table
* Bar charts
* Histograms
* Line graphs
* Pie charts
* Pictograms
61
What are each type of data presentation most useful for?
* Table: when there's wide range of results, or a lot of text
* Bar charts: when absolute size needs to be compared
* Histograms: can represent frequency data and show mode
* Line graphs: when there's time or a trend
* Pie charts: shows relative importance of sections out of total result
* Pictograms: to attract readers to look at the results.
62
What type of averages are there?
* The arithmetic mean
* Mode
* Median
63
Def. Arithmetic mean
Calculated by totalling all the results and dividing by the number of results.
e.g (4+5+6)/3
64
Def. Mode
The value that occurs the most frequently in a set of data.
65
Def. Median
The value of the middle item when data have been ordered.
66
Def. Range
The difference between the highest and lowest value.
67
Def. Marketing Mix
The four key decision that must be taken in the effective marketing of a product. Place, Promotion, Product and Price.
68
What are the 4Cs?
The 4Ps are more centred on the firm and its product rather than the Customers - 4Cs.
• Customer solution: what the firm needs to provide to meet the customer's needs and wants (Product)
• Cost to customer: the total cost of the product including extended guarantees, delivery charges and financing costs (Price)
• Communication with customer: providing a 2 way communication links to both promote the product and gain important market research information (Promotion)
• Convenience to customer: Providing easily accessible pre-sales information like demonstrations or locations for purchasing the product. (Place)
69
Def. CRM
Customer relationship marketing: using marketing activities to establish successful customer relationships so that existing customer loyalty can be maintained.
70
Def. Product
The end result of the production process sold on the market to satisfy a consumer need. Can be both tangible (goods) and intangible (service).
71
Def. Consumer durable
Manufactures product that can be reused and is expected to a reasonably long life, such as a car or washing machine.
72
Def. Brand
An identifying symbol, name, image or trademark that distinguishes a product from its competitors.
73
Def. Product positioning
The consumer perception of a product or service as compared to its competitors.
74
Def. Product life cycle
The pattern of sales recorded by a product from launch to withdrawal from the market.
75
What are the stages of product life cycle? (5)
• Development: No sales as the product is not launched yet.
• Introduction: Launching of the product, sales are often quite low.
• Growth: When sales start increasing rapidly.
• Maturity/Saturation: Sales fail to grow but they do not decline either.
• Decline: Sales decrease.
Graph: pg. 294
76
Def. Extension strategies
These are marketing plans to extend the maturity stage of the product before brand new one is needed.
77
What are the possible extension strategies? (5)
* Sell into new market
* New advertising campaign
* New improved version of the product
* Sell through additional retail outlets
* Change packaging
78
Uses of product cycle? (3)
* Assisting with planning of marketing-mix decisions e.g. at which stage is advertising most important?
* Identifying how cash flow might depend on the product life cycle (Graph pg. 296). Cash flow is negative during the development of the product because costs are high etc.
* Identifying the need for a balanced product portfolio (graph pg. 296). For cash flows to be balanced as positive cash flow of one product can finance negative cash flows of other product. Or in factory capacity as declining output of some goods replaced by increasing demand of other output.
79
Def. Price Elasticity
Measure the responsiveness of demand following a change in price. Percentage change in quantity demanded / Percentage change in price.
Interpretation of graph pg. 298
80
Elastic or Inelastic?
0-1 is inelastic
>1 is elastic
(absolute value/magnitude)
81
What are the factors that determine price elasticity? (4)
* How necessary the product is. e.g Salt is inelastic
* Number of competitors: the higher the number the more elastic
* The level of consumer loyalty: The more loyal the less elastic
* The price of the product as a proportion of consumer's incomes e.g. matches or toothpicks are inelastic
82
What are the applications of PE? (2)
* Making more accurate sales forecasts: If the price were to go up or down, how will it affect the revenue.
* Assisting pricing decisions: Could be used in price discrimination.
83
Limitations of PE? (3)
* If the business were to lower it's price, but at the same time a competitor leaves the industry, the increase in revenue may not only be due to the change in price.
* PE only calculates change in prices, but the product may be out of fashion and original PE is no longer applicable.
* PED is hard to calculate accurately because by the time they are calculated, market conditions might have altered.
84
What are the determinants of pricing? (6)
* Cost of production
* Competitive conditions in the market e.g monopolist or high market share
* Competitors prices
* Business and marketing objectives e.g. to grow or to survive
* Price elasticity of demand
* Whether it is a new or existing product e.g. if new, it needs to decide whether to use 'skimming' or 'penetration'.
85
What are the pricing methods (just names)? (5)
* Cost based pricing
* Competitor pricing
* Price discrimination
* Penetration pricing
* Market skimming
86
Cost based pricing
| Def, ad and disad
• Setting price by calculating the unit costs for the product, and then adding fixed cost margin.
Ad: Easy and fast to calculate. Price set will cover all costs of production.
Disad: Does not take the market's competitive conditions into account. Opportunity cost - might have been opportunities for higher pricing.
87
Competitor pricing
| Def, ad and disad
• Setting price upon the price set by its competitors
Ad: Flexible for market and competitive conditions
Disad: Price set may not cover all costs of production. Have to vary a lot due to changing market's conditions.
88
Price discrimination
| Def, ad and disad
Charging different groups of consumer's different prices for the same product.
e.g. Train stations sell more expensive tickets in the morning.
Ad: Uses price elasticity knowledge to charge different prices in order to increase total revenue
Disad: Consumer paying higher prices may object and look for alternatives.
89
Penetration pricing
| Def, ad and disad
• A low price is used to enter the market and build up customer loyalty. Once costumer loyalty is established, the price goes up.
Ad: Dominates the market and reduces competition
Disad: Only works short term
90
Price skimming
| Def, ad and disad
• A high price is used to enter the market and profits and skimmed off. Usually happens with technology.
Ad: Gives the product a good image and impression of high quality.
Disad: Competitors with lower pricing take away the market.
91
What is a method for product portfolio analysis?
* Boston Matrix: a method of analysing product portfolio of a business in terms of market share and market growth.
* High market share - High market growth product: Star
* High market share - Low market growth product: Cash Cow
* Low market share - High market growth product: Problem child
* Low market share Low market growth product: Dog
92
Def. Promotion
| And types of promotion? (7)
```
The use of advertising, sales promotion or any other means to inform potential consumers of the product and persuade them to buy it.
• Advertising
• Sales promotion
• Personal selling
• Direct mail
• Trade fairs and exhibitions
• Sponsorship
• Public relations
```
93
Examples of promotion objectives?
* To increase sales by raising consumer awareness of the product
* To remind consumers of an existing product and its distinctive qualities
* To develop or adapt the public image of the business
94
Def. Promotion mix
The combination of promotional techniques that a firm uses to sell of product.
95
Def. Above the line promotion
A form of promotion that is undertaken by a business by paying for communication with consumers. e.g. Advertising
96
Def. Advertising
Communicating information about a product or business through the media.
97
What are the two types of advertising?
* Information advertising: adverts that give information, like price or main features, of the product rather than creating brand image.
* Persuasive advertising: Creating distinct image for the product and may not contain any technical information about the product.
98
What are the factors to consider when choosing media for advertising? (5)
* Cost
* Size of audience
* Profile of the targeted audience like age, sex, income and interests
* The content of the advertisement
* The law and other constraints
99
Def. Below the line promotion
Promotion that is not directly paid for means of communication, but based on short term incentives to purchase. e.g sales promotion, personal selling, direct mail, trade fairs and exhibitions, sponsorship and public relations.
100
Def. Sales promotion
Incentives such as special offers or special deals directed at consumers or retailers to achieve short term sales increases and repeat purchases by consumers. e.g. temporary reduction in price (10%), coupons, 'buy one get one free'.
101
Def. Personal selling
A sales staff communicates with one consumer with the aim of selling the product and establishing a long term relationship between company and consumer.
102
Def. Branding
The strategy of differentiating products from those of competitors by creating an identifiable image and clear expectations about a product.
103
What are the benefits of an effective brand identity? (3)
* Clearly differentiate the product from others'
* Reduce price elasticity of demand
* Increase consumer loyalty to brands
104
How can a business determine the spending limits for promotion?
* A percentage of sales: marketing budget would vary with sales. The flaw is that with low sales, the less promotion.
* Objective base budgeting: sees how much sales needed to be made to reach target and assess how much supporting expenditure is needed.
* Competitor based budget
* What business can afford
* Incremental budgeting: Taking last year's budget and adding a percentage that reflects sales targets.
105
What are the functions of packaging?
* Protect and contain the product
* Give information about the product e.g. ingredients
* Support the image of the product
* Aid the recognition of the product
106
Def. Channel of distribution
This refers to the chain of intermediates a product passes through from producer to final consumer.
107
What are the three most commonly used channel distributions?
* Manufacturer to consumer (no intermediates) e.g. Farmers market
* Manufacturer to retailer to consumer (1 intermediate) e.g. some super markets that hold their own stock
* Manufacturer to wholesaler to retailer to consumer (2intermediates) e.g. Soft drinks manufactures over seas
108
Benefits and limitations for no intermediates? (4 4)
Benefits:
• Producer has complete control over marketing mix
• Quicker than other channels
• Fresher products
• Direct contact with consumer offers good market research.
Limitations:
• Cost of storage for inventory
• No retail outlets so consumer can't see the product first
• Location may not be convenient for consumer
• Deliveries may be expensive
109
Benefits and limitations for 1 intermediate? (4 3)
Benefits:
• No storage costs
• Retail does product display
• Retailer's are in locations more convenient for consumers
• Producers can focus on production
Limitations:
• Profit mark up making products more expensive
• Producers lose some control over marketing mix
• Deliveries may be expensive
110
Benefits and limitations for 2 intermediates? (4 3)
```
Benefits:
• Wholesalers buy in larger bulks
• No storage costs
• No delivery costs
• Allows producers to enter foreign markets
Limitations:
• More profit mark up
• More loss of control over marketing mix
• Slows down the distribution chain.
```
111
Factors influencing choice of distribution channels
* Industrial products tend to be sold directly with fewer intermediates than consumer goods
* Geographical dispersion
* The level of service expected by consumers
* Unit value of the product e.g. selling a yacht is worth hiring staff to help sell
* Number of potential customers - direct selling for little number of potential staff like aircrafts
112
Def. Internet marketing
The marketing of products over the internet.
113
Benefits and limitations to Internet marketing (5 4)
Benefits:
• Relatively inexpensive
• Easier to reach world wide audience
• Easier to collect market research
• Convenient for consumers
• Dynamic pricing - charging different pricing to different consumers - is easier.
Limitations:
• Consumers do not get to touch, or smell tangible goods before buying.
• Increase in product returns
• Cost and unreliability of postal services in some countries
• Consumers' worry about internet security.
114
Def. Viral marketing
The use of social networking sites or SMS text messages to increase brand awareness or sell products.
AS Level Business Studies
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