Unit 4 – Marketing – Flashcards
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Distinguish between "market size by volume" and "market size by value"
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Market size by volume: the amount of goods sold by quantity (e.g litres of milk, packets of crisps) Market size by value: amount spent by consumers on the total volume of goods sold
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Give two external factors which cause market growth or decline?
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- state of the economy - technology - social/demographic change
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Define "market share"
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the proportion of the total market's sales held by one organization
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Define "marketing"
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the process of getting customers interested in a product through research of consumer needs, promotion and selling/distribution of products
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Distinguish between "market orientation" and "product orientation"
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market orientation: A business approach or philosophy that focuses on identifying and meeting the stated or hidden needs or wants of customers product orientation: A business approach or philosophy in which whatever a company makes or supplies is the focus of the management's attention.
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Give three differences between goods and services?
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- goods can be returned if a customer is dissatisfied but services cannot be - services cannot be stored, they must be used immediately - harder to compare different services as opposed to different products - services are intangible (can't be handled)
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Define "social marketing" (give an example)
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an approach that uses commercial marketing concepts to develop activities aimed at changing or maintaining people's behavior for the benefit of individuals and society as a whole. (e.g. public health campaigns - smoking; drink-driving - these adverts normally use "shock tactics" to discourage/encourage the public)
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Define "asset-led marketing"
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An approach to marketing a product or service that focuses on the positive attributes, or assets, of the product, service, the brand, or the company itself. Asset-led strategies leverage strengths such as core competencies, brand recognition, and distribution or supply networks.
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Define "marketing plan" and outline the four main contents of it
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a document that puts the company's strategic marketing aims into practice - key marketing objectives (marketing goals that must be met to meet the needs of the overall cooperate objectives) - strategic plans (overview of how the objectives are be achieved) - specific marketing actions (details of the timings/type of marketing activity to be carried out) - marketing budget - detailed costing's of the marketing activity
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Define "marketing mix"
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The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market.
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Name the four P's of the marketing mix and explain what they are
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PRICE: how much the consumer is going to pay for the product PRODUCT: the characteristics of the product/service being offered PLACE: where the consumer buys the product; also the distribution channels that the company uses PROMOTION: how the product is communicated to customers (e.g. advertising, sales promotion)
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Name the four additional P's of the marketing mix
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* PEOPLE: human capital involved in bringing the product to market * PROCESS: the systems used which allow a company to bring a product to market * PHYSICAL EVIDENCE: the element which allows a consumer to make a judgment of the organization (e.g. hotel room cleanliness) * PACKAGING: the way that the product looks to consumers
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Name and explain three limitations which may affect the marketing mix and the final outcome of the marketing campaign?
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- COST: does the finance has suitable resources and finance to launch the most effective marketing campaigns? - COMPETITION: is the company able to market their product as effectively as their competitor? What is the effective of the launched marketing campaign on their market share? - NEW TECHNOLOGY: is the business making full use of technology in their marketing campaigns (e.g. social media - "viral campaigns"; new distribution channels; cheaper pricing through cost savings)
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For each of the main four P's of the marketing mix - suggest two ways in which unethical behavior could be carried out?
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PRICE (misleading/false claims about prices; price comparisons with rival products; failing to mention key conditions of sale; failing to mention contract details) PROMOTION: (over sexualized advertising, offensive advertising towards minority groups, overusing "shock tactics", inappropriate timing for TV/radio adverts) PRODUCT: (using cheap suppliers > affect health and safety; poor quality; impractical for purpose; advertising of product doesn't match actual product) PLACE: ("doorstepping", street-promotion; placed in reach/sight of children when not appropriate)
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Define "marketing audit"
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a report which investigates the cost and effectiveness of marketing activity of a business on a periodic basis (often through conducting a SWOT analysis)
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What is Porter's five forces, and name the "five forces"
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a method for analyzing the competitive environment of a market - by understanding these five key factors the company can understand the strength of competition and hence devise a suitable marketing strategy - competitive rivalry - threat of new entrants - bargaining power of suppliers - bargaining power of buyers - threat of substitute products
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Give three reasons why market research is essential to creating a successful product?
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- helps to collect objective data about the market, competitors and consumers - helps to work out the size of the market - // growth rates - // market share held by rival businesses - // the need of consumers
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Give two advantages and disadvantages of conducting primary research
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+ targeted research is carried out - the organization is in complete control of the process + better data interpretation- can be examined depending on the organization's needs rather than relying on secondary data + more accurate tool - some secondary data may be irrelevant + ownership of information - the company owns the data and doesn't need to share it with competitors (gives competitive edge) - high cost - time consuming - possible inaccurate feed-back - more resources are required (both physical and human)
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Define, give one benefit and one limitation of the following sampling techniques? - cluster sampling - quota sampling - random sampling
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CLUSTER: a random sample of "clusters" or groups within a population are taken, with all units within the cluster examined + quick and easy + doesn't require complete population information + good for face-face surveys - expensive if the clusters are large - greater risk of sampling error QUOTA: obtain a sample that is representative of the overall population, population is divided by the most important variables (e.g. age, income) and a required sample is drawn from each stratum + quick and easy - not random - risk of bias - need to understand population to be able to identify the variables to stratify RANDOM: ensures that every member of the population has an equal chance of selection + simple to design and interpret + can calculate estimate of the population and the sampling error - need a complete and accurate population listing - quite difficult to minimize bias completely
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Define "market segmentation" and its purpose?
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the process of dividing a market into sub-groups based on some key defining characteristics of consumers + allows a business to better target its marketing efforts, using more specific promotional activity to better meet the needs of consumers
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Distinguish between "niche marketing" and "mass marketing"
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NICHE MARKETING: Concentrating all marketing efforts on a small but specific and well defined segment of the population MASS MARKETING: An attempt to appeal to an entire market with one basic marketing strategy utilizing mass distribution and mass media
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Define "consumer profile"
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A description of a customer or set of customers that includes demographic, geographic, and psychographic characteristics, as well as buying patterns, creditworthiness, and purchase history.
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Define "corporate image"
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the way an organization is presented to or perceived by its members and the public. Mental picture that springs up at the mention of a firm's name. It is a composite psychological impression that continually changes with the firm's circumstances, media coverage, performance, pronouncements, etc.
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Define "USP"
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a factor that differentiates a product from its competitors, such as the lowest cost, the highest quality or the first-ever product of its kind. A USP could be thought of as "what you have that competitors don't."
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Define "sales forecasting" and give two reasons why sales forecasting should be carried out
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Sales forecasting is the process of a company predicting what its future sales will be. This forecast is done for a particular period of a time in the near future, usually the next fiscal year. + Accurate sales forecasting enables a company to make informed business decisions. + helps businesses to plan investments + helps plan the launch new products + helps to decide whether to withdraw products from a line
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Distinguish between "product mix" and "product line"
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product mix: the complete range of products produced by a business (including product lines and individual products) product line: group of products within the mix that are closely related to each other
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Give three benefits of creating strong product lines
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+ whole range likely to appeal to many consumers + strong brand will encourage consumers/existing customers to try new versions of the product + helps to increase sales and profits + keeps the brand new and fresh
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Give three reasons why product development is important in terms of an organization's innovation?
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+ customers' needs and wants change + maturing products within product mix + end of product life cycle + marketing environment changes + competitors + problems with the current products + technological change
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Identify the six stages of the product development process
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1. Brainstorm ideas 2. Develop ideas 3. Create the product 4. Refine and carry out final testing of the product 5. Launch 6. Ensure continual development
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Identify the five stages of the product life cycle?
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1. Development 2. Introduction 3. Growth 4. Maturity 5. Decline
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Give three examples of extension strategies that a business could use to extend a product's life cycle?
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* re-branding: give an existing product a new name or purpose, and/or aim at a different target market * modify features: change the product to adapt to market changes and customer preferences * packaging: change packaging to give product a fresh look or to attract a new market * pricing: reduce its price to aim at a lower-end market or to extend the life of an old version (e.g. iPhones), or offer different pricing options and deals
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Distinguish between the product life cycle and the product diffusion curve
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PRODUCT LIFE CYCLE: shows how sales are likely to be generated throughout the market life of a product PRODUCT DIFFUSION CURVE: groups customers according to how quickly they adopt a new product
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Identify the five stages of the product diffusion curve
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- innovators - early adopters - early majority - late majority - laggards
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Explain the Boston matrix including: - the two variables/axis - the four categories
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*low-high market share of a product * low-high overall market growth rate Star: High market share, high market growth rate Cash cow: high market share, low market growth Problem child/question mark: low market share, high market growth Dog: low market share, low market growth
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How is the Boston matrix used in developing strategic direction?
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* businesses must ensure that they have a range of cash cows, stars and a few question marks * when cash cows decline, they have stars to take their place * investment in question marks/problem children will lead to a future supply of stars
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Give two costs and benefits of using the Boston matrix?
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+ quick and easy to do + more management time can be devoted to the specific issues of the products on offer - it assumes you need a large market share to be successful, many businesses are successful by using niches in a larger market - assumes that a fast-growing market is where opportunities can be found. Some slow-moving markets have been revolutionized by new entrants (e.g Dyson and the vacuum cleaner industry)
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Distinguish between "brand awareness", "brand development" and "brand loyalty"
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BRAND AWARENESS: the extent to which consumers are familiar with the qualities or image of a particular brand of goods or services BRAND DEVELOPMENT: increasing the power of name/logo in order to increase the brand awareness and therefore gain higher sales BRAND LOYALTY: the willingness of consumers to purchase the same brand repeatedly (and even to act as a marketing tool, by people telling their friends how good a product is)
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Define the following types of branding * family branding * product branding * company branding * own label branding * manufacturer's brand
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FAMILY: when an organization uses its strong name and reputation to launch new products under the umbrella of one of its existing brands (+ products automatically have the associations with existing brand) PRODUCT: where a business assigns a new brand name to each of its products with no clear connection between them (- no immediate association, + if one product in the line fails, it doesn't affect all the other products, + easier to sell off parts of the business without losing complete control of their brand image) COMPANY: the practice of promoting the brand name of a corporate entity, as opposed to specific products or services (i.e. The Virgin Group) OWN-LABEL BRANDING: when retailers (e.g. supermarkets) brand products under their own names (e.g Tesco Value, Tesco Kids, Tesco Finest) MANUFACTUERS' BRAND: brands created by the producers instead of the distributors (e.g Levi Jeans)
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Analyse the role of branding a global market
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* companies have to create marketing campaigns that can be used across the world * advertising/branding may have to altered for different countries in order to make them relevant or more accessible (e.g. "I'm lovin' it" for McDonalds in different languages; TV adverts featuring local celebrities) * the rise of technology means that products are available to purchase from around the world, it more important than ever to make brands global to increase global market share
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Name the three of the five types of cost-based pricing strategies
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- cost-plus - marginal cost - contribution
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Define cost-plus pricing
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working out the average cost per unit produced and then adding a percentage mark-up. The higher the mark-up, the higher the profit per unit sold (also called absorption or full-cost pricing)
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Define marginal cost
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The change in total cost that comes from making or producing one additional item The marginal cost of an additional unit of output is the cost of the additional inputs (variable costs) needed to produce that output
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Define contribution pricing
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the difference between sales and variable costs of production Contribution = total sales less total variable costs Contribution per unit = selling price per unit less variable costs per unit
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Name the three types of competition-based pricing strategies
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- price leadership - predatory - going rate
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Define price leadership
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Situation in which a market leader sets the price of a product or service, and competitors feel compelled to match that price.
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Define predatory pricing
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the pricing of goods or services at such a low level that other firms cannot compete and are forced to leave the market. Predatory pricing in the UK is illegal. It is prohibited under EU Competition Law to sell goods at a loss with purpose of forcing other firms out of business.
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Define going-rate pricing
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Setting a price for a product or service using the prevailing (current) market price as a basis. Going rate pricing is a common practice with homogeneous (alike/similar) products with very little variation from one producer to another, such as aluminum or steel.
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Name the six types of market-based pricing strategies?
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- penetration - skimming - price discrimination - loss leader - psychological - promotional
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Define penetration pricing
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where a business sells its products at a low price to try to break into a market and gain market share quickly. The aim of this policy is to gain enough market share to be able to raise prices in the future once the business has become established
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Define price skimming
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setting the price high initially to attract innovators (those customers who will pay almost any price to get the newest product), before lowering prices to tempt other consumers i.e. games consoles, smartphones
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Define price discrimination
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the action of selling the same product at different prices to different buyers, in order to maximize sales and profits. (e.g. daytime vs. evening phone calls; car insurance)
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Define loss leader (pricing strategy)
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a business offers a product or service at a price that is not profitable for the sake of offering another product/service at a greater profit or to attract new customers. This is a common practice when a business first enters a market; a loss leader introduces new customers to a service or product in the hope of building a customer base and securing future recurring revenue.
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Define psychological pricing
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Psychological pricing is the practice of setting prices slightly lower than rounded numbers, in the belief that customers do not round up these prices, and so will treat them as lower prices than they really are. Also includes setting prices higher in the belief that customers will attach more importance/luxury to a product
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Define promotional pricing
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The act of offering a lower price temporarily in order to enhance the effectiveness of product sales efforts to cost sensitive consumers (e.g BOGOF)
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Define supply and demand
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the amount of a commodity, product, or service available and the desire of buyers for it, considered as factors regulating its price
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Explain the nature of supply and demand in terms of pricing
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* There must be an equilibrium between the price that a business is willing to sell at and the price a customer is willing to buy for * if a business increases their prices, they will have an incentive to increase production * on the other hand, high prices will lead to insufficient demand and therefore excess stock leftover. * The business will the drop their prices to sell of excess stock to a level where demand again equals supply ("the invisible hand" theory)
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Define and explain "price elasticity of demand" (PED)
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measures how sensitive the demand of a product is to changes in price. It is expected that if prices increase, demand will decrease but PED measures how much the decrease is expected to be. 1+ = demand is price elastic 1 = unitary elasticity (a change in price will lead to a identical percentage change in demand) 1- = demand is price inelastic (change in price will lead to relatively little change in demand)
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Define and explain "income elasticity of demand" (YED)
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measures the change in demand for a product if there is a change in consumers' income If demand change is higher than income change = demand is income-elastic If demand change is lower than income change = demand is income-inelastic
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Define and explain cross-elasticity of demand (XED)
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measures the responsiveness of change in demand of one product to the change in price of another (a complement/substitute) Positive XED = products can replace each other (e.g. coffee prices increases, demand for tea increases as people have swapped to the cheaper option) Negative XED = products are linked (compliments) (e.g. as the price of DVD players increase, demand decrease - DVD sales also decrease) Zero XED = no connection(e.g. increased car prices, doesn't affect the demand for cheese)
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Define and explain advertising elasticity of demand (AED)
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measures how sensitive the quality demanded is to changes in an organization's advertising expenditure AED 1+ : advertising elastic (the change in demand is more than proportional to the change in advertising expenditure) AED 1- : advertising inelastic
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Distinguish between above the line and below the line promotion - give three examples of each
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ABOVE THE LINE: direct advertising through consumer channels where the process is passed on to third parties (e.g. TV, cinema, newspapers, Internet, radio) BELOW THE LINE: promotion done through means other than through a third-party, kept within the company's control (e.g. price promotions, direct selling, loyalty cards/schemes, repeat purchase discounts, point of sale displays)
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A promotional mix, is the variety of promotion methods used to market a product, identify three areas that are considered in the promotional mix
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- stage in the life cycle - nature of the product - competition - marketing budget - marketing strategy - target market
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Define "distribution channel"
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The path through which goods and services travel from the vendor to the consumer or payments for those products travel from the consumer to the vendor.
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Give the four main distribution channels and a key advantage and disadvantage of each
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DIRECT SELLING: + very low cost - hard to gain customer awareness RETAIL OUTLETS + helps to build brand awareness + customers have confidence because they can bring goods back - expensive to staff and run WHOLESALERS + allows businesses to gain access to smaller retailers - wholesalers add a further mark-up (increases retail price) AGENTS + may be able to give better knowledge of customers' needs - also offer rival products' from other suppliers
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Give two costs and benefits of international expansion (also in terms of marketing)
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+ possible huge untapped markets + successful business model in one country may be possible to replicate around the world + internationalization reduces dependence of sales in the home market - may require significant product modification and cost increases - strong local competition may already exist - culture and language barriers may already make an organization less efficient
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With reference to the four P's of the marketing mix, explain what needs to be adapted to increase opportunities and reduce threats
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PRODUCT: the needs of the customers may vary, products may not be suitable/relevant to international markets (e.g. McDonalds in India had to adapt to fit religious/cultural dietary requirements) PLACE: The distribution channel used in different locations may be different PROMOTION: Businesses may use different techniques to advertise (e.g. local celebrity endorsements); difference in luxury-status of products between countries may affect promotional angle used PRICE: Different pricing strategies used to fit with different buying power of consumers in different countries
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Distinguish between B2B and B2C
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B2B: Business-to-business ecommerce (one organization dealing with another organization) e.g. buying components, movement through the distribution channels B2C: Business-to-consumer ecommerce (selling to the end use e.g. buying music on iTunes)
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Explain how e-c0mmerce would affect the marketing mix?
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PRODUCT: customers are able to tailor the products to their own needs (e.g. Dell computers allow for vast customization); larger range of products available than possible in shops (e.g. Amazon) PRICE: quicker research into prices makes markets more competitive; easier to compare products in terms of properties, prices and reviews PROMOTION: advertising can be spread quickly and cheaply (e.g. pop-up ads, social networks); online surveys allow for consumer profiles PLACE: low cost alternative to retail channels/outlets - possible loss of customer confidence (prefer physical outlets) - high street outlets increase reputation) - some customers prefer to handle/see physical goods before purchase.
