Unit 2 - Marketing

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CHAPTER 1 - Introduction to marketing

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76 Terms

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CHAPTER 1 - Introduction to marketing

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Marketing

The management task that links the business to the customer by identifying and meeting the needs of customers profitably - it does this by getting the right product at the right price to the right place at the right time.

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What does marketing include

  • Market research

  • Product design

  • Pricing

  • Advertising

  • Distribution

  • Customer service

  • Packaging

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Market orientated

An outward-looking approach basing product decisions on consumer demand, as established by market research.

When a business conducts market research to find out consumer wants before developing a product. - It is less risky.

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Product orientated

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.

A business who’s main focus of activity is on the products itself - doesn’t conduct market research.

Develops a product in the hope they will find consumers who purchase it.

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Advantages of market orientated

  • Less likely for newly developed product failing

    • It can be worth it if cost of developing product was expensive e.g. car

  • Likely to survive longer

  • Make higher profits —> more sales

  • Constant feedback from consumers allows product to be adapted to changing consumer tastes

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Disadvantages market orientation

  • Offering choice and range is expensive

  • Business might overstretch its resources if they adapt to all changing fashions - expensive

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Market share

The percentage of sales in the total market sold by one business.

It can be a measure of a business’s performance compared to its competitors.

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Equation for market share

Market share % = (Sales of business in time period / total market sales in time period) x 100

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Market leadership

When a business has the highest market share of all firms that operate in that market.

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Advantages of being ‘market leader’

  • It can be used in advertising and promotion as a convincing argument to attract customers

  • Suppliers - Might offer special discounts on supplies as they want to have a long-term supply contract

  • Retailers - Keen to stock

  • Recruitment of high class employees

  • Financing might become easier

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Disadvantages of being ‘market leader’

  • Pressure on business and key employees to continue like that

  • Financially unsustainable in the long-term if using ‘sell-it-cheap-to-increase-share’

  • Government regulations

    • Prevent monopolies

    • Higher prices to consumers as a result of low competition

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Market size

The total level of sales of all producers within a market.

Measured in

  • Volume of sales (units sold)

  • Value of goods sold (revenue)

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Market growth

The percentage change in the total size of a market (volume or value) over a period of time;

  • Volume = units sold

  • Value = Revenue made

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Equation for market growth

Equation for annual market growth: (Total market sales this year - Total market sales last year) / Total market sales last year * 100

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Reasons why markets grow

  • Technological advancements

  • Increasing customer incomes - greater disposable incomes

  • International trade agreements

    • Lower trade barriers

  • Legal changes

  • Changes in consumer tastes

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CHAPTER 23 - Marketing planning

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Unique Selling Point (USP)

The special feature of a product or customer service that makes it different from those of competitors.

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Target Market

The segment of the market that a particular product is aimed at.

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Market segment

A sub-group of a market made up of consumers with similar characteristics, tastes and preferences.

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Marketing planning

The process of developing appropriate strategies and preparing marketing activities to meet marketing objectives.

Based on market trends, competitors’ actions, consumer wants.

Market research is vital

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What are the main elements of a marketing plan?

  • Details of the company’s SMART marketing objectives

  • Sales forecasts to allow the progress of the plan to be monitored

  • Marketing budget - how much finance the business plans to spend and how it is allocated.

  • Marketing strategies - adopted to achieve marketing objectives.

  • Detailed action plans

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Market segmentation

Identifying different segments within a market and targeting different products or services to them.

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Marketing mix

The key decisions that must be taken in the effective marketing of a product.

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Consumer profile

The main characteristics of consumers in target market. - It helps in marketing decision.

A quantified picture of consumers of a firm’s products, showing proportions of age groups, income levels, location, gender and social class.

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How do businesses segment markets?

  • Geographic

    • Based on location

    • E.g. clothes depend on weather

  • Demographic

    • age, sex, family size, ethnic background

  • Psychographic

    • Lifestyle, personalities, values, hobbies, attitudes

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Production positioning

The process of designing the company’s products and image to occupy a distinctive place in the perceptions of consumers in the target market.

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Product position map or perception map

A diagram that analyses consumer perceptions of completing brands in respect of two product characteristics.

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What are the uses of product-positioning analysis

  • Identifies potential gaps in the market

  • Busines could position the new product with others - less risky but also less profitable

    • Marketing manager is aware of key features of the product that should be promoted most heavily.

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Niche marketing

Identifying and exploiting a small segment of a larger market by developing products to suit it.

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Niche market

A small and specific part of a larger market.

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Mass marketing

Selling the same products to the whole market with no attempt to target groups within it.

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Mass market

A market for products that are often standarised and sold in large quantities.

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Boston Consulting Group (BCG) Matrix

A method of analysing the product portfolio of a business in terms of market share and market growth.

The size of each circle on the matrix represents the total revenue earnt by each product.

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Competitive advantage

An advantage that a business has over rivals gained by offering consumers greater value, either with low prices or by providing greater benefits and service to justify a higher price.

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CHAPTER 24 - Sales forecasting

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Sales forecast

Prediction of sales for the next time period.

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Benefits of sales forecasting

  • Reduces risk

  • Operations department - knows how many units to produce + how much inventory to hold

  • Marketing department - see if changes need to be made to exisiting marketing mix

  • HRM - workforce plan of how many employees are needed

  • Finance department - plan cash flows with greater accuracy

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Limitations of sales forecasting

  • Precision is difficult

    • Can be inaccurate

  • Unforseen external factors

  • New laws

  • Pressure group activity

  • General economic climate

  • Suppliers might increase selling prices

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CHAPTER 25 - Market research

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Market research

Process of collecting, recording and analysing data about customers, competitors and the market.

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Why do organisations carry out market research?

  • Find out whether a consumer will buy a particular product

  • The reaction of consumers to:

    • Different price levels

    • Alternative forms of promotion

    • New types of packaging

    • Different methods of distribution

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Why do organisations carry out market research?

  • To identify the main features of a market and reduce risks of market entry

    • Key features:

      • Overall size - is it worth entering the market?

      • Growth - is the market becomin bigger or smaller?

      • Competitors - is it easy for new rivals to enter market?

    • Assess the likely chances of that product achieveing a profitable level of sales?

  • Predict future demand changes and market trends

    • Use research to try to establish future demand trends

  • Explain consumer buying patterns for existing prdoucts and market trends

    • Also conducted for existing products and brands

    • Assess current performance

    • Helps future marketing objectives

    • Find out reasons behind consumer decisions to purchase or not.

  • Assess the most favoured designs, flavours, styles, promotions and packaging

    • Find out what consumers like and dislike

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Types of market research

  • Primary

  • Secondary

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Primary market research + (Adv + Dis.)

The collection of first-hand data that is directly related to a firm’s needs.

Data which is collected by the business itself for its own needs.

Advantages:

  • Up to date - more useful that secondary data

  • Relevant - directly addresses questions of the business

  • Confidential - Competitors don’t have access to it

  • Increasing use of IT - is reducing its cost

Disadvantages:

  • Costly - need to hire agencies

  • Time-consuming - obtained from the internet more quickly

  • Doubts over accuracy and validity - risk of sampling error

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Secondary market research + (Adv + Dis.)

Collection of data from second-hand sources.

Data which has already been collected by an outside source e.g. competitors.

Advantages:

  • Cheap

  • Good to get a general idea of the market before primary research

  • Quick

  • Allows comparison of data from different sources

Disadvantages:

  • Out of date - not updated frequently

  • Not entirely suitable for needs of business

  • Accuracy of source needs to be checked as accuracy might be unknown

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Primary research methods

  1. Surveys / questionnaires

  2. Interviews

  3. Focus groups

  4. Observations

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Survey

Detailed study of a market or geographical area to gather data on attitudes, impressions, opinions and satisfaction levels of products or businesses, by asking a section of the population.

You can obtain both qualitative and quantitative data

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Things to consider when conducting consumer surveys

  • Who to ask - impossible + expensive to ask all potential customers. - Sampling is needes

  • What to ask - Has to be unbiased + unambiguous

  • How to ask - face-to-face, telephone, social media, online survey

  • How accurate it is

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Open questions

Those that invite a wide-ranging or imaginative response.

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Closed questions

Questions to which a limited number of present answers is offered.

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Interviews (adv. + dis.)

Advantages

  • Qualitative data

  • Follow-up questions can be asked

Disadvantages

  • Questions can be misunderstood

  • Expensive

  • Time consuming

  • Biased

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Focus groups

When a group is asked questions about the product and they actively take part in a conversation between them.

A group of people who are asked about their attitude towards a product, service, advertisement or new style of packaging.

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Observational technique

A qualitative method of collecting and analysing information obtained through directly or indirectly watching and observing others in business environments, e.g., watching consumers walk around a supermarket.

Problem - How ethical is it?

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Methods of secondary research

  1. Market intelligence analysing reports

  2. Academic journals

  3. Government puublications

  4. Trade organisations

  5. Media articles and specialist publications

  6. Online

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Qualitative research

Research into the in-depth motivations behind consumer buying behaviour or opinions.

Quality rather than quantity.

Motivational factors behind consumer buying habits.

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Quantitative research

Research that leads to numerical results that can be presented and analysed.

Quantity rather than quality

To find out the quantities that consumers might purchase and at what prices.

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Sample

A group of people taking part in a market research survey selected to be representative of the whole target market.

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Methods of sampling

  1. Quota sampling

  2. Random sampling

  3. Convenience sampling

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Sampling error

Mistakes in market research caused by using a sample for data collection rather than the whole target population.

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Quota sampling

Gathering data from a number of people chosen out of a specific sub-group.

Selection is non-scientific - can be biased

Interviewer chooses the people out of the market

Not everyone gets a chance of selection

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Random sampling

Every member of the target population has an equal chance of being selected.

  1. List of all the people in the target population

  2. Each person is given a numerical value

  3. Chosen at random

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Convenience sampling

Drawing a representative selection of people because of the ease of volunteering or selecting people because of their availability or easy access.

Likely to be biased

E.g. ask people in the street

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CHAPTER 26 - The seven Ps of the marketing mix

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Digital promotion

The use of the internet, mobile devices, social media, search engines and other channels to communicate with consumers to provide information about products and encourage the purchase of them.

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Marketing mix

The key decisions that must be taken in the effective marketing of a product

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Coordinated marketing mix

Key marketing decisions complement each other and work together to give customers a consistent message about the product.

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The 7P’s

(for all products - goods + services)

  1. Product

  2. Price

  3. Place

  4. Promotion

(for services

  1. People

  2. Process

  3. Physical evidence

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Product

The end result of the production sold on the market to satisfy a customer need.

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Consumer durables

Manufactured products that can be reused and are expected to have a reasonably long life, such as cars.

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Product life cycle

The pattern of sales recorded of a product from launch to withdrawl from market.

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Stages of product life cycle

  1. Introduction - sales usually low, increase slowly

  2. Growth - Sales increase quickly

  3. Maturity / saturation - Sales slow down - most consumers already have the product.

  4. Decline - sales decrease largely

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Product portfolio

The collection of all the products (goods and services) offered for sale by a business.

  • Reduces the risk

  • Diversification

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Balanced product portfolio

When one product is in the decline stage and another is in the growth stage or ready for introduction.

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Extension strategies

Marketing plance that extend the maturity stage of the product life cycle.

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Extension strategies

  • Add features

  • Repackage

  • Discount

  • Rebrand

  • Sell to new markets

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